The Mini-Grid Business

Where to go next – Which countries are at the top of the funders’ list? PART 1

December 06, 2023 Nico Peterschmidt / INENSUS Season 1 Episode 10
The Mini-Grid Business
Where to go next – Which countries are at the top of the funders’ list? PART 1
Show Notes Transcript Chapter Markers

Ever wondered how mini-grid grant funders think, decide and act?

In this insightful episode, we're thrilled to host a panel of experts from the forefront of funding Africa's mini-grid sector. Join us as Benjamin Curnier from AFDB SEFA, Tatia Lemondzhava from World Bank ESMAP, and Dennis Nderitu from GEAPP delve into the mechanics of driving mini-grid initiatives across Africa. They'll illuminate the strategic differences in funding pivotal projects by major institutions and the critical role of client governments in these endeavors. This is PART 1 of the discussion. PART 2 will be published one week after PART1.

We begin by exploring the respective approaches of SEFA, ESMAP World Bank, and GEAPP in funding mini-grid projects, revealing the complexities of coordinating among each other, with other sector stakeholders and especially with the client governments. Our guests shed light on the crucial data and analytics driving these initiatives, showcasing how mini-grids can effectively bridge the electricity access gap.

Shifting focus, we spotlight the African Mini-Grid Developers Association (AMDA) and its significant contributions in promoting mini-grids as a commercial reality. Hear about AMDA's efforts in capacity building, regulatory dialogue, research, and access to capital, all aimed at transforming the African energy landscape. We discuss the importance of a unified private sector voice for effective government engagement.

This episode delves deep into the funding dynamics, revealing that it's not just the banks but the governments that define the flow of funds, leveraging the banks' knowledge and support for developing frameworks, laws, regulations, and procurement procedures. We highlight the vital role of private sector organizations like AMDA in these early decision-making steps and the necessity of building trust with governments through data-driven success stories.

Discover how organizations like GEAPP and SEFA are overcoming the 'hen and egg' challenge by providing catalytic donor finance, demonstrating successful business models, and generating opportunities without indebting governments. They play a pivotal role in informing governments about the mini-grid sector's potential, carrying the opportunity cost on behalf of these governments.

With the belief that the mini-grid sector is rapidly building trust between governments and the private sector, we anticipate a surge in countries taking loans for private-sector mini-grid grants under programs like the World Bank's DARES.

Tune in for a comprehensive understanding of the intertwined roles of development banks, donors, and governments in shaping the future of sustainable energy through mini-grids.

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Speaker 1:

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Speaker 2:

Hello, this is Nico. Welcome to our episode on when to Go Next. Which countries are at the top of the funders list? My guests are representatives of three major funding institutions Benjamin from AFDB, cepha, tatiya from World Bank, s-map and Dennis from the Global Energy Alliance for People and Planet, g-up. Benjamin Cronier is a sustainability and management director with nearly 20 years of experience. He joined AFDB's Sustainable Energy Fund for Africa, cepha, as the green mini-grid lead to the day exactly two years ago. Happy anniversary.

Speaker 2:

Ben Benjamin is responsible for the development and delivery of CEPHA's green mini-grid portfolio of investments. This includes leading the design and delivery of the Africa Mini-Grid Accelerator Program, amap, which is CEPHA's flagship TA program, and the design of funding solutions for green mini-grid programs in several countries, including Guinea, mauritania and Ethiopia. Tatiya Limonsaba is an energy specialist with the World Bank's Energy Sector Management Assistance Program, s-map, where she leads the global facility on mini-grids, which provides technical assistance and ground support to pipeline and ongoing lending projects with mini-grid components across the World Bank portfolio. Tatiya is also part of several World Bank operational teams implementing large-scale lending projects in key priority energy access countries such as Nigeria and Ethiopia, where she leads the dialogue with the governments and key sector stakeholders on delivering electrification through mini-grids and off-grid methods.

