Insufficient development of centralised electricity grids has created a massive and heavily-subsidised diesel generator economy in Asia and Africa, where 3.5 billion people remain unserved or underserved in terms of reliable energy. According to Wood Mackenzie’s latest report, at least 17 African countries generate more electricity from distributed diesel than from centralised power grids. This scenario impacts the poorest (largely rural and farming) communities, which are also the most vulnerable to climate change. These communities are also highly price-sensitive, so the recent uncertainty in global energy markets and the escalation of diesel prices have hit them hard. While power generation and access levels in Africa remain among the lowest in the world, World Bank research notes that with renewable energy sources becoming increasingly cost-competitive, solar mini-grids are the most cost-effective form of rural electrification for nearly 500 million people.
One company already scaling these renewable-energy-powered solutions is Husk Power. A leading mini-grid developer with operations in India and Sub-Saharan Africa (SSA), Husk Power signed an UN-Energy Compact this year, committing to build 5,000 mini-grids that would reduce these regions’ diesel use by 700 million gallons by 2030. At least 500 of these mini-grids will be built in Nigeria as part of the “Sunshot Initiative” that aims to benefit at least 2 million Nigerians with reliable, renewable energy by 2026 and take at least 25,000 diesel and gasoline generators offline. Manoj Sinha, the company’s CEO and co-founder, talks about the importance of “frugal innovation” in serving the unserved and underserved and provides insights into the company’s latest expansion efforts in Africa, its partnerships with regulatory bodies and policy reforms that can improve clean power supply and climate resiliency in emerging markets.
Fuelling rural electrification growth using solar mini-grids in Sub-Saharan Africa
According to the International Energy Agency (IEA), Africa’s economy will be four times larger by 2040, with energy demand projected to rise by 60% as the continent undergoes rapid population growth. Yet, the report simultaneously mentions that current policy and investment plans are not enough to meet Africa’s future energy needs, with little progress having been made in improving energy access and reliability through the power grid over the past decade, particularly in West and Central Africa. As energy access is crucial to unlocking the region’s economic potential, the World Bank notes that broad reforms are needed to incentivise private sector investment and improve electrification efforts through reliable methods, such as off-grid solar systems and mini-grids that can reach rural communities and provide clean electricity to service healthcare, schools and businesses.
“In SSA countries like Nigeria, national grids have failed to serve or have unreliably served tens of millions of businesses and households. As the recent Afrobarometer survey indicated, while 65% of respondents were reported to be connected to the grid, only 14% mentioned having electricity that operated sufficiently”, Manoj Sinha notes.
For these reasons, he adds, “besides off-grid mini-grids, the development of mini-grids that are interconnected with the main grid could have a large impact by broadening reliable energy access and driving long-term sustainable growth in Nigeria and across SSA”.
The Nigerian government set up the Nigeria Electrification Project (NEP) in 2018, creating a performance-based grant to incentivise private sector mini-grid developers to enter the market. More recently, the NEP has expanded to include communities within the distribution companies (DISC
Os)’ existing service areas, allowing companies like Husk Power to serve both off-grid and weak grid communities.
Given the enabling market conditions and Husk’s operational learnings from a decade of experience in India, Sinha says, “this knowledge we’ve built over 14 years has helped the Nigeria team scale at a much greater rate and, through the NEP grants, recoup our up-front capital investment and reinvest that money in building even more projects. This has allowed Husk to become the only company to launch multiple mini-grids at once in late 2021, when it commissioned six sites in Nigeria”.
Flexible pricing and local community education help improve consumer adoption
In the IEA’s net-zero by 2050 scenario (NZE), nearly USD $4 trillion of annual investment in clean energy is needed by 2030, 70% of which in emerging markets and developing economies (EMDEs), driven mainly by network expansion to connect millions of new customers to the grid, address growth in demand and support end-user electrification. Most importantly, the IEA has noted that innovative business models will play an essential role in ensuring such network expansion takes place affordably and inclusively. As private-sector-enabled mini-grids are increasingly being recognised as delivering quality last-mile electrification in the SSA region, Sinha points out that “scaling up mini-grid infrastructure also requires educating local communities on electricity use. This has involved having a local team that interacts with consumers and teaches them about electricity and its use – such as solar electricity cost compared to diesel generators or kerosene, how much electricity appliances use, best practices to reduce energy usage, etc.”
Sinha notes that, as mobile usage continues to rise in the SSA region, “Husk Power has been onboarding consumers onto its mobile Huskify app to facilitate them in their journey and, based on individual needs, customise pricing options and provide credit access to purchase energy-efficient appliances (fans, TVs, refrigerators, etc.)”. This frugal approach of localising teams and bringing consumers onto a digital platform to access various services has allowed Husk Power to scale quickly, generate revenue and optimise mini-grid utilisation within several months in Nigeria. This process took a couple of years in India.
Furthermore, with broader policies aimed at incentivising the development of mini-grids, Sinha plans to expand Husk’s local teams to improve the consumer experience. “We already have a 100% local team in Nigeria, with a strong gender balance. As our fleet of mini-grids grows, we plan to source field sales agents from the communities we serve and field technicians and security. This will help our team service consumers more efficiently track key socio-economic metrics from our mini-grid system in the communities.”
Local manufacturing and integrated electricity grids can address future challenges
Based on the International Renewable Energy Agency (IREN
A) ‘s report on the African energy market, many countries remain highly dependent on traditional energy sources despite a strong economic rationale for transitioning towards a low-carbon economy. IRENA notes that to accelerate this energy transition, African countries need to become producers rather than just consumers of low-carbon technologies. This will allow them to build long-term resilience, derisk supply chain disruptions and generate high-skilled employment opportunities in equipment design and manufacturing. In several SSA countries, the public-private partnerships (PPPs) model has been touted as an efficient way to develop and manufacture renewables and, more critically, build inter-connected, privately-owned mini-grids in partnership with state-level distributions companies (DISCOs) throughout the region.
According to Sinha, with electricity demand continuing to rise in SSA, “developing local manufacturing would help scale up the deployment of renewables. This is because supply chain disruptions can be eased, and mini-grid developers like Husk can diversify suppliers and incorporate warehousing as needed to continue building the regional power infrastructure”.
To help establish local manufacturing capabilities in the SSA region, he adds, “governments should look to put forward more comprehensive industrial policies that derisk manufacturing and collaborate with educational institutions to prepare the workforce for careers in the manufacturing and technology sectors”.
Since a reliable power supply is crucial to the manufacturing sector, Sinha recommends “strengthening the collaboration between mini-grid developers and DISCOs, so more integrated electricity networks are established”. He believes that through these structural changes, “consumers and businesses would then be able to experience better power supply service and reliability.”
Moreover, for the SSA region, as water scarcity and food security worsen from the impacts of climate change, Sinha said that “these local manufacturing and integrated grid networks would provide more capabilities to address these issues. This is because water pumping and irrigation equipment could be locally produced and, through a more reliable power supply, used to extract water, grow food in the communities, and build climate resiliency”.