Welcome And Guest Introductions

Nico 0:35

Hello, this is Nico. Welcome to our podcast episode on mission 300. I'm here today with Jan Kappen and James Knuckles from the World Bank. Among many other things, Jan is in charge of the regional Daris program, and James works on the Ascend program. Both are World Bank-led programs under Mission 300. And we have Lamide Niyafuye, CEO of the African Mini-Grid Developers Association Amda. Welcome, Jan, James and Lamide.

SPEAKER_03 1:06

Hey Nico. Thanks, Nico. It's great to be here, Nico. Happy to be here.

What Mission 300 Really Is

Nico 1:09

Jan, before we start talking about mission 300, I think we first need to understand what mission 300 actually is. Can you give us an introduction?

SPEAKER_04 1:17

Mission 300 is a big promise and engagement commitment by the World Bank and the African Development Bank to basically reach 300 million Africans with electricity services by 2030. And the commitment includes both grid and off-grid electrication. So this is why mini-grid operators have a very important role to play. But the key about Mission 300 is that it's not just a promise, it's a very detailed reform program that is basically broken down by countries through country compacts, which are very detailed reform programs that are really anchored at the very highest level at each country. So typically these compacts are endorsed by the president's or prime ministers' office. And this is kind of a game changer to traditional reform programs, which are usually anchored within single-line ministries. This provides a lot more firepower when it comes to the political commitment that you need to the sometimes really complicated reforms, including tariff reforms, where you really need full cabinet level alignment, meaning finance ministries, energy ministries, planning ministries all have to be aligned. So I think these are the key characteristics, apart from just promising more money, which is definitely something that happened very prominently in DAR. There were billions of dollars of additional financing pledged for energy access across Africa. The really key added value of the M300 is much stronger government to buy in at the very top level, and also much more detailed timelines and roadmaps when it comes to the actual underlying reforms with clear dates by which they have to be implemented and clear timelines by which they have to be completed. Now, in terms of what does that mean for mini-grid operators, I think the key thing here is that mini-grid operators have a very important role to play when it comes to the off-grid part of the electrification agenda. And mini-grid operators also have a lot of experience when it comes to the shortcomings of established policies that are not really applicable to the DRE sector anymore. So policy advocacy, in a sense, is a bit the new commercial risk management that we need mini-grid operators to engage in and to push the political agenda, especially when it comes to tariffs. I'll stop here and I'll let uh James continue and complete anything that I forgot.

SPEAKER_00 3:30

Yeah, I mean, that was pretty comprehensive, Jan. I think for me something that stands out about Mission 300 is you know, we've we've all been working in the energy access space for a long time. And also at the World Bank. And this is the first time, I think, in history, that the you know, all of the stars seem to be aligning to support energy access in Africa. I mean, right from the top from AJ Banga, I think one of his first visits as president was to a mini-grid in Nigeria. And you know, Mission 300 is this corporate program, this corporate initiative collaboration with AFTB, but it's bringing in all these other partners. I mean, really, this is I don't know, in my experience, this is kind of an unprecedented moment that we have with this Mission 300 as a way to sort of galvanize all the different partners and ideally also the private sector.

Nico 4:23

All right. So basically, what you're saying is it's policy reforms plus support by significant funding, and that is supposed to then deliver the 300 million additional connections by 2030.

SPEAKER_00 4:38

Yeah. Right now, and maybe, maybe to I mean, maybe to also maybe this is stating the obvious, right? But we at the World Bank, we're putting our money where our mouth is. So there's a significant uptick in the amount of World Bank financing that's going to energy access in Africa. You know, the projects that contribute to mission 300, you have Ascent, of course, which is a big regional program. We'll talk about it, I'm sure, in Africa East. Then you have the Regional DARES program in Africa West. You also have big national programs, right? I mean, I work on a program in Madagascar that's contributing to Mission 300. So we are, you know, kind of putting our money where our mouth is. It's not just a you know reform roadmap and and trying to galvanize partners, it's also sort of a World Bank and AFDB investment program.

Nico 5:26

What the feedback that I get from people on the ground, businesses, business people, what they say is, well, mission 300 is just the name. There's no additional money coming. They basically just package it in a new kind of way. Are they right?

Is There Actually New Money

SPEAKER_04 5:44

Well, yes and no, I'd say. I mean, there there is definitely if mission 300 would depend exclusively on IDA funding, on World Bank funding, then we would never be able to reach the 300 million. Because I mean, just to give you an example, for West Africa, the mission 300 targets basically mean that we have to double our ambition. Our original target for 2030 was around 50 million people to be connected. Now we're at 100 million, right? So, needless to say, that if this would only depend on IDA funding, we'd have to eat into the funding of other sectors. So this is happening at some point, but also it's happening because we're being smarter with working across sectors and combining, for example, agriculture projects that have an energy component with energy projects that have an agricultural component. But there's only that far we can go in terms of using existing funding more efficiently. So the key for the World Bank is actually to provide new platforms where we can bring new donor funding on board. And not only conventional donors, but also philanthropies and also commercial funding. So we have to get a lot smarter with using the existing World Bank funding to leverage both additional donor funding but also private sector investment.

