Difference between revisions of "NAE Case Study: Mali, Rural Electrification Programme"

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{{NAE Case Study Table Mali}}
 
{{NAE Case Study Table Mali}}
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= Description<br/> =
 
= Description<br/> =
  
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The aim is to increase access to electricity (equally in all 47 counties) and promote renewable energy development. An integrated approach is being employed, involving the expansion of national grid in rural areas, development of mini-grids and installation of stand-alone systems (primarily solar PV) - all with an equal (cross-subsidised) tariff. USAID estimates that about 10% of new connections by 2025 will be off-grid. Providing for basic needs in remote communities has also involved widespread dissemination of solar lanterns.&nbsp; Promotion of a private sector-driven approach to rural electrification has been a focus by encouraging private investments in off-grid systems such as solar home systems, solar lanterns and mini-grids. For example, at Kissi, private operators are leading the design, build and management of 4 advanced 100% solar micro-grids in villages with a total solar generation capacity of 80 kW; together with a pre-payment platform. The Rural Energy Authority (REA) has overall responsibility for increasing energy access in rural areas through all appropriate means, whether via grid expansion or through off-grid applications; REA is currently involved with constructing mini-grids in 11 sites.
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A programme to support the private sector delivery of mini-grids was implemented, managed by the national energy agency, AMADER.  AMADER provided technical assistance and financial support (investment subsidies) and ensured the successful completion of the procurement process for mini-grid concessions. The tariffs negotiated between the operators and AMADER were different for each concession. Although there is no uniform tariff, the pressure to keep electricity prices low is significant and substantial subsidies were granted to private operators to overcome the gap between the cost-reflective tariff and the (lower) approved tariff.  (For mini-grids operated by EDM, tariffs were kept at the same level as those of grid-connected customers, around $0.20/kWh; tariffs for the mini-grids operated by private operators were often much higher at around  $0.50/kWh). The private investments were subsidized through the Rural Electrification Fund that is managed by AMADER.  Investment subsidies from the REF are designed to yield affordable tariffs for rural customers but still provide an acceptable financial return for the investors.  These subsidies were limited to 75% of capital costs, with the local private operators providing the remainder.  In this public private partnership, the electricity tariffs were set to recover the private capital cost. 
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The operation and maintenance costs were passed to end-users.
  
 
= Context =
 
= Context =
  
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The installed capacity&nbsp; of the interconnected system as at March 2016 was 2,341 MW which included 632 MW of geothermal energy and 821 MW of hydro power.&nbsp; The off-grid system installed capacity in 2015 was 28 MW and consisted of diesel, solar and wind power plants with supporting mini-grids.&nbsp; Following the full operationalization of the new 280MW geothermal plant in Olkaria, the&nbsp; national electricity consumption by mode will be 47% geothermal, 39% hydro, 13% thermal and 1% wind.&nbsp; Kenya’s demand is expected to rise to 15,000 MW by 2030.&nbsp; The Government's "Vision 2030" recognizes energy as a key priority, which requires an alignment of the energy sector policy and legislation. The target for rural electrification is “full access” for the rural population by connecting those public facilities (trading centres, state schools, health centres) that are not yet electrified (about 4,000 from the total of 25,000).&nbsp; However, this target of full access does not mean that all households will be connected.&nbsp; The tariff system is uniform (cross-subsidy) irrespective of grid or off-grid and is based on energy consumption and fuel used for generation (the average generation cost in 2010 was $0.29/kWh).&nbsp; In order to offset fuel consumption, renewable energy is being introduced into the off-grid systems. There is a huge potential for replacing diesel with solar power in micro-grids.&nbsp;
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As of 2014, Energie du Mali SA (EDM) had an estimated total installed capacity of around 400 MW, including both grid interconnected and isolated systems with about 60% hydropower and most of the remainder using imported fuel sources.   Approximately a quarter of the population is provided with electricity (59% in urban areas, 14% in rural areas).  This reported figure for rural electrification has risen from 2% a decade ago, but the quantity, quality, reliability and affordability of this rural access are often questionable. There is estimated potential for 1150MW of hydropower, of which 250 MW is presently developed (and partly shared with Senegal and Mauritania); this concerns primarily the hydroelectric plants of Sélingué (46 MW) and Manantali (200 MW). In addition, various other sites provide options for mini- or micro-hydro plants. In 2015, the Norwegian project developer Scatec Solar, signed an agreement with EDM and MEE to build a 33MW solar plant, the first utility scale solar plant in West Africa.
  