Speaker 2:

Dennis Zindarito is the manager of energy systems at the Global Energy Alliance for People and Planet, g-up. He provides technical support, input and advisory across G-UP's partnerships and projects. Before joining G-UP, he has worked in energy for impact, deploying solar, biomass and hydro mini-grid technology with Davis and Shirtliff, in C&I Solar and in PowerGen Renewable Energy for mini-grids in Kenya, uganda, tanzania and Rwanda. Once again, welcome everyone. To get started. I would like to find out what is the motivation behind funding the mini-grid sector for a large funding group, a development bank and so on.

Speaker 3:

So, from the World Bank's perspective, as you might know, we have conducted a lot of research and analytics into the sector, especially in our program on ESMAP, and it's very clear and obvious to us that mini-grids have a tremendous potential to help close the electricity access gap by 2030. From our assessments, we believe that modern mini-grids third-generation mini-grids could serve as the least cost solution to electrify about 490 million people by 2030. So for us, this is not really a question of why mini-grids, but a question of where do mini-grids make the most sense? And as we work with our client governments to help them create comprehensive, data-informed national electrification programs, we offer them a suite of options to support, be that through the grid, through mini-grids and off-grid. And it's our job to really make the case for each solution makes the most sense in each context and go from there.

Speaker 2:

That's interesting. Are mini-grids always embedded in larger programs on the World Bank end?

Speaker 3:

No, but that is increasingly what we're seeing With the World Bank.

Speaker 3:

Really it's demand-driven work. So it's not our job to tell governments where exactly they should direct the funds that they borrow from the bank. At the end of the day, they're borrowing credits from us loans highly concessional, but still loans from us and it is up to the government and the line ministries to determine what is the best way to use those funds. But it is our job to work with them to help develop the data and the analytics, to understand what are the best tools available, what are the most innovative and frontier options available to business models and what they can do to create an environment for those to take off at scale. So we are seeing increasingly more and more mini-grid demand from our client governments, and not just that but in terms of the scale that governments are looking for, fewer and fewer countries come to us asking for pilots and to understand if mini-grids could work in one or two communities. More and more there's really demand for comprehensive support portfolio programs and really having them embedded as core options in addition to the grid and standalone solar.

Speaker 2:

Alright, Ben, is that the same at your end in AFDB?

Speaker 4:

Yes and no all at the same time. I think it's important to distinguish between the AFDB, which obviously has a very similar business model to the World Bank and through its lending will lend to national programs or to sovereign operations, versus CEPA, which is the fund for which I work more specifically, which is a special fund within the bank which administers donor-funded monies and invests those very specifically into private sector-led business models that deploy renewable energy on the continent SLOAD, which is Utility Scale, renewables and Energy Efficiency. The objective here is always to fund the deployment of private sector-led business models to deploy renewable assets on the ground, and GreenMiniGrid probably takes up around 30-40% of the overall CEPA portfolio. Our investment is broadly in two types.

Speaker 4:

So we do the provision of technical assistance support and that funds feasibility studies, impact studies, enabling environment support, and there our beneficiaries may ultimately be the public sector. So we might work with the government in order to review the regulatory environment, to promote private sector participation in a GreenMiniGrid market, or indeed identify sites, conduct preliminary feasibility on those sites with a view to then eventually running a national-scale GreenMiniGrid program. And then on top of that, we then move into our concessional funding instruments, which are funding the projects themselves Now in the GreenMiniGrid space, often that's viability. Capex grants could be reimbursable grants or indeed concessional debt, and here we're funding the projects themselves or, as you've rightly pointed out, the developers themselves. We don't provide lending to the government to then onlend to the beneficiaries of those GreenMiniGrid programs. We're funding the projects themselves.

Speaker 2:

Yeah, and when you say you fund the projects or the developers, does that mean you provide equity or debt or grant?

Speaker 4:

If we're going through some sort of kind of national program, then we might be funding the grant. We have other circumstances where we're going to fund or make debt available, or indeed equity available through platform structures for developers, so we can ultimately end up funding multiple bits of that capital stack.

Speaker 2:

Dennis, how does GIAP fit into this landscape of funding organizations?

