At least 618 million Africans do not have access to electricity. While mini-grids provide the cheapest way to power at least 100 million of those people, the energy sector still does not have sufficient capital to support investments in new energy infrastructure. The sector needs billions of investments, which mini-grids have not raised because the underlying business model is not commercially viable.
The Mini-Grid Innovation Lab partners with 18 private sector mini-grid developers across Africa to identify, test, and scale innovations to the business models to make developers’ operations commercially viable. By establishing the evidence base to reallocate government fossil fuel subsidies to renewable mini-grids, this partnership will generate a market for mini-grids. The Lab’s research finds many productive uses of energy don’t make sense at tariffs above $0.50 per kWh, although developers are currently forced to sell power at double or triple that. Instead of charging customers high tariffs that reflect the full cost of providing power, developers can provide electricity to rural customers at affordable tariffs. More people can consume more energy while developers achieve the same, or greater, revenue. We can create a market for mini-grids and transform the economics of use for the 618 million Africans currently living without power.
By trialing tariff reductions on mini-grids at scale, the partnership aims to prove the case for replacing subsidies currently supporting inefficient fossil fuel-powered generation, with subsidies supporting efficient solar generation through mini-grids. Ultimately, we expect to generate a market for mini-grids, growing the number of mini-grid developers on the continent and reducing the number of Africans left unelectrified.
Africa Mini-Grid Developers Association (AMDA), Rockefeller Foundation, Department for International Development, Carbon Trust, The Shell Foundation, University of Massachusetts Amherst, Duke University, Carnegie Mellon University, and 18 private sector mini-grid developers across Kenya, Nigeria, Tanzania, and Zambia.