 
= Objectives =
 
= Objectives =
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The goal is to implement mini-grids when they are the least-cost solution for energy access to remote areas.  This requires integration with stand alone systems.  There is no apparent target agreed for the number of mini-grid connections to be achieved.
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Although overall electricity access increased from 23% in 2009 to 50% in 2015, the coverage is still limited to the coastal, central and some eastern and western parts of the country, with remote regions (such as northern Kenya) having access of only about 5%. The mandate of REA to power the Vision 2030 is to reach ‘universal connectivity by 2030’.&nbsp; REA has a target of 23% of the population to be served by mini-grids, both publicly and privately owned. There are no such formal targets for stand-alone systems, though the government estimates that the cost of connecting a rural household to the national grid is between $800 and $1000 whereas a stand-alone solar system (providing enough power for an off-grid household) costs an average of between $150 and $300 – this acknowledgement is likely to see increased support for such systems as part of Vision 2030.
 
  
 
= Legal Basis =
 
= Legal Basis =
  
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National Energy and Petroleum Policy (2015), provides the basis for the development of a comprehensive electrification strategy towards universal access by 2020.&nbsp; This provides dedicated targets for rural electrification and off-grid generation. For mini-grids, generation, distribution and supply licences are required from the Energy Regulatory Commission (ERC) as well as clearance from the National Environmental Management Authority (NEMA).&nbsp; For stand-alone solar systems, a licence is required for any person who “carries out any solar PV system manufacture, import, vending or installation work” according to the Energy (Solar PV) Regulation, 2012.
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The Energy Sector Organisation Law signed in 2000 allows private sector operators to supply electricity and mini-grid concessions to be established.
  
 
= Institutions, Roles and Responsibilities<br/> =
 
= Institutions, Roles and Responsibilities<br/> =
  
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The national utility Kenya Power & Lighting Company (KPLC) is a for-profit corporation, majority-owned by the government. It is one of the two companies that dominate the Kenyan power sector. While KPLC is responsible for power transmission, distribution and supplies to consumers, and manages diesel-powered mini-grids set up in off-grid areas of commercial or strategic importance, Kenya Electricity Generating Company Limited (KenGen) is the leading electric power generation company, producing about 75% of installed electricity capacity (using hydro, geothermal, thermal and wind). Independent Power Producers (IPPs) such as IberAfrica, Tsavo, Or-power4 Inc., Rabai, Imenti, and Mumias -&nbsp; own and operate private power stations connected to the grid and sell electricity to KPLC. Collectively, they account for about 28% of the country’s installed capacity.&nbsp; The Geothermal Development Company (GDC) was formed by Government in 2008 to develop geothermal electric power. The Rural Electrification Authority (REA) was established in 2007 to extend electricity to rural areas - REA is responsible for the Implementation and sourcing of additional funds for the rural electrification programme – it handles the planning of network extension (including the development of mini-grid sites throughout the country), facilitates links with private investors/operators, and manages the Rural Electrification Program Fund. KPLC&nbsp; oversees the implementation of these mini-grids. For the 18 existing mini-grids,&nbsp; distribution and sales are done by KPLC, and the generating equipment is owned either by KenGen or REA (all three are government organisations). There are a few private developers (e.g. Powerhive, Powergen RE, and Talek Power) that own and operate independent mini-grids, though the licensing/tariff regulation regime presents a major barrier (regulations are still quite vague and generally prioritise grid expansion over non-grid electrification in remote areas), and the uniform national tariff is still predominant (though exceptions have been agreed e.g. for Powerhive). Other key players include the Ministry of Energy (MoE) - responsible for policy as well as generation and distribution licenses - and the Energy Regulatory Commission (ERC) – responsible for energy planning, tariff setting, and recommendations for licenses
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The National Energy Directorate created in 1999 (within the Ministry for Mines, Energy and Water) is responsible for the energy sector. The Electricity and Water Regulatory Commission (CREE) was established in 2000 and is responsible for energy regulation in all areas.  Urban electricity is provided by the state-owned utility, Energie de Mali (EDM). AMADER (the Malian Agency for the Development of Rural Electrification) was formed in 2003. It regulates and supports rural electrification independently of CREE (it has responsibility for the regulation of off-grid energy service providers, with generation systems below 250 kW) and manages the Rural Electrification Fund (set up in 2005). AMADER manages the mini-grid program, which includes providing the initial capital cost subsidies to connect new customers (of about $625 per new connection), and makes all major decisions concerning mini-grids.
  
