Productive uses of energy refer to the utilisation of electricity for income and employment generating activities. Productive use (PU) activities can be a catalyst to rural development and sustainable economic growth, providing opportunities for job creation, skill development, increased income, market access and reduced vulnerability. PUs can also accelerate the success of green mini-grid (GMG) projects, by increasing demand for energy and increasing household income, thereby enabling people to purchase more energy and ‘climb the energy ladder’.
In order to catalyze economic development in a community through PUs there are many variables and complex dependencies that must be addressed by multiple stakeholders including mini-grid developers, financial institutions and small to medium enterises (SMEs). Cottage industry activities tend to be easier to set up and generate faster returns from integration with clean energy solutions, than large, capital intensive PUs that tend to need more resources and have a longer break even period. Financial viability of any PU is essential to ensure the benefits reaped by the community are sustained and to ensure mini-grid developers can effectively provide the quality and quantity of energy needed.
This guide is designed to provide support to practitioners to make effective decisions and aid in implementation of PUs.
The guide is the result of the GMG Facility Kenya’s extensive work to support mini-grid developers and the mini-grid industry at large to address sector level barriers to expanding off-grid electrification, with an emphasis on increasing market access and social inclusion for bottom of the pyramid (BoP) consumers and businesses. A Sector Mapping conducted in 2017 highlighted that practitioners had alimited understanding of how productive use activities should be integrated into mini-grid planning and operations. This Guide is the final product of a technical assistance (TA) project that seeks to address this barrier.
This guide aims to help practitioners assess whether milling is an appropriate, beneficial and financially viable productive application, both for a community and for a mini-grid developer. It also provides guidance for practitioners on how to operationalize a milling PU, recognizing the complexity of doing so.
The Guide is organised as a series of tools that can be applied independently or together:
- Feasibility checklist to help determine whether a productive use application is viable within a specific context.
- Business model guidance to help identify the most appropriate business model for the productive use application.
- Technical considerations and requirements to highlight considerations for equipment conversion or reconfiguration and provide guidance on mini-grid sizing.
- A detailed plug-and play financial model that assesses various scenarios based on the business model options.
- Guidance on monitoring and evaluation, including suggested indicators and data collection tools and processes.
Who should use this Guide
This guide is organized as a series of tools that can be applied independently or together, based on the individual needs of the practitioner, the objectives of the activity, and the participating community’s circumstances. It establishes a set of best practices to be considered and is not an exhaustive list of how to integrate PUs into off-grid electrification initiatives. The guide is relevant for practitioners involved in rural electrification initiatives, including:
- Mini-grid developers
- NGOs and donors working to increase rural electrification and pilot or implement PUs
- Investors in mini-grid companies and projects in rural areas.
- Communities interested in attracting a mini-grid developer to partner on addressing electrification needs.
- Government officials and regulators setting policy on green energy development activities.
- Companies seeking to partner with mini-grid developers to establish or grow their businesses, such as productive use technology companies.
Ideally the guide should be used during the feasibility stage of development for mini-grid developers, as the tools offer important considerations that will help in the decision-making process for practitioners to ensure more accurate assessment of demand when considering sites; ultimately improving success for the communities that benefit from rural electrification. However the tools are also designed to be used as a resource in areas where a mini-grid is already operating.
Contents of the Guide
- Tool 1: Feasibility checklist to help practitioners determine whether a milling PU is viable within their context.
- Tool 2: Business model guidance to help practitioners identify the most appropriate business model for the productive use application. It focuses primarily on the ownership configurations, which involves partnerships with other actors. The tool also provides tips on effective community engagement.
- Tool 3: Technical considerations and requirements to highlight considerations for equipment conversion or reconfiguration and provide guidance on mini-grid sizing.
- Tool 4: A detailed plug-and play financial model that allows practitioners to assess various scenarios based on the business model options in Tool 2 and anticipate costs, revenues and future investment needs.
- Tool 5: Guidance on monitoring and evaluation, including suggested indicators and data collection tools and processes.
This guide is organized as a series of tools that can be applied independently or together, based on the individual needs of the practitioner.
Milling as a Productive Application in GMG Systems
PUE Milling Financial Model