Speaker 5:

Yeah, thank you very much, Nico. It's a pleasure to be on this platform. Giap is a funding platform formed by three philanthropic funds and our main sort of top line targets are on improving access, enhancing jobs and livelihoods and reducing carbon emissions. So for us really, mini-grids are key to what we do and we do sort of hold the same appreciation that mini-grids are going to play a key role in electrifying a lot of people in low and middle income countries. On our side we really are funding into different avenues. We fund into government to improve their capacity so that all the challenges of project development are reduced, whether it be regulatory or sort of any government handholding that is required. We also fund directly into private companies and mostly why we do this is to try and generate proof points to show what works and how can that be enhanced, because it's really a sector that has gone through a lot of motions and one thing that is clear is there's need to show what sort of models work and scale that as much as possible.

Speaker 5:

Finally, our work is informed partly by the experience of our colleagues in India. So the Rockefeller Foundation, which is one of our anchor backers, had funded a program in India called Smart Power India seven or eight years ago and the team there really got in neck deep to work with mini-grid developers and they were able to develop more than 500 grids and we sort of see a lot of learnings that can be replicated in other countries in the global south and we want to help do that and help scale that. So our money goes in as catalytic funding and philanthropic flexible funding. So we do think that is needed to take the sector to the place where it needs to be, so that it can attract more private funding. That's the role that GIP is really looking to play in the mini-grid sector in the next couple of years. Just get the market ready for the scale that it requires to be at to serve all the people.

Speaker 2:

Dennis, who are typical recipients of your funding? Is that private sector, mini-grid companies? Is that governments? Is that research institutions?

Speaker 5:

I would say it's sort of spread across the three of mentioned and even others.

Speaker 5:

We've funded government in Nigeria to create an energy transition office, which is all about the energy transition story in Nigeria.

Speaker 5:

So that is something that we see as necessary to create an enabling environment. And once that is done, we do need to provide the viability gap, funding or any sort of capital that is required to tip the projects into execution. So we also fund into developers directly or through instruments that we've funded as well, such as aggregated procurement facilities, the RBF facility called UEF, that is run by Sustainable Energy for All, and a lot of other instruments. And we see the need of bringing the community of practice with us. So what we sort of call centers of excellence, where the organizations which traditionally have been offering very, very good intelligence to the sector. We see value in funding them as well to continue providing the leadership that is required and the deep dive analysis that is required for us to get solutions that work across different markets. So I would say it's a breadth of that, plus any other emerging requirements, which is companies offering appliances or service providers that are necessary to make business models viable.

Speaker 2:

All right, given that each of the funders represented here today has a slightly different view on the sector and comes from a different angle. How do funders coordinate amongst each other? For the World Bank, for example, it doesn't make sense to go into a country where there is no developer prepared to pick up the task of implementing mini grids. For AFTB, you would probably be looking for markets where private sector could actually engage in and for G-UP, most probably you're also looking to invest your funds or the development of new concepts into markets that will soon be picked up by one of the large funders for larger mini grid scale ups. So how do you coordinate each other? How do you talk to each other? How do you define which countries you will go to next?

Speaker 3:

So let me go first, Nikon, that I do want to provide a bit of context for what ESMAP does within the bank, and then that will also help me answer your question more clearly. Esmap, which is a very long-term energy sector management assistance program, is a separate entity that sits within the World Bank. It's a trust-funded, donor-funded program within which I lead the global facility on mini-grids, and it's a pretty unique entity. I haven't seen anything like that in any other international organization. Really, we have donor funds allocated to us by bilateral donors that we work with who trust us to then channel those funds to create the pipeline of new World Bank projects. So what we do with that funds that we have directly within ESMAP is that we provide grant support and, more importantly, direct technical assistance and advisory support to our own projects, to our own task teams that are creating new lending programs, and that can be short-term, just-in-time support. That can be long-term support, where we embed senior experts onto our teams to help them design the programs, to help inform various studies, the dialogue with the government on draft regulations, whatever that may be. We also do what's called cross-support, where we ourselves, as the core team members, lead the preparation of lending programs directly. And in that way I guess I would say that I wear two hats within the bank, because I work both on the ESMAP side and also directly on the lending side, where I help both develop the pipeline and then also to actually create and implement those projects.