 
= Interventions<br/> =
 
= Interventions<br/> =
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15-year concessions, granting the right to sell electricity within a specified service area,  are awarded by AMADER to private sector mini-grid developers. Concessions specify the level and quality of electricity provision. Concessionaires set their own tariffs, subject to AMADER approval. (Initially AMADER set concession zones and asked developers to bid for these, but the process proved to be too cumbersome). The tariff is expected to cover operating costs and financial costs, and also to include a return on investment for the operator over the 15 years covered by the authorization. (The commonly accepted rate is around 8%, which is low compared to major infrastructure projects where it is generally around 15%). AMADER provides grants from a Rural Electrification Fund (funded by WB & KfW) for up to $500k to subsidize up to 80% of capex costs (including generation, distribution and connections within 15m of distribution lines) for new mini-grids and for hybridizing diesel-powered mini-grids. Developers finance the balance from commercial loans and remittances. If the main grid is extended to the concession area, EDM takes over the assets and compensates the owner for the non-amortized portion of their value. RE components have been made exempt from VAT.  EDM grid tariffs have been adjusted towards cost-recovery levels since 2009.
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The off-grid energy market in Kenya has developed on the basis of a wide range of well-co-ordinated interventions at many levels, including:
 
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*Vision 2030 to prioritise energy and prepare appropriate policy/regulation frameworks
 
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*the establishment of a dedicated Government agency (REA) with focussed mandate and a clear target (full access by 2030)
 
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*specific actions to address barriers and encourage the private sector, including pilot projects to demonstrate that cost-reflective tariffs were socially possible for mini-grids, capex provided by government, cross subsidy from all KPLC customers,&nbsp; the removal of value-added tax on solar products
 
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*proactive and customer-oriented marketing strategy that also covered the poor peri-urban districts
 
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*promotion of solar lanterns as a substitute to the use of kerosene as the main source of lighting in rural areas and as the main back up lighting system in urban areas<br/>
 
  
 
= Impacts Achieved<br/> =
 
= Impacts Achieved<br/> =
  
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Kenya added 1.3 million households to its electricity grid during 2016, raising the percentage of connected Kenyans to 55%, from just 27% in 2013. This has been complemented by a dramatic growth in implementation of off-grid solar powered electrification; it is projected that the installed capacity of solar photovoltaic systems in Kenya will reach 100 MWe, generating 220 GWh annually, by 2020. (In&nbsp; mid-2013, it was estimated that about 2.5 million people were already using off-grid solar lighting products, with evidence of more than 35% annual growth in this sector). The policy and regulatory environment for electrification is fairly advanced, with significant and growing IPP presence, unbundling and partial privatization of national utilities, and increasing take-up of cost reflective tariffs. Over 30% of the off-grid population has first hand experience with solar lighting (BNEF/GOGLA market trends report 2016), with many replacing kerosene and other fossil fuels with pico and small home solar PV systems for lighting, resulting in significant energy-related savings. However, there is need for continued effort in order to achieve the universal access goal, with additional connections becoming more challenging as they become more remote. By the end of 2016, 5.7 million households had been connected. The next target is 6.5 million connected households by 2017.
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Mali is seen as the most successful country in Africa with the application of isolated mini-grids. There are more than 60 private mini-grid operators, and now more than 200 mini-grids (mostly small diesel) in operation across the country. By 2015, there were over 160 new isolated mini-grids established (in addition to the mini-grids managed by EDM), serving an average of 500 connections each (a total of around 80,000 connections).  
  
