One of the major barriers hampering universal electrification in sub-Saharan Africa is the fact that national utility companies often find little incentive to extend the national grid to rural areas since it’s financially unfeasible. Indeed, expanding the grid to these areas exposes utility companies to the risk of encountering low electricity demand in rural and impoverished areas. Inevitably, it locks out many low-income households from accessing affordable, clean, and reliable electricity.
Bringing power to these areas is a capital-intensive and long-term infrastructure investment. This is also complicated by the fact that the cost of grid extension, including distribution and generation costs, is often not commercially viable even with peak electricity demand. This is because even in urban households, the average kWh per day consumption is only used for lighting and powering few electric appliances – leading to low margins for utility companies.
Beyond the high costs of grid infrastructure, electrification in off-grid areas face a myriad of challenges in sub-Saharan Africa. The high up-front installation cost of connecting homes to the national grid is the biggest problem. Even in areas where households are clustered just meters away from low-voltage power lines, the prohibitive connection cost means that the centralized grid model is ill-equipped to bring last-mile connectivity to off-grid areas
Recognizing the immense task African governments face in achieving universal electrification, a collaboration between Small Power Producers (SPPs) and energy regulators is thus emerging as a key step in the generation and distribution of power to rural communities that do not have access to the national grid through microgrids. This is because they are cheap to install and, tariffs charged to customers on microgrids are cheaper than those of the main grid.
Microgrids, are self-sufficient, decentralized power grids that are usually located near where the energy is consumed. Meaning that, while a centralized grid transmits electricity with a single connection across huge distances, a micro-grid generates and distributes electricity on a reduced scale to small communities and villages.
This is why experts reckon that decentralized grid solutions could be the key to achieving universal electrification in Africa. In fact, analysis of various policy initiatives in countries such as Nigeria, Tanzania, and Kenya suggests that African governments are keen to implement this novel approach to providing reasonably priced, universal energy access to off-grid households.
Specifically, these countries have engaged in ambitious policy positioning that brings together energy regulators, donors, and the private sector in order to enable SPPs to generate and distribute power to off-grid areas. Nigeria, for example, plans to roll out close to 10,000 microgrids in order to achieve equitable and universal access to electricity.
Despite the regulatory and funding hurdles that plague the nascent microgrid sector, African governments see mini-grids as a complementary extension of the centralized grid model and national electrification plans.
However, decentralized microgrids as autonomous energy systems are complete business solutions in electrification because they can reach remote and sparsely populated regions not served by the main grid. They also offer a more reliable, cleaner, and cheaper alternative in areas already served by the main grids. In this aspect, microgrids build resilience in electricity distribution in areas where power is costly and unreliable.
Currently, microgrids are generally small and limited to places like military sites, tourist lodges, and camps, police stations, business parks, schools, healthcare facilities, mining sites, etc. As a result, SPPs in Africa are very limited, and investor skepticism is widespread. This is partly due to policy gaps resulting from a lack of reliable data from feasibility studies, and partly to the questionable business viability of deploying microgrids in remote areas.
According to the African Development Bank (AfDB), “barriers to the growth of private sector mini-grids in Africa include gaps in the policy and regulatory framework, the lack of proven business models, the lack of market data and linkages, the lack of capacity of key stakeholders, and the lack of access to finance.” This is despite the fact that various stakeholder workshops and multi-stakeholder partnerships in the mini-grid sector have resulted in extensive knowledge-sharing on technical and policy issues such as barriers hindering the uptake of microgrids, developing viable technological and operational capacity for a successful mini-grid, tariff models, and harmonization, donor financing requirements, public funding and subsidies, compliance with grid codes, and quality control.
Even where there is the political buy-in for off-grid solutions such as in Nigeria, Kenya, and Tanzania, energy regulators, and policymakers have been unsuccessful in reassuring enough investors to kick-start the deployment of mini-grids. This is why in the absence of grant funding, concessional financing schemes, and public-private partnerships, African governments might not be able to attract the investor capital and interest needed to invest in the microgrid sector.
Despite the hurdles to attracting investment into the microgrid sector, universal electrification in sub-Saharan Africa can still be achieved through other avenues; namely, through solar kits that do not require substantial technical expertise to install.
As pre-engineered kits, these systems are extremely affordable for low-income households, since they can be purchased via microfinancing instruments such as pay-as-you-go (PAYGO). With PAYGO, customers can make small weekly installments to pay for not only the solar kit itself, but also related products such as solar lanterns, solar water pumps, refrigerators, clean cookstoves, and mobile phones.
Solar kits are an agile solution that does not face the regulatory hurdles that confront microgrids since the kits do not depend on deploying heavy infrastructure to anchor distribution lines. These stand-alone solar systems have the additional benefit of allowing device manufacturers and distributors to use smart-metering systems, remote mobile communication connections, and keycode technologies to remotely monitor and collect mobile money payments from their customers. Moreover, since solar kits have significantly lower up-front costs, this solution might just close the energy infrastructure gap in Africa’s rural and off-grid areas.
However, experts are quick to point out that autonomous solar systems will eventually become too expensive. This happens when the systems need to be scaled up to carry productive loads capable of powering things like solar agro mills, rice-huller units, and welding machines. This reality undercuts the notion that solar could significantly stimulate the growth of rural enterprises or change economic fortunes in sub-Saharan Africa’s off-grid areas.
In fact, solar kits perfectly illustrate the inherent flaws of using them to alleviate poverty, since most of the products require specialized appliances and accessories to be able to run on DC power, unlike commercially available alternatives that run on AC power. Furthermore, customers who have procured plug-and-play solar kits through financial installments decry the fact that the lifespan of the battery could expire by the time they pay the last installment. This cancels out solar kits’ advantage of low up-front costs since customers are burdened by the recurring cost of replacing an expensive battery every five to eight years.
Despite the substantial hurdles facing the scaling up of mini-grids and stand-alone solar kits in sub-Saharan Africa, it is clear that the old model of centralized, top-down power grids is not the answer for accelerating last-mile connections and universal electrification. For this reason, much of the continent’s transition to renewable energies is being undertaken by small power producers, since most of their projects are powered by solar, wind, hydro, and biomass instead of diesel and other fossil fuels.
Charles Waiganjo holds post-graduate qualifications in philosophy and political science. He completed his studies at the Université Michel de Montaigne, and at the Université de Bordeaux. Charles is an African Liberty contributor.