Policy options for mobilising investment in renewable energy mini-grids in Africa

Updated: Aug 18

14/07/2021




On 14th July the Climate Parliament organised a virtual roundtable with legislators from sub-Saharan Africa, focused on rural access to electricity. The meeting was convened in collaboration with the UN Industrial Development Organisation, UNIDO, and the European Commission’s Directorate-General for International Partnerships, and was co-sponsored by the Pan-African Parliament. The session started with a conversation between Nicholas Dunlop, Secretary-General of the Climate Parliament, and Nicola Bugatti, a key expert in rural electrification and energy islands at the EU’s Global Technical Assistance Facility (TAF) for sustainable energy.


Nicholas Dunlop began by stressing the importance of rural access to electricity and the need to rely on renewable energy, the cheapest option for all countries. While many communities do not possess a single light bulb, they do have renewable energy, which could be harnessed through mini-grids. He displayed a graphic of the globe to show how 1% of the world today is so hot it is uninhabitable for humans, crops and livestock. An increase in average temperature of 2°C could raise this figure to 19% by 2070 - or, if feedback loops kick in, by 2050 -, by which time large areas of Africa and Asia will be unliveable for humans, and we could have lost the Amazon basin.


Nick Dunlop said that energy costs have been falling but that trend has not translated to microgrids so as to attract private investment. Have faith, replied Nicola Bugatti. What is needed for a massive deployment of microgids in Africa? The most important way to move the needle is policy and the regulatory framework. Tariffs are key and they involve a sovereign decision by each country: everything else amounts to technicalities. Cost reduction requires volume. The best way to achieve economies of scale is through competition. We should achieve a price of 25 cents per Kw/hour by 2025, so that investors get a return, thinking not of “a mini-grid here, a mini-grid there”, not of projects but of programmes. They need guarantees that when the national grid reaches their community, they will still be able to make a profit. The cost of finance is directly linked to the cost of energy per Kw/hour. Currency risk could be subject to a guarantee, and tenders should be accompanied by guarantees that would mitigate risk: policymakers could be effective here.


In the following discussion, it was stressed that African countries have varying approaches to mini-grids and access to electricity. “All are interesting, they are sovereign, and all are good”, said Mr. Bugatti. “There is no one size that fits all.” Within West Africa, for instance, Ghana, Sierra Leone and Nigeria have achieved some excellent results with varying approaches. It was stated that governments should be more ambitious in their support of local companies, investing in their capacities. Ethiopia, for example, is considering cross-subsidies that could help to lower costs. Bugatti spoke of “the tyranny of the Kw/hour” which does not reflect all the dimensions of energy access. Costs should be linked instead to energy’s availability, and to the alternatives to it - walking to the nearest village, or simply remaining in the dark. Consumer incentives are needed. Professor Jakob Mulugetta, of UCL, said governments need the steady leadership of parliamentarians. Mini-grids have come of age, they offer grid stabilisation. Falling costs have increased demand. We need to be talking about energy services rather than Kw/hours. And it is impossible to over-emphasise the importance of public administration. No private company would seek involvement where the administration is dysfunctional.