Mini-Grids for the Sustainable Electrification of Rural Areas in Sub-Saharan Africa: Assessing the Potential of KeyMaker Models

Andrea Cabanero, Lars Nolting and Aaron Praktiknjo
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Andrea Cabanero: Department of Energy Engineering, Campus El Gouna, Technische Universität Berlin, 10623 Berlin, Germany
Lars Nolting: Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University, 52074 Aachen, Germany

Energies, 2020, vol. 13, issue 23, 1-31

Abstract: Solar hybrid mini-grid systems possess the potential to substantially support electrification in sub-Saharan Africa. While their technical reliability has been proven, their financial viability is achieved only by heavy subsidization as of now. Due to the growing importance of results-based financing, we ask whether newly developed business models leveraging on the value added of electricity supply in rural areas (such as the KeyMaker Model) bare the potential to substantially reduce amount of grants required to finance the initial capital investment and thus contribute to a sustainable form of development. The principle of the KeyMaker Model is based on utilizing the locally supplied mini-grid electricity to establish a local agro-processing project, the revenues of which are an additional income stream for the mini-grid operator, while the project creates an end-market for the local farmers to sell their produce. We have developed two scenarios (without and with KeyMaker Model) for four rural villages in Nigeria as a case study to scientifically assess the potential of KeyMaker Models. We simulated and optimized the mini-grid systems using the software tool HOMER. We then assessed their financial viability. Our analysis demonstrates grant finance requirements ranging from 82% to 99% of the total investment for the base-case mini-grid projects without consideration of the KeyMaker Model. We find that a well-selected KeyMaker Model such as cocoa bean processing reduced the grant requirement by 68 percentage points, while processes based on maize, palm oil and cassava processing achieved reductions of 36, 26 and 8 percentage points, respectively. Hence, we conclude that the value added by the introduction of new local business models bares the potential to reduce grant requirements for the socially and economically necessary electrification across the Global South.

Keywords: mini-grid; rural electrification; energy poverty; grant requirements; business model development; sustainable development (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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