Nico 6:51

Jan, you said initially that the compacts that each government prepares plays a central role. Like in this compact, basically, the government lays out its strategy for electrification up to 2030 and beyond, I guess. Now, the question that is most interesting to our listeners today is how many countries, how many governments are actually considering mini-grids? And what role does mini-grids play in these compacts?

SPEAKER_04 7:26

So I mean this is interesting, and I'd like to hear James on this because Africa East and Africa West actually vary quite a bit. But in Africa West, you have a lot of, especially the Francophone governments who are what I call, I mean, this is provocative, but I mean it's true in a sense. We're still living in grid la la land to a sense that they still believe that you can reach electricity targets by just extending the current grid, which I mean, just the financing doesn't add up. It's the most expensive approach to bringing electricity, especially to rural areas, but also the economics don't add up because most of the, especially in Francophone countries, or utilities are really ailing financially and are already losing money with every customer that they're serving. So if you add poor customers in rural areas with much higher connection costs to that equation, it's needless to say that it's highly unsustainable. So there's not only a technology, but also an economic need to really think beyond the grid. And this is really important. This is where the compacts had a huge impact on policies and strategies because governments had to admit that they can't have a cake and eat it too, right? If they want to commit to universal electricity access, they have to change the strategy with which they extend electricity reach and they have to think beyond grids. And this was probably one of the key added values of the M300 in West Africa, that it completely changed the dynamics. And the other added value is that it's not only about long-term goals and technologies and long-term strategies. This is also about the short to medium-term reform agenda. So governments needed to make commitments. If, for example, for certain mini-grid regulation is missing. So let's say the regulation for the encroachment of the main grid on the mini-grid or tariff regulation for mini-grids, then they have to provide a timeline, an ambitious timeline by which this will be implemented and fully endorsed and fully adopted, because if they don't meet the timeline, they risk losing funding or they risk the World Bank reallocating funding to other governments that really play ball and that they respect the ambitious timeline of their compact. So I think these two factors were really critical. And yeah, and for mini-grid operators, especially in the francophone and West African countries, that means that they finally have the visibility that they deserve as an important part of the electrification equation.

Nico 9:37

James, do we want to contribute from the East African side?

SPEAKER_00 9:42

Yeah, I mean, I think East Africa is interesting in the ways that it might differ from West Africa. So you do have a couple of francophone countries, right, that have a similar kind of concession approach to what you find in some of the West African countries. But you also have a lot of countries that are trying to set up minigrids under a licensing scheme or a registration scheme. And I think the compacts there, you know, I don't have the sort of matrix of mini-grid specific elements of the compacts in in Africa East. But the one that I worked on in Madagascar, it touched on tariffs, it touched on the concession, accelerating the progress through there. So, you know, the ones that I saw come through or come across my desk, mini-grids played a pretty key role. And as Jan said, you know, the governments they realize that they're not going to achieve their ambitious energy access targets just by doing the grid. And, you know, mini-grids in East Africa, at least in several countries, are a priority for the government.

Nico 10:41

Lamida, what is your impression from going through the compacts and what are your learnings from there?

Compacts And The Mini-Grid Role

SPEAKER_03 10:47

Thanks so much, Nico. And I want to echo the views of Jan and James, really, where they said basically for the first time in history, we're we're starting to seem sort of all hands on deck and every sort of single component of the value chain taking full ownership of what needs to happen. Obviously, the devil's in detail. So and now that we've had the compacts published by 30 countries, the various task teams sort of in place and the various projects up and running. Now it's crunch time to deliver. But where we stand, and I'm sort of we did an analysis of 29 compacts before the 30th was published. And we came up, and I when I say we, a group of 29 really grid companies representing a significant uh proportion of the market share in Africa came up with a position paper from our analysis, at least from commitments made publicly, we know that half of uh the mission 300 targets were positioned to be uh powered by DRE as a whole. And from that from that 150 million, from that 50 percent, we've deduced that about 116 million people can be connected through mini-grids. What does that mean? That means obviously significant capital to be deployed. But I like Jan's point about uh how the delivery or the preparation of the compact has started to see governments take a mind shift towards uh exploring alternatives to the grid. And from our vantage point, mini grids will provide a significant uh cost savings as an alternative to grid. Uh from the uh analysis, I believe, and from the broad assessment of the cost per uh connection, we see that mini grids can achieve with about 28 billion to 46 billion. However, people have told me to stop using those numbers and speak about what the current pipeline looks like. So from our membership, from the 29 companies that participated in the delivery of this uh paper, we see about 2.7 billion in pipeline being required to achieve about a I mean a significant chunk of that. But essentially what what I'm the message I'm trying to pass across is that uh mini-grids are positioned to achieve a significant chunk of the mission 300 targets, and the private sector is willing and ready to take charge and support the achievement of the targets. I'll stop there for now and talk a little bit more about the paper later.