 
= Lessons Learned<br/> =
 
= Lessons Learned<br/> =
  
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The potential for increased private sector involvement is not yet clear and the viability/sustainability of existing initiatives&nbsp; to increase electrification has not been fully proven mainly due to tariff issues. The Government has established regulatory and policy frameworks to encourage private sector investment, but there is still a lack of local capacity for planning and for financial assessments to consider the load demand growth. Clear national plans are required to motivate private reinvestment for new customers. The Solar Lantern programme has shown how government policy and strategy have a significant impact on the private sector’s ability to advance in these markets,&nbsp; but a key to commercial success will be making these products and services affordable and attractive to Kenyans.&nbsp; It is probably possible for high-quality off-grid lighting to compete with inexpensive, low-quality products if sufficient attention is given to consumer outreach, advertising, to raise awareness of quality differentiators.&nbsp; Another critical factor has been mobile pay-as-you-go off-grid solar vendors’ ability to leverage the popular M-Pesa mobile money and payments service for standalone solar products.&nbsp; Private enterprises generally agree that direct subsidies are counterproductive in the case of small lighting products such as solar lanterns and small SHSs. Such support is not needed, since this segment of the rural electrification market will grow quickly by itself. The private sector believes that government efforts should rather be centred on enabling issues such as consumer education (on quality), access to finance, and training of skilled local retailers.
+
Having a rural electrification agency with a specific focus is a key success factor of Mali´s mini-grid roll-out. Mini-grids can act as a valuable intermediate step towards grid electrification for communities.  It is important to select mini-grid locations far from the main grid for mini-grid operators (who do not want a connection to the main grid during the 15-year period of their contract since this will undermine the level of their returns). Other lessons include: (i) Offering multiple avenues for private sector participation in the mini-grid sector provides flexibility and may provide unanticipated opportunities for expanded participation (ii) Capital cost grants can support financial viability and sustainability of mini-grid projects (iii) Designating a “one-stop” agency to regulate and provide mini-grid grants can increase efficiency and make private sector engagement more attractive (iv) Allowing mini-grid developers to set their own tariffs can support mini-grid deployment (v) Support for hybridization of diesel-powered mini-grids can reduce operating costs and lower tariffs (vii) Initial process for private developers to bid for concession zones was cumbersome and failed to attract the private sector (viii) Some projects failed due to uneconomic tariffs and/or lack of skills (ix) There have been coordination problems with EDM especially related to grid extension (x) Communities felt disempowered by AMADER (xi) Differences between mini-grid and grid tariffs has created tariff-envy (xii) Confusion regarding the status of concessions following hybridization.  Private operators have struggled to get tax exemption and to recover their operating costs.  
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= Effectiveness<br/> =
 
= Effectiveness<br/> =
  
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A key to the success of this national programme in increasing use of off-grid energy systems has been the integrated approach to market development.&nbsp; This has combined policy frameworks with financial support mechanisms and customer education, which has led to growing market demand for off-grid products.&nbsp; It is important to note that direct subsidies from government are not seen as an effective route to a sustainable market.&nbsp; Despite this lack of direct financial support from the public sector, the growth of off-grid electrification (primarily through solar applications) has been substantial enough to represent a nascent commercial market.&nbsp; This has been stimulated by a range of supportive measures, with access to mobile banking services and customer awareness initiatives having the greatest impact.&nbsp; This facilitative approach has had positive results to date and certainly appears to represent a very cost-effective means to extend national electrification.
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The approach adopted in Mali has been very effective in establishing a well-functioning mini-grid industry for the supply of electricity to remote areas.  The public sector cost has been up to US$500k per mini-grid installation, which on average has typically serviced 500 households.  This equates to a connection cost to the Government of maximum US$1000/household. This excludes 20% of the capital and associated installation costs, which must be borne by the supplier and refunded by users who have to pay electricity charges to provide suppliers with an adequate return on the balance of capital and ongoing operating and maintenance costs. (it should be noted that this cost is likely to increase as the location of mini-grids becomes more remote and transport/service becomes more expensive). Even with capital subsidy tariffs, the average price of $0.50/kWh is still much higher than for grid electricity, which brings the danger of tariff envy, particularly from customers near to EDM gridlines. In practice, the 80% capital subsidy has been covered by international donors and so has not required government funds.  Such an approach (with a one-off project cost funded by donors) can fulfil the needs of all involved since the donors are satisfied with the outcome and bear no long-term obligation for additional resources, the government can successfully facilitate an essential service to consumers, and a private sector market is developed, with good prospects of being maintained through future expansion, service and maintenance demands from customers.  In principal, mini-grids will provide tier 4-5 in terms of the SEforAll energy access ratings, which will be comparable to power from the main grid; in Mali, questions over the reliability of grid supplies mean that the mini-grids will often perform better. This initiative therefore seems to represent good value for money from the perspective of all stakeholders involved.
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= Overview of Other Country Case Studies =
 
