Mini-grids in Kenya serve those outside the main electric grid

Off-grid power has long been a fast and easy solution to the energy access challenge across Africa, largely in the form of diesel-powered generators, open fires or burning kerosene.

With the rise of renewable energy, however, along with the reduction in costs associated with it, new off-grid options are now appearing, and Kenya stands out as a laboratory in which these are being tested. The solutions on offer range from household to community-sized, and they address financial challenges as well as technical ones.

Mini-Grids

A leading option for those looking to source their power from outside the main grid is mini-grids. The multi-tier market for mini-grids features non-commercial applications in remote areas to expand access to energy, and commercial offerings in urban areas for those who can afford to enhance their existing supply.

Mini-grids typically involve a distribution system connected to a generation source, which has historically been fossil fuel-based but increasingly can incorporate renewable energy. A 2014 market study by German development agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) found 21 mini-grids in Kenya. All of them used diesel and some also incorporated renewables. Another 10 were in various stages of construction at the time of the report, and in August 2016 the government announced $37m in financing from the French Development Agency that would allow the construction of 23 more using wind and solar.

Costs

Mini-grids cannot benefit from the economies of scale that the on-grid system does, so their usage is most often an alternative in remote areas to using kerosene or burning biomass.

GIZ’s study calculated the average cost of the necessary fuel to produce power for the state’s 21 mini-grids at $0.42/KWh, more than double the cost of electricity sourced through the main grid. For this reason private investment in mini-grids to service retail customers in the regulated market is limited. Commercial mini-grids are most often found in urban areas where grid power exists, but as an option to augment existing supply.

Providers including Powergen, Access Energy and Powerhive have established these grids in dense urban areas. Market connection fees are typically lower or non-existent, but consumers pay much more – between $1/KWh and $5/KWh, GIZ found.

In the sugar industry, three companies have combined to build their own 18-MW mini-grid that will use bagasse – the residue left after the extraction of juice from sugar cane, and a by-product of their own industrial processes – as a feedstock, with the aim of reducing their energy costs.

Ray Of Sunshine

Another option is M-Kopa Solar’s home solar kit, which has more than 400,000 customers in Kenya, Tanzania and Uganda combined. It costs $200, but customers can pay $35 up front and then make payments of $0.50 daily for a year. Payments are made through M-Pesa, the mobile financial platform offered by Kenya’s Safaricom. M-Kopa can also use a customer’s financial history on M-Pesa to conduct a credit check, and those who pass it can access better financing terms.

Buying an M-Kopa system is more expensive than grid power, but the company has said that it is not trying to compete with national systems. “All of our customers would love to be connected to the grid but it is not within their reach,’’ said Chad Larson, a company founder and its finance director. “We perceive our main competition as being kerosene.” Kenyans in off-grid settings typically spend approximately $0.75 a day on energy, according to a 2014 study, which means that M-Kopa costs around $0.25 less per day during the payback period. Competitors are now stepping up in this segment, such as Mobisol, which offers a 36-month repayment period.

 

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The Report: Kenya 2017

Utilities chapter from The Report: Kenya 2017

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