Nico 13:22

All right. So, Jan and James, now we have the commitment from the government. Now I guess it's a lot of coordination work from mission 300 sites, from your programs respectively, to make it happen, right? The money, the World Bank and the AFDB are probably requiring certain conditions to be set. And some of these conditions are probably already laid out in the documents, the compacts that the government submitted. But I guess it's a lot of pushing and communication here and there. Now, what are the actual tasks now? What are the next steps to implement these policy changes?

SPEAKER_04 14:05

Yeah, that's a great question because I mean this is what we're all trying to wrap our heads around, especially on the new regional projects, including the regional tier. So it's one thing to, you know, put the commitments in a compact and then also to follow up with governments to see, hey, you had promised a tariff reform, you know, by the end of 2025. Where is that? Um hey, you had promised a new regulation on grid encroachment from inequality operators by the summer of uh 2026. So the follow-up is really important. But what's even more important is that there are for each government there are different ways to get where they want to go, right? I mean, so first of all, there's a huge variety of governments when it comes to the role of DRE. And some governments with a very good reason. There are certain countries in West Africa, for example, including Togo, that actually where grid electrification is really important because Togo, because of its geography, is very prone to be much more ambitious on the grid than other countries that have huge rural areas like Nigeria, for example, right? So there's no boilerplate strategy. So for us, it's really important when we develop regional programs to leave a fair amount of flexibility between the different technology solutions and also between the different tendering solutions. And so one example is the mix between DRE and grid, and even within DRE, the mix between mini-grid and off-grid. Well, knowing that the optimal solution that we are really pushing now is to let the private sector decide what the optimal technology is for a given village is and not to second guess the technology. So for mini-grid operators, this means that you sooner or later in West Africa won't be able to bid alone anymore. You'll have to team up with other technology providers to be able to provide a continuum of DRE technologies in a given village rather than just oversizing a mini-grid and connecting everyone and their grandmother to the mini-grid, which is a very expensive solution. But also, you will have to give governments the choice between different market scaling instruments. And this is particularly important in West Africa, where you have the francophone countries in the civil law tradition and the anglophone countries mostly in the common law tradition that have completely different approaches to scaling markets. So the francophone approach is very concession-driven, whereas the other approach is very license-driven and much more open. And both approaches, there is no silver bullet, both approaches have their pros and their cons, which is really important is to give countries the possibility to follow their own way, to cook their own soup with their own ingredients, but then to also compare continuously what works best and what is the fastest approach, and to find ways to make countries join and reach critical economies of scale. And so this is the third role where regional projects are really important because a lot of the countries in West Africa have markets that are too fragmented and too small to really attract large-scale private sector investment. So you have to help these markets to consolidate. And so one way, and I'll stop here, one good example of doing so, is to organize large combined minigrid tenders across countries. So rather than doing 20 minigrids in Liberia and 30 minigrids in Sierra Leone and another 10 in Chad, you could do hundreds across several countries in a single tender with different lots. And especially if you want to do that across francophone and anglophone countries, it takes a fair share of harmonization of regulatory standards, which is not, as Nico's team you know, is not exactly uh a pedestrian challenge, but it can be done.

Scaling Delivery Across East And West

Nico 17:30

All right, James, before we go into East Africa with the same question, let me get uh Lamida's feedback first. Lamida, is the private sector ready to deliver on the demands that regional Dare's is opening up in West Africa? Do we have enough mini-grid companies which are willing to deliver also solar home systems or team up with solar home system players and team up with mesh grid players? And are they willing to basically roll out the technology across various countries at once and at the scale that regional DAES is expecting from them?

SPEAKER_03 18:11

The simple answer to that is yes. Now, obviously, if we compare what the ambition is against what exists today, it's quite scary. You know, however, we've seen a strong evolution of the sector where we went from sort of experiments and you, Nico, are a pioneer in this in this sector. You've seen various iterations of business models of types, and we've started to see companies in sort of where it innovate or divorce. So, yes, we have companies now that uh understand the business, they can build it in their sleep, but need the capital and need the policy environment to achieve. And I would say that maybe the number that we currently have may not be able to achieve the target, but we've also seen a SWAT of local African-owned companies that are emerging as part of the initial Nigerian education project and other projects that have come up. So to answer your question very simply, yes. Now, in terms of multi-technology, I I love the concept of the regional deaths, which is you know not being overly prescriptive of the technologies that should be adopted, where I think we've learned enough in sort of natural education planning, in site selection to know what works best and what can achieve the viability in the respective locations. So we started to see that emerge. So if you look at a company like Anka Madagascar that is sort of partnered with an organization called Moon to basically work hand in hand to provide solo home systems whilst they figure out the financing required for mini-grids. And then, you know, sort of it's sort of an innovative model where we're seeing companies working together. Some companies are sort of fully integrated where they're providing both solo home systems, mesh grids, and mini-grids. And then some companies are starting to adopt the uh Anchor business model. So not just PUE, but we're seeing companies that sort of power in a PPA-esque style, where they achieve a PPA with uh an Anchor business that consumes perhaps 40 to 60 percent of the power, where the residual power goes to the community. So if we consider uh the state of the market today, we have companies that can achieve it at the scale. But what is needed is uh continuous innovation in technology, rapid scale in capital mobilization, which I believe with the support of the ASEAN and the regional DS programs, we will be able to achieve and then a strong government-enabling environment. What does that look like? Adopting uh regulations that are able to protect the investment, adopting cost-effective tariffs aligning with the various standards, for example. The Africa Forum for Utility Regulators has a regulatory tool, which we started to see countries adopt, and a tariff tool, which we started to see countries adopt. So if we adopt those standards, which makes it much easier to build the regulations and adopt it or adapt it to their own local circumstances, we will achieve the targets.

