Business Case and Intervention Summary
Title: Green Mini-Grids Africa
Intervention Summary
What support will the UK provide?
The UK will provide total support of £75m from the International Climate Fund (ICF), of which
£60m will support project preparation and leverage private investment in Green Mini-Grids
(GMGs) in Kenya and Tanzania. The remaining £15m will support a regional facility for
market preparation, evidence and policy development, and prepare for wider scale-up of green
mini-grids across Africa. Funding will commence in 2014 and run until 2019.
Why is UK support required?
There are 1166 million people without electricity access, of which 590 million are in Africa.1
The lack of reliable, affordable energy is a binding constraint to economic growth and
to human development. Girls and women are often most constrained in their opportunities
by lack of light and power, and an estimated 1 billion people are served in health facilities
without electricity, with direct impacts on birthing and neo-natal care.2 60% of African
businesses cite access to reliable power as a constraint on their growth3 and power outages
cost countries 1-2% of their GDP annually.4 94% of the global growth in carbon dioxide
emissions to 2040 is expected to come from low and middle income countries, while global
demand and competition for fossil fuel resources is expected to remain high.5
In response to these issues, the Sustainable Energy for All (SE4ALL) initiative, originated by
the UN Secretary General Ban ki Moon, has proposed three targets - Universal Energy
Access, Doubling of Renewable Energy and Doubling of Energy Efficiency by 2030. These
targets were adopted in the indicative framework proposed by the High Level Panel on the
post-2015 development agenda.6
The IEA has calculated that in order to achieve universal electricity access by 2030, a
combination of grid extension, mini-grids and isolated household systems will be required –
with around 40% of the remaining connections best be achieved through mini-grids. While
both grid extension and household systems investment must accelerate further – it is the
intermediate scale of mini-grids which is most off-track to meet its projected share. Around
half of the new capacity in mini-grids is needed in sub-Saharan Africa.7
Mini-Grids are village or district level electrical distribution networks serving the needs of
communities too distant and dispersed to be economically connected to the grid in the near to
medium term - but densely populated enough to offer economies of scale in power delivery
compared with individual home systems. Green Mini-grids (GMGs) are mini-grids powered by
either fully renewable or hybrid (mixed renewable and fossil fuel) generation. A peer-reviewed
study conducted for DFID8 has indicated that GMGs are the most economic route to
expanding energy access to a large proportion of the homes and businesses within the IEA’s
40% estimate. GMG systems compatible with possible grid-interconnection in the medium to
long term will future-proof communities, building in low carbon smart technologies and system
1
resilience (including diversity of supply) from the outset.
Although Green Mini-Grids have played a significant role in electrification in a number of Asian
countries,9 progress in Africa has been slow. Barriers to the expansion of GMGs in Africa
have been identified through an international consultation process led by DFID from
November 2012 (detailed in Annex 4), as well as an Africa-wide study,8 and an Options
Assessment conducted in Kenya and Tanzania.10 Some barriers identified are common to
energy projects in sub-Saharan Africa, and some are specific to mini-grids. These include
GMG-specific policy and regulatory barriers, early stage market fragmentation, project
preparation and capacity issues, lack of proven commercial business models and lack of
access to affordable longer term finance. While utility performance and power sector viability
in many countries in sub-Saharan Africa is a major barrier, GMGs are often delivered by Small
Power Producers (SPPs), potentially opening up monopolies and offering an opportunity for
progress while utility and electricity market reform is pursued.
The barriers are interconnected and their relative importance varies with national and local
contexts – meaning approaches must be tailored to the market, policy and physical context.
ICF support described in this Business Case has been designed to complement other
available assistance to enable a more coherent support system and investable value chain for
GMG market participants. Specifically, the ICF programme will provide £30m for project
preparation and credit support to GMG projects and developers in both Kenya and Tanzania,
countries assessed as ready to absorb capital and to achieve critical mass of GMG installation
volumes and experience. Existing funds and co-ordination structures will be used to minimise
start-up time, reduce management costs and maximise coherence. In addition, the
programme will provide £15m of support at the African regional level to develop market and
regulatory conditions in other countries, as well as expand sector evidence and capacity on
policy, technology and business models, supporting wider market transformation.
What are the expected results?
Accelerated deployment of green mini-grids across Africa would fill a critical gap in creating
universal energy access, support economic growth, as well as displace increasing demand
and dependence on diesel and kerosene as economies expand. This programme aims to
help transform the Green Mini-Grids sector in Africa from a nascent and sporadic series of
pilot projects, to a thriving industry on track to contribute the IEA’s estimated 40% of universal
electricity access by 2030. This will be achieved by creating a critical mass of experience
and evidence of GMGs success in two countries, coupled with improved policy and market
conditions for investment in mini-grids regionally.
Results of the programme would include:





1.1m people with access to off-grid sustainable energy, as well as access for
enterprises and community services
1.05m TCO2e reduced or avoided
135 Green Mini-grids in sustainable operation, providing 44MW installed capacity,
and also serving enterprises and community services
500 new jobs in a strengthened Green Mini-grids sector in East Africa
Increased public and private capital flows into GMGs in Africa, including at scale
investment programmes in a further 2 countries
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Business Case
Strategic Case
A. Context and need for a DFID intervention
Drivers and policy priorities
Sub-Saharan Africa has the lowest levels of energy access in the world. Only 32% of people
have electricity access and dispersed populations challenge the already slow pace of grid
extension. Under the current IEA scenarios 48% of Africans will still be without electricity
access in 2030. Energy access is increasingly recognised as a basic human need,
essential to escape chronic poverty,11 and the High Level Panel on the post-2015
development framework included energy access in their recommended targets.6
The impacts of energy poverty are not felt equally however, and girls and women are often
most constrained in their opportunities by lack of light and power – with direct implications on
movement at night, personal safety, education and economic activities.12 Furthermore, an
estimated 1 billion people are served in health facilities without electricity, with direct impacts
on birthing and neo-natal care.
60% of African businesses cite access to reliable power as a binding constraint on their
growth13, while power outages cost countries 1-2% of their GDP annually.14 DFID’s new
economic development strategy sets out an ambitious agenda on growth, and recognises
that infrastructure, and in particular expansion of energy access and supplies, will be a
critical element in this. No country has grown without expanding energy supplies and
consumption. Expansion of both supply (including to uses in enterprise) as well as of access
(enabling wider participation in the economy) are necessary to create and sustain growth, as
both Brazil, with their Light for All programme, and China have shown.
However, with expanding energy supplies and consumption comes environmental and
resource risks. 94% of the growth in carbon dioxide emissions to 2040 is expected to come
from low and middle income countries, while global demand and competition for fossil fuel
resources (particularly from Asia) is expected to remain high.15 Dependency on imports of
fossil fuels creates a high and unpredictable burden on the balance of payments of oil
importing countries. In this context countries, including poor countries, are seeking virtuous
circles of more affordable and accessible energy supplies, driving higher incomes and
standards of living, with reducing local and global impacts. The DFID Future Fit Energy
paper recommends that DFID should position, staff and structure itself to deliver more and
better advice and support to countries and communities grappling with energy constraints,
opportunities and trade-offs.
This set of issues has been drawn together by the Sustainable Energy for All initiative,
originated by the UN Secretary General Ban ki Moon in 2011. The initiative promotes 3
targets on universal energy access, a doubling of renewable energy and a doubling of
energy efficiency by 2030. The DFID Secretary of State is on the Advisory Board of SE4ALL
and the SE4ALL targets are central to discussions on a post-2015 development energy goal.
3
Getting to zero on energy poverty
To achieve universal energy access by 2030 (to both electricity and clean cooking) the total
financing required is estimated at $1trillion, which although large, represents just 3% of
expected global investment – much of it private - in energy in that period. Most of the current
approximately $9bn invested annually in expanding energy access is devoted to on-grid
electricity and connections in urban areas. Taking population growth into account, this level
of investment will leave 1 billion people without electricity in 2030. The investment required
to achieve universal access is an average of $48bn per year, mostly focussed on SubSaharan Africa.16 While the IEA estimates that all forms of finance will have to increase, it is
private finance which must grow the most. However, in spite of increasing interest, private
flows into Sub-Saharan African energy sectors remain slow due to policy and regulatory
barriers including non-viable (politically distorted) tariffs and electricity markets, and poorlyperforming centralised monopoly utilities. The ClimateScope tool, supported by the ICF, will
provide improved analysis and ranking of enabling environments for private investment in on
and off-grid clean energy in Africa.17
Within the electrification financing challenge however, the chart below illustrates the mix of
global investments in grid extension, isolated off-grid (effectively solar PV home systems)
and mini-grids, which the IEA calculates are required to achieve universal access to
electricity:
Figure 1: Incremental Electricity Generation and Investment in the Universal Modern Access
case, 2010-2030 (Data: World Energy Outlook, 2011)18
The analysis indicates that a mix of grid connections as well as isolated off-grid and mini-grid
systems will be required to reach universal access. However, the current pattern of global
investment does not reflect this balance, with the majority of utility investment concentrated
on grid-based generation and distribution.16 While investment in both grid expansion and
isolated household systems (which has recently seen a marked increase) must accelerate
further – it is the intermediate scale of mini-grids which is most is off-track to meet its share
of the IEA projections to universal electricity access in 2030.
4
The role of mini-grids
Mini-grids (often also called “micro-grids”, particularly in smaller installations) are village,
town or district scale electrical distribution networks either unconnected to, or able to operate
autonomously from, the main electrical grid.19 Mini-grids can be a viable and cost effective
route to electrification of places where the distance from the grid is too large and the
population density too low to economically justify a grid connection, but where the population
density (or the demand from an anchor customer) is great enough to allow an economy of
scale in delivery compared with a series of stand-alone household systems. This is
illustrated graphically in Figure 2 below.
Figure 2: Illustrative view of Grid and Off-Grid perimeters (DFID-IED, 2013)
Mini-Grids typically provide an enhanced electricity service level (hours of service and
maximum power) compared with household systems, and, depending on local resources and
technologies employed, can be comparable to a well-functioning grid. Mini-grids will in some
instances be an intermediate step towards grid-connection, and should where appropriate be
forward-compatible with this eventuality. However in many contexts they can also be the
final solution – most obviously in islands, but also in other isolated locations as indicated in
the IEA analysis. A study conducted for DFID using GIS data and a series of criteria based
on economic cost to supply, identified the potential for mini-grids in Kenya and Tanzania at
around 20-23% of remaining connections in each country – more than 8 million people in
each country.8 Small-hydro and diesel mini-grids have played an important role in rural
electrification in China, Mali and Sri Lanka,20 while solar PV-diesel hybrid mini-grids have
expanded to fill electrification gaps in Laos21 and Thailand22. Mini-grids can be a first
electricity connection for those relying on kerosene or wood for lighting, can represent a
service level increase from solar lanterns, or can displace an individual diesel generator.
This is influenced by the type of mini-grid, and the Green Mini-Grids sector can be split into
three sub-categories as follows:
5
Figure 3: Scales and types of GMG (adapted from ASD, 2014)
Larger Type 1 mini-grids (Mwenga Hydro in Tanzania would be an examplea) would tend to
provide a power service level similar to the grid, while type 3 Micro-grids (Husk Power
Systemsb or Devergyc would be examples) usually focus on providing basic energy services
(2 bulbs and a phone charger) at lower power levels and are often DC as opposed to gridstandard AC. Type 2 mini-grids between 100kW and 1MW are intermediate between the
two (Inensusd is an example), usually involving higher service and power levels than microgrids, and are usually AC power, forward compatible with any future grid connection.
Powering Mini-Grids
A large body of analysis, including a recent study by the DFID Business Change and
Strategy Unit,23 has considered the most economic electricity generation sources in different
contexts. Such analyses can quickly go out of date due to the moving prices of both
renewable and fossil resources and technologies, however the Figure 4 below is generally
seen as the most comprehensive study to date, looking across actual projects and regions,
a
http://www.riftvalley.com/mwenga-hydro/
http://www.huskpowersystems.com/
c http://www.devergy.com
d http://www.inensus.de
b
6
Figure 4: Typical Levelised costs of electricity24
The chart presents the levelised costs for different renewable generation sources on the grid
(i.e. without considering distribution costs), and demonstrates that they are cost competitive
with diesel-based generation which is widely used in Africa for “emergency” grid generation.
Solar PV is the only technology that under some circumstances is currently as expensive as
the diesel alternative. However, it is important to recognise that levelised costs demonstrate
the life costs of generation for simple comparisons. A key issue with renewables in general
is that they tend to have higher up-front costs than diesel generators. However, they tend to
have a longer life time and lower fuel and running costs in comparison. This becomes more
of an issue in more rural or isolated areas where the cost of fuel is greater due to transport
costs.
The most cost effective energy source for a mini-grid is strongly dependent on the local
availability of renewable resources and the cost of diesel. Uncertainty on the future cost of
diesel and recent reductions in the price of some renewables (particularly PV, which has
declined rapidly25) can make comparison difficult. In addition, fossil fuel subsidies can
obscure the true cost of diesel, while there remains no effective carbon price to recognise
the climate impact of CO2 emissions. The figure below illustrates the effect which resource
availability and fossil fuel subsidies can have on payback period on diesel versus solar PVdiesel hybrid mini-grids.
7
Figure 5 – Amortisation of Hybrid PV-Battery-Diesel Systems versus Diesel26
Where diesel mini-grid systems do already exist in Africa - usually government-financed for
remote communities or privately-financed for installations like mobile phone masts - these
are increasingly being hybridised with solar in an attempt to contain diesel operating costs.
Mini-grids using renewable sources like bioenergy, hydro, solar, wind and hybrids of these
with diesel - are what are described in this document as Green Mini-Grids (GMGs).
Most available generation cost analysis considers grid-based generation, where installations
tend to be larger than for mini-grids, and the cost of transmission and distribution is not
included. In the case of either on- or off-grid rural electrification, the cost of distribution is
significant, and for mini-grids is around half of the installation cost of the total system.7 In
addition, while in a grid-based system the intermittency of renewables is managed through
the aggregated supply and demand properties and management systems of the grid - in a
mini-grid, the intermittency of some renewables (particularly wind and solar) requires
additional measures. This involves either hybridising the system with a variety of generation
sources with different intermittency characteristics, or using a form of energy storage (usually
batteries). Such measures add to the cost/unit, and particularly for larger solar mini-grids, it
is often most cost-effective to hybridise these with diesel. However, the combination of
renewable generation options can also be considered as they are often complimentary.
Drawing together this set of issues, the table below contains the summary produced by IED
for DFID of Levelised Cost of Electricity (LCOE) for mini-grids, based on review and
compilation of the available cost information on generation, backup/storage (taking the
diesel-hybrid cases for wind and solar) and distribution.
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GENERATION
DISTRIBUTION
Technology
Size range
(kW)
Power plant
CAPEX ($/kW)
LCOE
($/kWh)
Operating time
(h/yr)
Diesel genset
5 – 300
500 – 1500
0.3 – 0.6
Any
Hydro
10 – 1000
2000 – 5000
0.1 – 0.3
3000 – 8000
Biomassgasifier
50 – 150
2000 – 3000
0.1 – 0.3
3000 – 6000
Wind hybrid
1 – 100
2000 – 6000
0.2 – 0.4
2000 – 2500
Solar hybrid
1 – 150
5000 – 10000
0.4 – 0.6
1000 – 2000
400V
$5,000 –
8,000
/km
A rough estimate of the
required length is 30
customers per km.
LV distribution
Connection costs
MV distribution
$350 per customer
33kV
GMG total ($/kWh)
13,000 15,000
$/km
0.25 – 1
$/kWh
Table 1: IED Reference Costs for Green Mini-Grids (GMG)7
As can be seen, the cost bands are relatively wide, reflecting the range of local conditions as
well as the technology and resource characteristics. However, it is clear that renewable or
hybrid sources retain an advantage over diesel in all cases except solar, although in
smaller installations the advantage of solar is increased.
In general the larger Type 1 mini-grids (>1MW) are powered with hydro or biomass, and will
typically deliver a lower cost per kWh on a larger overall total investment cost in a relatively
smaller number of possible locations (limited by availability of hydro sites or biomass wastes
and larger communities not served with the grid). These schemes can be considered as
Independent Power Producers (IPPs) which also serve local customers. By contrast the
Type 3 <100kW “micro-grids” will tend to cost more per kWh, but (especially in solar-battery
form) but be applicable in a greater number of smaller and more remote settlements where
the grid will not economically reach, diesel is more expensive, and larger GMGs would not
be applicable. The higher cost per kWh of micro-grids can still be least cost for the
community in question, and when competing against a business-as-usual of kerosene and
phone charging services, commercially viable micro-grid service price points without subsidy
can be found.27
However, many GMG firms are still in relatively early stages and donor support to the
emergence and roll out of GMG specific technologies and business models is still needed.
In the longer run it may also still be expected that, just as with conventional grid extension,
some degree of public support/cross-subsidy would be required on the distribution and
connections side for all mini-grid segments - although a customer connection fee would be
normal also.
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The barriers to scale up
Despite the increasing cost-competitiveness and autonomy (i.e. non- or reduced reliance on
diesel imports and prices) of Green Mini-Grids – clean energy mini-grids in Africa have not
yet achieved widespread replication. In recent years a significant and increasing number of
national and international firms and agencies have developed GMG technologies and
projects. A DFID-led consultation from November 2012 to date and two studies, one
regional and one focussing on Kenya and Tanzania, has drawn together evidence and
experience from more than 100 firms and agencies on the barriers and opportunities to
GMGs scale up (see Annex 4 for consultation details and written submissions). The key
barriers identified through this process are as follows28:
1. Inadequate regulation, policy gaps or uncertainty – frequently unclear policy
commitment to mini-grids, as well as possible changes in electrification plans,
regulatory requirements or incentives, and uncertain actual delivery of incentives
promised. The inability to charge cost-reflective tariffs is a common barrier, as is
uncertainty over if and when the grid will arrive, and what happens if it does.
2. Early stage market fragmentation and unmade linkages – particularly between
local/national businesses and communities with demand for power, and the
international developers, technology providers and financiers who each hold different
parts of the necessary elements for successful mini-grid development.
3. Capacity issues, project preparation and lack of standardisation – with
regulatory, resource and financial situations varying between mini-grid projects, types
and countries, most clean energy mini-grids are currently bespoke. This creates a
cost barrier and magnifies capacity constraints. There is a lack of project preparation
and delivery experience and need for a market ecosystem with more standardized
technology and operational elements available.
4. Lack of proven commercial business models – evidence is required of the ability
of clean energy mini-utilities in Africa (often in public-private partnerships recognizing
the development and economic case for rural electrification) to produce reliable cash
flows to support further investment and private sector leverage
5. Lack of access to affordable longer term finance – in the context of the above,
private banks and investors are not lending to GMGs projects, perceiving a greater
risk in a mini-grid than a grid-connected generation project, while also having little
sector experience and exposure.
These barriers are interconnected and their relative importance varies with the national and
local context - and with the existence of programmes sometimes addressing one or more
barrier. Some of these barriers are common to any energy projects in sub-Saharan Africa.
However the consultation and background studies conducted by DFID have indicated that
there are specific constraints to the GMGs sector, which are not experienced by either the
off-grid solar home/lighting sector - which is less dependent on utility failures, policy or
community/governance issues - and the independent power producer (IPP) sector - which is
less dependent on distribution and business models reaching poor consumers.
Summary and linkage to ICF Low Carbon Development Strategy
Green Mini-Grids fit closely with the Low Carbon Development Investment Strategy
approved by the ICF board in 2012, filling the gap in scale between grid-connected
10
renewables support and off-grid household and consumer product-scale access
programmes. A programme supporting GMGs would be in line with DFID strategic priorities
on economic growth and poverty alleviation - with particular benefits for women and girls while also responding to the challenges set out in the Future Fit Energy Paper. A substantial
country-level and regional Green Mini-grids Sector in Africa would contribute directly to
SE4ALL targets on achieving universal energy access and doubling renewable energy
generation (as defined in the SE4ALL Global Tracking Framework). Both of these targets are
also ICF KPIs (clean energy access is also a DRF indicator) and were included in the High
Level Panel Report on the post-2015 development framework. Energy access allows for
greater human development and is correlated with economic growth and productivity gains.29
In Tanzania, a Growth Diagnostic funded by the Millennium Challenge Corporation identified
energy supply as one of the key constraints on growth.30 Although it is difficult to directly
associate energy access with improvements in productivity, it is an enabling factor and
combined with other inputs (which it may help to facilitate) it helps to provide improved
opportunity for productivity gains and health access. As such, co-benefits from the
programme could include supporting wider rural development and economic growth,
enhanced agricultural productivity, local enterprise development, job creation and health and
education outcomes - particularly for women and girls, and where schools and clinics are
connected to the mini-grids.
Opportunities and impacts for girls and women
With regards to women and girls, this programme has considered how opportunities for girls
and women may be maximised and potential unintended negative impacts be avoided – in
line with the provisions of the International Development (Gender Equality) Act 2014. As set
out in the Social Development Appraisal, and at a series of points throughout this business
case, measures have been incorporated in the design to promote inclusion of women in the
delivery of GMGs and to ensure that women participate to the maximum extent in the
domestic and enterprise benefits of electrification, without losing any existing access or
benefits. Measures include consideration in project application criteria of women-headed
organisations as well as involvement of women in the supply and maintenance elements including measures developing girls and women’s capacity to benefit from the jobs created
as part of the programme. Criteria for project selection will also consider the potential for
displacement of women’s interests as land becomes more productive (e.g. in pumped
irrigation schemes) and mitigation proposed. The Mid-Term Evaluation will assess key
gender and social inclusion issues allowing course correction to ensure gender objectives
are achieved before a final evaluation which will investigate impacts for women and girls.
B. Impact and Outcome that we expect to achieve
This programme aims to help transform the Green Mini-Grids sector in Africa from a
nascent and sporadic series of pilot projects, to a thriving industry on track to contribute the
IEA’s estimated 40% of universal electricity access by 2030. This will be achieved by
creating a critical mass of experience and evidence of mini-grids success in two
countries, coupled with improved policy and market conditions for investment in mini-grids
regionally.
The Outcomes of the programme would include:

135 Green Mini-grids would be installed generating more than 81 GWh/year of
electricity from 44MW installed capacity and providing at least 1.1m people,
11


enterprises and community services with access to sustainable energy, while
reducing or avoiding at least 1.05mTCO2e
A strengthened Green Mini-grids sector in East Africa, including at least 500 jobs,
as well as at least 5 lead mini-utilities working at scale
Additional public and private investment into the GMGs sector, including 2:1
Private Sector Leverage achieved on DFID investments and new investment
programmes in at least 2 additional African countries
These would be achieved through Outputs including:




Increased pipeline of viable GMGs projects, developers and
offtakers/communities in Kenya and Tanzania through project preparation and
transaction advisory support
Credit lines fully deployed into GMGs projects and end-user finance through
national banks in Kenya and Tanzania
Improved market and policy environments for GMGs in at least 5 additional
countries in Africa
Evidence, capacity and experience of GMGs technologies, business models and
policies strengthened at the sectoral/regional level
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Appraisal Case
A. What are the feasible options that address the need set out in the Strategic case?
There are considered to be 3 primary options with regards to the electrification of
communities most economically served by Mini-Grids:



Business-as-Usual (counterfactual)
Diesel Mini-Grids
Green Mini-Grids (using a basket of clean technologies appropriate to resources
available.
The Strategic Case sets out the analysis of the role of Mini-Grids in universal electrification,
and the case for Green Mini-Grids versus Diesel Mini-Grids. The comparison between
GMGs and diesel is assessed in more detail in the Climate and Environment Appraisal
(section D below) and the Cost Benefit Appraisal (Section G below). However, in this
section on Feasible Options, the focus will be on the possible interventions to overcome the
barriers to GMGs sector transformation described in the Strategic Case, and then which are
most appropriate for inclusion in a UK funded programme
The appraisal is informed by an extensive international consultation conducted by DFID
from November 2012 (which continues in interviews and meetings to date), including over
100 firms and agencies as detailed in Annex 4. Two studies have also been completed into
the evidence base for Green Mini-Grids in Africa,8 and specifically on options in Kenya and
Tanzania.10
Counterfactual Option - Do nothing beyond current DFID programmes
Referring back to the IEA typology of on-grid, mini-grid and household/isolated as the main
three approaches to electrification – the diagram below illustrates the current DFID ICF
Portfolio with regards to these three sectors, and the range of barriers and intervention
options linked to the project cycle.
13
Figure 6 – ICF Programmes positioning with regards to on, off- and mini-grid sectors
Acronyms/Abbreviations: RBF – Results Based Financing for Low Carbon Energy Access; CMF – Carbon Markets
Facility; PRI – Policy Risk Insurance (in development); GAP – Green Africa Power; SREP – Scaling-Up Renewable
Energy Programme in Low Income Countries; EAIF – Emerging Africa Infrastructure Fund; EAGeo – East Africa
Geothermal; CP3 – Climate Public Private Partnership; EEP – Energy and Environment Programme Southern and Eastern
Africa; REACT – Renewable Energy and Adaptation to Climate Technologies; CICs – Climate Innovation Centres; CDKN
– Climate and Development Knowledge Network.
The above illustrates how the bulk of electrification-relevant ICF funds to date have
supported on-grid renewables and to a lesser extent (in volume of funds) off-grid
household/isolated product markets. Some of the programmes that support early stage
Fundamentals and Preparation support is applicable to GMGs, and some existing
programmes have minor mini-grids components. However, the analysis and consultation
conducted in preparation of this business case indicates that the GMGs sector faces
specific challenges and gaps in the enabling environment and support system – particularly
relating to at-scale financing availability - which existing programmes are not positioned to
address. GMGs companies and projects supported under REACT for example, cannot be
supported further by that mechanism beyond seed funding. The RBF programme can
support revenues (and is discussed in the options below) but does not substantially address
finance availability issues important for village-scale infrastructure like GMGs.
There is some current support from other bilateral and multilateral donors on GMGs, and
marked increasing interest. GIZ and World Bank have active programmes, while AFD,
ADB, Norway Energy+, the US Power Africa and others are developing programmes, some
at the sectoral or regional level, and some in specific countries. However current support is
14
piecemeal, leaves gaps at international and national levels, and does not come close to
achieving even the public portion of the IEA’s projections on the financing required for
GMGs contribution to universal electricity access. Wider Africa analysis, complemented by
scoping work in Kenya and Tanzania, has confirmed that although there is some country
government and donor action on GMGs to build on, significant gaps in the support system
remains, and critical mass is not currently being achieved in one or more GMG sub-sectors
(see figure 3).
Strategic Intervention Options - Regional/Sectoral or Country Focus
If DFID was to engage in acceleration of GMGs in Africa, a first strategic level of
consideration is with regards to whether a primarily regional/sectoral or a primarily
country-based approach would be most effective in achieving the transformation
envisaged. A more regional and sectoral approach would seek to support the GMGs sector
as a whole in a more top-down fashion, in the hope that supported lead (largely
international) firms, approaches or facilities would eventually gain traction in particular
countries. A country-based, more bottom-up, approach would try to facilitate progress in
specific countries, with a view to demonstrating that progress at scale is possible in a
particular context, and then successful firms, technologies and approaches would spread
out from there based on proven success.
A regional programme would be well placed to compare what was working between
countries, and develop and disseminate good practice in technology, policy and regulations.
However it may struggle to engage in specific country policy processes as it would not
necessarily have the country ownership. A regional programme would also struggle to
demonstrate the practical feasibility of green mini-grids in a specific country. By contrast, a
country programme would be in an ideal position to demonstrate results, and link actors in
the country, including developers, communities and financiers - stimulating local currency
lending and hand-holding specific deals – but it may struggle to attract international interest
and investment. A regional programme is well placed to create sectoral standards and
develop internationally leading capacity, but could have less long term impact on in-country
capacity without clear country-based components.
Each approach has its strengths and weaknesses and can be effective against different
barriers at different levels, however neither is superior. This conclusion also holds when the
efficiency and economy of these two approaches is considered regarding possible
delivery mechanisms for regional versus country programmes in table 2.
15
Regional or Sectoral
Facility
(such as an MDB
programme, or PIDG
Facility or CDKN-style
tendered facility)
Country-Based
approaches
(i.e. a series of
individual country
programmes)
Pros/Strengths
Cons/Risks
 Maximum programme economy of
scale for the implementing
organisation
 Single point of contact and contract
holder for DFID
 Single specialist fund manager (eg
as PIDG) can manage a multicountry fund
 Ability (in principle) to move money
between countries more easily if one
gets stuck
 Easy to co-ordinate with
international initiatives like SE4ALL
 Would have to be fully managed
centrally, rather than leveraging DFID
country presence and ownership
 Very hard for regional management
agent to have equally good presence,
offer and positioning in each target
country
 Difficulty of incentivising progress in
harder countries/sectors
 Multi-country funds can be more
distant and less responsive to country
contexts
 DFID central and country reporting
lines would be less clear
 Governments don’t necessarily
recognise and access regional funds
 Since there is no current facility able
to provide this, there would be a
tendering and setup time implication
 Fund management capacity in
countries may be limited or variable
 Separate contracts for DFID to
manage, and multiple sets of
overheads
 Possibility of disconnects between the
various country funds and participants
dropping between them
 Harder to achieve cluster benefits and
cross-learning between the country
programmes
 Risk of failure in isolation and lack of
access to best international practices
 Success may be seen as a pocket,
with low visibility
 Strong local ownership and
oversight from DFID country offices,
governments and leads on the
ground
 Organisations with maximum
functional and geographical
specialisation can manage each
function
 Relatively easy to co-ordinate and
position with regards to other
programmes in place
 Very modular and so scalable since
interdependence between funds is
limited
Table 2: Comparison of the Economy and Efficiency of Regional/Sectoral versus Countrybased approaches
In conclusion, the consultation and analysis suggest that a hybrid of Country
Programmes plus a Regional Facility is likely to be the best option to address the
respective barriers in an effective, efficient and economical way. A hybrid approach would
have the benefits of both the regional and the country approaches but also mean no
compromise on best country or regional positioning, retain country ownership but ensure
linkages between countries, mix results focus on the ground with regional visibility, learning
and coverage - and enable quick startup-time since maximum use of existing facilities is
possible. See the Management cases for a more detailed assessment of these issues.
Further Detail on Options for Country Focus
A central question is regarding which countries DFID should focus on initially, in order to
achieve results, demonstrating green mini-grids in practice, and generating the critical mass
to promote their use more widely in Africa. The following analysis was produced by IED
based on their review of the gaps and potential for GMGs, alongside the likelihood of
success and DFID positioning to act, with a focus on ICF priority countries in Africa:
16
Table 3: Criteria for Country Selection and Preliminary Scores (IED, 2013)
The analysis indicated that of all African countries, Kenya and Tanzania currently offer the
best mix of enabling environment, potential, opportunity and DFID positioning to play an
instrumental role in creating a clustered regional GMGs demonstrator of regional
significance. Green Mini-Grids have been prioritised by both the GoT and the GoK as
critical parts of their efforts to achieve universal energy access by 2030, linked with their
participation in the Sustainable Energy for All initiative. The DFID draft Country Poverty
Reduction Diagnostic (CPRD) for Kenya identifies dependence on energy imports as a very
high risk to economic resilience and identifies work on this as a priority. The draft CPRD in
Tanzania states that “in our support to the energy sector we will consider how greater
energy security can be achieved for growth and development, including development of
renewable energy and support improved rural energy access, including private sector and
off grid/mini-grid solutions”. GIS analysis conducted by IED in support of this Business
Case indicates that there may be as many as 18m people in Kenya and Tanzania who are
best served by mini-grids, given population densities, distances from the grid and costs of
grid extension (See Table 4 below)
Country
Total
Population
Mini-Grid
Potential
43,269,394
23%
Wind
22%
44,607,249
20%
10%
(% of population)
Kenya
Tanzania
*
Portion of GMG Potential
Hydro
10%
Biomass
10%
Solar
63%
10%
18%
64%
Table 4: Economic potential for GMGs in Kenya and Tanzania
* Note that the figures for Tanzania do not add up to 100 due to rounding errors
Although the analysis could be improved with additional county by county planning, and
such an effort has been started in Tanzania with the Rural Electrification Prospectus – the
analysis indicates a significant market and portion of the population which could be best
served with GMGs. Even if a margin of error of 50% is put on the figures in Kenya 31 the
market in Kenya would still be several millions of people – including many otherwise
marginalised villages uneconomic to connect to the grid.32
17
A further consideration is with regards to the Partnership Principles (updated May 2014)
and the implication of these on possible management and monitoring mechanisms.
However, as discussed in the Commercial and Management Cases, with funding not being
provided directly to Government Agencies, the Partnership Principles will not be applied
under this programme.
As assessed in Table 3 above, other countries in Africa are significantly further behind
Kenya and Tanzania in terms of the readiness to embark on GMG programmes. Key gaps
identified include data on energy resources and population/demand distributions, policy
gaps, awareness gaps and weak market ecosystems for GMGs. However, there are
positive signals that a second tier of countries has interest and future potential to
move on GMGs. Rwanda for example currently scores lower in a number of key readiness
areas than Kenya and Tanzania, however this could strengthen with current programmes
starting up (such as the DFID supported RBF programme – see Figure 6) and support from
a regional facility, drawing on the Kenya and Tanzania experience.,
Several countries including Malawi and Mozambique are assessed as having significant
potential for GMGs, and increasing interest in GMGs has been noted in Ethiopia. There is
also DFID country office interest in a potential phase 2 of GMGs Africa in those countries
and others. Two DFID countries (Nigeria and Somalia) are considering programmes
developing solar markets and power for rural schools and clinics in fragile and conflictaffected situations, which could be linked with the GMGs Africa approach, which focuses on
more investment-ready contexts. The Government of Cameroon has recently expressed its
interest in GMGs at an SE4ALL Ministerial in Addis Ababa. A selection process, with a
significant self-selection component (such as through SE4ALL Action Agenda prioritisation
of GMGs), would be necessary to identify which countries a Regional Facility should
support.
Intervention Options
At both the country and regional levels, a number of intervention options are possible as
identified through the consultation and research process. These address the five key
barriers highlighted in the Strategic Case, although these options are not mutually exclusive
and contain a number of sub-options:
18
Interventions
Barriers
Inadequate regulation, policy
gaps or uncertainty
A) Sector planning
and policy
interventions
Early stage market
fragmentation and unmade
linkages
Capacity issues, project
preparation and lack of
standardisation
B) Market
development and
coordination
work
Lack of proven commercial
business models
H)
Evidence
generation
research
and crosslearning
C) Project
preparation and
transaction
advisory
support
Lack of access to affordable
longer term finance
D)
Resultsbased
incentives
for
connections
E) Enduser
financing
F)
Credit
/Capital
G) Partial
Risk
Guarantees
Figure 7: Barriers and Intervention Options
Each of these options are assessed in the following sections. This includes whether they
should be included in the country or regional components of the total programme.
Option A) Sector planning, regulatory and policy interventions
Since mini-grids involve a piece of physical infrastructure, they are influenced more than
stand-alone systems by grid extension plans, the performance (or non-performance) of the
utility and tariff policy. In some countries, key regulatory blocks exist, particularly the ability
to retail power to consumers at a cost-reflective tariff and lack of clear policy commitment to
GMGs in the form of an electrification plan. In such cases the GMGs market will not be
able to attract investment or expand beyond informal micro-initiatives under the regulatory
radar. However, even in situations where the policy environment is conducive, a series of
barriers can remain, such as uncertainty over if or when the grid might arrive, and what
happens if it does come.
Such issues are documented in a recent book by longstanding advisors to the Tanzanian
regulator EWURA,33 and the regulatory position in Tanzania is attracting significant private
sector interests in expanding mini-grids. Meanwhile in situations with a complete policy and
grid-extension vacuum such as Somalia, private provision of mini-grids has boomed in the
gaps left – although using diesel given instability and the inability to wait for longer payback
to achieve lower levelised costs.
 Conclusion – the programme should only seek to invest directly in countries with at
least a minimally conducive policy and market environment, in order to achieve
results and demonstration effects. Therefore country investment programmes
should not require substantial direct ICF support for policy support. However, from
the regional level the facility should support countries with weaker regulatory
environments to develop their sectors and learn from leading countries.
19
Option B) Market development and co-ordination work
A linked, but also separate set of problems is relating to fragmentation and unmade
linkages within GMG value chains, in what remains a relatively early stage sector. A key
gap relates to the need to link (often international) technical expertise and access to
financing with (often national) knowledge of the local context and presence, and agents
(sometimes CBOs or local government) with an ability to liaise effectively with community
institutions and consumers. A market development approach (for example the Making
Markets work for the Poor - M4P - approach) would seek to identify and address such
market dysfunctions. Although state utilities do participate in mini-grids in some countries,
such as the arid lands of Kenya, in general such institutions are better placed to pursue grid
expansion and densification, and are not staffed or structured to develop and operate
distributed mini-grids.
The Lighting Africa programme is an example of a market development approach in the
energy sector, in which a series of market failures were translated into business lines on
market intelligence, quality assurance/standards, work on policy barriers, business
development services and facilitating access to finance. The IFC/World Bank’s Lighting
Africa programme in Kenya claims credit for a substantial increase in the market
penetration of solar lighting systems - reaching 9m people with quality solar lighting. In
2009, they say only 6 manufacturers had products meeting Lighting Africa standards, in
2014 there are 29 manufacturers with 50 products. Awareness campaigns have to date
reached over 17 million people, and with the project closed, the sector is still growing at
150% per annum.34 Although the solar lighting sector has expanded more broadly due to
structural cost reductions and independent evaluation of the role of Lighting Africa is
needed, there appears to be a clear read across to the GMGs sector. Extending M4P
approaches to the end-user side, supporting market access and productive uses, would
also support increased development impact as well as viability of the GMG tariffs.
 Conclusion – the programme should adopt a market development approach overall,
with a focus on the barriers faced by market actors – particularly developers,
communities and financiers. The market development approach should apply at
both country and regional levels, and to both the market-based delivery of the
GMGs, as well as maximising the productive uses of the energy provided.
Option C) Project preparation and transaction advisory support
The technical requirements of appropriately designing and engineering a mini-grid can be
challenging for many developers and communities. Although a number of firms are
developing standardised elements which can be plugged in to a system such as prepay
meters and generation/load control systems (such as Firefly Solar35), many elements today
must be custom designed. The costs and technical challenges of project preparation have
been recognised for some time in energy access projects and several, including ICFsupported projects, 36 provide a matching-grant to developers to help cover design costs.
The Tanzania Energy Development and Access Project (TEDAP) has a matching grant
facility to support project preparation, and this has been successful in generating a pipeline
of larger Type 1 GMGs, although developing the pipeline has taken 6 years. Even projects
which have been designed have however been struggling to achieve financial close, and
this has led to the recent provision of specialist Transaction Advisory support to bridge the
gap between developers and financiers.
20
 Conclusion – The UK should only provide project preparation and transaction
advisory support if it is not already present, while promoting a wider market
development perspective (B) in such approaches. Where project preparation and
transaction advisory support is not in place, the ICF should support it as a minimum
requirement alongside any credit to the sector.
Option D) Results-based incentives for connections
Payment-by-Results is still an emerging sector in development assistance, but in the
context of energy it is relatively well known in the form of Feed-in Tariffs (FiTs) which pay a
pre-agreed price per unit to a generator, enabling a more guaranteed return on their
investment. For example, the GetFIT Uganda programme provides a kind of top-up to
tariffs to cost reflective levels in a RBF-type approach, however this is for grid-connected
IPPs rather than GMGs. In the off-grid sector DFID is piloting Results-Based Financing
(RBF) for Low Carbon Energy Access in partnership with the multi-donor Energising
Development (EnDev) programme managed by GIZ, while the World Bank has active PBR
programmes and Norway’s Energy+ adopts this approach. In the context of GMGs, in
Tanzania the TEDAP programme already incorporates a results-based payment based on
new connections made which will pay out up to $500/connection (although a formula ties
the payment to the actual costs incurred if they are less). In Kenya, an RBF is being
proposed in the second tranche of the DFID programme which would fulfil a similar role,
while an RBF on mini-grids in Rwanda will be starting shortly. However, with RBFs it is
necessary for project proponents to raise the capital required to achieve the result in
advance of receiving the funds - which can be a key barrier in capital intensive sectors in
countries where affordable longer tenor financing is hard to secure.
 Conclusion – Payment-by-Results RBF is unlikely to be sufficient or efficient to shift
GMGs markets alone. However, RBFs are likely to be the most efficient way of
incentivising scale up in later phases and delivering any required cross-subsidy
portion necessary to bridge the viability gap in electrifying marginalised communities.
RBF should therefore be considered in the proposed programme in countries if not
already present, integrated with other approaches. Supporting the costs of
connections is also a good way to help overcome the barriers to access for poor
people, and ensuring more equitable delivery of project benefits.
Option E) End-user financing
Uncertain or weak effective demand on the part of consumers in terms of their ability to pay
for a connection, or consume power at levels justifying the installation is an issue in GMG
projects. A number of programmes have focussed on the extension of micro-credit to end
users to enable them to spread connection payments over a longer period, seeking to bring
the monthly payments below that spent on kerosene or phone charging. In addition, in
order to help consumers actually use the electricity for productive purposes, taking their
