Minigrids have the potential to accelerate energy access in Africa and costs are starting to come down, while reliability and financing are improving; however, further improvements are needed in terms of regulatory frameworks to engender a level playing field and transparency and certainty around tariffs and subsidies.
Africa Minigrid Developers Association (Amda) CEO Aaron Leopold told delegates attending the virtual Africa Energy Indaba on March 2 that, according to data the organisation was collating from 2019 and 2020, the number of minigrid projects almost doubled across the continent in one year, which pointed to encouraging growth in the sector.
He noted that one of the major factors in this sector was the high capital expenditure (capex) costs because of the small scale of minigrids. These costs also increased when the minigrids were being implemented in rural, remote and less densely populated areas.
Leopold noted that 2019 was the first year where market expansion happened, but this also came with increased capex per connection.
In terms of operational costs, he highlighted considerable potential for cost optimisation though standardisation, learning and scaling the sector.
Leopold emphasised the need for funding of central operations as a risk mitigation tool.
Leopold stressed the need for public funding in the sector.
He also noted that regional consumption of energy differs considerably across countries on the continent, and that demand/revenue growth support was fundamental to making this sector viable.
In terms of the regulatory environment, Leopold noted that there had been improvements, with regulators having reduced approval times by half. However, he emphasised that this was still not enough, with average total approval times still being more than one year.
With estimates showing that the continent needs 140 000 minigrids, he emphasised that the waiting period was still far too long.
Therefore, Amda is focusing both on funding and digitalising regulatory processes with the aim of streamlining these processes.
Consulting and engineering firm Inensus cofounder and MD Nico Peterschmidt indicated that the minigrid sector was becoming more mature, and was starting to using more digital technology, which presented opportunities.
He mentioned opportunities in terms of rural electrification, where minigrids should look beyond electricity supply. Once a reliable supply is provided to rural areas and communities, these should contribute to rural industrialisation, he noted.
Cross Boundary associate principal Humphrey Wireko said minigrids as a business model worked in peri urban areas, where there was a high customer connectivity to cover the cost and people could afford it. Therefore, the challenge was in bringing electricity to rural populations, with higher costs and lower revenue, which makes the business model more challenging.
He emphasised that the use of subsidies to bring electricity to rural places was not new and has been done globally, and therefore, using subsidies and infrastructure investment for rural minigrids was not controversial.
Looking forward, he indicated that, as costs keep declining and operational capacities improve, rural minigrids can become self-sustaining.
Moreover, there is potential for private capital in this space.
Studer Innotec Africa sales manager Johannes Tuwilika emphasised that Africa sorely needed development, and that electricity was pivotal to this.
He said the costs of not putting in place energy solutions would be much higher than the cost of doing so.