Nico 21:12

Thank you, Lamida. Uh James, do you want to provide the East African perspective and introduce the Ascent program?

SPEAKER_00 21:19

Yeah, sure. I want to first come back to something you said in your initial question, Nico, about coordination and almost the effect that these compacts are having on that. So in each of the countries where we operate, there's always a donor coordination group, right? And in my experience, these donor coordination groups, you know, they're hit or miss. In some countries, they work really great and there's very close collaboration. In other countries, you know, it's sort of like a monthly check in. Everybody says what they're working on, they say thanks, great, see you next month. I think with the compact, we now have a common set of actions that we can all rally behind. So if the Germans are providing technical assistance to the regulator on the tariffs, Then and that's part of the compact, then that's great. We'll make sure, right, that through our technical assistance to the Ministry of Energy, that the tenders, if it's a tender approach or the results-based grant program, is linked up with that tariff discussion. You know, again, this is kind of coming back to this idea that Mission 300 is a different way of doing business now. It really has provided these anchor points that the different coordination groups can rally behind. So maybe setting that aside for a moment, it's just, I think, something I've noticed. In Africa East, the primary way that we are contributing to Mission 300 is the Ascent program. So the Ascent program was actually launched pre-mission 300. It's a$15 billion program, of which$5 billion is from IDA, and an additional 10 billion is coming from development partners, foundations, and the private sector to connect 100 million people to electricity by 2030. When this program was launched at the end of 2023, it sort of raised a lot of eyebrows in a good way among the senior, very senior management at the bank. They said, wow, here we have a regional program that's extraordinarily ambitious in an what had previously sort of been a niche space, the energy access space, that is actually contributing a significant result for the region. And so it was actually one of the catalysts for launching Mission 300, because if Ascent can do 100 million by 2030, let's build on that and see if we can get to 300 million. So how are we doing it? Ascent has country verticals and regional horizontal programs. So the country vertical projects are what you would think of as a standard World Bank operation. We often have an investment part and a technical assistance part. But what makes it different under Ascent is that each of the projects pick from a standard menu, basically, of activities. So there's the building out infrastructure on the main grid. So not grid scale generation, but building out distribution networks, doing grid densification, basically adding new connections on the main grid. And then supporting the private sector DRE sector to connect everybody that's not on the grid or shouldn't be connected to the grid for cost and time reasons. And then there's a third pillar, which is policies, regulations, and planning. So all of the Ascent projects have some element of these three investment and programmatic activities in them. Then we have a suite of horizontal regional programs. So there's a regional technical assistance facility that can provide technical assistance to companies, to investors, and also to governments to help develop pipelines of projects. There's a regional equity facility called Zafiri, which was just recently launched, and that actually covers not just Africa East, but also Africa West. So that's a continental-wide equity platform. And then we have a regional line of credit, which is implemented by the Trade and Development Bank, which provides debt to distributed renewable energy companies, including minigrids. And we have a regional results-based grant program. Let me pick up on the regional results-based grant program because there's an important nuance here. And it kind of marries the matrix approach that we're taking, right? The country verticals and this horizontal program. And it also brings in the coordination piece. So it's all linked. So this regional results-based grant program is open to DRE companies, including Minigrids, of course, that are operating in Africa East. But it is intended to fill the gap. So if you want to build a mini-grid in Uganda, for example, and there's no results-based grant program for mini-grids in Uganda, the regional results-based grant program can step in and provide those results-based grants to you in order to help you build the mini-grids. Okay? So it really the objective is to make sure that if you are operating as a DRE company in Africa East, we are at least putting solutions on the table for you that cover debt, equity, results-based grants, and technical assistance.

Nico 26:14

Sounds great. So now it also becomes clearer why there are two programs. Because you have different starting conditions in West Africa compared to those governments and countries in East Africa. Whereas some countries in West Africa, like Nigeria, like Sierra Leone, like Senegal, they are very much advanced in mini-grid deployment. Whereas there are also some countries in East Africa, like Burundi and some others, that are a little bit behind. So why did you make the split between East and West and not advanced versus a little bit behind?

