Customer Agreement Considerations for Micro-Grids in Sub-Saharan Africa

Sep 24, 2018

Source/author : United States Agency International Development

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Great strides have been made in electrification over the last two decades, bringing power to roughly 1.2 billion people around the world (IEA 2017). However, an estimated 1.1 billion people—roughly 600 million of whom live in Sub-Saharan Africa—still lack access to modern electricity services (IEA 2017). The majority of electrification gains have been achieved through connection to the main grid. But to reach the next billion people, off-grid solutions will be increasingly necessary—particularly in more remote areas of Sub-Saharan Africa, where grid extension is prohibitively expensive.

Investment interest in micro-grids has been growing among national governments, international donors, and the private sector, but significant barriers to scale remain. In particular, attracting the private capital needed for the industry to scale will require well-understood and scalable business models that provide reliable returns commensurate with the associated risk. Currently, many projects are financed through donor funding, but to take the next step in growth and serve the hundreds of millions of households without access, private debt and equity financing will need to take a leadership role.

This report discusses one dimension of building bankable micro-grid investments: the customer agreement between the developer and the customers the micro-grid will serve. This article draws on the National Renewable Energy Laboratory’s (NREL’s) experience developing and implementing the Quality Assurance Framework (QAF), which seeks to address barriers to providing reliable and affordable power to remote communities through micro-grid deployment (Baring-Gould et al. 2016). This report is part of a series of articles developed to support implementation of the QAF, along with related developer and country-level technical assistance.

Customer agreements from several active developers1 in sub-Saharan Africa, with whom NREL has partnered to implement the QAF, are referenced here to highlight approaches currently being taken. These developers and others in the region have made progress with customer agreement design, but many systems still operate with simple verbal agreements (e.g., “power for two light bulbs and a phone charger is $5 per month”). Conversations with stakeholders from government, nonprofits, and the private sector have identified a need for stronger customer agreements that support industry efforts to scale and expand access to modern energy services. The customer agreement’s role in scaling spans individual micro-grids, company-level scaling, and industry-wide needs.

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