The Africa Minigrid Developers Association (AMDA), has released the key findings from the second edition of its Benchmarking Africa’s Minigrids report. The Benchmarking Africa’s Minigrids report is AMDA’s flagship report. AMDA is an industry association created by minigrid developers to boost the health of the sector and deliver on global renewable energy access objectives.
Although the minigrid sector is starting to gain some traction, the report urges governments and donors to step up support for minigrids to accelerate universal energy access in rural areas in Africa. To enable the sector to flourish, simplification of regulatory processes and shortening of licensing timelines will be critical. This will allow players in the sector to deploy quickly enough to help achieve universal energy access in a reasonable timeline. Bulk licensing of portfolios rather than licensing individual sites is also identified as a strong enabler and should be implemented urgently.
The growth of the minigrid sector has long been viewed as one of the pathways to address the lack of universal access. However, progress has been a bit slow. The report finds that concessional capital commitments are not being honored and deployed fast enough. This slow progress is impeding real impactful change in the drive to develop renewable energy systems for universal electrification. With over 600 million people still without access to electricity, along with targets to connect this population by 2030, there is a lot of work needed to connect everyone via extending the traditional national grids as well as through these minigrids to have a chance of meeting these targets.
“We have an opportunity to build dynamic, intelligent and renewable energy infrastructure that helps grow communities and economies. Energy is the foundation for all of the SDGs and as such needs the kind of support from Governments and donors that traditional utilities have received. This is critical for the sector to realise this potential and provide stable renewable energy infrastructure to Hundreds Millions of people,” says Jessica Stephens, Chief Executive Officer at Africa Minigrid Developers Association (AMDA).
More highlights from the press release:
The report presents an in-depth analysis of changes that occurred in the industry in 2020 and 2021, including the impacts of the COVID-19 pandemic, and uncovers emerging opportunities for achieving immediate scale and long-term sustainability.
Key findings include:
Sector Growth: The number of connections almost doubled from 40,700 connections to more than 78,000. The number of operational private sector minigrids grew by 39%, from 288 sites in 2019 to 400 in 2021.
Revenues and Operating Expenses (OPEX): Revenues grew consistently as operational costs dropped, indicating that the industry is approaching financial viability. The Average Revenue Per User (ARPU), a key metric of industry sustainability and business success, was $8.30 per month for sites commissioned before 2019, up from $4.29 in the previous AMDA report.
Slow disbursement: Financing of the sector remained slow due to the continued government bias toward the centralised grid. In 2020, only 13% ($208 million) of the $1.6 billion of concessional capital committed to the minigrid industry was disbursed to minigrid developers despite progress on all business metrics across the industry. Perceived risk, complex fund design and the time frame to get through regulatory compliance are hindering the ability to disburse concessional capital.
Policy and Regulations: Licensing remains a substantial hurdle with projects often taking more than a year for approval due to complex regulatory frameworks. There is an urgent need to create a regulatory structure that reflects the decentralized nature of minigrids, that allows for bundling sites and bulk licensing of portfolios.
Minigrids as the Growth Engine for Local Economies: Minigrids continue to outperform national and sub-national utilities on service metrics, including up-time, power quality, number of reliable connections and downstream job creation.
“We hope that the insights provided in this report will spur action. AMDA is collaborating with sector players to address market barriers and leapfrog the development and scaling of minigrids that are essential in ensuring the achievement of energy access goals,” said Jess.
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