event 05 févr. 2020

Publication // RE-thinking Access to Energy Business Models: Ways to Walk the Water-Energy-Food Nexus Talk in Sub-Saharan Africa

by Marco Aresti, Amy Barclay, Paolo Cherubini, Olivier Dubois, Florent Eveillé, Davide Fioriti , Valeria Gambino, Christian Gertig, Andrés González García, Andrea Micangeli, John Shehata, Susan Stritzke, Carlo Tacconelli, Luca Traini, Philipp Trotter, Stephan van den Berg, Timothy Volk. An analysis of the technical, regulatory and financial challenges and opportunities was carried out to clearly identify the most viable and scalable business models for mini-grid projects. The results confirm that a broader perspective including different actors and sectors in an integrated manner is able to pursue business for impact.

Res4africa re thinking access to energy business models

Abstract

Looking at 2030, universal access to electricity will remain an African issue. Considering the policies and implementing measures adopted as of mid-2018 along with relevant policy proposals announced, the IEA estimates that the world will count 650 million people with no electricity in 2030, 90% of which in Sub-Saharan Africa, and mostly living in rural areas. Promoting private sector’s investments is now recognized as fundamental to accelerate access to electricity. This urges governments to strike a balance between ensuring affordable and equitable access to energy to rural people, and favouring a low risk environment to developers and investors. The main issue lies in the fact that rural electrification is more expensive than the electrification of high-density and well-connected urban areas, and this applies to grid extension, micro-grid electrification and isolated systems. Therefore, to reach rural areas and provide access to affordable, reliable, sustainable and modern electricity to low income people, it is necessary to fill the gap between possible revenues from off-takers and the costs of rural electrification.
A mix of grid extension and off-grid solutions should be properly combined in the country’s electrification masterplan to pursue universal access to electricity. Despite the business of individual systems, the viability of which has already been proven in several developing countries, the mini-grid sector still requires to demonstrate solid business models. In this sense, opportunities arise when looking beyond the sole electricity supply: additional services, complementary value chains, innovative partnerships and horizontal integration can bridge the gap between viable and non-viable projects. This study analyses access to energy business models with a focus on the productive use of electricity, excluding captive projects with a unique industrial off-taker since their financial feasibility is already demonstrated and they represent a notable potential market in developing countries, even though still relatively untapped.
An analysis of the technical, regulatory and financial challenges and opportunities was carried out to clearly identify the most viable and scalable business models for mini-grid projects. The results confirm that a broader perspective including different actors and sectors in an integrated manner is able to pursue business for impact.
The more than 20 rural electrification projects in Sub-Saharan Africa analysed in this study give a picture of a growing and innovative sector with heterogeneous experiences. Process for identification of the most promising business models has gone through the analysis of these case studies, which have been classified on the basis of three criteria: (i) services provided, (ii) operating methods and (iii) ownership.
The classification based on the provided services shows that 67% of case studies provide sole electricity, 14% electricity and other energy-related products/services, while 19% provide electricity and other WEF nexus-related services. All the projects included in the latter two classes are ranked among the top-10 most financially sustainable projects. The only one exception is emblematic to RE-think viable business models, as it’s characterized by (i) unfavourable regulatory framework, (ii) not-for-profit WEF related activity and (iii) large diesel component in the power mix on one hand, whereas it is successful by looking at the project’s results on the other hand.

Published

December 2019

By

Res4Africa and the enel Foundation

© Literary property reserved Gangemi Editore spa

Download and Link

Res4Africa Foundation (2019). RE-thinking Access to Energy Business Models: Ways to Walk the Water-Energy-Food Nexus Talk in Sub-Saharan Africa.

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