Electrifying Africa: Grid Extension Models in Sub-Saharan Africa

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Overview - Key Messages

  1. The cooperative approach has not been applied in most African countries. So far only few cooperatives exist which are engaged in the management of diesel-fueled mini-grids instead of grid extension. Only in Burkina Faso have cooperatives managed grid extension with disappointing results that, however, seem to be due to the specific set-up of the cooperative model in Burkina Faso.
  2. Grid extension has been managed by more centralized macro-level approaches. In Ghana this approach constituted cooperation between the Ministry of Energy and the national utility yielding great success rates. Tanzania and Senegal have both employed the REA approach which has been widely successful in Senegal. In Tanzania electrification rates are still very low but the REA has also only been operational within the last 4 years.


In Sub-Saharan Africa electrification rates are even lower than the average for developing countries. Total electrification rates range around 29% as compared to 64% for developing countries on average. In rural areas the share of the population having access to electricity is as low as 10%. Ghana and Senegal rank among the countries with the highest electrification rates in Africa while in Tanzania electrification rates are still relatively low (AEI, 2009).

Whether or not grid extension is the appropriate technical solution to remedy this problem is a topic on its own merit. Considering the sparse population in rural areas and the resulting low anchor loads mini-grid or off-grid solutions might be better suited but are not always as reliable as receiving electricity from the national grid. For these alternative solutions as well as for grid extension, however, different institutional models have also been employed in different African countries.


Cooperatives

Rural energy cooperatives have hereby mainly played a role in the management, operation and maintenance of local mini-grids rather than the extension of the national grid. Examples there of can be found in Tanzania, e.g. the Urambo Electric Consumers Cooperative Society – UECCOO, or in Uganda with the Bundibugyo Electric Cooperative Society – BECS. In these cases mini-grids were fueled by diesel-generation and were either installed by the national utility, as in the case of Tanzania, or by private companies like in Uganda (Marandu, 2002; Ilskog et al., 2005; REA, 2009)

In the Tanzanian case the Urambo Electric Cooperative has proven as a very successful model for the management of mini-grids and could therefore also possibly become a successful approach to grid extension (Ilskog et al., 2005). In Uganda the approach is still relatively new and pilot projects are only in their early stages providing limited evidence with regard to their effectiveness (REA, 2008).

Only one case seems to exist so far in which cooperatives were employed to manage grid extension – the case of Burkina Faso. However, the cooperative approach in Burkina Faso incurred a significant amount of problems. Being instituted as complementary to already existing private companies operating in rural areas cooperatives in Burkina Faso faced a great amount of competition. Additionally a rural electrification agency and the utility were also involved in the rural electrification process, requiring cooperatives to cooperate with several actors at once. While the utility remained important as the sole owner of the transmission lines the REA/REF was the main source of funding, providing a 60% subsidy to cover the initial investment costs and an additional 40% which had to be repaid within 10 years. Upon repayment of this loan cooperatives would then be formally regarded as the owners of the distribution system. Yet, this ownership seems to have remained on a formal level with private companies assuming responsibility for the building, operation and maintenance of the network while cooperatives were merely responsible for covering the arising maintenance costs (Box 1.1.1) (Nygaard, 2009).

Compared to the cooperative approach employed in the US or Asian context this example already shows significant differences with regard to the responsibilities assumed by the cooperatives and regarding local ownership. Cooperatives in Burkina Faso did not have to contribute a certain percentage of the costs in the early stages of the project and more than half of the costs were subsidized by the REA/REF. They also did not assume any management or operational tasks and were merely supposed to provide funds for maintenance of the network. Indeed Nygaard (2009) notes that one of the problems which led to unsuccessfulness of this approach in Burkina Faso was the lack of ownership by the cooperatives. The provision of training to improve the technical and economic capacities of cooperatives would have been necessary to remedy this problem. Moreover, a certain amount of equity should have been provided by the cooperatives to create a feeling of responsibility otherwise actors will rely and remain dependent on other institutions involved in the process (Nygaard, 2009).

While the cooperative approach has, therefore, not yielded much success in Burkina Faso this seems to be the results of the specifics of the case. Apart from this example cooperatives, however, seemed to have not played a prominent role with regard to rural electrification through grid extension in the African context. Other operating models, e.g. centralized utilities assuming responsibility for grid extension have featured more prominently. In recent years, REAs and REFs have also increased in number and have been institutionalized in many African countries to manage the rural electrification process.