consumption up but also the income to pay for it, a number of projects (including AREED 2)
have extended end-user finance through Micro-Financing Institutions (MFIs) or Savings and
Credit Co-operatives (SACCOs) to consumers – often in conjunction with some form of
business development services or market access support. End-user financing can in this
way support the financial sustainability of a GMG installation as well as helping achieve
development and economic outcomes. Although recent changes in legislation in Tanzania
allow the collection of repayments on end-user credit through energy bills and there are
some connection subsidies in place, current programmes in Tanzania and Kenya are
21
focussed on developer financing rather than end-user financing – although there is a wide
network if MFIs and SACCOs in parallel.
 Conclusion – Given the importance of end-user financing to enabling connections
for poorer consumers, the programme should support the provision of end-user
financing in country interventions, either through developers, or through participating
banks or MFIs, as most appropriate.
Option F) Developer Credit and Capital Support
Even where a green mini-grids investment has been well designed, customers ready and
incentives secured, by far developers most common complaint identified through the
consultation process is problems accessing loans at the costs and tenors required to build
GMGs. This is because GMGs are up-front capital intensive (as opposed to consumer
goods like solar lights), most developers do not have the balance sheets, collateral or
proven revenues which banks typically want, and the experience of financiers with GMGs is
very limited. As the sector matures it would be expected that credit availability will improve,
however in the next five years the supported availability of affordable local currency credit
for the tenors needed for GMGs projects is likely to be a requirement for the lead firms in
the sector. Affordable capital is essential to realise the lower levelised electricity costs of
Green versus diesel mini-grids.
The TEDAP credit line in Tanzania is an important marker in this regard. It has been in
place since 2008, and is expected to fully deploy its funds by the middle of 2014 into
generally Type 1 large mini-grids, with the credit provided through national banks, who in
the process gain exposure of the GMGs sector. The time taken to deploy highlights the
need where possible to build on established credit lines with clear project
preparation/transaction advisory support. In general, while a single loan might be
appropriate for a Type 1 GMG, in the case of Type 2 and certainly Type 3, the loans would
be against a cluster or bundle of GMGs in order to achieve a minimum scale to keep
transaction costs down.
As discussed in the Strategic Case however, with many GMG firms still in relatively early
stages - and with some GMGs targeting very low income populations and community
services such as schools or clinics which may be poor credit risks, with relatively high
development benefits - the possibility of a grant portions within proposed business models
(effectively Public-Private-Partnerships) should not be ruled out. This would be in line with
common practice on cross-subsidy linked to rural electrification, but should be carefully
designed in inception phases to ensure that any such provision builds rather than
undermines market-based delivery.
 Conclusion – Where the conditions for accessing credit remain challenging for lead
GMG firms, country interventions by the programme should include the provision of
credit, particularly where existing facilities with proven disbursement records can be
topped up, or adapted. The potential for a grant portion for early stage firms and
cases with particularly high development benefits should not be ruled out, but be
carefully managed.
Option G) Partial Risk Guarantees
For large Type 1 GMGs in countries with unreliable utilities, the issue of non- or delayed
payment of agreed tariffs can be a dominant risk for developers and their creditors.37 In
22
such cases, Partial Risk Guarantees (PRGs) could play an important role in encouraging
lenders to provide finance. In general DFID would struggle to efficiently provide a PRG
directly since it would require the provision in a separate account of the money required for
the guarantee. The World Bank is better positioned to provide PRGs as they are not
required to keep 100% of the funds guaranteed set aside, and they are able to call the
funds back from the recipient governments more effectively since they may hold back other
credit requests. World Bank PRGs may be a useful tool to secure final close on projects
with a series of other measures in place but with a residual utility which does not have
investor confidence (such as Tanzania), but would probably not be necessary where a more
reliable offtaker is in place (eg Kenya).
 Conclusion – The programme should not directly provide PRGs, however the World
Bank should be encouraged to consider their use as complementary to ICF support,
where there is a clear gap and demand for them.
Option H) Evidence generation research and cross-learning
The Kenya and Tanzania options assessment highlighted that the GMGs sector in East
Africa, particularly in the isolated Type 2 and Type 3 cases, is still in the relatively early
stages with a lot of innovation in technology and business models ongoing, and still to take
place. Even on the policy and regulatory side, there are disagreements between countries
and about important features such as cost reflective tariffs and into which parts of the
market private participation and investment is encouraged. Strong cross-sectoral learning
and improvement on technologies, business models and policy will be important for wider
transformation in the mini-grids sector across Africa. Although country-level learning will be
important, it can be expected that evidence and cross-learning co-ordinated from the
regional level would potentially bring additional value, by enabling market participants and
policy-makers to be more aware of what is being achieved in leading countries, and
potentially cross-fertilise approaches.
 Conclusion – The programme should include research and evidence generation, led
and co-ordinated from the regional level. Part of the rationale for supporting GMGs
is also that they will stimulate jobs, the growth of small enterprises, opportunities for
women and girls, and better provision of health and education services. This needs
to be built into the evaluative framework for the programme, to be assessed mid-way
through implementation (eg through a process evaluation), and key indicators on
access for poor people, affordability and jobs built into the monitoring framework.
Summary appraisal of intervention options with respect to Kenya and Tanzania
While each of the intervention options above has a potentially valuable role in addressing
one or more of the barriers (see Figure 7), the consultation to date and studies at regional8
and country levels10 indicate no evidence that any single intervention would be able to
unlock the potential of GMGs. In each context, a series of measures are likely to be
necessary, which would also have to mesh with existing programmes where they exist. In
summary, the ICF should seek to contribute to a coherent and co-ordinated
programme of support to the Green Mini-Grids sector at national and regional levels.
The two diagrams below for Kenya and Tanzania represent an analysis of the GMGs
project development chain in those countries, where projects may be initiated from a
developer perspective, or community/local government led. The remaining gaps where
barriers could be addressed through UK assistance are highlighted in red.
23
Figure 8 – Tanzania GMGs Project Development Cycle, Barriers and Support in place
In Tanzania, substantial work by the Rural Energy Agency (REA), the regulator EWURA,
and the TEDAP programme has addressed enabling environment issues and put in place a
series of support services to project development. In this context the remaining gaps
should be targeted through 3 of the possible 8 intervention options in Figure 7, as follows:
-
B) Market development and co-ordination work integrated with existing project
preparation and transaction advisory support
-
F + E) Top up and expansion of existing Credit Lines and Capital Support
(covering also Type 2 and 3 GMGs), allowing also for end user finance
While in parallel, encouraging the World Bank to consider:
-
G) Partial Risk Guarantees under the auspices of WB TEDAP (or incoming
Renewable Energy for Rural Electrification (RERE) programme under SREP), to
address the TANESCO credit risk for TYPE 1 GMG developers.
A similar analysis for Kenya is illustrated in the Figure below:
24
Figure 9 – Kenya GMGs Project Development Cycle, Barriers and Support in place
In Kenya, there remain more challenges in the enabling environment for GMGs and less
support systems in place. However, based on the Options Assessment, the proposed
programme would build on and adapt related programmes, which have not yet focussed on
GMGs, with a UK contribution focused on 4 of the potential 8 interventions described
above:
-
B + C) Market development and co-ordination work integrated with direct project
preparation and transaction advisory support
-
F + E) Developer Credit Lines and Capital Support allowing also for end user
finance
While in parallel, encouraging the following options, outside the scope of the proposed
programme:
-
A) Policy and Regulatory Work ongoing on Power Sector reform by IFC, in
coordination with the Rural Electrification Authority (REA), the Energy Regulatory
Commission (ERC), the National Energy Institute, and the Energy Efficiency and
Conservation Agency
-
D) Results-Based Financing via the related, but separate, RBF programme,
potentially in co-operation with the Energy+ initiative for greater scale.
Summary appraisal of intervention options with respect to the Regional Facility
Given the importance of national contexts to direct investments, it is proposed that the
Regional Facility should focus on enhancing the effectiveness of the 2 proposed country
investment programmes, identifying and helping a second tier of countries prepare their
25
initial market and regulatory conditions, and supporting regional sector players and wider
sector improvements, lesson exchange and evidence generation. It is proposed that it
focusses on three options:
-
A and B) Sector planning, regulatory and policy interventions and market
development and co-ordination work at sectoral level (e.g. with developers
working in multiple countries) and in non-investment-ready countries
-
H) Evidence generation research and cross-learning between active GMGs
countries and market participants, and with those just entering the sector
Summary of Preferred Option
The preferred Option for the proposed programme would consist of three components
(effectively projects): a Regional Facility and Country Programmes in Kenya and
Tanzania. This is considered to offer the best mixture of the benefits of responsive,
nationally-driven and owned country approaches, with the regional footprint needed to
prepare additional markets and to provide linking and cross-learning between countries and
internationally.
The figure below demonstrates how this combined approach addresses the
recommendations emerging from the options appraisal of the intervention options A to H in
Figure 7.
Figure 10. Summary of intervention options and programme recommendations
26
B. Assessing the strength of the evidence base for each feasible option including
delivery routes
The evidence base in the GMGs sector is mixed, with some strong international experience
and some Africa experience on elements, but with clear gaps also identified to be taken up
in the research agenda of this programme. The existing TEDAP and AFD credit lines both
supply important field experience in the sectors and approaches envisaged, while there is
increasing literature on Green Mini-Grids policy approaches and effectiveness. The table
below provides a summary (weak, medium or strong) of the evidence ratings given for each
intervention option.
Option
Evidence
rating
Notes on evidence sources and ongoing research (in addition to the
IED and ASD reports for DFID)
EUEI-PDF have produced a GMGs policy toolkit, A book by
Tenenbaum et al documents regulatory experiences globally with a
focus on Tanzania, KfW are concluding a study in Kenya
A
Medium
B
Medium
C
Medium
D
Medium
FiTs in both countries can be considered as well as the TEDAP
connection incentive uptake, plus GetFIT in Uganda. It is too early to
extract lessons from RBF.
E
Medium
Evidence is available from AREED 2, and MFI/SACCO experiences
F
Strong
The TEDAP and AFD credit lines experience is a good guide
G
Weak
PRGs have not been applied in the Mini-Grids sector and not against
sovereign/utility default, and are only slowly coming into action on the
larger grid side.
H
Medium
Research is increasingly being integrated into DFID programming such
as WSUP and ESMAP
Lighting Africa provides a linked reference, the DFID M4P hub has
wider examples
Reporting on the TEDAP Technical Assistance and Transaction
Advisory support, there has been a wider review of Project Preparation
facilities in Africa by ICA
Table 5. Strength of evidence table
Evidence available with respect to GMG instruments and the suggested interventions was
gathered as part of the support study led by IED during 2013 on “Identifying the gaps and
building the evidence base on low carbon mini-grids” as well as the Green Mini-Grids Africa
- Options Assessment in Kenya and Tanzania by ASD. Stakeholder discussions have been
held with private sector financiers and project developers, in a series of events since
November 2012 (see Annex 4 for details). Recent evidence sources, for example “From
The Bottom Up: How Small Power Producers and Mini-Grids Can Deliver Renewable
Energy and Rural Electrification in Africa--An Implementation Guide For Policy Makers and
Regulators”38, have also been considered in assessing the strength of evidence available
for the feasible intervention options.
27
C. For each feasible option, what is the assessment of local capacity? Is the
intervention likely to strengthen capacity in a durable manner?
The IED study assessed the capacity in potential ICF priority countries of intervention for
GMGs as summarised in Table 3, with criteria 6, 7 and 8 relating to political interest/will,
sector capacity, and existing support programmes to build on. As set out in the Options
Appraisal, it is proposed to focus country investments and support where there is a
minimum level of capacity and investment readiness in place. A core function of the
regional facility is to help additional countries get to investible stage, which requires an
increased level of capacity across the GMGs ecosystem within developers, service
providers, regulators, financiers, NGOs etc.
In Tanzania, the rural electrification sector has a relatively well-developed institutional
infrastructure with the Ministry of Energy and Minerals (MEM) the central body, a Rural
Energy Agency (REA) focussing on rural electrification, a regulator EWURA (regulator) and
a state utility TANESCO. Tanzania also has a Rural Energy Fund, funded by the
government, SIDA and NORAD and by a 3% levy on existing electricity users. There is
also a series of Rural Energy Master Planning and Prospectus documents and a welldeveloped regulatory structure for GMGs. However, the pace of rural electrification has
remained slow and as of 2013, there was only 7% electricity access in rural areas.
TANESCO is in charge of urban electrification while REA is in charge of peri-urban and
rural electrification. For the past several years, TANESCO has had management problems
and faced bankruptcy before a bail out as it has been selling electricity at a loss while
increasingly relying on “emergency” diesel generation. Reforms are ongoing and there has
been a recent rise in tariffs, however it will take some years for these to work through. In
addition, the TEDAP (Tanzania Energy Development and Access Project) programme
financed by WB/GEF supports electrification in both rural (implemented by REA) and urban
(implemented by TANESCO) areas. Financing mechanisms under TEDAP, such as the as
matching grants for project preparation, a credit line and performance grants, help develop
Small Power Producers (SPPs), as well as engage national banks in the rural electrification
sector. By working with and through the existing national institutions, particularly REA and
WB/TEDAP, the proposed support will fill gaps and build further the capacity developed in
Tanzania in this sector. Some particular gaps are with respect to the specific needs of the
smaller, but potentially more numerous Type 2 and Type 3 GMGs, and regarding support to
the capacity of communities and marginalised groups to engage better with potential minigrid developers.
Kenya also has a Rural Electrification Authority (REA), which was established in 2007 and
has a new mandate to power the Vision 2030 by reaching ‘universal connectivity by 2030’.
REA will expand the national grid in the rural areas and install off-grid stations and develop
mini-grids. However, the capacity in practice of the government of Kenya to take forward
this ambition without additional private and/or donor investment appears limited. Although
the Government of Kenya prioritised GMGs in their SREP Investment Plan, the project
proposal has been delayed, while the proposed delivery model excludes private investment.
However, there is substantial interest, also through the Government’s Privatisation
Commission, in enabling wider supported market delivery of GMGs and a number of donors
including WB, AFD, GIZ/KfW, Spain, Denmark and the US Power Africa initiative are
looking for ways to work more effectively and scale-up support in the GMGs space.
28
However, there is no existing programme of support targeting GMGs in Kenya. The nearest
is the Regional Technical Assistance Programme (RTAP) programme led by AFD and
managed by the Kenyan Association of Manufacturers (KAM) - which provides both
technical assistance and a line of credit through 3 banks to industrial renewable energy and
energy efficiency projects. The current programme has a pipeline 88 projects totalling 211
MW worth US $332m, and has developed three green mini-grids. KAM has also developed
a network of energy auditors, equipment suppliers, designers and technical experts. The
proposed programme in Kenya will build on this capacity, focus it more on the mini-grids
sector, and ensure that capacity support also extends to communities and local government
(including at county level, which is expected to play an increasing role in rural
electrification).
GMGs capacity and market readiness in Africa was generally assessed as being lower
outside Kenya and Tanzania (see Table 3, Criteria 7), however, with medium capacity in 5
out of 9 of the other countries considered. At the regional level some agencies such as the
AfDB have expressed interest in GMGs, but have yet to engage strongly with the sector.
The Regional Facility would build on such early stage interest in countries which have not
yet developed GMGs market or regulatory systems, as well as support the development of
the GMGs sector at a regional level. It is expected that the Regional Facility would have
three mechanisms. The first of these is country-specific packages of policy and market
preparation activities including: training and exchanges, feasibility studies and
resource/demand data collection, affordability and tariff structure analysis, financier
introductions, community mobilisation, and developing deal pipelines and market facilitation.
The second tool would be regional co-ordination and sector support which would ensure
co-ordination between country and international programmes, and provide support at the
sectoral level to GMGs market actors operating in multiple countries. The third component
on action learning and evaluation would provide the forum for cross-learning between the
market, policy, country and regional actors supported in Kenya, Tanzania and through the
Regional Facility – extracting lessons and commissioning research into evidence gaps,
including on co-benefits, access for the poor, job creation/small business development and
opportunities for women and girls.
The overall DFID programme will be framed as an initiative under the banner of a
Sustainable Energy for All “High Impact Opportunity” (HIO) on Clean Energy MiniGrids – which DFID has helped to develop. This should facilitate international level coordination, lesson learning and visibility with other programmes and actors, improving the
coherence and impact of actions in this area. At the regional level, co-operation with the
SE4ALL Africa hub and the AfDB, would be important to ensure co-ordination and regional
capacity building.
D. What is the likely impact (positive and negative) on climate change and
environment for each feasible option?
The options considered in the preceding sections relate to the intervention options and the
delivery approach - however these would not have a strong influence over the physical
climate and environment outcomes. For this reason, this section will consider the options at
a more strategic level between the following:
29
Climate change
and environment
risks and impacts*
Climate change
and environment
opportunities*
Do Nothing
B
B
Diesel Mini-Grids
A
C
Green Mini-Grids
B
A
Options
Notes key risks, factors and concerns
Ongoing energy poverty and climate
vulnerability, with local environmental and
minor climate impacts linked with kerosene
and small diesel generators
Improvement in energy access and income
diversification potential - however local and
climate impacts linked to CO2 and particulate
emissions (particularly when aggregated
across an economy), and longer term import
vulnerability
Improvements in energy access income
diversification, without adverse local or climate
impacts, however some technologies are
linked to weather patterns, while electrical
waste must be managed
Table 6. Climate and Environment risk and opportunities for intervention options.
KEY - A, high potential risk / opportunity; B, medium / manageable potential risk / opportunity; C, low / no risk /
opportunity; or D, core contribution to a multilateral organisation.
Considerations
Will the success
of the intervention
be affected by
climate change or
the environment?
Will the
intervention
contribute to
climate change or
environmental
degradation?
Assessment
Some renewable energy technologies, such as hydropower or biomass, are vulnerable
to climate impacts such as reduced rainfall or changes in agricultural productivity. It is
therefore important to ensure that the programme targets opportunities that have been
screened against possible climate impacts. Where possible, guidance should be
provided to private sector participants to enable them to factor such risks into project
appraisal decisions. Overall the impact under this consideration is deemed as
medium/manageable (B).
This intervention is not expected to contribute to climate change or environmental
degradation as the technologies supported are low carbon and renewable. With respect
to hydropower, green-mini grids would typically be run-of-river hydro in any case (since
under 10MW) so flooding of land will not be an issue. There would be a requirement on
any micro-hydro plant supported that river diversions would be limited to recommended
minimum flows maintaining the river ecosystem. In addition, most schemes (and
certainly where any damming or diversion of rivers takes place) would be subject to an
environmental impact assessment and have to comply with in-country legislation, such
as Tanzania’s 2004 EMA legislation – although in the case of micro-grids an EIA based
on the type of project may be most proportionate. Bioenergy green mini-grids can be
expected to have positive net impacts on forests, however consideration of biodiversity
and ecosystem services implications should be included in the criteria for analysis of
individual funding proposals - including life-cycle environmental impacts. Some risks
relating to waste electrical equipment exist, and should be mitigated by requirements on
planning for this issue when issuing loans. Overall, the intervention is categorised as
medium/manageable (B).
30
Could the
intervention help
tackle climate
change or build
resilience to it;
could it help
improve the
environment or its
management?
Renewable energy technologies produce considerably less emissions than diesel or