= Overview of Other Country Case Studies =
  
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= References =
 
= References =
  
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*[http://www.erc.go.ke/images/docs/National_Energy_Petroleum_Policy_August_2015.pdf http://www.erc.go.ke/images/docs/National_Energy_Petroleum_Policy_August_2015.pdf]
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*AFD (2013) Access to Electricity in Sub-Saharan Africa: Lessons Learned and Innovative Approaches  *http://www.afd.fr/jahia/webdav/site/afd/shared/PUBLICATIONS/RECHERCHE/Scientifiques/Documents-de-travail/122-VA-document-travail.pdf
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*[http://www.kplc.co.ke/content/item/1119/electrification-project- http://www.kplc.co.ke/content/item/1119/electrification-project-]
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*https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Profil_ER_Mal_Web_light.pdf
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*Practical Action, ODI, Solar Aid, GOGLA. (2016). Accelerating Access to Electricity in Africa with Off-grid Solar [https://policy.practicalaction.org/policy-themes/energy/off-grid-solar https://policy.practicalaction.org/policy-themes/energy/off-grid-solar]
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*Clean Energy Solutions Centre & iied. (2015). Policies to Spur Energy Access. https://cleanenergysolutions.org/resources/policies-spur-energy-access
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*[http://www.renewableenergy.go.ke/downloads/policy-docs/Updated_SREP_Draft_Investment_Plan_May_2011.pdf http://www.renewableenergy.go.ke/downloads/policy-docs/Updated_SREP_Draft_Investment_Plan_May_2011.pd]<br/>
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*https://www.esmap.org/sites/esmap.org/files/2b.MALI_Rural%20Electrification%20and%20Opportunities%20for%20Gender%20Integration.pdf
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*[http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1327690230600/8397692-1327691237767/Rural_Electrification_in_Kenya_presentation_Final_11thNov2011.pdf http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1327690230600/8397692-1327691237767/Rural_Electrification_in_Kenya_presentation_Final_11thNov2011.pdf]
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*http://www.fres.nl/wp-content/uploads/2014/12/01072013_PwC_Socioecomonic_study_EN_F.pdf
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*[http://www.vision2030.go.ke/projects/?pj=2 http://www.vision2030.go.ke/projects/?pj=2]
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*https://www.reeep.org/mali-2012
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*World Resources Institute (2015),Clean Energy Access in Developing Countries: Perspectives on Policy and Regulation, Issue Brief 2 [http://www.wri.org/sites/default/files/clean-energy-access-developing-countries-issue-brief.pdf http://www.wri.org/sites/default/files/clean-energy-access-developing-countries-issue-brief.pdf]
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*http://projects.worldbank.org/P131084?lang=en
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*World Resources Institute (Year Unknown), Implementation Strategies for Renewable Energy Services in Low-Income, Rural Areas. Policy Brief Issue 1.<br/>
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*World Bank. 2014. From the Bottom Up. How Small Power Producers and Mini-Grids Can Deliver Electrification and Renewable Energy in Africa https://openknowledge.worldbank.org/handle/10986/16571
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*[https://www.wri.org/sites/default/files/pdf/implementation_strategies_renewable_energy_services_low_income_rural_areas.pdf https://www.wri.org/sites/default/files/pdf/implementation_strategies_renewable_energy_services_low_income_rural _areas.pdf]
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*The World Bank Group, (2012). Institutional Approaches to Electrification: The Experience of Rural Energy Agencies/Rural Energy Funds in Sub-Saharan Africa. November 14–16, 2011 Dakar, Senegal https://openknowledge.worldbank.org/bitstream/handle/10986/26073/763820WP0P11090s0to0Electrification.pdf?sequence=1&isAllowed=y
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{{NAE Acknowledgements}}
 