Box 1.1.1

Cooperatives in Burkina Faso: A mixed success

The cooperative approach in Burkina Faso was less successful than in some of its Asian counterparts. Some of the factors that contributed to that were, according to a former employee of the REA in Burkina Faso, the fact that “cooperatives are only formally responsible for running rural electrification in Burkina Faso. With the REA being responsible for technical assistance call for tenders are usually made by the REA on behalf of the cooperatives. Afterwards a private company builds and operates the system. Usually these private companies completely take over making it difficult for cooperatives to play a responsible role, partake in making any decisions and becoming a strong and respected actor. They become more of a fake organization needed to fulfill the requirements for being considered for rural electrification.”

“The whole set-up of the cooperative approach is already problematic. Cooperatives are established using a top-down approach and have mainly been introduced by international donors. The problem of that is, on the one hand, that people don’t really feel any responsibility, also because they did not have to invest anything. On the other hand, the concept of cooperatives changes in a development setting. In the West cooperatives were used as a means of pooling resources. In many developing countries they are seen as a way of gaining access to resources."


Reasons for this difference in perception can partly be attributed to local circumstances and partly to general problems of dependency within a development context. “One reason why people would not want to pool their resources in a communal organization is bad experiences made in the past. There are numerous examples of organizations that were used to pool resources but when the money was needed it was no longer there. People simply feel it’s safer to keep their money to themselves and raise communal money, e.g. for repairs, when it is needed. People in developing countries also see it as more of a strategy to access funds due to experiences with the general development context. This also makes it more difficult to get people to take the initiative in starting cooperatives since they know that if they can await something from above the best strategy is to simply just wait.”

In order to remedy some of these problems especially more financial involvement has been suggested. “Asking for 20-30% of the initial costs raises the sense of responsibility. In many development projects in other sectors 10% are the usual requirement but often local parliamentarians simply contribute these 10% on their own making it seem to the villagers like they were the ones who brought the new benefits to the village and thereby also defeating the purpose of asking for a communal contribution.”


Tanzania: A young REA approach

Tanzania has a relatively low level of electrification. In 2010 only 10% of a population of 37 million people had access to electricity. In rural areas where 75% of the population live, this rate is even lower with only 2% of the population having access to electricity (Msofe, 2009).

In order to improve this situation a National Energy Policy (NEP) was launched in 2003 which among other components foresees the creation of a rural electrification agency in Tanzania. Consequently, the REA was established in Tanzania in 2005 but only became fully operational by 2007. The REA is an autonomous body whose activities are supervised by the Ministry of Energy and Minerals (REA, 2011; Uisso, 2009). It is governed by a rural electrification board (REB) consisting of members of different ministries engaged in the rural electrification process and other institutions, e.g. civil society organizations, consumer representatives, donor community etc. (REA, 2011). In addition to the REA a rural electrification fund (REF) was established to manage the financial funds dedicated to rural electrification. Both institutions are financed through government budgetary allocations, levies on electricity as well as donor funding, e.g. from the World Bank and SIDA (Msofe, 2009; Uisso, 2009).

The REA/REF in cooperation with the Tanzanian national utility TANESCO, who acts as the project developer, has so far implemented a variety of projects including on- as well as off-grid installations for rural electrification. Thereby it provides funding to TANESCO to connect previously unconnected areas as well as finances research and development for the innovation of low cost distribution designs (Uisso, 2009). Additionally to its classical role of providing financial means to undertake projects the REA also provides trainings and capacity building expertise for project developers that are engaged in rural electrification activities as well as providing technical expertise and assistance in setting up collaborations between project developers (Msofe, 2009).

Complementary to the REA the Tanzania Energy Development and Access Project was launched. The latter is mainly financed through funds provided by the World Bank and the GEF and is comprised of an on-grid as well as off-grid component. However, the on-grid component does involve the extension of the grid to provide increased energy access to rural populations but focuses on strengthening the existing grid and improving the efficiency of TANESCO. The off-grid component which focuses on the provision of funding for renewable energy off-grid installations mainly aims at increasing access to electricity in rural and peri-urban areas of the country (Msofe, 2009).

In undertaking these activities the government aims at achieving its target of providing access to electricity to 25% of the population by 2025 (Free Energy Foundation, n.d.).



Ghana: A promising centralized approach


In comparison to Tanzania, Ghana had already achieved higher levels of electrification by the 1980’s than Tanzania today. Through a well-defined strategy it has accomplished to increase these numbers even further and today ranks among the countries with one of the highest electrification rates in Sub-Saharan Africa.

