4th African Mini-Grids Community of Practice held in November 2018 in Abuja, Nigeria

The fourth meeting of the AMG-CoP was held in Abuja, Nigeria from 09-11 November. The meeting was hosted by the Nigerian Rural Electrification Agency. The focus of the meeting was on tariff and subsidy design. This three-day meeting was well attended with over 45 participants from 16 countries on Day 1 (open day) and 31 participants on Day 2 and 3. The workshop featured the first AMG-CoP public-private dialogue among government officials and private mini-grid developers and financiers.

The objectives for the meeting were to:

• Explore the viability gap between tariff and subsidy
• Determine how to set tariffs based on the different forms of subsidies available and the timing thereof.
• Create mutual understanding of the approaches taken by each member country with regard to mini-grid implementation.
• Collaboratively develop a workplan for 2019 in a collaborative manner so that it responds to the needs of the members.

The workshop featured the first AMG-CoP public-private dialogue among government officials and private mini-grid developers and financiers.

The key lessons emerging from the meeting are:

• Despite the firming up or reviewing of the mini-grids/off-grid regulatory framework in many African countries, lengthy processes still continue to deter investments in that particular sector. Licensing processes are complex and lengthy, and in some cases require environmental and social impact assessment studies to be undertaken.
• Uncertainty over the continued validity of Power Purchase Agreements in the event of regime change continues to undermine the confidence of many investors.
• The timing of subsidies is crucial for a viable business model and yet in many instances, the disbursement of the subsidies can take up to three years. This deters developers from venturing into poor communities where electricity is most needed for socio-economic development.
• Smart incentives such as duty waivers on imported hardware and material and/or reduced value added tax are required to boost the mini-grids sector.
• Access to finance, especially from local financial institutions, remains a key challenge.
• Coupling electricity as a service with the provision of appliances (appliance finance), i.e. a fee model, is increasingly being used because of its ability to activate demand and grow consumption. The costs of the appliance and the energy consumed are bundled.
• There is an increasing outlook at communities that have ongoing economic activities to tap into productive use as a way to anchor users. This helps mini-grids in terms of supply, tariffs and cross-subsidisation.
• Site assessments can significantly lower the costs to the developer which ultimately reflects in the tariffs set.