The SE4All Africa Hub manages a regional Green Mini-Grid Market Development Program (GMG MDP).
Green Mini-Grids are village or district level electrical distribution networks.
GMGs serve the needs of communities too distant to be economically connected to the grid in the near to medium term, but densely populated enough to offer economies of scale in power delivery compared with individual home systems. The International Energy Agency has estimated that 40% of investment required to achieve universal electricity access by 2030 can most economically be achieved through mini-grids. Universal power access in Africa will require as many as 350,000 mini grids.
However, the development of Green Mini-Grids presents a number of challenges. Chief amongst these challenges is profitability and therefore sustainability. Building a mini grid is not inexpensive, and therefore payback periods are likely to be relatively long in African environments where households and businesses have limited ability to pay. Related to the challenge of profitability is, therefore, commercial financing of any mini grid initiative. Banks are seldom interested in investments resulting in small margins and relatively long payback periods. There are other challenges as well, including:
- Measuring the market and designing an appropriate technical response;
- Limited business acumen of potential mini grid developers;
- Regulation, technical and safety standards;
- Building, operating and maintaining the mini grid;
- The potential arrival of and connection to the main grid;
- Theft and risk mitigation, including local currency depreciation;
- Marketing, customer satisfaction and ensuring reliable revenue;
- Few best practices and business models for replication.
The Sustainable Energy Fund for Africa (SEFA) has approved in June 2015 a USD 1 million grant to launch the first phase of a Green Mini-Grid Market Development Program (GMG MDP) which will be implemented by the SE4All Africa Hub in coordination with SE4All’s Clean Energy Mini-Grid High Impact Opportunity (HIO) stakeholder group.
The objective of the Green Mini-Grid Market Development Program is to support the scale-up of investments in commercially viable GMG projects through a broad range of interventions to improve the enabling environment. The project seeks to remove or reduce market barriers at regional scale and strengthen the ecosystem for the emergence of a thriving GMG sector in Sub-Saharan Africa – contributing significantly to the objectives of the SE4All, and most specifically universal access to modern energy by 2030.
The GMG MDP will be implemented through five business lines, with specific activities envisaged for the Program’s first phase:
1. Market Intelligence: Creation of a mini-grid market opportunity assessment methodology to generate comparable data across countries, guiding GMG developers geographically and to where resources, markets and policies are most beneficial. An initial inventory and analysis of currently existing assessment methodologies has been conducted and built upon. Five countries will soon be the focus of market assessments.
2. Business Development Support: Provide advisory/Helpdesk services to developers. A GMG toolkit – with a complete range of knowledge products and tutorials for GMG developers – is now available through GMG MDP Helpdesk. Launched in September 2016, this dedicated website will grow in scope in 2017. It will also be a forum for GMG developers to share information and experiences;
3. Policy and Regulatory Support: Develop an Africa Green Mini-Grid Strategy to be adopted by the AU. SEFA and the SE4ALL Africa Hub are also working with individual ministries of energy to develop strategies and plans for GMG development in their countries. Country programs are underway in Mozambique and Rwanda;
4. Access to Finance: The Program is conducting a market study on available financial instruments in support of GMGs and an assessment of GMG developer financial needs, in anticipation of designing a financial instrument in support of GMG development. An initial mapping of stakeholders in the GMG space, has been conducted by the Alliance for Rural Electrification;
5. Quality Assurance: The GMG MDP implementation of this business line will start in the second phase of the Program. A Quality Assurance Framework for Mini-Grids, developed by Global LEAP (Lighting and Energy Access Partnership), the U.S. Department of Energy and the USG National Renewable Energy Laboratory will also soon be available on this site.
Keep visiting this sight over the following months to learn more about the GMG MDP, the Green Mini Grid sector and how you can get involved in this new business opportunity.
Visit the GMG MDP Helpesk