The road to this success in Ghana was paved by employing a highly centralized approach based on the National Electrification Scheme (NES) which was established by the Government of Ghana in 1989. The aim of this scheme was to extend access to electricity to all communities of more than 500 people in Ghana within a period of 30 years, from 1990-2020 (Abavana, 2008; Abavana, 2004).
The NES is mainly managed and implemented by a combination of public authorities and utilities. Thereby the Ministry of Energy assumes the role of policy formulator and coordinator for the electricity sector and is responsible for the overall management of the NES. It is assisted by two smaller public agencies, the Energy Commission and the Public Utilities Regulatory Commission, with the former being responsible for licensing and the enforcement of technical standards and the latter setting and enforcing service quality standards and regulating tariffs. The technical implementation of the extension of the grid is undertaken by Ghana’s public utilities which are divided into separate generation, transmission and distribution facilities (Vanderpuye, 2010).

In order to achieve its objective the NES was composed of four components: the District Capitals Electrification Program, the National Electrification Program, the Self-Help Electrification Program (SHEP) and the System Re-enforcement Program (Abavana, 2008). The first component was implemented during the first phase of the scheme and included the electrification of all district capitals and all communities en route to these capitals. The other three components were and are being gradually implemented throughout the lifetime of the scheme and regulate that as part of the National Electrification Program at least five communities per district per year have to be electrified and within the System Re-enforcement Program the efficiency of already existing distribution lines has to be improved (Abavana, n.d.). Thereby it is ensured that electrification takes place relatively evenly throughout the country and that already existing customers receive a reliable and improved service.

The most successful component of the program to date, however, is the SHEP which, similarly to the cooperative model, heavily relies on the involvement of the community. The Self-Help Electrification Program (SHEP) gives communities that want to accelerate their connection to the grid the opportunity to apply for an earlier connection in return for taking over responsibility for the erection of low voltage distribution lines. Apart from being able and willing to finance these distribution lines the community also has to ensure that the houses of at least one-third of their members have to be wired and ready to connect to the grid. Other rules include that only communities within a maximum of 20 km distance from the already existing grid can apply to be included in the program (Abavana, 2008). In order to ensure that a community is capable of fulfilling all of the requirements representatives of the Ministry of Energy visit every community that applies to be included in the program to assess its capability. While the Ministry of Energy is therefore responsible for the selection of communities and general management of the program it also awards contracts to the implementing agents and administers the technical implementation. Implementation as well as operation and maintenance are thereby generally the responsibility of the distribution utilities. The Ministry of Finance manages the funds available for the implementation of the program (Vanderpuye, 2010). Funding for SHEP is provided through a mix of investments from the communities themselves, government budgetary allocations and international donors, e.g. SIDA (Abavana, 2008).

Despite a rather complex process and interaction of a variety of actors as well as the multitude of pre-conditions to be fulfilled by the communities the SHEP has proven very successful. As part of a total of 3000 towns that were connected to the grid between 1990-2008 more than half, 1900, received their connection as a part of SHEP. The other 1100 communities were connected as part of other components of NES and a smaller number of additional communities now receives electricity through the installation of off-grid solar PV installations which was introduced as complementary to the NES in 2001 (Abavana, 2008; Abavana, 2004). Overall, these means have led to a drastic increase of the electrification rate in Ghana which was as low as 15% in 1989 and had reached 66.7% by 2008 (DEA, 2007; Vanderpuye, 2010).
In addition to providing increased access to electricity the government has also taken measure to ensure that once poorer consumers have been connected the running costs for electricity will be affordable. Lifeline tariffs and cross-subsidization were introduced charging higher tariffs to wealthier and high usage consumers to ease the burden on poor consumers in rural areas (ESMAP, 2006).

Despite the successes in Ghana which have led the country to become one of the most highly electrified countries in Sub-Saharan Africa some of the overall figures are illusive. While Ghana has indeed increased overall access to electricity rural areas are still disproportionately affected by the lack thereof. Access to electricity in most urban areas in Ghana is still three times higher than in rural ones. The national objective of achieving universal electricity by 2020 is according to estimations also highly unlikely to be achieved (KNUST, 2009). Reasons for that are manifold ranging from inadequate and unreliable support by the government to a lack of private capital and a lack of commitment by the national utilities (Barfour, 2009). A variety of measures to improve the current rural electrification strategy have therefore been suggested, e.g. the targeting of small-scale businesses and the promotion of increased productive use. This ensures that the general economic conditions of the connected households will be improved and that households, consequently, will be capable of covering the monthly charges (Karekezi et al., 2006). In this way rural electrification could contribute to the general improvement of living conditions in rural areas and the long-term financial sustainability of the electricity providing utilities could be ensured.


