4 Barriers to Minigrid Deployment in Rural Kenya

July 30, 2020

The traditional method of bringing power to the unserved communities is to expand the electricity grid, establishing new power plants fueled by fossils and running both distribution and transmission lines to these homes.

This model has worked for the developed world, but it has failed miserably for Africa, especially sub-Saharan Africa where 65% of the population lacks access to electricity. This is partly due to several reasons, including the low ability of end-users to pay, high infrastructure costs, high infrastructure costs, unreliable electricity supply through the main grid, and disproportionately small end-use demand in rural areas.

Minigrids are being considered as an alternative approach to providing way energy across rural areas. These small-scale distribution networks, with local generation primarily based on solar PV power and backed up by generators and batteries can provide reliable and clean power in isolated rural areas.

Minigrids have a transformative effect that comes with larger and more reliable amounts of electricity- whether it’s welding or grinding maize. These are essential activities and appliances for real economic growth in remote Africa, and the kind of development many African citizens and governments are seeking.

Even though successful cases exist, minigrids have yet to scale across Kenya and sub-Saharan Africa.

The barriers to scaling minigrids in Kenya are:

Cost

Most minigrids are still too expensive.

Although most governments, donors, and companies are developing standardized designs, most minigrids are unique with custom installations. As a result, the typical Levelized cost of energy for a well-run minigrids today is at least 60 Kenyan Shillings per kilowatt-hour.

Utilization

The power produced by minigrids is still underutilized.

Most rural households in Kenya lack the resources to purchase refrigerators, washing machines, and other appliances and devices that would fully utilize the minigrid’s potential electricity generation. Poor utilization in turn drives up the cost per unit of electricity sold because of the limited number of kilowatt-hours of consumption share the up-front capital and operational costs.

Consequently, the demand for power that exists does not match the generating profile of a solar-powered minigrid.

Finance

As it stands, financing is limited or unavailable.

Companies developing minigrid solutions are struggling to secure equity and support from local governments. This has in turn barred them from scaling up their operations.

Additionally, the available financing is expensive with rates of commercial debt available to minigrid solution developers typically higher than normal debts.

Regulatory and Policy Barriers

Numerous policies along with regulatory bodies slow execution progress and increase costs. This also makes the process unpredictable with different licensing and tariffs along with requirements that regulate the price that can be charged for electricity add further risks and challenges to minigrid deployment.

Quality of Life

Despite the success of solar home systems and solar lanterns, a much-needed critical leap must be made and that is providing electricity in not just watts but kilowatts. People do not only need solar lanterns but also mobile phone chargers, other appliances, and devices that will support economic growth and improve their quality of life.

For this reason, there is a vital role for minigrids. Even though successful cases exist, the deployment of minigrids in Kenya and Africa (to an extension) has failed to scale. Stakeholders must address and overcome these barriers to deliver their benefits to communities that need it most.