fossil fuel alternatives, and so can be considered to improve the environmental
sustainability of electricity production. This intervention is intended to make a positive
contribution to efforts to tackle climate change by avoiding or reducing emissions.
Further, many unserved households use kerosene for cooking and lighting, and
reducing these local emissions has important environmental health benefits (noting that
GMGs - other than potentially TYPE 1 - are not currently expected to power cooking,
however low power induction hobs may make this feasible in future).39 Decentralised
provision of modern energy services also has the potential to reduce the vulnerability of
households and communities to the impacts of climate change – for example, by
enabling diversification/improvement of livelihoods returns via application of energy
services such as pumped irrigation, and earning opportunities in decentralised energy
supply. Use of decentralised renewables can also protect people from systemic issues
(such as drought or natural disasters) disrupting centralised grid systems and insulate
people from fossil fuel price volatility. Furthermore, the use of renewable energy and
improved energy efficiency can, in many cases, reduce pressure on local environmental
assets such as forests. The economic analysis below estimates that up to 1MtCO2
could be saved over 20 years as a result of this programme, compared with diesel
based mini-grids. This intervention is therefore categorised as having a high potential
opportunity (A).
Table 7. Climate and Environment Assessment.
In conclusion, the climate and environmental opportunities of GMGs outweigh the risks and
- providing the recommendations of this assessment are taken up - there should be minimal
environmental damage associated with the programme.
E. If any, what are the likely major impacts on social development?
Considerations
Assessment
Does the
intervention
sufficiently
target poor
people?
Green mini-grids in low income countries are largely targeted at poor people since the
smaller grids (type 2 and type 3) in particular are aimed at those without grid connections,
and are particularly suited to rural and marginalised areas. For example, in sub-Saharan
Africa just under 80% of people had no access to electricity in 2008, with the number
without access to modern fuels slightly over 80%. The GMGs programme will expand
access to electricity in households, local businesses and community services such as
schools and clinincs - through addressing policy and regulatory barriers, market
fragmentation, access to longer term financing and capacity issues. It will also work with
communities, firms and local government to deliver the smaller type 2 and 3 GMGs.
While the focus is on the use of markets to deliver services, this does not necessarily
ensure that the poor are targeted. Inability to pay for connection and user fees is a key
barrier to poor people benefiting from electricity connections especially for off-grid
solutions. The programme should look to the integration of voucher schemes or
measures such as lifeline tariffs in the programme design to maximise the distribution of
benefits, including via a degree of cross-subsidy - without undermining financial viability of
schemes. Kenya already has such a scheme in place for on-grid provision, and is
currently undergoing a tariff reform process. Schemes will also be put in place by the
programme (or co-ordinated with the programme - such as connection incentives) to help
poorer families as well as public services benefitting poorer groups - access affordable
connections and appliances.
The programme will also monitor the extent it reaches poorer communities and poorer,
more vulnerable regions, to maximise potential co-benefits from the programme. This will
include mapping these regions, tracking GMG projects and coverage, and targeting
support to ensure that poorer areas are reached. This will help ensure more equitable
access, especially in Kenya, where levels of inequality are already extremely high, and
the risk of elite capture of programmes is relatively high.
31
Does the
intervention
take into
consideration
gender and
social inclusion
elements?
The impacts of energy access in the home - such as improved lighting - tend to
disproportionately benefit women who are typically responsible for household tasks also
suffer most (with their children) from the impacts of indoor air pollution from kerosene
lighting for example. However, it is also known that poor people, especially women and
girls, even when connected to electricity, do not always use it for cooking because of
technical (peak capacity or reliability), economic (cost of usage) or social reasons
(traditions), although they would use it for other purposes such as lighting.
The programme, through the developers and community mobilisation actions, will seek to
encourage wide use of electricity beyond lighting. In addition cost reductions over time
stimulated by the GMGs programme should enable more women to access these
products and services.
The programme will also integrate and build on analysis of social norms, gender relations
and ‘nudging’ behaviour change towards the use of clean energy services and
appliances, and look at how these can be applied around GMGs (this will be conducted
within the community awareness and mobilisation activities in Kenya and Tanzania).
Additionally, in the GMGs project designs, application criteria would include maximisation
of the participation of women-headed organisations as well as women in the supply and
maintenance elements of energy provision, as has successfully been done already in
several South Asian cases (e.g. the Barefoot Solar Engineers case). Selection criteria
will also prioritise developers and NGOs who include specific measures regarding
developing girls and women’s capacity to benefit from the jobs created as part of the
programme. Criteria for project selection should also consider the potential for
displacement of women’s interests as land becomes more productive (e.g. in pumped
irrigation schemes).
Equitable service provision in some countries is strongly determined by human resources
deployment.40 Teachers and nurses have been reluctant to be relocated in resource
districts with poor service delivery including the lack of electricity. This programme will
partly contribute to addressing this since it is targeted to rural/marginalised areas without
access to electricity.
The Mid-Term Evaluation, managed from the Regional Facility, will assess key gender
and social inclusion issues such as how women access electricity, what they use it for,
whether greater irrigation of land increases or impedes women’s access to land, how and
whether women benefit from increased income opportunities through SME development
and GMGs, and how these could be impoved for the remainder of the programme. Final
evaluations will also investigate these impacts for women and girls.
Does the
intervention give
adequate voice
and
accountability to
poor people?
Developers will be required to consult with men and women in communities in the
preparation of the GMGs projects with communities to be served, while a component will
support communities and CBOs to participate effectively in these processes. This would
enable preferences for energy services and modes of access to be taken into
consideration in the design of the projects – recognising the importance of collective
decision making and agreement with regards to the viability of an isolated mini-grid
scheme. The monitoring for the programmes will include a component of soliciting
feedback from customer/beneficiaries, which will include a survey form including
questions on how energy access has contributed to incomes for example, and their level
of satisfaction with the services provided. The evaluations will also include a component
of inputs and feedback from beneficiary populations, thereby enabling a feedback and
improvement cycle (see Management Case). This will require sufficient capacity on social
and gender issues within programme implementers, as well as external evaluator teams.
Does the
intervention
ensure no harm
policy
Provision of energy carries a risk of resettling people either because of production or
transmission – although the risks are clearly greater in larger schemes, particularly large
hydropower. It is not anticipated that GMGs would lead to any resettlement, however the
intervention will ensure that any relevant local policies on land, resettlement and
compensation are applied so as to minimise any risk of poor people being adversely
affected. Specific risks around possible loss for women of access to irrigated land once it
has a higher productive value, connection affordability promoting equitable access, and
implications of biomass use in electricity generation (potentially displacing other uses) will
need to be assessed as part of the GMG feasibility process in each area.
Table 8. Social development appraisal
32
F. For fragile and conflict affected countries, what are the likely major impacts on
conflict and fragility, if any?
It is not anticipated that there will be any notable impacts on conflict or fragility as a result of
this programme. On the contrary, the regional and local capacity building elements of the
programme, and the provision of renewable resources and promotion of inclusive and
equitable access to energy, including employment opportunities, should contribute to
reducing local conflicts and the vulnerability of geographically marginalised people.
The main risks in both countries are political and operational. There is a risk that political
factors will play a role as a negative force for change if it is perceived that programmes are
being supported to develop success models independently of central Government and other
forces. Mitigating this, the programme will build on the relationships that the DFID has
developed in country and with delivery partners. There are some security and corruption
risks to be managed, particularly in Kenya. For example, security particularly in eastern
and northern provinces, could limit access to sites, while the UK does not currently provide
GoK with budget support due to financial management concerns (Kenya is ranked 136/175
on the Corruption Perception Index). Mitigating actions for this mean that funds in Kenya
would be delivered through non-state implementing partners. GMGs projects in conflict
affected areas would have to conduct appropriate conflict and risk assessments.
G. What are the costs and benefits of each feasible option? Identify the preferred
option.
The cost benefit analysis section assesses the cost-effectiveness of green mini-grids,
versus diesel mini-grids, and no action - as well as demonstrating the impact of DFID
policies using the interventions discussed in the appraisal section above.
It should be noted that given the level of heterogeneity associated with the costs and
benefits of mini-grids that the numbers used and presented in the cost benefit analysis
chapter should be treated as only indicative to provide a demonstration of impact and
comparability and should not be used as the basis for investment or final policy decisions.
The cost benefit analysis builds on the work undertaken by IED “Identifying the gaps and
building the evidence base on low carbon mini-grids”.8 Within this study is a detailed
investigation of the technical potential for different green mini-grids for a number of African
countries as opposed to grid extensions or individual or standalone systems. The paper
provides a collection of appropriate cost ranges for the elements of mini-grid infrastructure,
including the different generation types. In addition IED undertook a number of detailed
investigations into existing mini-grids in Africa, modelling the financial returns from these
investments. The collection of information by IED provided a substantial basis for preparing
a social cost benefit analysis of the impact of DFID intervention in Kenya and Tanzania.
The approach undertaken for this analysis was to calculate the cost and benefits of an
average sized mini-grid, based on the average number of households served and the
density of population. This average mini-grid is then used to calculate the costs for building
the network infrastructure, household connections and the generation capacity necessary.
In practice it is likely that there will be a range of mini-grid sizes and this is likely to also link
to the most appropriate generation types (solar mini-grids are likely to be smaller due to the
technology comparative advantage). For the purposes of this analysis an average mini-grid
33
is assumed to consist of around 2,500 households for hydro and biomass and 1,500
households for wind and solar, having an average of 4.6 people per household who
consume around 150 kWh of electricity per year.
The social cost benefit analysis calculates the total benefits to society associated with the
electricity provided by these mini-grids, including the carbon benefits and the value to
consumers of a reliable electricity connection, minus cost to DFID against the business as
usual scenario. The business as usual and country level interventions in Tanzania and
Kenya are described below. The options analysis compares the business as usual in
Kenya and Tanzania against DFID intervention as discussed in the appraisal case above.
This is used to investigate the return on investment that would be achieved for green minigrids developers in Kenya and Tanzania.
Tanzania
Under the BAU there is assumed to already be some financial support to developers (9% as
opposed to 15% cost of capital via the TEDAP programme) and connection support (50% of
connection costs). The retail price is assumed to be $0.2/kWh. As described earlier, the
DFID intervention options considered are:
- B) Market development and co-ordination work
- E + F) Top up and expansion of existing Credit Lines and Capital Support for both
developers and consumers
While in parallel, encouraging the World Bank to consider:
- G) Partial Risk Guarantees under the auspices of TEDAP/RERE, to address the
TANESCO credit risk for TYPE 1 GMG developers.
Intervention B and the Regional Facility are assumed to help to reduce the overall cost of
green mini-grids, either by helping to developers to pick cheaper solutions or removing or
reducing transaction costs. The regional facility is also likely to reduce the potential risk of
project failure as it ensures lesson learning and knowledge sharing. Therefore this is
modelled by assuming the potential low cost sensitivity for solar and wind. Interventions E
and F are represented by more attractive finance to developers and the availability of
finance to end customers. Intervention G is outside the scope of this programme. The
assumptions that vary from the BAU assumptions discussed above are:
- Low cost assumptions for wind and solar (central for hydro and biomass)
- Interest rate of 5% for developers (over a 5 year loan)
- Interest rate of 10% for consumers (over a 5 year loan)
Kenya
Under the BAU there is assumed to be no existing financial support as no current
programmes target GMGs. The retail price is assumed to be $0.2/kWh. The DFID
interventions considered are:
- B + C) Market development and co-ordination work integrated with direct project
preparation and transaction advisory support
- E + F) Credit Lines and Capital Support for both developers and consumers
While in parallel, encouraging:
- A) Policy and Regulatory Work ongoing on Power Sector reform by IFC and GoK
- D) Results-Based Financing via the related RBF programme
Interventions B and C and the Regional Facility will work to help reduce the overall cost of
34
green mini-grids, either by helping to developers to pick cheaper solutions or removing or
reducing transaction costs. The regional facility is also likely to reduce the potential risk of
project failure as it ensures lesson learning and knowledge sharing. Therefore this is
modelled by assuming the potential low cost sensitivity for solar and wind. Interventions E
and F are represented by more attractive finance to developers and the availability of
finance to end customers. Intervention A will contribute to decreasing transaction costs.
Intervention D is outside the scope of this programme. The assumptions that vary from the
BAU assumptions discussed above are:
- Low cost assumptions for wind and solar (central for hydro and biomass)
- Interest rate of 5% for developers (over a 5 year loan)
- Interest rate of 10% for consumers (over a 5 year loan)
- A 50% connection cost support through RBF. This is not included in the CBA and the
cost to DFID.
The intention of DFID involvement is to create the sustainable delivery of green mini-grids
and therefore it seeks to create a tipping point to help demonstrate the potential investment
returns. To ensure appropriate scale of green mini-grids it is necessary to support a range
of technologies, and due to the greater level of feasible potential it will be necessary to
provide greater support for solar mini-grids. It is assumed that supporting up to 5% of the
total potential MG population as assessed in the IED report (see Table 4 above), should
help to create confidence in the green mini-grid market. Over the course of this
programme, costs are expected to fall with experience and volume/clustering effects,
resulting in further green mini-grid investments with reduced need for additional public
support – although an ongoing rural electrification cross-subsidy component may be
required to reach marginalised populations.
The Regional Facility is considered to be integral to the overall effectiveness of the
programme and mitigates the risks set out in table 2 regarding stand-alone country
programmes. However, in addition to cross-learning, supporting cluster effects and
attracting international investment in Kenya and Tanzania, the Regional Facility seeks to
create wider transformation, building the foundations for further GMG development across
Africa. The benefits in other African countries are likely to be significant. It could be argued
that if the regional facility helped to facilitate even 10% of what might be achieved in Kenya
and Tanzania in five other African countries then this would be equivalent to benefits of over
£150m. However, these benefits have not been monetised/ included in the cost benefit
analysis due to the potential overlap in attribution that might arise with future donor actions.
Assuming that solar and wind mini-grids are 40% smaller than hydro and biomass grids the
table below demonstrate the aggregate results that could be achieved by DFID intervention.
Due to the existing TEDAP support a smaller level of DFID funding is needed in Tanzania
per mini-grid. Consequently more mini-grids would result in Tanzania (81) with the same
level of funds as Kenya (54).
35
Programme cost benefit
analysis
Hydro
Bioma
ss
Wind
Solar
Total
Cost to DFID (£m)
Benefits (£m)
Net benefit (£m)
BC ratio
£12.4
£51.6
£39.2
4.2
£12.1
£48.0
£35.9
4.0
£16.4
£72.2
£55.8
4.4
£34.1
£138.2
£104.0
4.0
£75.0
£310.0
£235.0
4.1
IRR for private investment
Private finance leveraged
Total private investment
(£m)
Number of MGs
Energy access # HHs
Energy access #ppl
Carbon saved (tCO2)
relative to Diesel MG over
20 years
MW clean energy installed
GWh clean energy per yr
Direct Jobs on networkse41
16%
1.83
12%
2.17
19%
2.21
12%
2.29
15%
2.17
£22.6
14
35k
163k
£26.2
14
35k
163k
£36.2
37
56k
259k
£78.0
70
107k
490k
£163.1
135
234k
1,076k
301k
4.5
20.9
140
186k
5.5
19.2
140
179k
9.7
12.6
111
387k
24.1
28.8
140
1,054k
43.8
81.5
531
Table 14: Final cost-benefit results table for the GMGs Africa Programme
As can be seen, the net benefits of the whole programme are estimated as £235m,
arising from a DFID investment of £75m, giving a benefit-cost ratio of 4.1 overall.
Around 135 mini-grids would be supported and 44 MW of clean energy installed, providing
energy access to almost 1.1m people. It should be noted that this results table does not
consider other donor finance that might be leveraged by this programme. The private
finance leveraged does take into consideration any overlap with the TEDAP scheme.
Of the technologies hydro provides the highest benefit cost ratio and also return on
investment. However, the technical potential for hydro mini-grids is limited (see Table 4
above)), whilst the technical potential for solar is much greater. All the technologies are
more cost effective than diesel-only alternatives.
Undertaking sensitivity analysis on these numbers demonstrates that the results are
considerably affected by the costs of technologies, whilst sensitivity on the benefits
(including carbon price) has a much smaller impact. This is to be expected given the wide
range of potential costs suggested in the IED study (up to 70% variation either side of the
central assumption for most of the renewable and network costs).
For a more detailed explanation of the cost benefit analysis methodology see Green mini
grids cost benefit analysis methodology March 2014 and for the analysis see the Economic
model for Green Mini Grids Business Case March 2014.
e
This is derived from IED interviews with mini-grid firms and estimates employment in the operation of the minigrids at 10 per GMG for the larger hydro and biomass schemes, and 3 for wind/diesel hybrids and 2 for solar PV.
This does not include construction jobs, jobs in the manufacture of bought equipment (as included in the Ecofys
Report to DFID on the Co-benefits of private investment in climate change mitigation and adaptation in
developing countries) or indirect jobs associated with improved electricity access (which would be assessed in
the evaluation) - and so should be conservative overall.
36
H. Theory of Change for Preferred Option
The Theory of Change summarising and describing the proposed approach is as follows:
Inputs
Activities
ICF Funds
managed at
country level
Green Mini-Grids
Country
Programmes
 £30m managed
by DFID Kenya
 £30m managed
by DFID Tanzania
 Market Development
and Project
Preparation/TA
 Credit Lines to
developers and endusers
DFID Advisory
Time in national,
regional and
international fora
£15m ICF Funding
managed at
regional level
 £10m managed
by ARD + CED
 £5m managed by
RED
Other
Government and
Donor funds
(see table 18)
Green Mini-Grids
Africa Regional
Facility
 Policy/regulatory
support and market
development in new
countries
 Cross-learning, coordination and
evidence generation
Other Government
and Donor
interventions Eg
 Master Planning/ policy
work
Outputs
Increased
pipeline of
projects,
developers and
offtakers/comm
unities in Kenya
and Tanzania
Credit lines
fully deployed
through
national banks
Improved
regulatory and
market
conditions in 5
additional
countries
GMGs
technologies,
business
models and
policies proven,
and evidence
and awareness
built
 Partial Risk
Guarantees
 Results-based
Financing
 Renewable Energy
Resources
Assessments etc
 Sector standards
Other Govt and
donor
programmes
deliver as
expected
Outcomes
At least 135
GMGs
sustainably
providing:
- 1.1m people
with clean
energy access
- 44MW RE
- 1.05mTCO2e
abated
Critical Mass of
experience in
Green Mini-grids
in East Africa:
- 500 jobs in the
sector
- 5 lead miniutilites working
at scale
Impacts
Green Minigirds on
course to
make up
40% of
Universal
Energy
Access in
Africa by
2030, rather
than diesel
MGs
Additional
investment into
GMGs sector:
- 2:1 Private
Leverage on
DFID investment
- New
investment
programmes in
at least 2
coutnries
Investment climate
and sector coordination on GMGs
(helped by HIO)
Key:
Figure 10: Theory of Change
I. What measures can be used to monitor Value for Money for the intervention?
Value for Money for the intervention?
The proposed ICF support is positioned to fill gaps and expand the support systems for
GMGs in the respective countries and regional/sectoral setting. Although this approach
37
seeks to ensure that improved value for money is achieved, it also means that there will
need to be a degree of flexibility in the measures used to assess value for money since
multiple contributions and types of system change may have to be considered. The
following preliminary measures can be used to monitor value for money, however, some
may be more applicable for certain delivery routes than others (e.g. credit lines versus
project preparation). Specific measures for monitoring, e.g. in annual reviews, will be
determined in the early stages of project implementation for each component.
Economy (Input)
The choice of delivery partner and route is made to ensure that the cost of providing inputs
is minimised. It is proposed that this is monitored in the following ways:

Administration and running costs associated with the delivery partners as a percentage
of total support committed.
Efficiency (Input to Outcome)
The efficiency of the project is how well it uses the inputs to create outputs. For example,
how efficient providing credit support is in creating a green mini-grid. The research by IED
demonstrates that the costs of delivering GMGs will vary considerably depending on the
location, technology and a range of other variables. Therefore, any measurement metrics
in this area should focus on the efficiency of delivery, ensuring minimal duplication, high
levels of private sector leverage, and high levels of additionality. The measures below will
depend on the delivery route chosen. This programme should also encourage cost
reductions as information asymmetries about technologies and techniques are resolved.



Private sector leverage ratio
Average cost per new connection and cost per kW of installed mini-grid (taking into
consideration other variable that might be cost drivers, as well as customer satisfaction
and the quality of service levels – using where possible the proposed SE4ALL tiers of
electrification access)
Deployment of creditlines and extent to which end-user finance is provided within loans
Effectiveness (Output to Outcome)
This considers whether the outputs have produced effective outcomes. The outcomes are
to have working, efficient green mini-grids that are creating learning and examples of cost
effective solutions. Therefore VfM measures might include:



The retail price faced by mini-grid consumers and the levelised cost of supply
Gendered development co-benefits arising from GMG energy access – such as
women’s time savings, health and educational benefits (e.g. linked to increase in health
clinics/schools connected to mini-grids) and income impacts - relative to the overall cost
of engagement
Percentage of facilities offering lifeline tariffs, end-user finance or other approaches to
enabling poorer consumers to benefit
The Monitoring and Evaluation case below sets out how tracking progress against all the
indicators will be achieved in practice, and the logframe incorporates the above VfM
measures for tracking and evaluation.
38
J. Summary Value for Money Statement for the preferred option
The net benefits of the programme are estimated as £235m, arising from a DFID
investment of £75m, giving a benefit-cost ratio of 4.1 overall. The Green Mini-Grids
programme seeks to reach communities most economically served with electricity in this
way (see Strategic Case), but which are currently unserved, or may be more
uneconomically served at some point in the future via other means. By filling gaps in and
strengthening the existing support system (see Options Appraisal) the proposed
programme seeks to achieve the greatest impacts at the lowest marginal costs. By building
on or retasking existing structures and institutions at country and regional levels the
programme will achieve the fastest possible start-up time, reduce risks, and share delivery
costs with other donors (see Management and Commercial Cases).
39
Commercial Case
Direct procurement through a contracted supplier
Not Applicable
Indirect procurement - Delivery through a third party entity (multilateral organisation;
civil society organisation or support to government)
A. Why is the proposed funding mechanism/form of arrangement the right one for
this intervention, with this development partner?
The Management Case describes how the country and regional facility components of this
business case will be implemented as three separate DFID projects. In this context the
most appropriate funding mechanism and form of arrangement for each has been
considered in detail through an Options Assessment in Kenya and Tanzania, and a design
and consultation process around the Regional Facility (see Annex 4 for consultation
details). For each project a series of possible partners and funding mechanisms have been
explored as below:
1) GMGs Kenya
3) GMGs Tanzania
3) GMGs Africa Facility
Kenya (REA)
Tanzania (REA/REF)
(Regional Govt in this case eg AU)
- DFID does not fund direct
via GoK
- GoK priority is on statedelivery not private sector
investment (although
change is in process)
+Build on donor capacity
building of REA to date and
core funding of management
functions
+ Can be delivered through a
bilateral contribution through
Sweden (as a REF donor),
who would also co-fund
+Norway and Sweden have
already done due diligence, as
has UK through an FRA
- There may be concern in the
market that a government
entity will not be quick or
efficient enough – may have to
link to sub-contractors or IFC
+ Political buy in/ positioning
- Regional governance is still less
strong than national, and focussed
more on regional issues when it
comes to energy
- There is no clear existing
programme to join or adapt
1) Fund via
Government
NOT PREFERRED
PREFERRED IN PART
NOT PREFERRED
(For Type 2 and 3 GMGs)
2) Fund
through an
existing
multi-donor
programme
AFD/Kenyan Association
of Manufacturers (KAM)
and the Regional
Technology Assistance
Programme (RTAP)
+ AFD Credit line and TA
facility in place with Kenyan
Association of
Manufacturers (KAM) with
both private sector and govt
buy in can be easily
adapted to GMGs
+/- Limited GMGs
World Bank TEDAP/RERE
Programme
+ Builds on previous
experience and pipeline
established reducing setup
time
+ Co-ordinates with
complementary funds and
approaches from WB and
SREP
+ Builds confidence of private
banking sector through credit
line in financing mini-grids
40
Sustainable Energy Fund for
Africa (SEFA) at AfDB or the World
Bank Energy Sector Management
Assistance Programme (ESMAP)
+ Can link with additional lending
from MDBs
- Is sometime perceived as being tied
only to bank lending
+ Can build on existing MDTFs
reducing startup time and costs at
fee rates agreed by UK Directors at
respective MDBs
+ Can link with wider co-ordination -
experience - can be built on
- Questionmark over ability
to work with communities
(likely KAM would focus on
private developersand
another intermediary would
focus on communities/
counties)
+ Transfer would be
bilateral agreement with
AFD, with DANIDA also
contributing
+ Startup time and costs
would be avoided, admin
costs shared
PREFERRED
- Could be better integrated
with REA/REF
- Limited MDB capacity on the
ground to deliver (would need
an additional in-country
transaction adviser)
+ Provides an additional layer
of oversight/assurance on
support to REF
+ Is likely to require capital in
2014/2015 due to exhaustion
of existing credit line
SE4ALL Regional Hub and/or
SE4ALL knowledge hub
+ Can co-ordinate with and leverage
other donor funds (inc US Power
Africa)
+/- MDBs have mixed records on
smaller scale energy, and innovative
approaches
+ Can connect with the WB Gender
Innovation Lab and PREM team
- SEFA does not have a mandate for
research and cross-learning
+/- ESMAP is strong on knowledge,
but has limited staff in Africa
PREFERRED IN PART
PREFERRED IN PART (primarily for
integration with SE4ALL and national
government systems)
(For Type 1 Mini-Grids)
+ Responds to DFID-K
prohibition on assistance
through government
+ Many potential players in
place who can respond
3) Create a
new Fund or
Facility and
tender out
- Potential to be seen as
disconnected from
Govt/REA
- Poor donor co-ordination
approach when an
alternative exists, and
would limit joint funding
- Would imply longer
startup time
NOT PREFERRED
- Would ignore donor coordination priority with
REA/REF and existing
experience under
TEDAP/proposed SREP
programme
- Uncertain institutional
positioning with national
processes
- Would imply longer startup
time, limiting time frame for
disbursement and results on
the ground
NOT PREFERRED
- Creates a strategic disconnect with
international processes and
partnerships – including making it
harder to co-ordinate with SE4ALL
regional and knowledge hubs
+ Enables contracting of the best
private sector and civil society
specialists, not currently in MDBs
which have not focussed on GMGs
to date
- Will find it hard to engage in
national energy planning for
integration of GMGs in 5 countries
- Does not promote MDB lending into
the 2 new programmes targeted
- Learning will likely not feed back
into institutional practice – either for
this project or others
+ Maximum competition for
resources and transparency, has the
potential to drive down delivery costs
- Potentially reduced flexibility after
contract signature if course
corrections are needed
- More startup time and management
burden on DFID compared with MDB
leadership with staffing in place
PREFERRED IN PART (mainly for
ability to draw in best expertise from
private and civil society sectors)
Table 15: Options for delivery mechanisms of the three projects
To conclude, the appropriate delivery vehicle for each component of the programme has
been identified based on the objectives of that component and the options most likely to
deliver on the objectives. The final selection is as follows:
41
Funding relationship/
Implementer
Component
Project 1: GMGs
Kenya
Project 2: GMGs
Tanzania
Project 3: GMGs
Africa Regional
Facility
1: AFD Credit line and KAM
RTAP TA
AFD (bilateral) into KAM RTAP
Programme and National Banks
1: TEDAP/RERE TA & credit line
World Bank
2: Isolated GMGs window in
REA/REF
SIDA (bilateral) into special account
under REA/REF GoT
1: Country Preparation, Coordination and Technical Support
AfDB Sustainable Energy Fund for
Africa (SEFA)/SE4ALL Regional Hub
World Bank Energy Sector
Management Assistance Programme
(ESMAP)/SE4ALL Knowledge Hub
Table 16: Preferred delivery mechanisms for the three projects
2: Action Learning and Evaluation
Project 1: Summary rationale for funding mechanisms for GMGs Kenya
DFID does not place funding directly in Kenya Government institutions, so alternative
options for the development of the GMG project are required. The Kenya Options
Assessment considered a range of options and identified the preferred option as being
through a bilateral contribution to the Agence Francais de Development (AFD) who will
commission a new GMGs window with partner Banks and the Kenyan Association of
Manufacturers under their Regional Technical Assistance Programme (RTAP). This
window will be designed in more detail in an inception phase, however it will have two focus
areas of work – 80% of funds would be set aside for credit and capital support, run with
Kenya’s national banks (in the case of loans), earmarked for new mini-grid developments
(Component 1) and a 20% contribution to a Technical Assistance and project preparation
section to developers and communities (Component 2). This support builds on AFD’s
existing investment, reducing administration costs and start up time, and maximising the
potential for additional donor involvement – particularly DANIDA (see table 19 for additional
contributions). Note that market development activities are to be delivered under
component 2 (TA and project preparation are two key forms of market development
support), while end-user credit would be eligible for refinancing through the Component 1
either as part of developer proposals for GMG projects/businesses, or potentially as
MFI/SACCO proposals linking to multiple GMG schemes. Loan repayments from the credit
portion of the project will be revolved into future GMGs projects and for monitoring results of
the programme – with precise modalities to be defined in the inception phase with AFD and
partner banks. AFD have confirmed their agreement that no loan repayments on UK funds
will return to their accounts.
Project 2: Summary Rationale for funding mechanisms in GMGs Tanzania
The options assessment for delivery of the GMG programme in Tanzania, recommended
the funds for the GMG to be managed in two ways, i) through a Nordic plus Memorandum
of Understanding for delegated authority with Sweden (SIDA) and ii) a World Bank
managed Trust Fund. The Nordic plus (which includes both Sweden and UK) will be used
for the MoU arrangement, as previously used by DFID Tanzania for support to Zanzibar
power sector. We are confident in the management and procurement systems used by
42
SIDA in Tanzania and have conducted a Fiduciary Risk Assessment (FRA) of the REF and
will ensure the mitigating actions are applied to reduce the risk of fiduciary exposure and
improve VFM of procurement. Secondly funds will be channelled through a World Bank
trust fund arrangement. The World Bank (IDA) as part of the MAR was assessed to provide
very good value for money, we have also undertaken a due diligence assessment of the
WB systems at country level and these have been assessed to be effective. The ASD
options assessment for Tanzania recommended co-operation with WB/TEDAP, but that
more of the financing should go through REA/REF and only Technical Assistance through
TEDAP. Subsequent discussions and submissions from WB have increased confidence
that a funding gap for larger GMGs via the Credit Line exists and that spreading support
between REF and WB is a good match for DFID priorities for the GMGs programme. Given
that the pipeline for TEDAP is already developed, this component will focus only on credit
provision. The market development activity (which, more broadly than GMGs, is already
part of REA’s mandate) would be focussed on the SIDA/REA component and delivered as
part of the 20% of funds for project preparation and TA, with the remaining 80% for
credit/capital support. End-user credit could be proposed under either component either as
part of developer proposals for GMG projects/businesses, or potentially as MFI/SACCO
proposals linking to multiple GMGs.
Project 3: Summary Rationale for funding mechanisms for the GMGs Africa Regional
Facility
An additional consultation and multi-criteria analysis was developed for the options to host
the Regional Facility with the focus on comparing options with the World Bank (bringing
together WB, ESMAP and IFC), with AfDB and with an external tender. Other options
including UNEP, IRENA, PIDG/GAP and SE4ALL were considered but discarded as
unsuitable at an earlier stage. Each option has important advantages and disadvantages
as summarised in the table 15 and set out in more detail in the Regional Fund Delivery
Options MCA. The concept of a “One World Bank” offer (taking the best available
experience from WB, ESMAP and IFC) scored best in the MCA, with particular strengths in
reliable delivery and knowledge services (ESMAP is the knowledge hub for SE4ALL).
However, on exploring options further with both the WB and AfDB, the design team felt that
on balance it would not serve the Regional Facility to be placed entirely with the WB. The
AfDB has strong institutional linkages with the African Governments who are key to the
success of the Regional Facility, and is the regional hub for SE4ALL (with all the links that
this implies into national action planning). At the same time, although contracting out and
creating a new entity was not preferred overall, it was noted that specialists outside of
MDBs in the private, academic and civil society sectors may have the best market
expertise, and so the Regional Facility would also want to tap into the wider sector, and not
be siloed within the MDB system. Although costs are a consideration, it was considered
that in the case of the MDBs such costs (see section C below) are largely agreed at Board
of Director level with UK participation, while a purely contracted out option was not able to
offer the advantages of the MDB positioning for the Regional programme in particular.
Standard MDB procurement processes will drive VfM in any sub-contracting.
It is therefore proposed that the delivery of the Regional Facility be conducted in partnership
with both MDBs – given their respective competencies and positioning. The AfDB’s SEFA
fund’s Enabling Environment component would be the vehicle for the sector planning,
regulatory and policy interventions, and the market development and co-ordination work (in
co-operation with the SE4ALL Regional Hub at AfDB). The ESMAP SE4ALL Knowledge
Hub would be the vehicle for the evidence generation research and cross-learning.
43
However, although activities will be bank- or client-executed, within those sub-projects
substantial portions of the technical assistance, research and evaluation work will as usual
be tendered out by the banks (or partner governments in the case of client-executed) for the
services of specialist firms, agencies and NGOs in the respective countries and sub-sectors
of interest. Market/sector development activities would be delivered from within the
AfDB/SEFA component and would either be tendered out, or potentially delivered as a
project with the SE4ALL Regional Hub – options will be further assessed in the inception
phase.
The AfDB (African Development Fund) was assessed in the 2013 MAR update as
representing Good Value for Money for UK Aid while the World Bank (IDA) was considered
Very Good Value for Money. Working with these institutions will also reinforce and apply
the recent gender strategy at the AfDB, and enable input from World Bank Gender
Innovation Lab and Poverty Reduction and Economic Management (PREM) group to help
ensure delivery of co-benefits and advise on inclusion etc. The detailed arrangements
(ESMAP Trust Fund and/or the Sustainable Energy Fund for Africa (SEFA) Trust Fund) are
subject to further negotiation to establish how this regional facility can best be managed and
integrated with the SE4ALL High Impact Opportunity on Clean Energy Mini-Grids as a coordination device (see management case).
B. What assurance has been obtained on capability and capacity to deliver?
1) GMGs Kenya
AFD has a strong portfolio in the energy sector in Kenya and are leading the Donor Energy
sector coordination group. AFD has a strong track record in the commissioning of RTAP
which has just moved to Phase II working through KAM and commercial banks to address
the financing gap for a healthy pipeline of renewable energy projects. DFID GMG funds will
flow through AFD, however the ultimate beneficiary will be the Kenyan private sector (KAM)
and the mini grid developers and communities. DFID Kenya will ensure that for any DFID
funds being delivered through the AFD programme there is sufficient visibility for the UK
and adequate UK branding on the goods and services delivered under this programme.
KAM is a respected organisation set up in 1959 with membership of 750 private
sector/manufacturers in Kenya. Through the RTAP programme KAM has build up a
substantial body of experience and capacity to pursue the objectives of the GMGs Kenya
project. With AFD, KAM RTAP provides both existing technical assistance capacity and an
existing line of credit and relationship with national banks. KAM’s project experience, and
specifically its work with community groups such as the Kenya Tea Development Authority
(KTDA), positions it to move into energy access projects. KAM RTAP’s work with
Cooperative Bank provides it with a capacity to work with rural communities. Coop Bank
has over 8 million members in Kenya, many of which are in dairy, coffee, tea and cashew
farming, as well as the civil service. AFD and KAM have been working extensively with
banks to build capacity within Kenyan institutions to understand alternative financial
products and to help the banks diversify their risk portfolio. Understanding renewable
energy and energy efficiency technology investments has been a key part of this work
which acts as a fore-runner to DFID’s support. The programme will use KAM’s strong
knowledge of the opportunity and market environment and their network of energy auditors,
equipment suppliers, designers and technical experts which further support their capacity
and capability to deliver market development activities. With regards to the engagement
with communities, AFD may reach out to other intermediaries such as NGOs and county
44
governments for support and partnership in delivery of this. This assessment was supported
by the Kenya Options Assessment study by ASD, and is assured by the ongoing bilateral
relationship with AFD. At the mid-term review, each component will be reviewed to see if
the programme is reflecting DFID priorities, that deliverables are on time and of expected
quality, and the take-up mechanisms are in place and will determine whether or not to
proceed with the same level of support for the remainder of the programme.
2) GMGs Tanzania
Sweden (SIDA) have been engaged in the energy sector in Tanzania for the last 20 years
and are closely involved in the establishment and capacity building of REA as well as
monitoring and tracking the effectiveness of the REF, alongside other donors such as
Norway. Both the ASD options assessment and the SIDA review have concluded that REA
is appropriate to handle this work, bearing in mind that institutional improvement and
strengthening of focus on key segments is an ongoing process, of which this support will
form part.
The creditline will be executed by the World Bank as per the TEDAP Operational Guidelines
and be channelled through the Tanzanian Investment Bank (Financial Intermediary) to
private finance institutions (NMB, CRDB), providing a credit line to finance loans made to
small power producers developing green mini grids. Major advantages of this approach are
that this is building on an established credit line and funding an established pipeline. WB
have recently reinforced their on the ground capacity with a Transaction Advisor on short
term contract, and expect to add a part-time staff member in the coming months. This
team, along with the team leader and advisor in Washington DC, will drive progress until the
arrangements for the TEDAP+/RERE programme are agreed in 2015, which should include
a strengthened transaction advisory function led by IFC.
3) GMGs Africa Regional Facility
The World Bank, AfDB and potential tenderers each bring a different set of capacities, and
levels of assurance. The UK is a member of the board of directors of both the WB and
AfDB, and provides existing funds to the World Bank managed ESMAP programme,
although the UK is not currently a contributor to the Sustainable Energy Fund for Africa
(SEFA) at the AfDB. SEFA was set up only 2 years ago, however review of annual reports
and existing donor interviews have shown good progress in the past year and a series of
responses to our concerns regarding previous Trust Fund arrangements with the AfDB,
including on the visibility of SEFA on the Vice-President’s dashboard, has been provided
satisfactorily. With regards to capacity on mini-grids, the World Bank has more experience
funding this sector through the Africa Renewable Energy Access (AFREA) Programme and
IFC, and in terms of knowledge through ESMAP. Both MDBs have large Africa presence,
although leadership of the Regional Facility if given to the World Bank would be from
Washington. AfDB’s current capacity and focus on GMGs at country levels is a weakness,
while the World Bank may be slightly stronger – however, both struggle to effectively deal
with off-grid sectors and SMEs. IFC have more track record in this area and could form part
of a “One World Bank” offer. With regards to the research and evidence portion, ESMAP
has a very strong experience in this area (and is the SE4ALL knowledge hub), while AfDB
is just developing this capacity. A tendered out facility could potentially draw in skilled
individuals and organisations in GMGs niches, however a tender can also fragment the
sector and award a sub-group, while excluding the participants in losing bids. An MDB
partnership managing a process of delivery, including case-by-case contracting to best-
45
placed private and civil society partners (including international agencies like IRENA or
UNEP) is considered most likely to provide the capacity required to deliver the Regional
Facility. Confidence in this option has been built through a series of exchanges and
evidence supplied over a 4 month period, including a visit by AfDB/SEFA staff and team
leader to DFID in late May, which will feed into a detailed due diligence report on the
contribution.
C. Is there an opportunity to negotiate on anticipated costs?
In all three projects there will be a focus in final negotiations on the costs of services
provided, ensuring that we understand and agree to policies on overheads, expenses, fee
rates, tendering procedures etc.
The standard fee for the World Bank Trust fund in Tanzania is 5% management fee plus
2% for the central administration costs. There is some scope for negotiation on the
management fee during the formulation of the administrative agreement but the amount is
relatively small for a £10m contribution. The AfDB will apply a standard 5% fee as for all
Bank-managed Trust Funds, that includes professional staff and management time across
different departments, as well as travel. This means that SEFA can call on the range of
energy, financial and other professionals in the AfDB to ensure implementation. The SEFA
Trust Fund also applies an additional 3% charge for long-term experts, that will include a
mini-grids expert, to ensure implementation. The amount of this 3% expert cost (£300,000
over 5 years on a £10m contribution) will be assessed against the quality of the proposed
full time expert to be working on this programme before agreement.” SIDA will not charge
any fees on bilateral contributions, however attention will be applied to the implementation
costs of REA/REF in the negotiation phase. AFD would be taking a more active role in
delivery of the programme in Kenya, and costs in the same range as the MDBs are
expected. A portion of AFD support staff time will also be covered by internal AFD budgets
Although in joining existing facilities and trust funds the ability to change policies may be
limited, it will also be possible to reduce start-up costs and share administration and
infrastructure costs, so reducing costs to DFID. If a cost-effective final solution cannot be
reached after further detailed negotiations with the respective lead implementers, then
alternative options will be reconsidered.
46
Financial Case
A. Who are the recipients of all proposed payments?
1) GMGs Kenya
The funds will be paid to AFD via an MoU which will be formalized between AFD and DFID
Kenya. Currently AFD and KAM have a working relationship governed under RTAP Manual
of Policies and Procedures (2011) which enables AFD to provide strategic oversight and
oversee process on procurement of services. AFD has already been operating credit lines
with local banks in Kenya for renewable energy/energy efficiency projects for businesses.
The design of the Green Mini-Grids window has been discussed with these banks which will
include a project preparation facility (with RTAP) and credit line for project developers.
Technical assistance supports the development of bankable projects whereby loans are
delivered to developers at attractive interest rates (4% in Kenya with initial grace period of 12 years for 8-10 years of loan portfolio). The partner banks will make the final determination
of financing levels for any project having received the technical agreement of KAM/RTAP.
The terms of any grant/PPP portion will be defined in the inception phase. Recipients of
capital or project preparation support are primarily private developers, however NGOs, CBOs
or MFIs for could be eligible if projects are compliant. The Government of Kenya is not an
eligible recipient due to rules on the use of UK Aid. Loan repayments from the credit portion
of the project will revolve into future projects and for monitoring results of the programme –
with the exact modalities for stewardship to be agreed in the inception phase. For all the
DFID funds provided to AFD under this programme none of the loan repayments will be
returned to AFD.
2) GMGs Tanzania
The funds for the GMG programme in Tanzania, will be paid out in two ways i) through a
Nordic plus Memorandum of Understanding for delegated authority with Sweden
(SIDA) and ii) a World Bank managed Multi-Donor Trust Fund. In the first case the funds
to SIDA will be jointly managed with SIDA support and deposited on agreed terms into a
Special Account in the Rural Energy Fund (REF) of Tanzania. DFID will also be consulted
and have an opportunity to input to the SIDA agreement with the government for the REF.
The second component through the WB will be recipient-executed through the Tanzanian
Investment Bank (TIB) and private financing institutions (local banks). An administrative
agreement between DFID and the WB will be agreed and the trust fund will be administered
under operational policies and procedures that apply to IBRD and IDA financing. The Credit
Line operates consistent with the World Bank’s Policy on Financial Intermediary Lending.
The Rural Energy Agency (REA) is responsible for overall implementation of the
rural/renewable energy credit line, including: (i) overall programme oversight, marketing,
coordination, and reporting, and (ii) subproject facilitation, including verifying subproject
compliance with eligibility criteria, including safeguards and fiduciary requirements, and
monitoring and evaluation. The Financial Intermediary for the Credit Line is Tanzania
Investment Bank (TIB) which operates under its own subsidiary financing agreement. Loan
repayments are repaid into the Rural Energy Fund (REF) and under the rules of the
agreement, the resources of the credit line can be used only to refinance loans made by
PFIs to SPPs.
47
3) GMGs Africa Regional Facility
The ESMAP Multi-donor Trust Fund will be used for the World Bank-led component
focussing on Action Learning and Evaluation, and the SEFA fund will be used for the AfDBled component focussing on country preparation and sector development. Any contracted
out services (including the evaluation for example) would be issued through the standard
arrangements of the respective fund. An additional due diligence will be produced on SEFA
at the time of the signoff of the transfer. The UK is already a contributor to the ESMAP
MDTF.
The principle of no funding in advance of need will be pursued in each of the respective
agreements, and funding requests through the credit lines in particular would be linked to the
pipeline of projects ready for financing.
B. What are the costs to be incurred directly by DFID?
The costs to be incurred directly by DFID will be through three separate projects as follows:
Aries
Code
1
Project/Component Name
£m
GMGs Kenya
30
RDEL/CDEL
203998 1.1
AFD RTAP - Project Preparation/TA
6 RDEL
1.2
AFD RTAP - Credit Line
24 CDEL
2
204365
GMGs Tanzania
DFID - K
30
2.1
World Bank - Credit Line
10 CDEL
2.2
Rural Energy Fund - Project Preparation/TA
4 RDEL
2.3
Rural Energy Fund – Capital Support
16 CDEL
3
Budget
Holder
GMGs Africa Regional Facility
DFID - T
15
203990 3.1
Country Preparation, Sector Support & Co-ord,
Market Development
10 RDEL
3.2
Action Learning and Evaluation
5 RDEL
ARD
RED
TOTAL 75
Table 17: Costs to DFID by Project and Component
The budget for monitoring will be included in the management budgets at the project level, to
ensure accurate and timely reporting. It is expected that the evaluation budget would be up
to 1% of the total project cost (or £750k), however this will be assessed in the inception
phase in consultation with Evaluation Department. The evaluation will be managed from the
regional level as part of the component 3.2 Action Learning and Evaluation, however an
internal cost sharing arrangement between the 3 projects will be agreed as appropriate in the
inception phase.
48
C. What are the costs to be incurred by third party organisations?
The programme aims to facilitate a leverage of 2:1 private sector investment for the DFID
contribution. This applies to investments by developers and financiers in building GMGs, as
well as consumers in paying a portion of connection costs.
In addition, we expect the following contributions to the objectives of the programme from
other funders as illustrated in the table below, although these will be confirmed in final
negotiations and pending the outcome of ongoing design processes:
1
Project/Component Name
GMGs Kenya
£m
DANIDA
AFD-KAM
Possible RBF/Energy+
2.1 GMGs Tanzania – WB/RERE
SREP - from Investment Plan (project design ongoing)
World Bank Group – New RERE programme
SIDA WB Trust Fund
2.2 GMGs Tanzania – REA/REF
SIDA (TA to REA and Capital through REF) current funding /new
programme under design
EU pipeline under new EDF 11 – mini grids
Norway - Support to REF (although not all to GMGs)
3
GMGs Africa Regional Facility
USAID Power Africa
Table 18: Other donor contributions expected relevant to the GMGs programme
* Using an exchange rate of $1.6 and €1.2 to £1
2.2
5.0
TBC
15.6
31.2
2.8
23.6
12.5-25
70
TBC
D. Does the project involve financial aid to governments? If so, please define the
arrangements in detail.
No. In Kenya the programme does not use government channels. In Tanzania the
programme partially uses government channels, however the UK contribution is provided
through a bilateral agreement with SIDA, into the REF, which has had a Fiduciary Risk
Assessment (FRA) completed by DFID on it as highlighted in the Commercial Case above.
E. Is the required funding available through current resource allocation or via a bid
from contingency? Will it be funded through capital/programme/admin?
Adequate funding is currently available within resource allocation for Kenya and Tanzania.
Funding for the Regional Facility is within the resource allocation for ARD and RED.
The breakdown of components by CDEL and RDEL is provided in Table 17, with the total
CDEL £50m, and the total RDEL £25m.
Project contributions will be capped at the budget allocations detailed in this report in the
contribution agreements with the respective delivery partners, and there is no potential for
contingent or actual liabilities in excess of these to be created.
49
F. What is the profile of estimated costs? How will you work to ensure accurate
forecasting?
The profile of estimated costs is provided in the table below. A key challenge in a
programme such as this is that uptake on credit lines is demand driven, and generation of a
pipeline of projects is not a certain process. The Options Assessment in Kenya and
Tanzania has produced an assessment of the pipeline in the three GMGs segments, and
with regards to the existing credit lines. In the case of the World Bank credit line (component
2.1) a detailed pipeline and funding gap requirement has been presented. However, in the
other segments the pipeline may take more time to build. Phased calls for support will be
used to try to increase predictability in funding requirements, while technical assistance
components and the regional facility are likely to have generally more predictable funding
requirements. In all components a key principle will be direct communication with the
respective implementation agents, with the dialogue led by the DFID office and department
best placed to track progress (see the management case).
Aries
1
Project/Component Name
GMGs Kenya
1415
2
£m
30
1516
6
1617
8
1718
10
1819
4
203998 1.1
AFD RTAP - Project Preparation/TA
6
1.5
1.5
1.5
1
0.5
1.2
AFD RTAP - Credit Line
24
0.5
4.5
6.5
9
3.5
2
204365
GMGs Tanzania
30
5.5
9.5
5.5
5.5
4
2.1
World Bank - Credit Line
10
5
5
0
0
0
2.2
Rural Energy Fund - Project Preparation/TA
4
0.5
1
1
1
0.5
2.3
Rural Energy Fund – Capital Support
16
0
3.5
4.5
4.5
3.5
3
GMGs Africa Regional Facility
15
1
3.5
4
4
2.5
204784 3.1
Country Preparation, Sector Support & Coordination, Market Development
10
0.5
2.5
3
3
1
3.2
Action Learning and Evaluation
5
0.5
1
1
1
1.5
TOTAL 75
8.5
19
17.5 19.5 10.5
Table 19: Estimated Profile of Costs
G. What is the assessment of financial risk and fraud?
1) GMGs Kenya
Currently AFD and KAM have a working relationship governed under RTAP Manual of
Policies and Procedures (2011) which enables AFD to provide strategic oversight and
oversee process on procurement of services. AFD provides its non-objection to KAM to
proceed with specific project operations, and to banks to proceed with given loans.
The RTAP is a proven working model taking advantage of the platform and network of KAM
as a respected organisation in Kenya and the region for more than 50 years and with direct
access to more than 750 manufacturers. The strong financial systems including checks in
place that KAM has (including a senior level Board and working committees) add to the
assurance that resources will be optimized. KAM has additionally managed and executed
50
such projects with over 10 partners in place currently.
AFD has assessed KAM to be compliant with its procurement rules and in the case of the
implementing Banks specific due diligence is done. AFD disbursements are based on
annual work program; bi- annual narrative reports; quarterly financial reports, quarterly
management accounts and annual comprehensive financial audits which includes reporting
from Banks. DFID Funds would be carefully tracked and linked to appraisal of projects and
regular progress reporting. This will enable close follow up on how the DFID contribution is
utilised on project support and will mitigate any financial risk and fraud.
The following actions are undertaken as a part of the RTAP project cycle for project
developers by AFD, KAM and Banks to ensure transparency and accountability through the
robust due diligence process:






