Towards energy leapfrogging in sub-Saharan Africa : exploring strategic investment as a way to increase access to finance among mini-grid energy service companies

[摘要] ENGLISH SUMMARY : The aim to extend national grids as an avenue for universal electricity access in sub-Saharan Africa failed extensively over the past few decades. The high cost of extending national grids coupled with low electricity demand and inability to pay in rural areas have resulted in 590 million people remaining without access to electricity, 80% of whom live in rural areas. Mini-grids powered by renewable energy are increasingly seen as viable alternatives by virtue of the technology's lower cost, decentralised and flexible nature and provision of energy services that are on par with that of national grids. The technology especially shows promise in sub-Saharan Africa owing to the vast renewable energy potential in the region. However, a variety of challenges are keeping mini-grid energy service companies (ESCOs) from expanding towards commercial viability. As it stands, mini-grid projects in sub-Saharan Africa are not financially sustainable without the help of grants, which results in an unattractive risk-return profile from an investor's point of view. This study argues that if the sector is to reach a point where debt and equity investors can generate a return, grants need to be complemented with additional funding to enable mini-grid ESCOs to scale up operations, expand their project portfolios and drive down costs. Thus, the main purpose of this study was to explore the potential of strategic investment as a way of attracting additional funding to mini-grid ESCOs. Data was collected by means of in-depth interviews with executive managers of mini-grid ESCOs that are operational in East- and Southern Africa and private sector companies that were identified to exhibit potential for investing strategically in mini-grid ESCOs. The results indicate that there is a need for strategic investments in mini-grid ESCOs. Electric utilities and independent power producers (IPPs) would be more likely to invest, given the closer proximity of mini-grids to their core business. The study contributes to the evolving best practices of viable mini-grid business models, by recommending that mini-grid ESCOs should build competencies in customer relationship management, rural distribution practices and the extrapolation of rural households' uptake of electricity and electricity dependent products and services from consumption data to commercial applications. Indeed, the study shows that potential strategic investors attach value to these focus areas, with the implication that when mini-grid ESCOs can demonstrate these competencies successfully, the probability of successfully attracting strategic investment would increase. Considering these implications, the study offers a contribution to the development of pathways to attract investment to mini-grid ESCOs, the achievement of which will facilitate energy leapfrogging in the region.

[发布机构] Stellenbosch University