{{NAE Acknowledgements}}
  
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[[Category:Mali]]
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[[Category:Kenya]]
 
[[Category:NAE]]
 
[[Category:NAE]]

Latest revision as of 14:19, 5 November 2019

NAE Overview Page
TechnologyTechnology: Grid ExtensionTechnology: Grid-Connected Mini-Grid/Distribution SystemTechnology: Isolated Mini-GridTechnology: Standalone SystemsDelivery ModelDelivery Model: PublicDelivery Model: Private (Non-Government)Delivery Model: Public-Private PartnershipLegal BasisLegal Basis: ConcessionLegal Basis: LicenseLegal Basis / Price/Tariff Regulation: UnregulatedPrice/Tariff RegulationPrice/Tariff Regulation: UniformPrice/Tariff Regulation: IndividualFinanceFinance: PrivateFinance : UserFinance: Grants & SubsidiesFinance: Cross-SubsidiesFinance: Tax ExemptionsFinance: GuaranteesNon-Financial InterventionsNon-Financial Interventions: Direct Energy Access ProvisionNon-Financial Interventions: Institutional RestructuringNon-Financial Interventions: Regulatory ReformNon-Financial Interventions: Policy & Target SettingNon-Financial Interventions: Quality & Technical StandardsNon-Financial Interventions: Technical AssistanceNon-Financial Interventions: Capacity Building & Awareness RaisingNon-Financial Interventions: Market InformationNon-Financial Interventions: Demand PromotionNon-Financial Interventions: Technology Development & AdoptionNon-Financial Interventions: National Energy PlanningNAE Case Study Table Mali.png]]


Description

A programme to support the private sector delivery of mini-grids was implemented, managed by the national energy agency, AMADER. AMADER provided technical assistance and financial support (investment subsidies) and ensured the successful completion of the procurement process for mini-grid concessions. The tariffs negotiated between the operators and AMADER were different for each concession. Although there is no uniform tariff, the pressure to keep electricity prices low is significant and substantial subsidies were granted to private operators to overcome the gap between the cost-reflective tariff and the (lower) approved tariff. (For mini-grids operated by EDM, tariffs were kept at the same level as those of grid-connected customers, around $0.20/kWh; tariffs for the mini-grids operated by private operators were often much higher at around $0.50/kWh). The private investments were subsidized through the Rural Electrification Fund that is managed by AMADER. Investment subsidies from the REF are designed to yield affordable tariffs for rural customers but still provide an acceptable financial return for the investors. These subsidies were limited to 75% of capital costs, with the local private operators providing the remainder. In this public private partnership, the electricity tariffs were set to recover the private capital cost. The operation and maintenance costs were passed to end-users.

Context

As of 2014, Energie du Mali SA (EDM) had an estimated total installed capacity of around 400 MW, including both grid interconnected and isolated systems with about 60% hydropower and most of the remainder using imported fuel sources. Approximately a quarter of the population is provided with electricity (59% in urban areas, 14% in rural areas). This reported figure for rural electrification has risen from 2% a decade ago, but the quantity, quality, reliability and affordability of this rural access are often questionable. There is estimated potential for 1150MW of hydropower, of which 250 MW is presently developed (and partly shared with Senegal and Mauritania); this concerns primarily the hydroelectric plants of Sélingué (46 MW) and Manantali (200 MW). In addition, various other sites provide options for mini- or micro-hydro plants. In 2015, the Norwegian project developer Scatec Solar, signed an agreement with EDM and MEE to build a 33MW solar plant, the first utility scale solar plant in West Africa.

