Fri, Sep

Electricity beyond the grid. Accelerating future momentum — (Final part)

Vish Ashiagbor

There is the need to develop a national integrated energy access plan and map. Current electrification strategies tend to focus on national grid extension plans, whereas the challenge of rural electrification needs to be addressed with an integrated and holistic national approach. All three technologies – standalone, mini-grids and the national grid – need to form clearly recognised pillars of national energy policies.

Instead of the tendency for mainly top-down grid extension centralised planning, policymakers should mix centralised top-down grid extension with decentralised demand-driven bottom-up strategies (mini-grids and standalone solutions).

Integrated energy access plans should contain a national energy access and opportunity map, including:

Clear identification of territories where extensions to the national grid are a viable prospect, with realistic and binding timetables for grid rollout.

For communities not included in grid rollout (and for those where grid rollout is not a near-term prospect or not cost-effective), mechanisms should be worked out to determine if they can be served by mini-grids or standalone solutions.

Plans should include an understanding of the role of different stakeholders and the opportunities available for non-grid companies to deliver electrification solutions to non-grid areas.

Clearly defined protocols should be agreed in advance, to avoid technology becoming stranded in cases where grid extensions become available to areas previously served by mini-grids.

Plans should be reviewed on an annual basis to reflect changes in technology development, speed of grid extension and deployment of off-grid solutions.

A clear energy access map and development plan would help provide a framework for a top-down planned electrification ‘push’ and a more commercially-driven bottom-up electrification ‘pull’. It would give more explicit recognition to the role of off-grid solutions in national energy policies and it would make it easier for companies to develop a viable business model and get access to finance.

Create an enabling environment for off-grid initiatives

A national energy access plan and map will help create greater awareness of and interest in off-grid initiatives, but if they are to take off, they will require a more enabling environment than currently exists in many countries. The most obvious enabler, in the case of standalone home systems, is the existence of a mobile payments infrastructure and access to micro loans. Countries with such infrastructure are seeing the rapid growth of such systems. Those without are not. Indeed, this is so central that we single it out as a key recommendation on the next page. But other enablers are also important:

Criteria for mini-grid development, such as the identification of anchor customers and minimum customer density, should be worked out, as these, in turn, would help clarify what is currently an unclear business model and rationale for mini-grids.

Invest in skills and training for clean off-grid system installation, repairs and maintenance. 

Implement mechanisms for the qualification and training of locals, enabling community participation and increasing local awareness.

Support the development and implementation of quality and safety standards, especially for mini-grid technologies.

Develop supportive regulation with clear responsibilities to allow private players to unlock the off-grid market potential.

Develop a supportive tax and customs framework with consideration given to import and tax exemptions for off-grid technologies.

Promote local distribution- and off-grid expertise centres, with non-discriminatory access for all interested companies and clients to these centres.

Support economies of scale by having planning mechanisms that enhance ticket size (project aggregation) and encourage process standardisation (e.g. with business plan templates).

Facilitate interactions between stakeholders to improve understanding of off-grid economics.

Recognise the value of and promote growth of mobile infrastructure, payment platforms 

Dynamic and flourishing consumer payment mechanisms and customer loans can do a lot to enhance the ability of households to purchase basic electrification systems and enable companies to develop markets for their products. In turn, this increases uptake, creates economies of scale and brings down costs. For example, the micro-credit environment in Bangladesh and the mobile-enabled payment and credit infrastructure in parts of Africa has spurred the uptake of standalone home energy systems. 

Mobile infrastructure is also crucial for facilitating ‘smart’ customer and home energy system interaction, giving providers a low-cost channel for customer relations and an ability to automatically manage non-payment. There are a number of measures that governments can consider to enhance the parallel development of mobile payments and financing systems to support the growth of off-grid electrification:

A clear national policy framework to support the spread of mobile infrastructure and inclusive finance and payment systems.

Exploration of opportunities for synergies between telecom grid and off-grid power developers, for example by examining the potential for mobile telephone masts to anchor clients for mini-grid systems.

Expand mobile payment potential by measures that encourage interoperability between different mobile platforms.

Reduce transaction costs for mobile payment

Solutions by the promotion of competition.

Establish an off-grid development and innovation fund

A highly visible development and innovation fund can play an important part in spurring off-grid growth in each country. At the moment there are many sources of possible grant funding, from multilateral institutions and from bilateral donors, but this can also result in a fragmented funding landscape and a scattergun approach to projects. A development and innovation fund, linked to the strategy established in the national energy access plan and map, can provide a more high-profile single focus for innovation finance, finance for pre-feasibility studies and for supporting local entrepreneurs. Among its functions, it can:

Provide access to finance for entrepreneurs and local businesses in the off-grid industry.

Develop a grant- and subsidy-funding mechanism for communities.

Consider innovative financial mechanisms, such as convertible grants (that convert into subordinated debt, which qualifies as equity, helping fulfil equity requirements from senior debt lenders).

Support feasibility studies for new business models, local entrepreneurs and technology implementation.

One approach can be for such a fund to have formal partnerships with commercial banks, in which the fund gives concession loans to local banks to administer. Loans can be released on a standard application that meets the requirements of the banks and also of the fund. Forging 

links between banks and project developers in this way can help commercial banks learn more about off-grid project economics and lead them to be more willing to lend from their own funds on market-based terms.

Have a high-level energy access champion who can drive results

A common challenge in many developing countries is difficulty in translating plans into effective delivery on the ground. There is a case for a high-level energy access champion, with their own project delivery oversight capability, who can cut across agencies and overcome obstacles and delays. Such an appointment might report direct to the president or prime minister, given the importance of energy access to the whole economy and society. The energy access champion would have a public duty to monitor and drive results, report annually on progress and have powers to remedy slippages.