Project initiation and Technical review: Pre-feasibility Decision support: Initial financing
application to check eligibility and pre-qualification
Bankable feasibility study: Documentation and pre-financed technical study
Final Financing application: Technical eligibility agreement with partner banks
Financing agreement: Financial structuring, negotiation and close financing deal
Project implementation: Engineering procurement and construction, revenue and asset
management
M&E and delivery of results: Financial management and loan repayment
2) GMGs Tanzania
The funding through the World Bank for the credit line managed by the Tanzanian
Investment Bank and the private finance institutions is already operational and is
administered under the operational policies and procedures that apply to IBRD and IDA
financing, they have undertaken an assessment of the fiduciary risks as part of the TEDAP
programme design and implementation. There will also be close monitoring through the
transaction adviser and WB Tanzania staff member who will work closely with REA and the
local banks to ensure effective disbursement of the credit line.
For the funds channelled through SIDA to the Rural Energy Fund, we have undertaken a
Fiduciary Risk Assessment (FRA) for the REF, which assessed that the risk of exposure was
low and also we will ensure the following risk mitigation actions will be put in place as part of
our agreement with SIDA. The following actions are recommended at a programme level:
Budget Credibility (transparency and accountability)
• Discuss with REA and SIDA (and Norway) measures to improve budget credibility,
including more realistic forecasting of revenues, greater prioritization in strategic
plans in accordance with planned Rural Energy Prospectus. (M)
Fund flow (transparency and accountability):
• In Memorandum of Understanding with GoT ensure that DFID/SIDA funds flow on a
predetermined date directly to REA and are not linked to government fund flows.
Monitor the relevant documentation closely. (H)
Project identification (transparency and accountability):
• Liaise with Norway on their review of the current Project Operations Manual (POM)
and ascertain whether there are any specific additions required to facilitate the
proposed funding for GMG. Monitor that all proposed projects are in line with the
51
Rural Electrification Prospectus (Off gird priority areas) (H)
Procurement planning and contract administration (accountability):
• Assess the capacity implications (technical and administrative) for REA and the TIB
of DFID funding for GMG. Work with REA and SIDA/WB and other stakeholders to
reach a solution to any shortfalls (H)
Internal controls (transparency and accountability):
• As DFID/SIDA are proposing to support a particular type of intervention – green mini
grids – request the initial use of a special purpose bank account but the use of all
other fund procedures. (H)
Internal reporting (transparency and accountability)
• Request that copies of quarterly budget v actual reports are produced together with
the status of individual projects. (H)
The above recommendations can only mitigate the risks identified, residual risk will remain in
all instances and in the months preceding the election, there will be the inevitable increase of
political lobbying. The existence of a clear policy and rural electrification prospectus go
some way to mitigating political pressure on the REA and its Board. Overall the risk is
assessed as moderate compared with a budget support or programme risk rating of
substantial. A moderate risk level represents a situation where the structure of the PFM
system broadly reflects good international practice, although there may be some gaps or
inefficiencies, which will be addressed through the measure identified above. Overall the
FRA assessed that here is basic compliance with controls within the system.
GMGs Africa Regional Facility
Funding delivered through World Bank and AfDB is subject to their standard operational
policies and procedures on financial risk and fraud. These are also applied to any partners
or subcontractors with whom they work. The operational procedures are agreed at board
level, on which the UK is represented.
The agreements with partners in all three projects will recognise the DFID annual reviews as
well as the Mid-Term Review (see M&E section D below) as key checkpoints at which DFID
will assess its support and consider whether the programme is meeting expectations and
which risks may have been realised. The option for exit from the programme in the advent of
poor performance or encountering unresolvable barriers will be retained.
H. How will expenditure be monitored, reported and accounted for?
Expenditure on each of the three projects will be overseen by the respective departments
and offices responsible (see management case). Responsibility for day to day monitoring
and periodic reporting on the respective funds will be captured in the contribution
agreements held between the DFID and the respective bilateral partners and implementing
partners (including the national banks). Arrangements will seek to adapt the existing
financial reporting and audit arrangements for each fund/facility being joined, while making
sure these meet DFID and ICF requirements. In general we would not seek to create
additional reporting or audit requirements unless those in place are insufficient.
As a general principle it is anticipated that financial reporting will be at not less than 6
52
monthly intervals, linked to disbursement requests, and taking any unspent funds into
consideration in any further disbursement requests. Externally audited reports will be at the
normal one year intervals.
Further information on the monitoring and reporting for each project, including audit
processes, is provided in Annexes 1-3.
I. Are there any accounting considerations arising from the project?
Not further to the above.
53
Management Case
A. What are the Management Arrangements for implementing the intervention?
The proposed UK assistance described in this Business Case has a modular structure. The
country and regional facility components of this business case will be implemented as three
separate DFID projects managed by DFID Kenya, DFID Tanzania and ARD. DFID
management of the three projects will be coordinated through a DFID Board, chaired by
ARD. The regional facility implementation partner will also draw together and make linkages
between implementation of the three projects. This overall structure illustrated in the Figure
below:
SE4ALL Clean Energy Mini-Grids High Impact Opportunity
3) Green Mini-grids Africa Regional Facility
ARD (with support from CED and RED). Implementation: WB and AfDB
3.2 Action Learning and
Evaluation Group (including
DFID Board)
Kenya GMGs
Co-ord Group
1) GMGs Kenya
DFID-Kenya
Partner: AFD
Implementer:
Partner Banks,
KAM+
2) GMGs Tanzania
DFID -Tanzania
Partner:SIDA & WB
Implementer: REA
Partner Banks
DP Energy
Group
+ REA/MoE
Figure 11: Programme Management Structure
The blue boxes illustrate the 3 project modules, and the DFID management, funding partner
(who our financial agreement would be with), and the implementer of the programme. Each
project is self-contained in terms of the finances, management and decision making, contract
relationships with respective partners and annual reporting. The solid orange box in the
centre refers to the primary co-ordination mechanism within the DFID programme, linking the
3 projects with an ARD-chaired DFID Board, which forms a sub-group of the wider Action
Learning and Evaluation Group - which also includes partners, implementers and invitees.
The Action Learning and Evaluation component would be funded (see Financial Case) from
the Regional Facility and managed by RED, and would provide the forum for cross learning
between the 2 DFID country programmes and the countries and sector participants
supported under the Regional Facility. This group would not only share experiences and
54
solutions, but would also steer the commissioning of cross-cutting Regional Facility research
into gaps, in a way integrated into the evaluation approach (see M&E section below). The
open orange boxes refer to sector co-ordination mechanisms at country and regional level
which would ensure that the DFID-funded programme was well integrated into national and
international efforts on GMGs.
This structure is intended to leverage DFID’s presence and capacity in the respective
countries of focus, as well as from central policy, research and regional departments, with
accountability and decision making at the most appropriate points to ensure delivery and coordination. This structure is also scalable, in that should additional DFID countries wish to
join the GMGs Africa programme with their own national programme, it would be possible to
create an additional country programme appropriate to the gaps and opportunities of that
country, and for them to join the regional Action Learning and Evaluation Group. Additional
support could be provided through an amendment to this Business Case.
The management time implied for each DFID business unit is estimated as follows. Note that
in addition to the below, the team would have to draw on additional skills from advisors on
social development/gender, evaluation and other cadres as required:
1415
1
2
3.
1
3.
2
GMGs Kenya (DFID Kenya)
Climate Change Advisor
Programme Manager
GMGs Tanzania (DFID Tanzania)
C&E/Energy Advisor
Programme Manager
1516
1617
1718
1819
0.25
0.25
0.2
0.1
0.2
0.1
0.2
0.1
0.2
0.1
0.25
0.25
0.2
0.1
0.2
0.1
0.2
0.1
0.2
0.1
GMGs Africa Regional Facility (ARD)
ARD C&E/Energy Advisor
CED Energy Advisor (secondment)
Programme Manager
0.1
0.2
0.2
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Action Learning and Evaluation (RED)
C&E/Energy Advisor
Programme Manager
TOTALS
0.2
0.2
1.9
0.1
0.1
1.1
0.1
0.1
1.1
0.1
0.1
1.1
0.1
0.1
1.1
Table 21: Management time of DFID programme staff
The normal delegated responsibilities and management arrangements for the respective
departments will apply to each project, which each has their own ARIES code. With regards
to the Component 3.2 on Action Learning and Evaluation, this will be managed as a
component by RED, although ARD will manage the Regional Facility Project 3 as a whole.
The management arrangements with regards to the funding and implementation partners are
summarised below, with further detail for each provided in Annexes 1-3.
GMGs Kenya
A Kenya GMGs co-ordination group with government, donor and market participants will be
established in order to ensure that the DFID support is co-ordinated with other actions in the
country. This will also be a sub-group of the Energy Donor Co-ordination Group. With
55
respect to the projects, AFD will manage the relationship with the Banks and KAM as the
programme implementers. KAM in turn manage the technical support activities and
relationship between developers and banks. DFID’s representation on the steering
committee of the programme will be through the Climate Change Adviser/Programme
Manager. This arrangement will ensure strategic oversight of the programme, progress
review with key stakeholders, as well as consultation with government and other
development partners in Kenya.
GMGs Tanzania
In Tanzania, the existing donor co-ordination group will be used to co-ordinate GMGs
activities, coupled with REA’s co-ordinating function on behalf of the Government of
Tanzania. The funds for the GMGs programme in Tanzania, will be managed through two
channels. The component 2.1 credit line contribution will be managed by the World Bank
and specifically the technical team based in Washington DC, with a Transaction Advisor and
a staff member in Dar es Salaam. The management arrangements are in co-operation with
REA, and are likely to be further strengthened in a further phase of TEDAP/RERE by IFC.
The component 2.2 and 2.3 will be managed through an arrangement with SIDA, who will in
turn pass on the funds to a Special Account in REA/REF. Both Sweden and Norway
(another key donor to REF) are considered ’like-minded’ donors with similar concerns over
transparency, domestic accountability, equity and gender as DFID. This co-operation will
ensure the relevant expertise is appropriately resourced within the overall programme. The
Partnerships Principles will not be applied directly to the REF support, as DFID does not
have a direct agreement with REA, and we are delivering our support through another donor
(SIDA), as per the guidance. However we have agreed with SIDA and this will be outlined in
our MoU that DFID will be consulted and be able to review the agreement with the
government (REA) and agree the “underlying principles” of our support and the instances on
the basis of which our support would be suspended or withheld. We have agreed certain
areas that will be monitored closely in implementation such i) political interference in the
disbursement of funds under REF, ensuring the projects are in line with the priorities in the
Rural Electrification Prospectus; and ii) ensuring matching government allocations to the
REF are made as per budget. With SIDA being a like-minded donor, we do not foresee any
issues with inclusion of such terms. At programme level we have already highlighted key
actions with respect to fiduciary risk management and domestic accountability - see
Financial case section G.
GMGs Africa Regional Facility
A High Impact Opportunity under the Sustainable Energy for All initiative will be the
overarching co-ordination vehicle for the GMGs Africa programme, with the Regional Facility
providing the major interface. This has been constituted and is expected to be officially
launched in June at the SE4ALL event in New York, with participation from organisations
such as UNEP, IRENA, AfDB, WB, GIZ, USAID and a number of industry and practitioner
organisations and firms confirmed, and more expected to be in place by June and thereafter.
Management of the Regional Facility will be by the World Bank/AfDB with sub-components
tendered out by them to best-placed delivery agents from the private and NGO sectors.
Existing teams and Trust Fund arrangements will be built on and adapted as required, with
an undertaking already provided by AfDB/SEFA to take on a GMGs specialist focal point in
addition to existing staff. DFID already participates in the governance of ESMAP, and would
do so in SEFA if this fund was joined in addition.
56
B. What are the risks and how these will be managed?
Risks are summarised in the table below with associated mitigation actions proposed:
Risk and
cause
Effect
Mitigation Actions
Lack of
investable
project/developer
pipeline
Credit Line fund
goes unused
because of lack
of suitable
projects.
Private sector
leverage not
achieved.
ASD options assessment has produced the most detailed
assessment of the deal pipeline to date, while TEDAP has a
clear pipeline of Type 1 GMGs in Tanzania, while and a
statement of interest has been signed by developers in
Kenya and Tanzania, co-ordinated by GVEP. Overall
potential and pipeline estimates show that more funding will
likely be necessary than will be available, although
information is less concrete in Kenya. However, funds will
not be transferred without demonstrated need, so the risk of
stranded funds is reduced. Nationally-managed project
development and transaction advisory support is coupled
with credit lines to help create viable projects, developers
and offtakers. Where possible (especially in TEDAP),
existing pipelines of prepared projects with a funding gap
are picked up. In Kenya more risks relating to policy
blockages exist and the enabling environment for GMGs will
have to be monitored, including feedback from IFC’s DFIDSupported work in this area through the Building a Reliable
Investment Climate in Kenya (BRICK) programme.
Customers do
not keep up
payments to
mini-utilities
Loan
repayments are
not made, firms
collapse and
electrical service
is lost
The primary mitigation is the community mobilisation
support and support to create viable business models for
mini-utilities, which creates consent to pay for a pre-defined
level of service. End-user financing of connections and
appliances for productive uses should help consumers
manage payments within households budgets, increase
incomes and reduce expenditures overall on kerosene and
phone charging.
Mini-Utilities do
not keep up
supply
Service is lost,
customers
refuse to pay
and trust breaks
down
The primary mitigation is the project development support
which should enable developers to specify a system which
is tailored to the needs of the community, and to charge a
fee which enables operation and maintenance of the system
at appropriate service levels. In some cases it may be
possible for other mini-utilities or REA/TANESCO to take
over supply in the case that firms run into difficulties.
Communities are
not keen to have
a mini-grid as
they have been
promised by
politicians that
the grid will
arrive
There is not
consent for a
mini-grid from
communities
even if
technically and
financially viable
The primary mitigation is clear planning on the part of
national governments illustrating the role of mini-grids in
serving populations. The secondary mitigation is that minigrids should be future-proofed against grid interconnection
where appropriate and cost-effective.
57
Off-taker and
policy risk
reduces
willingness of
PFIs to support
more projects
(and PRGs are
not provided)
Projects are
funded within
the credit lines,
but there is
lower leverage
and no
replication
In Tanzania, TANESCO has now agreed to pay SPPs in a
timely fashion. The financial sustainability of TANESCO is a
central focus on the WB DPO and AfDB power sector
budget support – including the TANESCO’s arrears to
ensure it is a financially viable footing as well as setting a
strategy to ensure its long terms viability. This will be
monitored and Partial Risk Guarantees under SREP will
also be explored by WB if TANESCO’s payment record
does not improve and market soundings indicate that this is
a critical barrier. In Kenya, the utility KPLC has a good
payment record, but clearer statements from the
Government on their interest in mini-utilities will be required
to reassure investors. The Mini-Utilities in both countries
selling directly to customers will largely make use of prepayment meters or collection systems not dependent on the
national utility.
Additional credit
line resources
are insufficient to
fill the funding
gap
Market
confidence is
lost and deals
are dropped
Depending upon the additional time gap, further projects will
be asked to delay but not be cancelled, or additional
financing may be sought.
Credit line
stimulates
inappropriate
market signals
Banks lend
without proper
due diligence to
bad projects,
and private
investment is
crowded out
Currently the sector cannot grow without long-term financing
and the purpose of the credit line in Tanzania is to make it
available. Private Banks and lenders must still have
between 15 and 25% exposure for credit risk under Credit
Line in the case of TEDAP. In general, the risk of crowding
out of private financing the 5 year period of the programme
is considered low, however after that period it would be
hoped that credit facilities are not necessary as developers
and banks would have sufficient credit histories and sector
experience respectively.
Research not
responding to
needs and
integrated with
GMG scaling-up.
Evidence not
used effectively
to influence
future
programmes
Research component is linked to existing MDBs active in
GMG programming and coordinated through Action
Learning Group, linked to HIO initiative on GMGs
GMGs charges
to consumers are
too high for
poorer
consumers
Inequality
increases as a
result of the
intervention
GMGs will not
result in
connections or
take up of power
by health clinics
and schools
Health and
ecucation cobenefits of the
programme are
not realised.
Developers will have to consider the most appropriate tariff
structure for the proposed schemes, taking equity and
regulatory considerations into account in their proposals.
Criteria on social inclusion will be included in selection
guidelines. Connection incentives and results-based
payments should be positioned complementary to the
programme support (see Appraisal Case) and end-user
financing allowed for under creditlines. Client satisfaction
mechanisms will be included as part of the monitoring
system from the start.
Criteria valuing connections for schools and clinics will be
incorporated in guidelines for proposals. Connections will be
made as appropriate with relevant ministries and local
governments (see local government components in Annex 1
and 2) to support the inclusion of public services in GMGs.
Where government budgets are a key constraint, REA
should seek agreements with the health and education
counterparts (or the Big Results-Now Initiative in Tanzania
58
for example) as required to ensure co-benefits are realised.
Additional jobs
and employment
opportunities do
not benefit
women and girls
Employment cobenefits of
programme are
not realised.
As set out in the Social Appraisal, selection criteria will
prioritise developers and NGOs who include specific
measures regarding developing girls and women’s capacity
to benefit from the jobs created as part of the programme.
Assurances regarding these risks will be solicited and
Quested during the due diligence process – including from
Resources
Resources
other donors parties to the MDTFs. Further, the contribution
provided to
intended for
agreements will only be signed in conjunction with an
basket funded
GMGs are not
agreed Work Programme corresponding with the activities
Trust Funds are
applied and
and results envisaged under the GMGs programme.
retasked to other results are not
Disbursements similarly will only be made on the basis of
activities
achieved
need, linked to a report on activities in the last period and
the workplan going forward.
For each loan component a process is set out for the
Loan repayments
repayment of those funds by the recipients, the final
are not properly
destination of repayments and how the funds will then be
Misuse of DFID
revolved into
used in further projects or related activities. These
funds
new projects or
agreements will be set out in the contribution arrangements
related activities
with the respective partner, and tracked in the monitoring on
the programme.
Table 22: Risks and mitigation strategies for programme
C. What conditions apply (for financial aid only)?
Not Applicable
D. How will progress and results be monitored, measured and evaluated?
The 3 projects will have their own, but coordinated, annual reviews. All delivery mechanisms
proposed are building on existing funds and structures which have progress and results
reporting approaches in place. These will be used unless it is felt that strengthening is
required. Further detail on the reporting and results monitoring arrangements for each
project is provided in Annexes 1-3.
As highlighted in the management arrangements, an evaluation function for the programme
will be commissioned under the Regional Facility Action Learning and Evaluation Component
(i.e. managed by ESMAP). Although commissioning the evaluation directly, outside of any of
the programme components, was considered, it was felt that given the strong learning and
programme feedback and improvement function of the evaluation - it was better
commissioned from inside the Action Learning and Evaluation component. This still gives
the management of the evaluation a degree of independence from the rest of the regional
facility and the country programmes – while to ensure full independence ESMAP will tender
out the evaluation as a single contract with an external service provider for the duration of the
programme, under the supervision of an evaluation reference group who will not be drawn
from the programme participants. Normal DFID processes regarding QA of the Evaluation
ToR and ensuring alignment with wider ICF and knowledge gaps will be a requirement, as
59
will compliance with DFID’s Evaluation Policy and standards on independence, transparency,
quality and utility of the evaluations undertaken. In the establishment of the ToR and
evaluation design, a consultation will be conducted at country levels to ensure that any
existing evaluation commitment by co-donors is not replicated unnecessarily and joint
evaluations are undertaken as required. However, an overarching evaluation of the whole
programme and its combination of country programmes and a regional facility will remain.
The evaluation will have baseline, mid-term and final evaluation components. The value and
focus of a potential ex-post evaluation will be assessed at the mid-term review. The midterm evaluation will focus on the processes established, including social inclusion issues
around who is being consulted, participating and benefitting (e.g. uptake rate of end-user
finance), and whether value for money is being achieved in the various components. This
will provide a basis for any course corrections in the second half of the programme. The final
evaluation will consider the relevance, effectiveness, efficiency, sustainability and impact of
the interventions undertaken in addressing the 5 key barriers highlighted in the Strategic and
Appraisal Cases (policy, market, capacity, business models and finance) - looking across the
components. The programme design allows for a comparison between the approaches
adopted in Kenya and Tanzania, as well as the pace of progress possible in the incoming 5
countries versus non-supported countries – although there will be variations in the approach
in each (responding to the circumstances and gaps found there). A number of GMGs firms
operating in more than one country may also act as case studies where a relatively
consistent developer approach is applied in a range of supported and unsupported countries.
The audience for the evaluation would be the wider mini-grids sector, in support of the hoped
for scale up in the sector towards the 2030 targets of 40% of universal electricity access
being delivered via GMGs. This would include firms, governments and agencies active in
GMGs in Africa and beyond. The positioning of ESMAP and the SE4ALL HIO in particular
will facilitate the uptake and communication of the evaluation to relevant stakeholders.
Evaluation Department have been consulted on this proposed approach and are content.
60
Logframe
Quest No of logframe for this intervention: 4437377
PROJECT
NAME
IMPACT
Green MiniGrids market
expansion in
Africa delivering
growth, poverty
and climate
benefits
Green Mini-Grids Africa
Impact Indicator 1
Baseline
Milestone
1
Milestone
2
Target
(date)
GMGs growth in line Planned with IEA projections
of 40% of universal
electricity access by
2030 being delivered Achieved
Source
in this way
SE4ALL Global Tracking Framework
IEA WEO
-
Impact Indicator 2
Baseline
Milestone
1
-
Milestone
2
-
Target
(date)
-
Milestone
1
Milestone
2
Target
(date)
Assumptions
34 GMGs
11MW
225k ppl
250kTCO2
(2016)
68 GMGs
22MW
550k ppl
500kTCO2
(2018)
135 GMGs
44MW
1.1m ppl
1.05mTCO2
(2019)
1. That there is
sufficient private
sector capacity to
respond to the
incentives on offer.
2. That business
models develop
further for Type 2
and 3 GMGs in
particular.
3. For CO2
projections,
lifetime emissions
reductions rely on
the predicted
lifespan of each
technology, and
that the grid will
not close before its
lifespan expires.
Planned Gendered impacts
and co-benefits from
GMGs realised –
such as women’s
Achieved
time savings, health
Source
care and educational
Independent Evaluation
benefits and income
impacts
OUTCOME
Outcome Indicator
1
Baseline
Creation of a
critical mass of
experience in
delivery of green
mini-grids in at
least 2 African
countries and a
wider network of
expertise
Planned GMGs: 0
Number of Green
Mini-Grids installed
MW: 0
with DFID support People: 0
including installed
TCO2: 0
capacity, women and
(2014)
men served, and
Achieved
lifetime mTCO2
abated (tracking also
REA/MEM.
average unit
Evaluation
costs,tariffs and
inclusivity)
Outcome Indicator
Baseline
2
Source
Project Reporting/Independent
Milestone
1
Milestone
2
Target
(date)
Planned 0 jobs
Number of new
125 jobs
250
500 jobs
employees (women
0 firms
1 firms
3 firms
5 firms
and men) in the
(2016)
(2018)
(2019)
GMGs sector in East Achieved
Africa and lead firms
Source
at scale (operating
Gender-disaggregated Project Reporting/
more than 10 GMGs)
Independent Evaluation
Outcome Indicator
3
Baseline
Additional public and Planned Leverage
private investment
New
into the GMGs
countries
(Private Sector
Leverage achieved
on DFID investments Achieved
Milestone
1
Milestone
2
Target
(date)
2:1
0
2:1
1
2:1
2
(2016)
(2018)
(2019)
61
INPUTS (£)
INPUTS (HR)
Source
and new country
investment
programmes)
Project Reporting/ Independent Evaluation.
DFID (£)
Govt (£)
Other (£)
Total (£)
DFID SHARE (%)
75m
*
*
*
*
Baseline
Milestone
1
Milestone
2
Target
(date)
Assumption
0
30
(2015)
50
(2017)
60
(2019)
1. Existing market
participants are
able to scale up
their operations,
while new market
entrants are also
attracted.
DFID (FTEs)
1.4
OUTPUT 1
Output Indicator
1.1
Increased
pipeline of
viable GMGs
projects,
developers and
offtakers/
communities
Firms, communities,
NGOs and local
governments
registered with the
programme
Planned
Achieved
Source
Project Reporting/Independent Evaluation
Output Indicator
1.2
GMGs developers
approved and
having focussed
project preparation
support/TA
Baseline
Planned
0
Milestone
1
8
(2015)
Milestone
2
16
(2017)
Target
(date)
16
(2019)
Achieved
Source
Project Reporting/Independent Evaluation
Output Indicator
1.3
IMPACT
WEIGHT (%)
20
INPUTS (£)
INPUTS (HR)
Contracts placed for
support and advice
to communities and
local governments
Planned
Baseline
Milestone
1
Milestone
2
Target
(date)
0
2
(2015)
4
(2017)
6
(2019)
Achieved
RISK RATING
Source
Independent Evaluation/Surveys
DFID (£)
Govt (£)
Other (£)
Total (£)
DFID SHARE (%)
£10m
*
*
*
*
Baseline
Milestone
1
Milestone
2
Target
(date)
Assumption
0
10
(2015)
20
(2017)
30
(2019)
1. Policy
conditions in
Kenya for GMGs
continue to
improve
DFID (FTEs)
0.2
OUTPUT 2
Output Indicator
2.1
Credit lines fully
deployed into
GMGs projects
and end-user
finance
GMGs developers
having developed
projects for
financing and been
appraised by
programme/banks
Planned
Achieved
Source
REA/MEM. Project Reporting/Independent
Evaluation
Baseline Milestone Milestone Target
1
2
(date)
Output Indicator
2.1
IMPACT
WEIGHT (%)
60
INPUTS (£)
Proportion of Credit
Lines/capital
deployed
[Proportion of
capital applied to
end-user financing/
lifeline tariffs etc]
Planned
0
[0]
25%
[5%]
(2016)
50%
[10%]
(2018)
100%
[10%]
(2019)
Achieved
RISK RATING
Source
Reporting from Implementing partners
DFID (£)
Govt (£)
Other (£)
Total (£)
DFID SHARE (%)
50m
*
*
*
*
62
INPUTS (HR)
DFID (FTEs)
0.4
OUTPUT 3
Output Indicator
3.1
Baseline
Improved
market and
policy
environment for
GMGs in Africa
Planned 0
Countries having
1
3
5
registered interest in
(2015)
(2017)
(2019)
developing GMGs
Achieved
Markets and having
Source
had support
packages delivered
Project Reporting/Independent Evaluation
Output Indicator
3.2
IMPACT
WEIGHT (%)
20
INPUTS (£)
Number of lead
sector market
participants in the
region having
received
support/advice to
grow businesses
and develop
technologies
DFID (£)
Planned
Milestone
2
Target
(date)
Baseline
Milestone
1
Milestone
2
Target
(date)
0
1
(2015)
3
(2017)
5
(2019)
Assumption
1. Further
countries
demonstrate
interest to build
GMGs sectors
through SE4ALL
Action Agendas
Achieved
RISK RATING
Source
Project Reporting/Independent Evaluation
10m
INPUTS (HR)
Milestone
1
Govt (£)
Other (£)
Total (£)
DFID SHARE (%)
*
*
*
*
Baseline
Milestone
1
Milestone
2
Target
(date)
Assumption
0
20
(2015)
30
(2017)
40
(2019)
1. International coordination and
lesson sharing
mechanisms are
effective
(particularly the
SE4ALL
knowledge hub
and Clean Energy
Mini-Grids HIO)
DFID (FTEs)
0.5
OUTPUT 4
Output Indicator
4.1
Evidence,
capacity and
experience of
GMGs
technologies,
business
models and
policies
strengthened
and analysed
Active participants
in knowledge
exchange and
Action Learning
Group
Planned
Achieved
Source
Project Reporting/Independent Evaluation
Output Indicator
4.2
Substantive
research outputs
produced on policy,
technology and
business models
Baseline
Planned
0
Milestone
1
3
(2016)
Milestone
2
6
(2018)
Target
(date)
9
(2019)
Achieved
Source
Project Reporting/Independent Evaluation
Output Indicator
4.3
IMPACT
WEIGHT (%)
20
INPUTS (£)
INPUTS (HR)
Evaluation reports
delivered on the
programme as a
whole, including
gendered impacts
and co-benefits
Planned
Baseline
Milestone
1
Milestone
2
Target
(date)
0
1
(2015)
2
(2017)
3
(2019)
Achieved
RISK RATING
Source
Independent Evaluation/Surveys
DFID (£)
Govt (£)
Other (£)
Total (£)
DFID SHARE (%)
£5m
*
*
*
*
DFID (FTEs)
0.3
63
ANNEX 1 – GMGs KENYA
Background and summary
As set out in the appraisal case, in Kenya, the GMGs programme seeks to build on and
adapt related programmes, which have not yet focussed on GMGs, with core support to:


GMGs market development and co-operation work integrated with direct project
preparation and transaction advisory support
Credit Lines and capital support available to GMGs developers allowing also for
end user finance
While in parallel, encouraging and co-ordinating with:


Policy and Regulatory Work ongoing on Power Sector reform by IFC through their
BRICK programme with Government of Kenya and other stakeholders
Appropriate Results-Based connection incentives via related programmes, potentially
in co-operation with the Energy+ initiative.
In the Kenya case there are three key challenges that need to be recognized: First,
opportunities for Type 2 (100kw-1MW) isolated mini-grids are comparatively fewer than in
Tanzania. Isolated GMGs will generally by Type 3 (less than 100kW), and be in remote
areas and in pockets where the utility is unable to reach in the near future. Secondly,
because of the Government electrification strategy, the programme will have to
opportunistically seek ways to complement, fill gaps and build cooperation with the Rural
Electrification Authority (REA) and Kenya Power and Lighting Company (KPLC) team.
Finally, to succeed, the programme will build on private sector capacity and interest, the
potential for PPPs and offer incentives for the public and private sector to use renewables
both for its own activities and for the surrounding communities.
Programme Results
The expected results of the programme are as set out in the Business Case and specifically
the logframe. The Kenya programme would have a share of the Outcomes and Outputs 1
and 2 in particular. The results expected associated with the Kenyan component of the
programme will be set out in a Kenya-specific logframe in the inception phase of the
programme, which will act as a nested logframe to the overall programme logframe in future
reporting and evaluation.
Programme Structure
The diagram below demonstrates the specific programme structure and management
arrangements for the programme:
64
* Expected to be a portion of earlier stage/higher development impact projects
Referring to Figure 7, the programme envisions the focus of mini-grid support packages on
the following two GMGs segments (although Type 2 would not be excluded):

Type 1. Grid Proximate GMGs will focus on access (additional connections),
productivity and enhancing renewable energy and energy investments notably through
a PPP approach and notably through AFD KAM credit line. DFID grant support would
allow Projects to be close to break even and bankable. It is expected that additional
DFID support will also enable existing GMG projects to increase their access services
and provide more income opportunities in communities.

Type 3. Remote GMGs (under 100 kW) will focus on smaller mini and micro grids in
areas where KPLC has no reach. These projects will require more technical
assistance and incentives to achieve bankability. The project will provide support to
enable these projects to be of interest to commercial banks.
DFID will deliver its contribution through a bilateral contribution to Agence Francais de
Development (AFD) who will create a GMGs window in their existing programme. The
GMGs window will have two focus areas of work:

Component 1 – Credit and capital support - to be delivered through the AFD credit
line run with Kenya’s national banks (especially for Type 1 projects) and more flexible
capital support to earlier stage and Type 3 GMGs projects

Component 2 - Technical assistance, advisory and project preparation support
- to developers, communities and other local entities through KAM/RTAP as well as
other intermediaries as required
65
Financial Summary
The UK will provide £30 million to support a six year programme to AFD. 80% of this will be
spent on supporting the Component 1 Credit and Capital support – a total of £24 million. The
remaining 20% will support Component 2 technical assistance and advisory - £6 million.
Further detail regarding specific budget lines etc. will be developed in the inception phase
prior to the approval of the contribution agreement with AFD. Negotiation of the budget
structure and fees will be led by DFID Kenya. Loan repayments from the credit portion of
the project will revolve into future projects in Kenya and for monitoring results of the
programme. For all the DFID funds provided to AFD under this programme none of the loan
repayments will be returned to AFD.
Programme Activities
During an initial inception phase, further market study and design work will be conducted led
by AFD on the components of the project and integration of DFID funds into the different
financial tools notably KAM/RTAP’s systems for the relevant types of GMG projects. The
following outlines the expected 6 inception phase activities which would take place over 6-9
months:

Deepen the understanding of the Kenyan regulatory framework and market
analysis, especially for the appetite and barriers for the private sector to invest in
such projects, identify the areas where the national grid would potentially be extended
in the next few years, and which sectors are the most promising (hotels, telecoms, tea
association, etc.)

Identify a first pipeline of GMG projects through calls for proposals, and analyse
their characteristics: public/private, retrofit/new GMG, capacity, production by a
private/public entity, distribution by a private/public entity, amount, need for a loan,
IRR, etc) including analysis of the regulatory, institutional, financial and technical
barriers for them to be financed (equity, profitability, electricity tariff too high, banks’
appetite, risks related to a national grid extension, etc)

According to the barriers identified and the type of projects in the pipeline, refine the
Component 1 and 2 design. For component 1 determine the financial support most
suitable per type of project in terms of loan terms, grants/incentives or other. For
component 2 define structure, content and implementing partners including KAM and
others based on needs.

For the private sector GMG projects which might be financed by a local bank through
the credit line, test the appetite of the partner banks for financing such
projects/businesses with the incentives proposed.

At the conclusion of the inception phase a meeting will be held between AFD and
DFID in order to define precisely the programme which would be formalized in a
detailed MoU.
Subject to the findings and recommendations of the Inception Phase, the following are the
indicative activities under each Component envisaged at this stage:
Component 1 – GMGs financing in Kenya: Credit Line or direct financing
 AFD will determine the procedures when a project shall be financed through the credit
66


line or through capital support and will structure the Component 1 accordingly,
including the definition of eligibility criteria.
RTAP (and other intermediaries as needed) will conduct awareness and capacity
building actions, including KAM members, communities, developers and banks on the
terms and opportunities of the credit line and capital support (including features like
end-user finance), as well as the appraisal of GMGs projects.
For the private sector GMG projects eligible to the credit line:
 KAM will work with banks to ensure the financing of the pipeline of potential
projects and developers (closely linked with Component 2).
 The banks will monitor pipeline, applications, reviews and decisions on the credit
line and report to KAM
 KAM and the Banks will include, when needed, the revolving fund operations and
monitoring and evaluation requirements necessary for GMGs into the Manual of
Policies and Procedures for the GMG window
Component 2 – GMGs Kenya Project Preparation and Transaction Advisory
 The technical support needs will similarly be designed building on the needs of the
proponents assessed during the inception phase and the pipeline of interest
generated.
 KAM/RTAP and intermediaries will work with sector stakeholders to pursue the
identification and structuring of the pipeline of potential communities, projects and
developers with interest in GMGs.
 Linked with the above, at least 2 further calls will be issued for participation in the
Component 2 in the first 2 years, with categories expected for 1) Private developers,
2) County Governments and 3) Co-ops/NGOs/CBOs (for activities relating to
community mobilisation and organisation around GMGs, acting as off-takers,
engaging with developers etc.). The call designs will also take into account GMGs
segments of 1) >100kW (which can be grid connected and with anchor customers)
and 2) <100kW (often serving more remote communities). Application forms will
prioritise VfM indicators and encourage inclusive approaches to tariff structures, enduser financing and productive uses etc.
 The steering committee (including the programme donors and invited experts) will
then conduct appraisal and select leading candidates in each category for follow up
support and matching project preparation grants and/or mentoring and technical
support. The scope of the calls and support will be set in the inception stage, however
it is anticipated that focussed support to a relatively smaller number of lead
developers (perhaps 10 in the course of the programme) could be the most efficient
approach. A similar view would have to be taken on most appropriate number of
counties to support, and whether just 1-2 intermediary NGOs conducting activities
such as consumer education, community mobilisation and coordination, enabling
community-led investment and supporting for productive uses to help enhance the
benefits of this programme.
 Provide, manage and monitor matching-grant support and technical assistance
through the project cycle
A number of cross-cutting activities are also envisaged as follows:
 Engaging with REA and government agencies, encouraging policy and regulatory
67




progress on the participation of private/co-op developers in the GMGs sector
Marketing and communications around the financing and technical assistance
package – either directly, or through NGO or communications intermediaries
Providing networking, linking and co-ordination services for the GMGs sector in
Kenya, encouraging joint ventures, linking developers, technology firms, anchor
customers and community groups, and linking domestic and international firms and
investors
Regular reporting to donors on progress on both components and cross-cutting
activities based on monitoring and management systems
Participation in the evaluation and lesson learning activities managed from the GMGs
Africa Regional Facility, including sharing experiences with other countries seeking to
develop GMGs
Management, Governance, reporting and review
The DFID contribution will be managed by DFID-Kenya through the Climate Change Advisor
and a Programme Manager (see table 21 for indicative time inputs). This role would be
conducted in close liaison with the lead advisor at AFD and programme management staff
there. The AFD Country Director would have lead responsibility, with technical input also
from HQ in Paris.
AFD will manage the relationship with KAM RTAP, the banks and other implementation
partners as appropriate. DFID’s representation on the management of the programme will
be through the Climate Change Adviser who will have a seat on the steering committee.
This arrangement will ensure strategic oversight of the programme, progress review as well
as consultation with government and other stakeholders and development partners in Kenya.
Disbursements will be to AFD based on work plans, audit reports and projects ready to be
approved – as is the current practice with the KAM RTAP programme.
The implementation will be managed by a minimum of one full time equivalent coordinator
per entity hosting and implementing the TA component. This would include expertise in
project management, technology, rural energy access, field support finance and rural energy
policy. A pool of expertise could be determined for each entity in order to provide flexibility
and the mobilization of expertise according to the needs of the program (consultants, short
term experts as for the existing KAM RTAP admin and support team, therefore increasing
efficiency and sharing costs). Reporting to the donors will be not less than every 6 months for input into the DFID/ICF results and annual reporting system. The results and reporting
framework will be discussed and refined in the inception phase, building on the existing one
and ensuring it meets DFID/ICF requirements.
The standard DFID Annual Reviews will be conducted by DFID-Kenya. In addition, at the
mid-term evaluation led from the regional facility, the GMGs Kenya programme will be
reviewed to see if it is reflecting DFID priorities, achieving value for money, that deliverables
are on time and of expected quality, and the take-up mechanisms are in place. This MTR
will determine whether or not to proceed with the same level of support for the remainder of
the programme.
Co-ordination with other programmes
A Kenya GMGs co-ordination group with government, donor and market participants will be
68
established in order to ensure that the DFID support is co-ordinated with other actions in the
country. This will also be a sub-group of the Energy Donor Co-ordination Group.
Donor partners, including the World Bank, GIZ/KfW, AFD and Nordic Development Fund
have interest in GMGs and renewable energy for rural energy access. The World Bank, AFD
and GIZ/KfW support the SREP plan of GMG rollouts under the REA-managed model. JICA
is supporting a business-oriented model for solar charging stations with the REA. The
Spanish Government is supporting continued roll-out of the solar school programme. Danida
is in direct conversations with DFID Kenya about possible support for GMGs through the
programme set out in this Business Case. Norway are considering joining the Results-Based
Financing (RBF) initiative on GMGs complementary to this programme. USAID Power Africa
has also included mini-grids in its program document (a call is currently seeking consultants
to execute the overall $72m program which includes Kenya and other countries). There is
general agreement from donor partners on the need for mini-grids in remote off-grid
electrification. As can be seen above, several actively support the Government approach
(KEEP/SREP), but there is considerable interest in developing new business models
enabling private investment in and/or operation of part or whole of mini-grids.
Specific relevant projects to co-ordinate/co-operate with include:

AFD existing GMG/SREP support. AFD has pledged investment support for the GoK
SREP/GMG program and will provide this support to develop and/or hybridise (with
solar) isolated diesel mini-grids now in operation. A tender was launched in
September to study several sites.

KfW/GIZ GMG program. As is the case with AFD, the German Government has
pledged investment support for the GoK SREP/GMG program and will provide this
support to develop and/or retrofit isolated mini-grids now in operation. KfW/GIZ are
currently studying potential sites in Turkana and Marsabit.

WB/SREP GMG Program. The Kenya SREP programme in GMG is approved at
investment plan level but to date no project proposal has been presented to the subcommittee. Additional GMG-relevant concepts may yet be put to the SREP Private
Sector Set-Aside. There is considerable scope for DFID to partner with SREP in
capacity building and training, especially of REA.

Nordic Development Fund is investing €2.8M in retrofitting of Government mini-grids.
A consultant for the project has been identified.