Why Disbursement Takes So Long

SPEAKER_04 26:55

Yeah, I mean, Nico, you you that's exactly right. But there's another very important factor that actually led to these two different approaches between ascent and regional layers, which is if you look at the access gap in West and Central Africa compared to East Africa, you'll see that in East Africa, the access gap is a lot more distributed. So basically, if in East Africa and the Bank's East Africa region, which by the way also includes the DRC, that's an important detail to not forget. I think you have to go to at least 15 countries to get to 70% of the total access gap. If you do that same exercise in Africa West, I don't remember the exact numbers, but 70% is a lot less countries. I think it's around five countries. So basically, in Nigeria plus the large cyber countries, you already have 70% of the total access gap. That in the past had the consequence that in West Africa, the bank was a lot more opportunistic in a sense that we really focused on the large access gap countries. So Burkina Fazo, Niger, Chad, Mali, and Nigeria, with very large long-term commitments, individual national programs that really push the access agenda across grid and off-grid solutions. And then M300 came along, and we noticed that, well, this opportunistic approach isn't going to cut it. We need another business model for all these smaller, more fragile countries that not only are small and fragile, but very fragmented regulatory systems that are very different. So you basically, as a mini-grid operator, you have to reinvent the wheel every single time you move from one small West African country, let's say Sierra Leone, to the Central African Republic, for example, right? Completely different regulatory frameworks. So there's a clear need to harmonize these frameworks and create economies with scale. And this is this additional challenge that we were put once M300 came along, because we couldn't just opportunistically focus on the large countries and just put more money on our big country-level programs. We needed to invent, in a sense, a new regional way of doing things and pushing the access agenda across West Africa. And that's the big difference between Ascent and regional Dayers.

Nico 29:01

All right. Good. Now, so let's break it down a little bit more and make it more tangible for mini-grid developers and operators. When can these companies expect those two Ascent and regional Daes programs to be ready for implementation?

SPEAKER_00 29:21

So at least for Ascent, I think at last count there were 14 or 16 countries that now have an active or approved national program. I would say conservatively, about half of them have started to implement in the Africa East Doctor. And the regional line of credit, so the debt facility, is open for business. And we're hoping to scale up the regional results-based grant program as well. So stay tuned. And as soon as we do, because we have we ran a pilot phase, so we have all the systems in place. As soon as that additional financing comes through, then we can start rolling with that. So really it's country by country, right? But in I would say in in many of the countries in Eastern Africa, we have programs that can support you.

Nico 30:07

Lamida, is that true? Are mini grid companies rolling already, or are they still waiting for something to happen?

SPEAKER_03 30:13

What I would say is that what is needed is not so much that a program. It's more the pace. You know, how quickly can we deploy the capital? We have a framework where we say the volume, the speed, the efficiency, and the impact. So, in terms of you know, how much is available, and then how do we move from committed capital to dispersed capital? I would say this honestly, that we are also looking inwardly. What are the things we as an industry need to do so that the perception of risk is changed or we upskill ourselves? So there's a lot of conversations inwardly, leveraging our mini-grid CEO roundtable around joint ventures, consolidation, multi-technology approaches. So that's that's one thing. But on the side of what is expected, I would say if we have more money dispersed, as much money dispersed as committed, or a less of a divergence between what is committed versus what actually gets into these companies. More flexible types of funding, I guess more equity into the sector. So we're encouraged by the emergence of the theory. But I think we need more of the theories, or as a theory, the fund itself to be scaled up. And I guess more technical support to ensure that these companies can absorb the capital as much as possible. And I'll talk a little bit more about what we're doing in our own sphere of influence to help with that. The pace of the deployment, so due diligence moving a lot quicker. So even at the RBF level to the equity or the commercial capital level, how do we ensure that the investors are speaking to themselves and so that we can sort of potentially grandfather due diligence or portfolio type due diligence or things like that? So more innovative approaches to due diligence in terms of the efficiency, I think that also speaks up to the speed. But it's like how do we ensure that as we identify bottlenecks along the value chain, we address them as quickly as possible. And then the impact is obviously how do we make sure that we're impact focused and not just counting sort of boxes for exercise. So we're encouraged by all that is happening right now. But I guess you know, being all of a twist, we're asking for more to be done as quickly as possible.

Nico 32:26

So, James, coming back to you, if I understand you correctly, what you said was basically the structure is there, the willingness of the government is there, but we still run the risk of basically run Mission 300 against the wall by all these nitty-gritties of implementation procedures that are country-specific and that basically need to be negotiated between the Ministry of Finance, who needs to finally sign the loan agreement with the World Bank, without any well, short-term cash flow that can cover these loans, right? Other than tax from other parts of the country. And this basically can hold back implementation.