Speaker 3:

That's sort of to address your question about how we coordinate and how we go about developing the pipeline and understanding what markets we need to go in. In a way it's demand-driven. We need to understand that the country is interested and committed to having a program there and once we get that sense then we go into a deep donor coordination dialogue with our other partners in that country to see what they've already been doing, what we can help facilitate and catalyze and bring in other donors to come in and partner with us. But in a way we also target specific countries where we feel that there's a very significant potential, and usually that's the highest-access deficit countries, right, and we talk very closely with those teams and help them understand better where the mini-grid market stands, where the access space is at the moment and what we feel they could benefit from in terms of better understanding the context in that country.

Speaker 3:

In our program we have what we call the 10 building blocks or the 10 frontiers where we feel the mini-grid market needs to be addressed in order to scale in that country. So we usually work with that task team and with that government to help basically measure where that country stands against each of the 10 building blocks. We have kind of a traffic light system and we conduct analytics and studies to understand where that country stands and then we help design programs that target each of the building blocks wherever they may be. And in that sense we also then work with our donor partners. We work very closely with our AFDP colleagues, with our Rockefeller and GEP colleagues and many, many others in each country to understand what their instruments are, what their advantages are, how they can come in where we cannot, to help really create that catalytic environment, especially in supporting the government and creating that catalytic environment for the market to flourish.

Speaker 2:

Thank you, Tati. It sounds a little bit like World Bank is kind of taking the lead and coordinating with the government to bring in other funders and donors. Is that the same perspective that you have, Dennis? Are you waiting for the World Bank to bring you into a country?

Speaker 5:

GEP is a relatively young organization. We are about two years old now. So when it comes to a question of us going into countries, these are countries where a lot of our alliance partners are already operating. So for us it's a question of how do we come in and work well together and add value to all the activities that they already do and they're very strong at.

Speaker 2:

Let me ask the same question to Ben Ben. Is that also your understanding that basically the World Bank goes first and then SEFA comes after?

Speaker 4:

I wouldn't necessarily characterize it like that. I think there are obviously different countries where the level of donor involvement and integration is different. I think there are countries where, indeed, the World Bank is probably extremely well placed to lead on the interactions of government and I think it makes sense for other donors to support that action. And I think in other circumstances maybe it's another donor who is leading those interactions. And the example that springs to mind in the immediacy is Madagascar, where, kind of arguably, giz has the longest history of supporting the development of the mini-grid market in the country and there it makes sense for other donors to support and to try and align activities with that particular donor.

Speaker 2:

Let's dive a little bit deeper into this Madagascar example. Giz, for example, is not a large grant funder. They can provide technical assistance, they can help government to somehow set up regulation, maybe fund some pilot projects or so, and then if you see, okay, now this is going into the right direction, what happens then?

Speaker 4:

Yeah, I think that's a good characterization of the beginning, and indeed GIZ and then to some degree, kfw, have gone on to fund particular windows of projects, as they're known, in Madagascar. And then other donors have come along and funded subsequent windows, and that includes in particular the AFD and the EU. And then more recently, the World Bank is launching a pretty sizable program, which obviously Tatiya will be able to provide more information on, and we're in the process of completing a technical assistance, if you like, kind of country review, with a view to understanding what additional funds and what types of funds would be necessary to continue to support that environment. And by quantum and type, I mean, is it grant or is it concessional debt, or is it indeed availability of equity that is needed by the developer in order to meet the funding requirements of both the existing calls for proposals and the future plan call for proposals?

