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On 27 April, the Climate Parliament organised a parliamentary roundtable on investment in minigrids for rural electrification, in collaboration with the United Nations Industrial Development Organization (UNIDO) and with the support of the European Commission (DG INTPA). MPs from Ghana, Kenya, Liberia, Malawi, South Africa and Zimbabwe participated in this session which featured Nicola Bugatti, a key expert on rural electrification at the EU Global Technical Assistance Facility (TAF) for Sustainable Energy. Rana Ghoneim, Chief of the Energy systems and Infrastructure Division at UNIDO, presented the main conclusions of the Clean Energy Mini-Grid Policy Development Guide developed by UNIDO in partnership with other organisations.
We now have less than eight years to complete Sustainable Development Goal 7, which aims to ensure access to affordable, reliable, sustainable and modern energy for all by 2030. In Africa, renewable energy will play a critical role to help us achieve it. The continent has by far the best levels of solar radiation in the world and also enjoys great wind and hydro resources. Although governments often concentrate their efforts on expanding the national grid, clean energy minigrids and off grid solutions will be critical to improve energy access in the continent. As several MPs pointed out, minigrids are sometimes the only solution that makes sense. Indeed, in the case of remote communities comprising only a few households, spending money on expensive cables to extend the national grid would not be economically wise. According to Nicola Bugatti, finding the most cost-efficient solution for each village requires a thorough analysis of all the costs for each technology, considering not only the initial investment but the total costs over the whole life cycle. Although certain countries choose a model where the investment is entirely public, most nations have opted for public-private partnerships. In the case of Sierra Leone, minigrid projects usually start with a first round of public investment, followed by a second round of competitive bidding for the private sector. This model ensures adaptability according to the evolution of market maturity, and allows us to lower the costs of energy, as project developers compete against each other.
A number of barriers are still preventing a rapid expansion of minigrids across Africa. To overcome them, our expert encouraged the MPs to focus their efforts on two fronts. On the one hand, parliamentarians can help governments improve the regulatory framework to create a more business-friendly environment and attract investors. This implies making sure their country has strong public institutions dedicated to energy access, such as rural electrification agencies, and an efficient and responsive energy regulator. On the other hand, MPs should also focus on enhancing the bankability of projects by encouraging their governments to provide financial de-risking mechanisms. Although parliamentarians are generalists, they are experts at influencing national budgets, and they have the power to make sure their country actually puts public money on the line. Indeed, one of the main concerns of project developers is that if the national grid arrives in the village where they plan to invest, they might not get paid anymore and lose their initial investment. But if the government has skin in the game too, it sends a powerful message of confidence for investors. While presenting UNIDO’s Clean Energy Mini-Grid Policy Development Guide to help policymakers navigate the renewable mini-grid market, Rana Ghoneim insisted on the need for decisionmakers to always consider the risk of termination and introduce demand risk mitigation tools in the policy framework. Governments can reassure investors by providing financial guarantees, credit lines and a minimum price through feed-in tariffs.
MPs can play an important role explaining to their governments that spending public money on energy access is not just an expenditure, but an investment on many levels. The energy price fluctuations that we are observing today because of the war in Ukraine remind us of the dire economic consequences of our reliance on fossil fuels. Investing in electrification with renewable energy generation means investing in our energy security and independence. Rural electrification is also an investment in health and in a better quality of life. Households deprived of electricity must rely on burning firewood for cooking, contributing to deforestation and air pollution which causes premature death of more than 3.8 million people every year, the majority of whom are women and children. Last but not least, electricity is an economic enabler. Much more than just turning on a light, it allows communities to develop economic and income-generating activities, and to build up services. Investing in energy access is investing in the social and economic development of the population.