[Kenya] CrossBoundary Group launches mini grid innovation lab to scale up investment in clean energy
Solar investment company, CrossBoundary Group, with the support of The Rockefeller Foundation, has launched the Mini-Grid Innovation Lab in Nairobi, Kenya – a research and development fund dedicated to testing business models and innovations in the mini-grid sector.
The Innovation Lab will identify, test, refine and support the scale-up of cutting-edge business models to advance the development of and investments in Africa’s mini-grid sector.
This will also help demonstrate to donors, investors, developers, government officials and policymakers the viability of mini-grids in delivering energy access, affordably and reliably, to 600 million people currently without power.
The Lab will work with Energy 4 Impact, Power For All, four mini-grid developers in Africa, the African Mini-Grid Developers Association (AMDA), Carnegie Mellon University, Duke University and the University of Massachusetts at Amherst.
“Since October 2017, with funding from the Rockefeller Foundation, we have been piloting two business prototypes in an effort to stimulate demand and decrease the cost of electricity among low-income customers: a tariff-by down facility to enable consumers to afford and utilise more power; and a working capital facility for mini-grid developers to finance the purchase of energy efficient appliances to be sold on credit to their customers,” explained Diana Kollanyi, Programme Manager, Energy 4 Impact. “The evidence that we produce will inform the Lab’s work and hopefully contribute to build the mini-grid business case and increase support and investment from donors, governments and investors into the mini-grid sector.”
Working with the Lab, Energy 4 Impact will be disbursing the funds to the developers and providing advice during the prototype implementation. It will also collect and monitor data on customer behaviour and their socio-economics over the project lifetime.
The Innovation Lab is currently examining the commercial returns and social benefits for mini-grids for offering appliances to customers on credit.
The Lab is funding appliance costs up front with developers selling these equipment on commercial credit terms while viewing it as a longer-term business model. Customers pay an agreed deposit and pay back the appliance cost over 12 months alongside their power bill.
Diana explains that mini-grid developers would want to evaluate the commercial viability of appliance financing to their business model. If costs such as working capital, transport, loan defaults, and administration, etc, of providing appliances is lower than the income generated from increased electricity intake, such a business model can be scaled up significantly. “Proving this financial scheme on a larger scale across several developers and sites would be a game changer for how developers think of themselves as a business, the sustainability of their business and how best to serve their customers,” Diana added.
Over the past decade, Energy 4 Impact has been working with mini-grid developers in several African countries to catalyse the growth and sustainability of the mini-grid market.