Senegal: Liberalization and ASER – a successful combination

Similarly to Ghana, Senegal has also managed to substantially increase its electrification rate in the past 15 years. Yet, Senegal followed the same approach as Tanzania in the establishment of a rural electrification agency, the Agence Sénégalaise d’Electrification Rurale (ASER).

Before the mid-1990’s the national utility SENELEC was responsible for the country’s electrification but had largely failed in achieving any significant progress with only a quarter of the population having access to electricity. This quarter also mainly resided in urban areas with electrification rates in urban areas reaching up to 50% while only 5% of the rural population had access to electricity (Gökgür & Jones, 2006). To improve this condition the government decided to engage in the unbundling of the main utility and to open up the market to other private companies. It also established the rural electrification agency ASER in combination with the CSRE which is the commission in charge of the regulation of the electricity sector in 1998 (Niang, 2006).

ASER is an autonomous agency supervised by the Ministry of Energy and Hydraulics that fulfils a multitude of functions. It generally manages the rural electrification strategy which contains two main programs: one focusing on the allocation of concessions for rural electrification to the private sector and the other supporting locally initiated rural electrification projects (ASER & Columbia Earth Institute, 2007). It also selects companies to implement electrification projects and supervises the implementation process, provides technical and financial assistance to these companies and sets minimum service standards to be adhered to (ASER, 2011; Niang, 2006).
With regard to the first component ASER thereby follows a “traditional private company approach” by dividing the country into different concession areas to be electrified. For each area to be electrified ASER accepts bids by private and public companies and selects the best bid employing different criteria, e.g. cost-benefit analysis. To create a notion of economic feasibility and thereby providing an incentive to bid, concession areas are relatively large with around 5000-10000 users within one concession area. Concessions are awarded for a term of 25 years. ASER also provides subsidies which can be as high as 80% of the calculated investment costs (Niang, 2006). On the other hand, ASER requires the concessionaire by contract to connect a certain number of households which are further than 20 km away from the grid to ensure that remote households will also be connected (Gouvello & Kumar, 2007). Thereby a balance is created between providing financial incentives for private companies to engage in rural electrification projects but similarly ensuring the social impact of the latter.

Apart from providing technical and financial support to companies engaging in rural electrification community projects, similarly to Ghana, are also supported by ASER. ASER provides financial support to the conduct of studies within the areas to be electrified as well as providing investment grants for the materialization of projects (Niang, 2006). While in Ghana these projects are mainly aimed at grid extension in Senegal it is unclear if communities engage in the latter or are rather involved in projects to provide electricity through off-grid installations. This, however, applies to all projects in Senegal since the concessions offered by ASER are all technology neutral and the choice of whether to undertake grid extension or employ mini-grid or off-grid options such as solar PV is left to the companies or communities (Gouvello & Kumar, 2007).

While ASER therefore engages in the majority of tasks relating to the general management of the rural electrification program, CSRE is solely responsible for the establishment of tariffs. CSRE sets the maximum tariffs. Companies can then choose whether to employ the maximum tariff or charge a lower tariff within their concession area. The tariffs set by CSRE generally vary between different concessions but not within concession areas (Niang, 2006). Despite setting the maximum tariff CSRE also determines the payment structure for fees to be paid by the customers by having introduced a tariff which adds a “payment facility”. This means that only a part of the connection costs has to be covered upon connection while the remnant can be repaid over time additionally to the monthly costs thereby making initial connections more affordable for families (Gouvello & Kumar, 2007).

Combining these measures the REA approach has almost doubled electrification rates within a decade, increasing the rate from 25% in the 1996 to 47% in 2007. Dividing these figures into urban and rural areas, however, urban populations have benefited immensely having reached 80% electrification rates while in rural areas still only 13% of the population have access to electricity (ASER & Columbia Earth Institute, 2007). In the future the focus of the electrification effort should therefore shift to rural areas and corresponding incentives need to be designed to engage companies in these areas. Alternatively other institutional options, e.g. the engagement of rural communities could also be pursued.

Further Information


References


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