A Mini-Grids concept proposing a tariff top-up between the unified tariff and the
economically viable tariff has been shortlisted in the DFID-supported Results-Based
Financing for Low Carbon Energy Access Facility delivered through EnDev. This
could be highly complementary to any GMGs fund which targets project preparation
and credit provision.
69
ANNEX 2 – TANZANIA
Background and summary
In Tanzania, the GMGs programme will build on and adapt related programmes relevant to
GMGs to scale them up to critical mass, fill gaps and ensure focus on all three GMGs
segments. Support will focus on:

Market development and co-ordination work integrated with existing project
preparation and transaction advisory support

Credit and Capital Support (covering also smaller and isolated Type 2 and 3 GMGs)f
allowing also for end user finance
While in parallel, encouraging the World Bank to consider:

Partial Risk Guarantees under the auspices of TEDAP+/RERE, to address the
TANESCO credit risk for larger Type 1 GMG developers.
In Tanzania, several funders along with the government’s Rural Energy Agency (REA) have
recognised the potential of mini-grids to play a significant role in rural electrification and a
number of programmes and funds are in place. However, energy access rates remain low,
there remain gaps in the support system, and critical mass and momentum in GMG roll out
has not yet been achieved. In this case a critical issue is co-ordination and effective gap
filling in the positioning of UK support to maximise the impact of the overall effort.
Programme Results
The expected results of the programme are as set out in the Business Case and specifically
the logframe. The Tanzania programme would have a share of the Outcomes and Outputs 1
and 2 in particular. The results expected associated with the GMGs Tanzania Project will be
set out in a Tanzania-specific logframe in the inception phase of the programme, which will
act as a nested logframe to the overall programme logframe in future reporting and
evaluation.
Programme Structure and Management
The diagram below demonstrates the preferred programme structure and management
arrangements for the programme. It should be noted that some detail design work and
negotiations are ongoing and will continue into the inception phase with the respective
partners - and so there may be some variation in the finally contracted position:
f
See Figure 3 for GMG Types
70
The DFID support in Tanzania will be delivered via two components:
1. A new window in the Rural Energy Fund (REF) focussing on Green Mini-Grids
2. A top-up to the existing World Bank Credit line for GMGs
The first component will be delivered through a Nordic plus Memorandum of Understanding
for delegated authority with Sweden (SIDA), who will in turn manage the joint funds in REF,
with REA leading on the implementation. SIDA is already a strong supporter of REA - and
have observer status on the board - but would like to see it segment its efforts, increasing its
focus on private-sector delivery, mini-grids/SPPs and balancing more the 95% of funding it
currently allocates to TANESCO-delivered grid extension. The second component will be
delivered through a World Bank managed Trust Fund which provides a number of
instruments, including connection incentives and a creditline. The creditline is provided to
the Tanzanian Investment Bank then on as refinancing to loans issued by local banks.
It is expected that the TEDAP programme will be scaled-up by the SREP Renewable Energy
for Rural Electrification (RERE) programme at some point in 2015, however there will be a
funding gap until this takes place while a number of Type 1 GMGs projects developed over
the last 6 years are just coming to maturity and are ready for financing. The existing TEDAP
pipeline is strong in Type 1 GMGs (particularly hydro and biomass) but does not currently
well address the potential of Type 2 and Type 3 GMGs - which the ASD report to DFID
advised could be better addressed from REA. The purpose of the DFID support to the new
window in REF is particularly to stimulate isolated green mini-grids that focus on rolling out
connections and building up isolated generation (rather than primarily attracting on or off-grid
feed in tariffs to generate revenue).
71
Financial Summary
The UK will provide £30 million in total for the GMGs Tanzania programme. Of this £20m will
be provided through SIDA into the new GMGs window in REF. 80% of this (£16m) is
expected to be used for capital support, with the remaining 20% (£4m) for technical
assistance and capacity building with communities and developers. Further detail regarding
specific budgetlines etc will be developed in the inception phase prior to the approval of the
contribution agreement with SIDA. Negotiation of the budget structure and fees will be led by
DFID Tanzania. The remaining £10m will be provided as a top-up to the World Bank
creditline. Loan repayments are repaid by default into the Rural Energy Fund (REF) and the
recycling or return of these will also be included in the agreement with WB.
Programme Activities
SIDA are currently working with REA on the design of the GMGs window in REF, however
the key elements with respect to the UK support in particular are expected to include:




A new window inside REF focussing on private investment in renewable energy,
managed by REA and including specific support for GMGs projects and developers
that are smaller, more isolated and less likely to receive TEDAP funding. A package
of services and financial support would be offered to developers, communities and
local governments, supporting the development of GMGs projects and associated
business models.
REA will develop and issue calls for participation in the GMGs REF window with
categories expected for private developers, local governments and Coops/NGOs/CBOs. Both relevant projects from the existing TEDAP/REA pipeline, as
well as new ventures, would be eligible to apply – judged against a series of criteria
set in line with the objectives of the programme and agreed with the donors.
It is envisaged that a relatively smaller cohort (perhaps 8-12) of lead developers of
Type 2 and Type 3 GMGs would be supported by the DFID funds with a range of
instruments including matching grant project design and development (including
liaison with communities and government – see below) and technical and transaction
advisory support over the 5 year period of the project. It is expected that project
preparation costs will be around 20% of the funding provided through this window and
80% will be capital. Detail design will consider the extent of grant versus credit in
terms of capital support, however it is considered likely that given the early stage
nature of some participants, particularly in the Type 2 and Type 3 segments, that grant
funding may be necessary alongside credit in proving business models and
technologies. Application forms will prioritise VfM indicators and encourage inclusive
approaches to tariff structures, end-user financing and productive uses etc.
It is further expected that a number of civil society organisations (eg NGO, CBO,
SACCOs/Co-operatives) and local governments will be engaged in the programme
through calls for proposal and allocation of funds for activities such as consumer
education, community mobilisation and organisation around GMGs, acting as
offtakers, developing productive uses of energy, raising community investment and
engaging with developers, technology providers and financiers etc. These are
expected to fall under the project preparation element of the support to REF.
Other core activities envisaged include:
72




Marketing and communications around the financing and technical assistance
package – either directly, or through NGO or communications intermediaries
Providing networking, linking and co-ordination services for the GMGs sector in
Tanzania, encouraging joint ventures, linking developers, technology firms, anchor
customers and community groups, and linking domestic and international firms and
investors
Regular reporting to donors on progress on both components and cross-cutting
activities based on monitoring and management systems
Participation in the evaluation and lesson learning activities managed from the GMGs
Africa regional facility, including sharing experiences with other countries seeking to
develop GMGs
The second component will be channelled through a World Bank trust fund arrangement into
a creditline with the following indicative activities:





The current credit line is due to be exhausted by June 2014, with the financial closure
of a further two projects. Discussions are being undertaken with the World Bank to
establish the expected gap in funding, and how UK funds would be positioned with
regards to the existing TEDAP, and incoming RERE programmes.
The TEDAP creditline has an existing operational guideline under which the financing
is channelled to the Tanzanian Investment Bank (financial Intermediary) to private
finance institutions (such as NMB, CRDB), providing refinancing of loans made to
Small Power Producers (SPPs) developing green mini grids. The money is treated as
a loan from REA to the banks and repayments are returned to REA, revolving into the
Rural Electrification Fund.
The WB also supports a transaction adviser to provide transaction advisory support to
developers and REA - and ensure that any issues with disbursement or contracting
with developers are followed up to ensure timely disbursement. They will also coordinate between REA who is responsible for overall implementation of the
rural/renewable energy credit line, the PFIs and developers, to track progress.
Although not directly funded, the WB programme would continue its complementary
work on the regulatory and incentive framework to encourage investment in RE
projects.
The World Bank Task Managers would provide not less than 6 monthly reporting on
progress to the donors.
Management, governance, reporting and review
The funding for the Rural Energy Fund (REF) will be channelled through Sweden (SIDA),
who have been engaged in the energy sector in Tanzania for the last 20 years and are
closely involved in monitoring and tracking the effectiveness of the REF, alongside other
donors such as Norway. SIDA are observers at the board of REA and approve annual plans
and budget in a semi-annual meeting (March-April) and then check implementation in the
annual meeting (October-November). The Nordic plus (which includes both Sweden and
UK) will be used for the MoU arrangement, as previously used by DFID Tanzania for support
to Zanzibar. We are confident in the management and procurement systems used by SIDA in
Tanzania and have conducted a fiduciary risk assessment of the REF and will ensure the
mitigating actions are applied to reduce the risk of fiduciary exposure and improve VFM of
73
procurement. DFID Tanzania will have regular progress meetings with Sweden to track
progress. We will use their systems and processes for reporting – quarterly progress and
financial reports and joint annual review.
REA would manage this window in co-operation with SIDA and the World Bank
TEDAP/RERE programme. The management structure will be agreed in the design work
with SIDA, however it would be expected to include dedicated REA staff, as well as and/or
consultants as appropriate to deliver the calls, review and management of support services.
Where possible consultants will have results-linked contracts, building on the experience of
REA/TEDAP with the transaction advisor on the larger scale projects.
With respect to the credit line, the WB would include the DFID-financed actions within the
reports of programme outputs. Management would be through a mixed in-country and
Washington DC-based team who would manage the funds and ensure effective
disbursement, supporting projects to reach financial closure and also liaising with the PFIs to
identify early on any obstacles. The World Bank Trust Fund Donor Centre on the secure
Client Connection website has details of all DFID’s Trust Funds. It shows real-time financial
information relating to receipts, disbursements, fund balances and quarterly un-audited
statements. Within six months of the end of each Bank fiscal year, the Bank will provide
DFID with a management assertion, together with an attestation from the Bank’s external
auditors concerning the adequacy of internal control over cash-based financial reporting for
Trust Funds as a whole. The cost of these attestations is met by the Bank. Details will also
be published on the Client Connection website. For Recipient Executed Trust Funds, the
Bank will provide the DFID with copies of all financial statements and auditors’ reports
received by the Bank from the recipient(s) in line with the terms of the grant agreement(s).
Co-ordination with other programmes
The primary co-ordination mechanism for the GMGs Tanzania programme is to be working
through the REA, which is the nodal agency on rural energy in Tanzania, and the TEDAP
programme which is implemented through it. In addition, the existing Energy Donor Coordination Group is considered to be an effective and appropriate forum in which to coordinate with other relevant programmes, in the context of the other energy and development
assistance and programming in Tanzania. This group is currently chaired by the World Bank
and includes, DFID, SIDA, Norway, the European Union, USAID (Power Africa), AFD and
others. This is the same co-ordiantion structure as will be used for the design of the RERE
project under SREP, so maximum coherence can be achieved.
74
ANNEX 3 – GMGs Africa Regional Facility
Background and Summary
The regional facility is intended to enhance the effectiveness of, and mitigate risks in, the two
country programmes, while also laying the ground for future country action and investments.
It is proposed that it focusses on:
-
Sector planning, regulatory and policy interventions and market development
and co-ordination work at sectoral level (e.g. with developers working in multiple
countries) and in tier 2 (not GMG investment-ready) countries
-
Evidence generation research and cross-learning between active GMGs countries
and market participants, and with those just entering the sector
Programme Results
The expected results of the programme are as set out in the Business Case and specifically
the logframe. The Regional Facility would have a share of Outcome 3 and the Outputs 3 and
4 in particular. The results expected associated with the GMGs Regional Facility will be set
out in a specific logframe in the inception phase of the programme, which will act as a nested
logframe to the overall programme logframe in future reporting and evaluation.
Programme Structure and Management
The following diagram illustrates the proposed structure and DFID management of the GMGs
Africa Regional Facility in the preferred option pending final negotiations with the respective
hosts:
75
It is envisaged that the operational activities of the Regional Facility will focus on country and
sectoral support and preparation through the SEFA fund of the AfDB. A complementary but
discrete Action Learning and Evaluation component run by ESMAP/World Bank would be
responsible for drawing together the learning from the regional facility and the country
programmes in Kenya and Tanzania, as well as commissioning new research into sector
evidence and knowledge gaps.
Financial Summary
The total UK contribution to the Regional Project would be £15m, of which £10m would be
focussed on country preparation, sector development, technical support and co-ordination –
with this component managed by ARD. £5m would be committed to the Action Learning and
Evaluation Component which would be managed by RED.
Programme Activities
The GMGs Africa Facility would not seek to make project construction investments at country
level (the two proposed country programmes in Kenya and Tanzania would do that). Instead
it would seek to support the effectiveness of the two country programmes, while developing
the policy and market ecosystems for GMGs in Africa – such that further investment is
enabled. It is proposed that the Regional Facility is set up with the three main functions and
the indicative activities below:
1) Country
Preparation for GMGs
Investment
2) Regional Coordination and Sector
Support
Supporting countryspecific packages of
policy and market
preparation activities
including:
Linking country and
international programmes
and sector leads, ensuring
coherent support and high
level follow-up:
 Planning and policy
processes
 Resource assessments
 Market facilitation
 Fund/prog. design
 Training and exchanges
 Consultations
 Feasibility studies
 Financier introductions
 Policy mapping
 Awareness raising and
exposure visits
 Community/local
mobilisation
 Developing deal pipeline
 Managing calls for
proposal and contracts for
country support
 Developing and coordinating sectoral market
development support
 Co-ordination of technical
and policy support
 Provide interface with
leading sector participants
and groups (eg the HIO)
 Ensure coherence with
SE4ALL Action Agendas
 Monitoring and overall
results reporting and
communications
3) Action Learning
and Evaluation
Ensuring capture and
exchange of lessons and
improvement of sector
evidence base, including:
 Convening a crossprogramme action
learning group
 Commissioning crosscutting research,
analysis and case
studies
 Filling knowledge gaps
on policy, technology
and business models
 Creation and
maintenance of
information bases
 Managing the overall
programme evaluation
Applications for the country-specific packages of preparation support would be
considered from any eligible country in sub-Saharan Africa, wherever possible responding to
the SE4ALL Action Agenda processes. Where a government prioritises GMGs (e.g. in their
76
Action Agenda) it is expected that the Regional Facility would then follow up to prepare the
market for investment and delivery. It is expected that the lead agency in respective
countries would be the government with the best-placed MDB or IO supporting, but that
preparatory activities should address all 4 key sector stakeholder types and barriers:
Government, Financiers, Developers and Communities. Although ideally the policy
environment would be addressed first, creating the ground for other actors, it is recognised
that policy and regulatory processes take time and iterations to put in place. In this context it
is expected that simultaneous support at appropriate levels to other value chain participants
who may be able to create examples, or become more effective advocates and promoters,
can also create the basis and momentum for sector progress.
The Regional Co-ordination and Sector Support function would be at the heart of the
management and delivery of the GMGs Africa Facility. It is anticipated that this would
manage and co-ordinate the assignment of funds to the country-specific packages in 5
countries. It would also play a bridging role between countries (including the two investment
countries – so up to 7), as well as with the international community and other relevant
programmes – including the proposed SE4ALL High Impact Opportunity (HIO) on Clean
Energy Mini-Grids. An analysis in the inception phase would be conducted of the sector at
the regional level and an appropriate sector support function developed which would be
relevant to GMGs developers operating in multiple countries, or looking to expand between
countries. This could include business lines on issues such as market information, creating
market linkages, business model/development support or access to finance – in coordination with other actors, including via the HIO. Delivery of country-specific packages
would be either client-executed (which can be in the context of a programme led by another
MDB) or bank-executed, with sub-contracting of sub-activities as required by them at the
country level. Sectoral/regional activities would be primarily bank-executed, with subcontracting to expert firms used as appropriate.
The Action Learning and Evaluation Function would sit slightly apart from the other two
functions of the Regional Facility and the Kenya and Tanzania programmes - but link all
three as well as the international stakeholder/co-ordination group via an Action Learning
Group. It would be responsible for cross-cutting and sectoral research and evidence
production in support of the goals of the programme, but also knowledge more widely on
policy measures, technology issues and business model approaches. The operational
research plan would be developed as part of the Inception Phase of this component and be
available by the time of the first Annual Review. At this stage it is expected that 2-3 research
calls will be issued in the first 3 years of the programme targeting gaps on these three
themes, with awards made for 2-3 year research projects at values of £200-500k. This
should ensure the span of coverage is wide enough, but the depth of research is deep
enough to have impact – while keeping transaction and oversight costs manageable. This
component would also house the evaluation and lesson learning on the overall programme,
again at arms-length from the direct management of the projects. As described in the
evaluation section, this would be delivered through an evaluation contract with an
independent party, conducting baseline, mid-term and final evaluations. Delivery of these
components would be further defined in the inception phase, however activities will be bankexecuted, using sub-contracts and open calls as appropriate and in line with TF procedures.
Management, Governance, reporting and review
As set out in the Management Case it is proposed that the delivery of the Regional Facility
77
be conducted in partnership with both MDBs – given that AfDB is the regional hub for
SE4ALL (with all the links that this implies into national action planning) and the World Bank
(ESMAP) is the SE4ALL knowledge hub. The AfDB SEFA MDTF would be the vehicle for
components 1 and 2 above on country and sectoral preparation, while the WB/ESMAP
MDTF would be the vehicle for the Component 3 Action Learning and Evaluation. The
standard MDTF features and procedures of these funds will be used, however with explicit
assurances or associated documents (e.g. a PAD or Work Programme) agreeing the
activities, budgets and results associated with the UK contribution. Activities will be bank
executed, however with the possibility of client execution on the country preparation
packages, and utilising sub-contracting where appropriate. This seeks to ensure that the
facility links in to mainstream MDB lending, learning and support systems (e.g. gender
teams), while also benefitting from external expertise. Existing teams will be built on and
adapted as required with long term consultants. DFID already participates in the governance
of ESMAP, and would do so in SEFA if this fund was joined in addition. The existing donors
(USAID and DANIDA) have been consulted, are strongly supportive of the UK joining, and
are supportive of the intent of the GMGs Africa Regional Facility.
The total budget for the GMGs Africa Regional Facility would be £15m, on an ARIES code
assigned to ARD. There would be a single annual report for this Facility, covering the 3
components. ARD would produce the review of the country preparation packages and the
regional/sectoral co-ordination component, and RED would provide a review on the Action
Learning and Evaluation component to ARD for incorporation. The DFID management would
be through a joint board chaired by ARD and made up of the respective leads of each
programme compoment, which would meet at least 6 monthly, either at the Action Learning
events above, or via VC.
Co-ordination/complementarity with other Programmes
The Regional Facility, along with the parallel country-level investments (as set out in
Annexes 1 and 2), would together be presented as an initiative under the banner of an
SE4ALL “High Impact Opportunity” (HIO) on Clean Energy Mini-Grids. The HIO will act as
the overarching co-ordination mechanism for the GMGs Africa programme, with the Regional
Facility providing the major interface – linking with the SE4ALL Africa Hub at the AfDB. This
should facilitate both international and regional level co-ordination and visibility with other
relevant programmes and actors. The HIO has been constituted and is expected to be
officially launched in June 2014 at the SE4ALL event in New York, with participation from
organisations such as UNEP, IRENA, AfDB, WB, GIZ, USAID, the Alliance for Rural
Electrification, REN21 and a number of other foundations, industry and practitioner
organisations, NGOs and firms. Country preparation support packages would be in
response to government prioritisation in SE4ALL Action Agendas, or other governmentapproved applications, and co-ordinated appropriately in each country.
78
Annex 4 - Consultation Details
During the course of developing the Green Mini-Grids business case a number of
consultations and market soundings have taken place. These have sought to ensure the
programme addresses the barriers as experienced by sector participants, and uses the most
efficient and effective delivery vehicles. Over 100 companies and agencies were consulted
during the drafting of the business case.
DFID held two initial consultation events in London and Glasgow in November 2012, which
involved participation and inputs from 42 firms and agencies. A further 35 organisations
requested dial-in details and participated remotely.
An international teleconference
consultation was also held in co-operation with the UN Foundation Practitioner Network MiniGrids Group. A panel at the Vienna Energy Forum in May 2013 on Green Mini-Grids was
held by DFID to draw out further international feedback.
Field interviews were carried out by IED in the course of their research into the Identifying the
gaps and building the evidence base on low carbon mini-grids report produced for DFID. In
Mozambique meetings were held with 8 organisations. In Kenya, IED interviewed 13
organisations.
In June 2013, building on the emerging conclusions of the IED study to focus on Kenya and
Tanzania, a series of follow-up meetings were held by the CED Energy Advisor and DFID
Country Office leads with market and sector actors in each country. This included a
consultation event at the British High Commission in Nairobi in June which brought together
around 20 stakeholders.
As an outcome of this set of meetings, a detailed Options Assessment was commissioned,
conducted by ASD, which involved detailed follow-up and design discussions with 19
stakeholders in Tanzania and 26 in Kenya.
Individual follow-up discussions and phone calls were also held with leading firms
internationally and potential implementers, including a visit to Tunis for discussion with the
AfDB in December 2013.
A further event was held in November 2013 at DFID in London, with 25 organisations in
attendance and others dialling in. This event shared the DFID-commissioned IED report,
provided attendees with an update on DFID’s progress, and provided a forum for feedback
on the programme.
Through this consultation process it became clear that, although there is a great deal of
interest and some activity in the Green Mini-Grids sector, there is a lack of co-ordination
between initiatives and knowledge is not being shared as effectively as possible. A further
meeting was held in the afternoon of the November 2013 meeting to gauge interest in the
possibility of starting a High Impact Opportunity under Sustainable Energy for All. 15
organisations are currently actively involved in shaping the HIO, and a number of others are
monitoring its progress with interest.
79
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Countries, study on behalf of SMA Stiftungsverbund
27 Based on interviews with Devergy and Mera Gau
28 These barriers have also been agreed with and incorporated into the SE4ALL High Impact
Opportunity on Clean Energy Mini-Grids document
29 Adamopoulou, E. 2014. Correlation and causation between energy development and economic
growth, Evidence on Demand, DFID http://dx.doi.org/10.12774/eod_hd.january2014.adamopoulou
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31 As suggested by the ASD Options Assessment
2
80
32
Further information and analysis on the Kenya and Tanzania contexts is provided in the reports to
DFID by IED and ASD.
33 Tenenbaum, Greacen, Siyambalapitiya, and Knuckles, 2014. From the Bottom Up
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Africa. World Bank, Directions in Development, Energy and Mining
34 SREP Ethiopia IFC Programme Proposal, referring in turn to an IFC internal program completion
report on Lighting Africa’s development impact and the program’s achievements
from 2008 to 2013.
35 http://www.fireflysolar.net/
36 For example the Energy and Environment Programme in East and Southern Africa (EEP)
http://eepafrica.org/about-us/
37 . For example the GetFIT Uganda programme provides a feed-in tariff top up to cost reflective
levels for developers, however a World Bank PRG is also required on the remaining payment by the
Ugandan utility in order to secure the loans.
38 http://documents.worldbank.org/curated/en/2014/01/18812270/bottom-up-small-power-producersmini-grids-can-deliver-electrification-renewable-energy-africa
39 http://www.who.int/gho/phe/indoor_air_pollution/burden/en/
40 World Bank (2010) ‘Education Rapid Budget Analysis, November 2010’
41 Ecofys (2010), Co-benefits of private investment in climate change mitigation and adaptation in
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81