Speaker 4:

And actually to answer your question about coordination, there is a regular bimonthly donor call which a number of us participate on, specifically for Madagascar, and there have been kind of bilateral calls between us, world Bank, ifc and GIZ, all with a view to trying to coordinate and to make sure that our support is similar in nature, noting that too many donors and too many different approaches can be quite damaging in terms of the interactions with local stakeholders. So making sure that we have a consistent message, and indeed I might take the liberty of citing Mauritania as an example where it's worked extremely well. Sefa has just recently announced that it will provide an additional 14.5 million euro grant to extend the Rindir mini-grid program that was originally designed by the EU, taken up by the AFD and has also parallel funding from the World Bank. So here you have a lovely example of what is now a fairly sizeable program which will electrify nearly 100 localities through a private sector-led business model, with parallel funding coming from AFD, eu on the one side, world Bank and now SEFA.

Speaker 2:

Mauritania is definitely an interesting example. Do, then, all funders agree to the same funding conditions for private sector, which is probably expected to implement the mini-grids?

Speaker 4:

In the case of Mauritania, the business model that has been, if you like, kind of agreed and negotiated with government, that was very much led by AFDEU at the beginning. They then obviously put a quantum of funds on the table to promote that, and very much that same model has been taken up by the World Bank and now subsequently by CEPHA. This is one of the unique cases where CEPHA will fund, if you like, through a sovereign operation where the utility is actually being given the responsibility for rural electrification going forward. And so they will run the procurement process to select the private sector developers on the lots to be procured, and then the grant funding will be made available to the concessionaires who win the procurement, and grant agreements will be signed between the developers and the respective kind of grant funders. So the conditions are all the same, but each funder will manage his grant contracts.

Speaker 3:

This is really important. I think what Ben is providing an example for in Mauritania. So another one that I thought was really useful and interesting to exemplify is, of course, the Nigeria case. Right, because Nigeria is, we all know, is by far the most dynamic, meaning good, market at the moment, and I think it's also a really good example of a lot of donors partnering and leveraging their strengths in the market.

Speaker 3:

Giz, of course, had the Nigerian Energy Support Program and ESP that was active in Nigeria for quite some time and that really paved the way for the bank to come in with the Nigerian Electrification Project later on, which we launched in 2018, and it became formally effective in 2019. The Nigerian Electrification Project was actually originated by our team in ESMAP. We provided a lot of initial pipeline support, technical assistance on the knowledge side, a lot of analytics and studies and directly cross-supporting to that project to work with the government. Myself and several of my colleagues were part of that team that set up that project directly in the country. And then, of course, we've had a very close coordination with our AFDB colleagues, who built on a very similar structure of the Nigerian Electrification Project to set up their own NEP project that followed the same rules, the same structure, the same conditions for the private sector, for the developers to follow for the grant program, and I'm happy to say that the NEP so far has been probably the most successful mini-grid program in the world. I think to date we have about 103 mini-grids that have been commissioned and now the bank is working with the government to prepare the new Nigeria Dairs Project which doubles down on that ambition. And I do feel that in Nigeria in particular we've seen a very significant example of a lot of donors, a lot of partners coming in and trying to understand what can we from our side add to the equation to really unlock the scale?

Speaker 3:

Another, I think, example that's really useful is Ethiopia, which is a very different context and a very complex context.

Speaker 3:

Very few mini-grid developers, basically no foreign developers present in the market. The World Bank has had a very long-term dialogue there with the government and a lot of presence of other donor partners, but everyone's sort of trying to understand how to unlock the market. We sort of came in at the same time as Rockefeller Foundation colleagues were engaging with the government and we were able to design programs that are quite complimentary. We have the Ethiopia Adele program that the World Bank helped the government design and the Rockefeller and subsequently GAP colleagues have the DreamPilot program in which they also engaged the AFDB staff colleagues. So we're all kind of trying to push at innovation in the market at the same time. Now it hasn't been all smooth sailing. Of course it is a complex context with security challenges in the country and with the pandemic and things like that. But it is very much to me an example of donor partners working closely together to try and understand how we can all leverage our strength and work in the same direction from our own sort of vantage points.

Speaker 2:

Tatja, you said earlier that you're mainly responding to demands from governments. Are the governments then taking the lead also in structuring the programs, or is that somebody else? Because usually mini grids are often new for governments and probably they don't really know how to structure such a program.