Objectives

The goal is to implement mini-grids when they are the least-cost solution for energy access to remote areas. This requires integration with stand alone systems. There is no apparent target agreed for the number of mini-grid connections to be achieved.

Legal Basis

The Energy Sector Organisation Law signed in 2000 allows private sector operators to supply electricity and mini-grid concessions to be established.

Institutions, Roles and Responsibilities

The National Energy Directorate created in 1999 (within the Ministry for Mines, Energy and Water) is responsible for the energy sector. The Electricity and Water Regulatory Commission (CREE) was established in 2000 and is responsible for energy regulation in all areas. Urban electricity is provided by the state-owned utility, Energie de Mali (EDM). AMADER (the Malian Agency for the Development of Rural Electrification) was formed in 2003. It regulates and supports rural electrification independently of CREE (it has responsibility for the regulation of off-grid energy service providers, with generation systems below 250 kW) and manages the Rural Electrification Fund (set up in 2005). AMADER manages the mini-grid program, which includes providing the initial capital cost subsidies to connect new customers (of about $625 per new connection), and makes all major decisions concerning mini-grids.

Interventions

15-year concessions, granting the right to sell electricity within a specified service area, are awarded by AMADER to private sector mini-grid developers. Concessions specify the level and quality of electricity provision. Concessionaires set their own tariffs, subject to AMADER approval. (Initially AMADER set concession zones and asked developers to bid for these, but the process proved to be too cumbersome). The tariff is expected to cover operating costs and financial costs, and also to include a return on investment for the operator over the 15 years covered by the authorization. (The commonly accepted rate is around 8%, which is low compared to major infrastructure projects where it is generally around 15%). AMADER provides grants from a Rural Electrification Fund (funded by WB & KfW) for up to $500k to subsidize up to 80% of capex costs (including generation, distribution and connections within 15m of distribution lines) for new mini-grids and for hybridizing diesel-powered mini-grids. Developers finance the balance from commercial loans and remittances. If the main grid is extended to the concession area, EDM takes over the assets and compensates the owner for the non-amortized portion of their value. RE components have been made exempt from VAT. EDM grid tariffs have been adjusted towards cost-recovery levels since 2009.

Impacts Achieved

Mali is seen as the most successful country in Africa with the application of isolated mini-grids. There are more than 60 private mini-grid operators, and now more than 200 mini-grids (mostly small diesel) in operation across the country. By 2015, there were over 160 new isolated mini-grids established (in addition to the mini-grids managed by EDM), serving an average of 500 connections each (a total of around 80,000 connections).

Lessons Learned

Having a rural electrification agency with a specific focus is a key success factor of Mali´s mini-grid roll-out. Mini-grids can act as a valuable intermediate step towards grid electrification for communities. It is important to select mini-grid locations far from the main grid for mini-grid operators (who do not want a connection to the main grid during the 15-year period of their contract since this will undermine the level of their returns). Other lessons include: (i) Offering multiple avenues for private sector participation in the mini-grid sector provides flexibility and may provide unanticipated opportunities for expanded participation (ii) Capital cost grants can support financial viability and sustainability of mini-grid projects (iii) Designating a “one-stop” agency to regulate and provide mini-grid grants can increase efficiency and make private sector engagement more attractive (iv) Allowing mini-grid developers to set their own tariffs can support mini-grid deployment (v) Support for hybridization of diesel-powered mini-grids can reduce operating costs and lower tariffs (vii) Initial process for private developers to bid for concession zones was cumbersome and failed to attract the private sector (viii) Some projects failed due to uneconomic tariffs and/or lack of skills (ix) There have been coordination problems with EDM especially related to grid extension (x) Communities felt disempowered by AMADER (xi) Differences between mini-grid and grid tariffs has created tariff-envy (xii) Confusion regarding the status of concessions following hybridization. Private operators have struggled to get tax exemption and to recover their operating costs.