SPEAKER_00 33:17

Can I just can I yeah, let me let me come in here because I think this is a super critical point. There's a big difference between having a program approved by the World Bank Board and getting money to start to flow. And it's actually a perennial challenge. You know, there's a lot of bureaucracy and steps on both sides, right? Internal to the bank, but also external on the government side, to put in place all these different elements that you need, for example, to set up a well-functioning results-based grant program. What we're trying to do more and more, at least internally, is you know, not reinvent the wheel every time, right? We all know kind of what an IVA should be doing, right? So we don't need to spend a lot of time rehashing what an IVA should do in the terms of reference for that. There are certain things that we can do internally that are that should just be copy and paste or highly replicable. But the politics behind it is often tricky. I mean, maybe this is controversial, but like for many of these programs, the government is borrowing from the bank. So it's not free money, borrowing from the World Bank, and then we're asking them to give it away for free to private companies. That's not you know a breakfast table conversation. Yeah, sounds great, have a great day. Right? I mean, these can be really tough negotiations. And even if it is, for example, like an IDA grant to a very low-income or you know fragile country, the conversations can be really fraught because maybe one technology is favored over another, maybe one approach is favored over another, but what we can do as the bank is bring that international experience and say, if you want to do it this way, here's our experience doing that way, and it's going to set you back three years.

SPEAKER_04 35:01

Exactly. I really like what James just said because this really summarizes the key challenge. There are certain issues when it comes to mini-grid that can't be solved just by speed, scale, and financial engineering. There are certain structural issues that are clearly embedded sometimes in and like really deeply ingrained politics that you can only solve through the conversations that happened around the compact. So, for example, I mean, we just talked about the format with which tenders are being done, right? If you'd want cross-country tendering, there will have to be some give and take between francophone and anglophone countries. There has to be adaptation on both ends. If you really want productive, economically viable mini-grids, you can't just throw more money at the problem or just make the mini-grids bigger. If mini-grid operators lose money per every customer, then they'll just going to be lose more money if you extend these mini-grids. So you have to find a way to allow mini-grid operators to either only connect the part of the village that can run economically viably or to team up with other technology providers to extend the grid with using other technologies. This is something that we see in Nigeria.

Nico 36:08

Sure. Now, coming back to my initial question, like when do you think mini-grid companies can start applying for grant funding? And when do you think they can actually start building?

SPEAKER_00 36:20

It is country by country. So let me just tick off a few that I'm aware of. In Madagascar, we have a results-based grant program that has already exhausted, I believe, the allocated budget for mini-grids. So it got off the ground. We worked with the big companies, we worked with the smaller local companies, so we had a fairly successful RBF program there. And the intention is to continue that with a follow-on World Bank program in Madagascar. In the DRC, we have a results-based grant program which includes mini-grids. There was an initial call for proposals. It was exclusive to existing mini-grids in the DRC. The idea was let's test out the internal systems and processes with you know mini-grids that already exist. So helping them extend and densify their grids. But the very next window that's going to be open is for new mini-grids in the DRC. So that's under the agree project. I think it's also important to remember that Ascent is not the entire universe of energy access projects that the bank has. So those two countries that I just mentioned, we have the DESTEM project in Madagascar, so it's not Ascent, that launched this results-based grant program for mini-grids, and the Ascent program is coming in to continue that. In DRC, we have the Agree project, which has this results-based grant program for minigrids. We have the regional results-based grant program, which was open to minigrid companies, and indeed we had one of the leading mini-grid companies apply and is slated to you know start deployment any day now. So there are programs that are moving, and there are others that are moving a bit more slowly.

Equity Gap: Zafiri And PCF

SPEAKER_04 37:52

Nico, to answer your question for Africa West, when are we ready? Africa West, as I already mentioned, we have large ongoing national programs already. I mean, Nigeria is the most important example that we we are, I think, now in the RBF facility at 100,000 payments per month. So this is really, it's it gained cruising altitude very rapidly, the Nigeria program. But we also have programs in Niger, in Mali, in Chad, and in Burkina Faso, who are fairly large and are now finally gaining traction. But the real game changer for the smaller countries that I mentioned will be the regional dayers, which is going to the board in the next couple of weeks and which will be ready to make first disbursements in autumn of this year, so towards September, October.

Nico 38:37

All right. James, you earlier mentioned Safiri, which is the equity vehicle under IFC supporting mini-grid companies, for example, in acquiring equity, right? They're basically providing equity to the mini-grid companies. So now I recently talked to Safiri managers and they said, yeah, ticket size is at around 15 million US dollars. They prefer to take a majority stake. They can go and prefer to go in partnership with other equity providers. So we're talking already about a ticket size of 30 million US dollars. Now, if both want to take, or one has already taken a majority stake, now how much is left for the mini-grid company after all?

SPEAKER_03 39:24

That's an excellent question, Nico. And I and I think we've we've already also taken steps to engage the promoters of the theory. I guess I echo the views of what you said. Now I believe it depends. I think it's relative. Some companies within our membership, for example, are starting to explore the this consolidation where they some sort of merge or joint venture. I think the devil's in the details, and one of the things we're looking to do is develop a blueprint for what that looks like in collaboration with the Zafiris now. Whether they're willing to give away 50% or a significant chunk of their funding, I think uh remains to be seen. And I think that there's a negotiation to be had uh with Zafi on what that looks like.