Speaker 3:

So that's a very important question, nikon. I'm glad that you asked it, because in the mini grid facility we interact quite a bit with the private sector, with the developers obviously, and we do hear a lot of frustration from the private sector on. You know, why is this project taking so long to design, for example, or why is this country not engaging as much on mini grids as we expected to? And it's really important to remember that the World Bank works with the government on the entire energy sector. Our dialogue is broader than just access or just mini grids specifically, and there is an MOU, there's an understanding on what are the priority areas for the government and where do we come in to support them on all of these right On utility reform or tariff review or whatever else may be, you know, efficiency, retrofitting, and then also on access. And that's sort of where the dialogue starts and then it trickles down slowly to okay well, access is a big priority for us and the World Bank task teams come in and leverage as map expertise and leverage specific access experts within our own teams to help them talk with the line ministries within the government and we have the Ministry of Energy and sometimes there is a rule of defecation agency that we talk to, to then sit down and discuss. Okay, if we're talking about an energy access program, what would that look like? Would there be a grid extension program? Would there be a mini grid component? Would there be standalone solar? You know, we have to work on a least cost electrification plan generally and understand if that is present in the country, if it's up to date, if it's informed by a geospatial mapping and if there's an understanding of the demand side. You know, what does the productive use aspect look like? And then we yes, indeed, we very much work with the line ministry and with the dedicated agency.

Speaker 3:

Usually we help the government set up a project implementation unit or project management unit, and then it is our job to support the government but make sure that they are in the driver's seat, to make sure that they are the ones who feel empowered to design a program that they feel will be most impactful.

Speaker 3:

Right, it's not our job to tell the government that this is what you should be doing, but it is our job to support them in identifying the resources, in knowing what are the different tools and the data that might be available to them, obviously to create the knowledge right.

Speaker 3:

So in this map we generate a lot of publications and handbooks and policy notes to also really help capacitate and empower them to decide what makes the most sense in each context. So we very much work with the government closely to create and design a project and that usually takes quite a bit of time. It can take anywhere between nine and 18 months, depending on the country, to design a project and then, as the project is being implemented, it still takes a lot of time to set up capacity building programs, training programs, training programs to help support the implementing agency in what their goal is with that program. So it is in a way a large bureaucracy and it takes time to design our programs. But we are usually the biggest mover in any market, we are the biggest lender. So it is also our responsibility to ensure that we are creating the right environment and that we are hearing what the government is telling us as part of a long-term dialogue to really hopefully set all the right pieces in place.

Speaker 2:

What, according to your experience and this is a question to all three of you what, according to your experience, motivates government to look into mini grids instead of main grid extension or solar home systems? And then the more important question what can the private sector do to motivate more governments to look into mini grids?

Speaker 3:

To answer your question, nico, I think we all know that many national utilities aren't performing very well and they can be in quite a bit of distress and generally focused on improving service to their existing customers.

Speaker 3:

Rather than extending the grid to rural and deep rural areas and that's completely understandable. Right, it is important for them to maintain the bottom line and continue to function. So very often governments come to us because they feel that mini grids might be a better solution than trying to pressure the utility company to extend the grid beyond where it would make the most economic sense for them to go. And in that sense we then talk to the governments closely to understand how does that fit into the broader context of what you want to achieve? Because often governments expect mini grid companies to be able to do impossible things. They expect them to be able to deliver electricity in very deep rural areas but at the same time to charge their uniform national tariff. Because governments feel very strongly about equity and fairness to their citizens, which is obviously very important in the right impulse. But it does take a lot of dialogue for us to highlight to them that the economics just don't work right If you feel that your national utility will not be able to extend the grid to those areas without additional subsidies, then a smaller company with tighter margins and higher costs and more expensive debt will not be able to do the same without being able to charge a cost-reflective tariff. And it is a long-term conversation. It fits into the much bigger narrative and dialogue that we have with the government about the tariffs that are charged by the utility, about the regulation that's present in the country and many other aspects right, but it is a very important conversation for us to have from the get-go, just to make sure that we're all on the same page about what isn't achievable and feasible for developers to do and companies to do within the framework that the government sets.