Effectiveness

The approach adopted in Mali has been very effective in establishing a well-functioning mini-grid industry for the supply of electricity to remote areas. The public sector cost has been up to US$500k per mini-grid installation, which on average has typically serviced 500 households. This equates to a connection cost to the Government of maximum US$1000/household. This excludes 20% of the capital and associated installation costs, which must be borne by the supplier and refunded by users who have to pay electricity charges to provide suppliers with an adequate return on the balance of capital and ongoing operating and maintenance costs. (it should be noted that this cost is likely to increase as the location of mini-grids becomes more remote and transport/service becomes more expensive). Even with capital subsidy tariffs, the average price of $0.50/kWh is still much higher than for grid electricity, which brings the danger of tariff envy, particularly from customers near to EDM gridlines. In practice, the 80% capital subsidy has been covered by international donors and so has not required government funds. Such an approach (with a one-off project cost funded by donors) can fulfil the needs of all involved since the donors are satisfied with the outcome and bear no long-term obligation for additional resources, the government can successfully facilitate an essential service to consumers, and a private sector market is developed, with good prospects of being maintained through future expansion, service and maintenance demands from customers. In principal, mini-grids will provide tier 4-5 in terms of the SEforAll energy access ratings, which will be comparable to power from the main grid; in Mali, questions over the reliability of grid supplies mean that the mini-grids will often perform better. This initiative therefore seems to represent good value for money from the perspective of all stakeholders involved.

Overview of Other Country Case Studies

Bangladesh, IDCOL Solar Home SystemsBrazil, Luz para Todos (Light for All)NAE Case Study: Cambodia “Light Touch” RegulationCosta Rica, Distribution CooperativesEthiopia, Solar Market DevelopmentKenya, Off-Grid for Vision 2030Mali, Rural Electrification ProgrammeNepal, Rural Energy Development ProgrammePeru, Concession Model for Standalone SystemsPhilippines, Islanded Distribution by CooperativesRwanda, Sector-Wide Approach to PlanningSouth Africa, Integrated National ElectrificationTanzania, Mini-Grids Regulatory FrameworkTunisia, Low Cost Distribution TechnologyVietnam, Rapid Grid ExpansionNAE Case Studies Navigation Table.png]]


References



Authors

Authors: Mary Willcox, Dean Cooper

Acknowledgements

The Review was prepared by Mary Willcox and Dean Cooper of Practical Action Consulting working with Hadley Taylor, Silvia Cabriolu-Poddu and Christina Stuart of the EU Energy Initiative Partnership Dialogue Facility (EUEIPDF) and Michael Koeberlein and Caspar Priesemann of the Energising Development Programme (EnDev). It is based on a literature review, stakeholder consultations. The categorization framework in the review tool is based on the EUEI/PDF / Practical Action publication "Building Energy Access Markets - A Value Chain Analysis of Key Energy Market Systems".

A wider range of stakeholders were consulted during its preparation and we would particularly like to thank the following for their valuable contributions and insights: - Jeff Felten, AfDB - Marcus Wiemann and other members, ARE - Guilherme Collares Pereira, EdP - David Otieno Ochieng, EUEI-PDF - Silvia Luisa Escudero Santos Ascarza, EUEI-PDF - Nico Peterschmidt, Inensus - John Tkacik, REEEP - Khorommbi Bongwe, South Africa: Department of Energy - Rashid Ali Abdallah, African Union Commission - Nicola Bugatti, ECREEE - Getahun Moges Kifle, Ethiopian Energy Authority - Mario Merchan Andres, EUEI-PDF - Tatjana Walter-Breidenstein, EUEI-PDF - Rebecca Symington, Mlinda Foundation - Marcel Raats, RVO.NL - Nico Tyabji, Sunfunder -


NAE Overview Page

Any feedback would be very welcome. If you have any comments or enquires please contact: mary.willcox@practicalaction.org.uk, benjamin.attigah@euei-pdf.org, or caspar.priesemann@giz.de.

Download the Tool as a Power Point: https://energypedia.info/images/a/aa/National_Approaches_to_Electrification_-_Review_of_Options.pptx

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