SPEAKER_04 40:12

On Zafiri, I I wanted to say, and this is really important, Lamid, you've you've said this. There's not enough game in town on equity investment in general. And the World Bank has identified this problem pretty early on. So there's actually not just Safiri, there's also the patient capital facility that's been implemented by Africa 50 that has a very complementary approach. Nico, you put your finger where it hurts the most, right? You see, Safiri really fills a very important role that was completely missing, but it still has a fairly large ticket size for smaller companies. And this is exactly where the PCF comes in. The PCF, unlike Safiri, doesn't follow the um the investment platform or the permanent equity vehicle, which is the correct term of Safiri, which makes direct investment, often takes a majority stake. But the PCF has a fund of funds approach that basically can fund other funds. It could even theoretically invest in Safiri, but that would make very little sense because the key the key opportunity that PCF is following on is much smaller investments. So it's the below 10 million investment. And it is really focusing on creating new specialized vehicles that focus on certain geographic areas, starting with Nigeria and starting with the ASF, which is a pan-African fund. And the other detail is that a lot of the funding that the bank put into Safari is earmarked either for East Africa or for certain countries. And what the PCF is doing is really pan-African funding from IDA. So it's been a complicated process because both of these vehicles are completely new to the World Bank. But it's we can already tell that it filled a very important need because we have a lot of demand in terms and a very rapidly growing pipeline, investment pipeline. But Nico, what you said is critical. We have to make it possible to reach smaller ticket sizes in an economically viable way. And we need a variety of approaches and not just there's no silver bullet in equity investment. There's no right or wrong way to do.

Nico 42:08

All right. New subject. What about public infrastructure? I'm talking about health centers and schools in regional Darius and in Ascent, respectively. How are you treating those? Because there is definitely great demand by governments to also get those public infrastructures electrified.

Powering Schools And Clinics Long-Term

SPEAKER_00 42:30

Yeah. So they're definitely part and parcel of the Ascent program and the Ascent strategy, particularly on a country-by-country basis. We're trying to work as much as possible with the energy as a service model. So basically moving away from the traditional EPC plus two years or three years of OM. I think that leads to a lot of you know broken systems over time. So there's definitely an opportunity there for minigrid operators to extend into this sort of business area if they're not already involved. Maybe another thing to say is whenever we are supporting a mini-grid, we're aiming to connect all of the public infrastructure in that area, whether it's by a regular metered mini-grid connection or a standalone solution. So that I think is another area that we're working on. And maybe one other thing to say is that at least under some of the programs that we have in Ascent, we're trying to where it makes sense, stack digital and energy connectivity. And this can be a real coordination challenge. But in Madagascar, we're trying to have a program where for every public education or public health facility that's targeted by the project, we're providing not just an energy solution, but also a digital connectivity solution. So that that school or that health clinic has high quality internet and high quality energy. And both of those services would be provided under an energy as a service model. All right.

SPEAKER_04 43:58

I mean, we learned a lot from Africa, right? So the energy as a service model evolved from experiences that we made in Uganda and Kenya and really important lesson learned. So in a sense, we're replicating these lessons learned in West Africa and under regional areas, we have a big component to roll out the energy as a service concept. Same thing also when it comes to digital energy co-delivery. This is really critical, especially when it comes to the actification of health centers and schools. The added value of each kilowatt hour really grows exponentially once you also support digital connectivity, of course, right? So this is this is an important add-on. But what's really important also to underline is that the kind of paradigm change that is implied in changing from a logic that is just about financing kilowatts to a logic that is about financing kilowatt hours over the long term. This is a game changer also for governments, and this is where the complex play a really important role because ultimately that means for the government that we will stop trying to pretend that we can solve a long-term operating problem with a short-term CapEx subsidy. What does that mean? That means that if you want operators to actually stick around and maintain and operate the systems that they're building, you need a completely different incentive scheme. You need an incentive scheme where you don't just dole out big CapEx subsidies in the beginning and then hope that operators made enough money to stick around in the long term. I'm exaggerating here, but this is basically the simplified version of the traditional approach. But you work with governments to find a scheme where governments enter into a long-term commitment with a private sector operator, pretty much like a PPA and the in the grid connected solar space, to commit themselves to providing a monthly fee for each health center or school over a very long period of time, ideally 15 to 20 years. And then the World Bank's added value is not just providing subsidies, capex subsidies, but providing a scheme where we can backstop the obligation of the government to make this long-term commitment and to make these monthly payments over a long period of time with the instruments that we have. And MIGA, we're working very closely with MIGA to develop new instruments that can backstop the government's obligation, the government's payment obligation over a longer amount of time, and then by extension, finally mobilize real capital investment. Because the key thing here is that the more RBF we spend on CapEx, the least private sector investment we will have on CapEx. So, in a sense, CapEx subsidies are crowding out private sector investment rather than crowding it in. And the game changer in here is that if we can credibly backstop government obligation over longer term, then private sector operators can go see their local banks and say, hey, I don't only have signed a long-term service agreement with a government, but I also have a meager guarantee backstopping the payments over 15 to 20 years. Now please provide me with the loan that I need to electrify these 50 health centers.