Speaker 3:

To answer your second question, nico, about what mini grid developers can do, I do feel that it's very important for developers to have a united voice, and so that's why we have always made an emphasis and a point to support the Africa Mini Grid Developers Association and to partner with them in many contexts to make sure that the developers feel they have a voice in the dialogue with the governments and that they have a representation, because otherwise it can often lead to bottom-up small systems developing in different markets.

Speaker 3:

But then when the grid arrives, there's just no clarity and the developers feel that they just have no say in what happens in each country and then they have to sort of go under the radar in order to enter a market, and that just is not a recipe for a long-term scale-up strategy and national-level engagement. So we do feel that it's very important for developers to be part of the dialogue and part of the conversation. We, from our side, do a lot for that as well. We create environments where we can have that conversation. We organize stakeholder consultations and private sector consultations, especially when there's a draft regulation under review and things like that. But at the same time I work with the government. It is my responsibility to be an honest broker and advise the government on what makes the most sense for them. I do feel, and we generally feel, that it's the role of the private sector to organize and have a united voice from their perspective, to speak as one and to get their interest and their priorities across.

Speaker 2:

Yeah, I would like to talk more about what role you expect AMDA to take, but first I would like to listen to what Ben has to say.

Speaker 4:

What I might add is, of course, that mini-grids are not actually a new technology, and I think many governments in Africa have trialed mini-grids in various forms in the past historically, you know, typically diesel-powered and obviously that was extremely costly to run as a result of in relatively poor service. So I think many governments are kind of particularly enthused and excited by the idea of the introduction of renewables, thinking that that can therefore bring them into operation in a more cost-effective manner. And of course this is true. But what Tati was saying around the reality that that still doesn't allow these sites to run in a viable fashion on a uniform tariff.

Speaker 4:

I think there's still quite a lot of education work to be done about a scalable and commercially viable mini-grid market, particularly if then one is constraining the tariff you know, even lower than levels of affordability to try and conform to kind of politically mandated tariffs.

Speaker 4:

And I think one of the things that we're exploring at CETA are kind of what are the long-term subsidy mechanisms that we can deploy in order to make mini-grids kind of scalable and commercially viable even in those contexts? And therein, I think, lies the real heart of the challenge for the market. I think we've started to find approaches in markets where we're permitting differentiated tariffs and Nigeria is the example where with a certain level of capital subsidy we can make mini-grids work more or less. But if we start to then mandate kind of alignment with politically mandated tariffs, then at that point I think we need to have other conversations about system-wide cross-subsidization. Or is the case in Ethiopia kind of, you know, trying to deploy projects which have anchor loads in the form of agri-processing or indeed irrigation. So I think the status points out there's still quite a lot of discussion, capacity-building and explanation about the subtleties of a commercially viable and therefore scalable approach to mini-grids in a lot of government and public stakeholder quarters.

Speaker 2:

Coming back to the African Mini-Grid Developers Association, tatiya, you mentioned, you would like to see the private sector having a strong voice. What does that mean? Does it mean they should clearly communicate with the government what they need to succeed, or talk to you and say, hey, please push the government into this and that direction, which is probably happening quite often? What are you expecting from?

Speaker 3:

them. I really cannot overstate, from my perspective, the importance of the unified voice for the sector. I think we all know that the African-Meninga Developers Association is undergoing a big transformation and scale up at the moment. I think the referring to it as AMDA 2.0 and I think it's a very, very important process. The sector is growing at an exponential, breakneck speed and it's important for there to be a vehicle and a channel for them to coordinate amongst each other, amongst themselves, and to harmonize their dialogue with the government. What that means, from my perspective specifically, is several key priority areas in which I really think that AMDA needs to play a critical role. One is in terms of capacity building internally across different developers. They have the CEO Roundtable that they organize, and I really feel that they have a really important role to play in designing other programs and tools through which they can help developers improve their value proposition, improve their pitches to the lenders and, just overall, understand better how they can reduce their costs and maximize their profits.

