Problem

In rural Tanzania, most households and businesses lack access to reliable energy services. Villages that do have electricity rely on diesel generators. Diesel fuel is expensive, so operators typically generate electricity only in the evening, limiting productive uses. Power outages are frequent.

Hybrid solar-diesel mini-grids have the potential to provide ample, reliable electricity in rural Tanzania. Combining diesel and solar PV technologies decreases generation costs, increases the supply and reliability of electricity and decreases greenhouse gas emissions.

Converting diesel-powered mini-grids to diesel-PV hybrids, however, involves risk and high upfront costs. Rural entrepreneurs perceive renewable energy as risky. They lack the technical expertise and capital required to invest in renewable energy technologies.

Solution

Redavia Rental Solar Power, a private company, has created an innovative business model to assume the risks rural entrepreneurs can’t afford to take. Redavia purchases and retains ownership of solar PV-generation and -storage technologies, covering the capital costs. Local operators rent the systems for a fixed monthly fee on a short-term contract that can be extended as needed. Operators then sell electricity to end-users using smart meters with pre-payment.

As a result, mini-grid operators can provide affordable, reliable electricity to local households and businesses. Redavia provides well-engineered, pre-assembled solar PV and solar-diesel hybrid systems appropriate for use in rural Tanzanian villages. Systems also include battery storage.

This business model protects the rental company as well as the local entrepreneur. The local operator can power a mini-grid and sell electricity without making a large cash investment or committing to a long-term contract. By retaining ownership of the solar PV system, Redavia protects its investment. If the mini-grid operator decides not to renew a contract or fails to pay the monthly rental fee, Redavia can easily relocate the technology to another community.

Innovation

Redavia innovates in two key areas—its business model and battery-storage technology.

Business Model Innovation

Local entrepreneurs are best situated to operate distribution networks, provide day-to-day operations and maintenance and sell pre-paid electricity. What local entrepreneurs lack are technical expertise and access to capital. Redavia covers the upfront capital costs and supplies the engineering and technology, partnering with local companies who rent the systems, operate the mini-grids and sell electricity to consumers. The local partner draws on community networks to encourage payment, nurture relationships with retail customers and provide on-site support, as needed. An outside company based in Dar es Salaam maintains diesel gensets. Redavia manages system integration, online monitoring (using the cell phone network), expansion and replication.

This business model reduces risk for the rental company and the entrepreneur. Focusing on generation technologies gives Redavia flexibility; the PV/diesel generation assets and batteries can be moved to other locations. Local operators can rent systems on a month-to-month basis rather than purchasing them.

Lithium-Ion Battery Storage

Redavia is pioneering the use of lithium-ion batteries in mini-grids. Lithium-ion batteries are more expensive than conventional lead-acid batteries, but they have have superior energy density and cycle life (especially in high temperatures). Lithium-ion batteries can also withstand repeated deep discharge, providing more usable electricity storage per kWh of rated capacity. In Shitunguru village, Redavia’s rental system uses a 135 kWh battery, while the mini-grid in Isenzanya village uses a 165 kWh battery. Redavia uses lithium-ion batteries manufactured by Samsung SDI and containerized by Qinous.

Challenges

Introducing cutting-edge technology to remote villages in rural Tanzania has posed challenges. Redavia has faced difficulties obtaining debt finance, finding batteries and identifying local entrepreneurs to rent and operate mini-grids.

Battery Technology Configurations

From the start, Redavia wanted to use advanced battery technology in village mini-grids. Both lithium-ion batteries and vanadium-flow batteries have significant advantages over conventional lead-acid batteries. Redavia soon discovered, however, that most of the configurations manufacturers were using wouldn’t work for deployment in rural villages. The company decided to focus on lithium-ion batteries while the technologies continue to develop.

Debt Financing

Redavia's has struggled to find funders—especially lenders—willing to invest in small, early-stage energy businesses in Tanzania. The company’s mini-grid projects rely heavily on grants. Redavia’s goal is to scale up the project where grant funding won’t be a sustainable source of revenue over the long term.

Local Technical Expertise

Finding local technical expertise is challenging in rural Tanzania. Few rural residents have technical skills, and skilled technicians in urban areas are reluctant to move to rural communities. In an effort to address this challenge, the company has launched Redavia Academy, a program for local partners, entrepreneurs and community members to gain skills in solar PV system installation and maintenance. In November 2016, Redavia Academy graduated its first certified installation manager.

Lessons Learned

Redavia's mini-grids are demonstrating that solar electricity is less expensive than diesel power, suggesting a promising market to displace diesel in mini-grids and other applications. Successes with lithium-ion battery use in Shitunguru and Isenzanya villages indicate that the technology is ready for mini-grid deployment.

Redavia’s business model requires a flexible and competent local partner. Early efforts to identify capacity needs and invest in capacity building will pay high dividends. Using a local operator to coordinate with villagers improves the integration process.