April 14, 2017

AfDB Annual Workshop Recommends Actions for Decentralized Energy Access (30 March 2017)

15 priority actions for the implementation of country priorities on decentralized energy access have been recommended by a working group that was convened at the Annual Workshop of the African Development Bank (AfDB), held at the Bank’s HQ in Abidjan (Ivory Coast) on 29-30 March 2017.

Working group context  

The off-grid solar and mini-grid sectors are evolving relatively quickly.  Since coupling solar home system technology with GSM telecom technology in the form of the Pay-As-You-Go business model, off-grid solar has experienced tremendous growth in East Africa, and the business model is now expanding into West and Southern Africa.    The growth has also benefited from falling PV and battery costs.  However, with over 600 million Africans lacking electricity in their homes, the about 700,000 existing solar home systems in Africa merely scratch the surface of the market’s potential and are well below the target of 75 million off-grid connections by 2025.  Mobilizing the massive capital requirements and addressing the East African elimination of clean energy tax exemptions are critical issues facing the sector.

As for clean energy mini-grids, the African Union Energy Ministers just this month adopted the Green Mini-Grids (GMG) Africa Strategy.  This commits countries to simplified licensing of mini-grids, freedom to set cost-reflective tariffs, and predictable outcomes in the case of main-grid arrival.  These are all critical policy issues that were previously barriers to the establishment of mini-grid markets.  Relative to project financing, new debt financial products and services are appearing in order to compliment pre-existing grant programmes.  The mini-grids sector, however, is still in its infancy, with few proven business models.

SE4ALL Action Agendas in all African countries highlight the need to foster development of decentralized energy access solutions.  Priority issues include integrated energy sector planning, public-private sector partnerships, equipment quality standards, local manufacturing of system components, capacity building for installers, and rural energy funds.  Examples of quantitative targets include 635,350 solar homes systems in Zimbabwe and 900 mini-grids in Malawi, both by 2030.

Four “scene-setters” made short presentations on recent developments:

  • Dean Cooper, Chairman of the Clean Energy Mini-Grids Partnership (and facilitator of the session), spoke about the Africa Union’s recent meeting in Lomé of the Specialized Technical Committee on Energy, and the adoption of the GMG Africa Strategy.
  • Koen Peters, Executive Director GOGLA, presented the state of the SHS market in Africa, challenges encountered and key asks from stakeholders (governments, donors, private sector etc.).
  • Nicola Bugatti, ECREEE, presented the findings and recommendations from the recently concluded ECOWAS Mini-Grids Workshop and mini-grid trends in West Africa.
  • Joao Cunha, from the African Development Bank, presented the key outcomes from the off-grid revolution event.

The working group of around 40 international experts discussed a wide range of issues related to decentralized energy access in developing countries, and recommended 15 priority areas for follow-up action:

1. Best practice/case studies/demonstration: to  reduce the perceived risk (uncertainty) of investors

2. Stakeholder forum: to bring together public & private sector, product/service providers, civil society

3. Advisory note: what not to regulate (short and fast)

4. Assessment of tariff options: national tariff or cost-reflective tariff (or other approach) – what works where?

5. Specify options for hybrid solutions: when/how are hybrids best to meet customer expectations?

6. Capacity building:  training programmes for installers and for journalists

7. Quality assurance framework: for decentralized technologies

8. How to use subsidies: collate experiences and lessons to find the most effective use of “appropriate taxes”  (without undermining the market); avoid overnight changes

9. Assist the formulation of policy frameworks: prepare model documents for policy/regulation to encourage private finance; leave door open for changes in dynamic market

10. Funding sources: ask MDBs to commit funds to off-grid applications and make known what incentives are available

11. Prepare options for grid extension: investor-friendly scenarios ready for the arrival of the grid

12. Connect info portals: increase knowledge of decentralized needs and opportunities; link African outlets to international media networks

13. Financial incentives:  specific provision for off-grid applications (e.g. tax relief, guarantees)

14. Mapping of resources: clear information on local fuels sources accessible, related conditions; allow financiers to id best sites

15. Prepare a model for integrated planning: consider the development focus (not only energy); provides an anchor for investors

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