Speaker 3:

Then, in terms of the regulatory and policy dialogue that I had mentioned earlier, I think that's really critical. Very often there will be a situation where there's a draft regulation being prepared in a given country and there wasn't really a meaningful consultation and a dialogue with the actual private sector as part of that process. There will be a consultation, there will be a kind of formal announcement and a schedule and conversation, kind of with a broader public, but there will not be an expectation and understanding that this will be a nuanced back and forth and meaningful inputs from the developers and from the private sector. And from my perspective this is absolutely critical because if you are designing regulation that will have an impact on whether or not a market will actually happen, it's really important to hear from that market and understand if this would address their concerns about the tariff, about the arrival of the grid, about minimum technical standards, whatever that may be the rate.

Speaker 3:

Then the other aspect where I think AMDA is and should be playing a critical role is research and data and reporting out on where the market currently stands. We in SMAP have our own mini grids for half a billion people handbook, which is underpinned by a tremendous amount of data. But down the line, I feel that it is the role of the sector to have more and more of this type of research come out more regularly and of course, amda is already coming out with this, but I do think it's absolutely core to their role in delivering that information to the market, but, more importantly, to the governments, to highlight to them that look, this is the scale that we're talking about, this is the potential that we're talking about, this is the job creation potential that we're talking about, and you really need to listen. And, finally, I think, access to capital. I think AMDA can and should play a bigger role in terms of unlocking capital for the sector and helping the companies have a more unified voice in talking to financiers.

Speaker 2:

Capital in terms of private capital, equity and debt, and I guess that is where Ben can come in. Are you seeing the approach from AMDA to your organization, to CIFA? Do you get what you actually expect from them?

Speaker 4:

So before I answer that question, Nico, I was just going to add to what Tassio was saying very briefly. I observe that the private sector isn't always as good, I think, at pointing out its value to governments. I think governments don't necessarily understand the benefit of a private sector led to a mini-grid market in terms of, obviously, the ability to mobilize private capital and therefore to accelerate electrification and achievement of universal electrification goals, but also the fact that private sector led mini-grids are, on the whole, a much better product than traditional electrification, often much greater uptime, much better quality of service and generally just a better experience for the end user. And I think that is often not the first thing that comes to mind for a lot of governments in terms of the role of the private sector. And often there is indeed a bit of skepticism. And I think that skepticism is all the truer when one is moving into francophone or loosophone markets. And I think that's where AMDA has probably lagged a little bit. The comms, I think, have been very good in anglophone markets, but I think the francophone markets and the loosophone markets, which of course are pretty sizable on the continent, I think not had the same, I think, level of attention. So kind of that communication I think could be improved in those areas.

Speaker 4:

In terms of our engagement with AMDA, obviously we discuss with them frequently and indeed we kind of bring them on board very often to try and make sure that our support in different countries is meeting what they believe to be required.

Speaker 4:

You asked the question about how do we help AMDA to better communicate the kinds of requirements that we have when we're looking to fund and that is very much a hot topic at the moment AMDA, looking at how it provides improved capacity building to its members in order to ready them when they come knocking on our doors for finance and the kinds of areas where we're seeing a need for improved capacity within the private sector is less on the core business model or the core technical offering.

Speaker 4:

Clearly that's their mainstay, but it's really around kind of the wider attributes which are obviously very important. By that I mean approaches to environmental and social impacts, so making sure that the companies have appropriate structures in place that can meet our funding requirements, that have properly developed gender promotion plans within their own organizations but also within the sites that they're developing. We need to be mindful of some of the labor considerations within the solar supply chains, which is very much kind of front of our minds and so kind of really supporting developers to have those kind of policies in place so that they meet our requirements. Where we're looking to fund.

Speaker 2:

Thank you, Ben, Thank you Tatja and Dennis. This takes us to the end of part one of our discussion. Part two will be published one week after part one. I am looking forward to the continuation of our talk. Bye for now.

Speaker 1:

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Funding the Future of Mini-Grids
Coordination and Funding for Mini-Grid Projects
World Bank and Energy Sector Development
AMDA's Role in Developing Mini-Grids
Continuation of Mini Grid Business Discussion