Nico 46:57

All right. Thank you all for your contributions. Now let's have final statements and then close the session. Who wants to start?

SPEAKER_04 47:06

I think the conversation has shown one thing very clearly, and I've already underlined this during our exchanges, is that I really strongly believe, and this is what also recent experience is showing, that especially when it comes to further developing the mini-grid industry, there is no silver bullet. And most importantly, scale and financial engineering will not solve the structural issues that we have to focus on. And I think M300, with its compacts and the firm government commitment to the regular reforms that it takes to really bring mini-grid location to the next level, is all about solving these tough political structural problems together. And this is where the mini-grid industry also has to contribute and to be very vocal when it comes to governments respecting the timelines and their promises for these tough and hard reforms. And I must say that over the past two years, I really enjoyed this journey and especially the exchanges with mini-grid operators who experienced in this challenge and who have provided the World Bank with a lot of great ideas to solve the structural challenges that also the World Bank has created. And one of the most critical examples, I mean, we've already discussed this, is RBF. The way that we deliver RBF needs to really follow and feed the industry and solve these structural challenges. And the other big challenge is that the way that we organize tenders. I just mentioned that tenders alone for starters are not a silver bullet, especially minimum subsidy tenders take a lot of time to develop. So we have to actively look for more developer-driven market development models that don't depend on tenders. And so these are, I think, two prominent examples of the tough structural challenges that the World Bank will have to work as well. And I'm really looking forward to continuing to work with Nensis, but also the mini-grid industries for inspiration and support in this really challenging journey. Thanks.

Nico 49:02

Lamita, do you want to say some final words? Final words. Final words.

Jobs, Key Takeaways, And Closing

SPEAKER_03 49:09

Yeah, so so for us, the critical path is this let's use the momentum from the compacts to start to take more constructive action, which we're doing. But the critical path includes one, you know, governments all compact countries should have in place the necessary regulatory and frameworks. And the tools, we have the tools that can help them develop their regulations within days, like the RFO regulatory tool, the RFO tariff tool that can be used to adopt to quickly generate regulation. Now, how we navigate the approvals, I think is probably down to what the complex structures that need to be unclogged. We want to see the successful advertisement of funding from the Ascent program, the regional DAS program, and the Nigeria Daes program, to name a few. And then we want to see the Firi really come to the table and the other instruments like the Africa 50 fund really come to the table and we start to see due diligence commencing and deployments moving. And then we see a role for ANDA as a sort of a voice for the private sector. We started to take steps on our own path to support these companies. For example, our CFO placement program, which we've launched in collaboration with CAMCO. As a phase one, we're going to provide five CFOs placed with 10 companies. We've also seen the emergence of the executive placement program by the AFDB Cepha, uh, to name a few, but we need those programs scaled up. We're going to be reaching out to the World Bank and other players to support a scaled-up version of these programs. And then we continue to leverage data as a tool to inform decision making. So that's one of the areas that ANDA will sort of be taking ownership and responsibility for. But ultimately, we're encouraged by all that is happening. But we need more, quicker, efficiently, and at scale. Thank you very much.

SPEAKER_00 51:17

So there's a J word that we have only sort of scratched the surface on in the conversation today, and that's jobs. We hear this over and over again from our corporate management, but also if you just read the statistics on youth unemployment in Africa and projected youth unemployment in Africa, I mean it's pretty staggering. I think where there's a really exciting nexus is at mission 300 and at mini-grids. Because mini-grids are engines of local economic growth, right? They're providing high-quality, productive energy for communities to drive job growth. Right. And to the extent that we can leverage that intersection in our conversations with policymakers, in our conversations with funders, in our conversations with donors in the private sector, I think it's going to continue to emphasize this pretty critical point. So I just wanted to maybe end on that, right? I I like to say that you know mini-grids are engines of local economic growth. But when you tie that to the jobs needs across Sub-Saharan Africa, and you pair that with this, you know, Mission 300 super ambitious energy access program, I think the results could be pretty exciting. We just have to kind of all continue to push in the right direction and cut where we need to cut and advance where we need to advance.

Nico 52:41

All right. Thanks a lot. Thanks a lot, Jan, James, Lamida. This was an exciting discussion. I think we haven't touched upon all the possible points, but I think we gave a good overview of what's happening right now under mission 300. And I'm looking forward to inviting you to a new session again after a year or two to see how things that are currently in the planning have evolved. Thanks a lot.

SPEAKER_03 53:05

Thank you. Thanks, Nico, for sponsoring. Thanks so much.

SPEAKER_01 53:11

This episode of the Mini Grid Business has been brought to you by Finances, your one-star chat for sustainable minigrids. For more information on how to make mini grid work, visit our website to finance.com to contact us to the links to the show notes.