Paving the Way for Mini-Grids

Speeches Shim

Photo courtesy of SEFA
Photo courtesy of SEFA

The African Development Bank’s Sustainable Energy Fund for Africa (SEFA) is promoting the growth of mini-grids in sub-Saharan Africa to unlock the region’s potential for clean energy and increase energy access in isolated communities.

SEFA is a $95 million multi-donor facility, funded by Power Africa and the governments of Denmark, Italy, and the United Kingdom. It provides project preparation grants, equity investments and enabling environment grant funding to support small- and medium-sized renewable energy and energy efficiency projects in Africa.

Mini grids are increasingly recognized as an essential part of the solution for increasing energy access in sub-Saharan Africa, especially to communities that are far from the national grid. They create village- or district-level electrical distribution networks that are in some cases lower-cost solutions than grid extension. They work best in off-grid communities that are populated enough to offer economies of scale in power delivery compared with individual home systems.

In many African countries, smaller clean and renewable energy projects, including mini grids, are potentially viable from a commercial perspective, but the initial development costs often prevent these projects from accessing necessary financing. SEFA is founded on the premise that reliable, clean and affordable energy can contribute to strong African economies and can have a positive impact in creating employment opportunities across the continent.

SEFA’s support for mini-grids aligns with the goals of the Power Africa initiative. Power Africa recognized the need to support off-grid electricity access and in 2014 launched the Beyond the Grid sub-initiative focused exclusively on unlocking investment and growth for off-grid and small-scale energy solutions on the African continent. These efforts are critical for helping Power Africa achieve its target of 60 million new connections for households and businesses by 2030.

Promoting mini-grids in Rwanda and Niger

Recently, SEFA supported Rwanda with a $840,000 grant to promote mini-grids and pave the way for private investments. The project is expected to support the Government of Rwanda’s efforts to provide electricity connections to at least 145,000 rural households and increase off-grid access from 5 percent to 22 percent by 2018.

SEFA then made a second grant of more than $1 million to Niger, a country with high solar energy development potential and an electricity access rate of less than 10 percent. The program will develop policy, regulations, and an enabling framework to promote market-driven mini-grid development through institutional and technical support. It will also provide support to developers through a business plan competition and feasibility studies.

The project is part of one of SEFA’s country programs that provides enabling environment support for green mini-grids through sector planning, regulatory and policy interventions, and market development activities in up to six countries. This approach complements SEFA’s direct support to companies.

Photo courtesy of SEFA
Photo courtesy of SEFA

Mini-grids come online in Tanzania

Earlier this year, JUMEME Rural Power Supply Ltd. celebrated the operational launch of its project, which uses solar hybrid mini-grids to electrify more than 100,000 people and 2,340 small businesses in Tanzania’s rural centers. This project received preparation support from SEFA, and is one of the first of its portfolio to become operational since SEFA’s inception in 2012. SEFA was awarded “Power Transaction of the Year” by the East African Power Industry for its role in financing JUMEME.

A joint venture between experienced partners, JUMEME was formed to develop and implement a large portfolio of solar-hybrid mini-grids in rural growth centres in Tanzania. With an extensive pipeline of projects, the initial phase, scheduled to run until 2017, includes approximately 28 mini-grids with a strong focus on supplying anchor customers such as the telecom industry, mines and small businesses.

“SEFA is working to enable more projects like this one across the continent,” said SEFA Coordinator Joao Duarte Cunha.

By 2022, JUMEME aims to implement around 300 mini-grids and supply high-quality and reliable electricity to 1 million customers across Tanzania.

The project highlights the importance of partnerships in the sector. JUMEME partners include INENSUS, TerraProjects, St. Augustine University of Tanzania, and RP Global. The project is co-financed by the European Union Energy Facility. JUMEME was also supported by U.S. Government’s Overseas Private Investment Corporation via its Africa Clean Energy Finance facility and will also receive support from the the Global Climate Partnership Fund.

To ensure successful implementation of the projects, JUMEME has joined forces with a number of experienced project partners: GVEP International, an NGO providing energy advisory services to micro, small and medium energy enterprises; the Sustainable Business Institute, a German research institute focusing on sustainable economies; and Excel Hort Consult Ltd., a Ugandan agribusiness and development company.

SEFA’s support to mini-grids is in line with the African Development Bank (AfDB)’s commitment to support energy infrastructure, climate change mitigation and adaptation. The project is part of the AfDB’s New Deal on Energy for Africa, and is aligned with Africa Renewable Energy Initiative’s objectives of increasing renewable energy penetration.