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Africa’s minigrids sector has doubled the number of people it connected to modern and reliable electricity in the last two years amidst the COVID-19 pandemic.

Today, more than 500,000 people, healthcare facilities schools and businesses in sub-Saharan Africa can access stable electricity thanks to minigrids.

This is according to the Africa Minigrid Developers Association’s (AMDA) second edition of Benchmarking Africa’s Minigrids report. This report is the only sectoral report that provides a comparative analysis of consumption and revenue trends for the same minigrids sites over multiple years.

AMDA used the report publication to call for more support from governments and donors to the minigrids sector in Africa which continues to face financial, policy and regulatory constraints despite its current strong resilience.

The sector is struggling to scale up and realise its potential to accelerate access to clean and affordable energy, particularly in rural areas on the continent with nearly half its population (~600million) still lacking access to electricity.

Jessica Stephens, AMDA CEO said the minigrids sector has the opportunity to build dynamic, intelligent and renewable energy infrastructure that helps grow communities and economies. “Energy is the foundation for all of the SDGs and as such needs the kind of support from Governments and donors that traditional utilities have received. This is critical for the sector to realise this potential and provide stable renewable energy infrastructure to hundreds of millions of people,” said Stephens.

Slow disbursement of funding, policy hurdles and regulation battles can’t keep minigrids sector down

The Benchmarking Africa’s Minigrids report presents an in-depth analysis of how the industry changed across 2020 and 2021. Not only does it look at the impact of the COVID-19 pandemic on the minigrids sector, but it also uncovers some of the emerging opportunities for achieving immediate scale and long-term sustainability in the industry.

The report shows that the number of connections almost doubled from 40,700 connections to more than 78,000. The number of operational private sector minigrids in Africa grew by 39%, from 288 sites in 2019 to 400 in 2021.

A key finding is that revenue for minigrids grew consistently as their operational costs dropped, indicating that the industry is approaching financial viability. The Average Revenue Per User (ARPU) is a key metric of industry sustainability and business success. That figure was $8.30 a month for sites commissioned before 2019, up from $4.29 in the previous AMDA report published in 2020.

Figures show that financing of the sector remained slow because of a continued government bias towards the centralised grid. In 2020, only $208 million (13$) of the $1.6 billion of concessional capital committed to the minigrids industry was actually disbursed to minigrids developers. This is despite progress on all business metrics across the industry.

Perceived risk, complex fund design and the time frame to get through regulatory compliance are hindering the ability to disburse concessional capital.

Minigrids outperform utilities

Licencing remains a huge hurdle for projects which can often take more than a year to gain approval because of complex regulatory framework. The report points out there is an urgent need to create a regulatory structure that reflects the decentralised nature of minigrids, that could allow for the bundling of sites and bulk licensing of portfolios.

According to AMDA minigrids continue to outperform national and sub-national utilities on service metrics including up-time, power quality, number of reliable connects and downstream job creation.

“We hope that the insights provided in this report will spur action. AMDA is collaborating with sector players to address market barriers and leapfrog the developing and scaling of minigrids that are essential in ensuring the achievement of energy access goals,” said Stephens.

This blog is authored by Theresa Smith, a Content Specialist for ESI Africa. It is originally published on ESI Africa