FEATURE: Learning by doing – testing models for rural electrification in India and Uganda
Juliane Nier and Susannah Fitzherbert-Brockholes of CDKN report on how businesses in India and Uganda are learning from each other about the scale-up of decentralised renewable energy technologies.
CDKN recently brought together two of its Business Partnerships projects for a three day workshop in Delhi. The purpose of this workshop was for the businesses involved to share and learn from each other’s experience of testing new business models for delivering decentralised renewable energy (DRE) in Uganda and India.
Energy access, particularly for rural communities, is a huge challenge in both of these countries, albeit for slightly different reasons. In India, the government has set targets to extend the grid to all villages and while in many cases the grid is there, often no electricity flows. As a result, local entrepreneurs have set up mini-grids that are powered by diesel generators. In rural Uganda however, there is little chance of the grid ever coming, so kerosene is the primary source of energy of household lighting and cooking. Whilst undoubtedly these energy sources support improved livelihoods in terms of increased economic opportunity, both also result in high-emissions, low efficiency of energy use with additional impacts on health and wellbeing.
In both of these countries, there is a huge opportunity to replace these dirty, traditional fuel sources with clean, green renewable energy. What we have been investigating through these pilot projects is the role that the private sector can play in making this transition.
Trial and error
In Uganda, CDKN has been working with Africa Power. Initially, the company’s plan was to convert the diesel generators that power rural telecoms masts to solar systems. Excess energy could then be used to power mini-grids to provide clean electricity to local villages. Through the project, they discovered that in reality the telecoms masts were too far from the villages for this to be realistic. Therefore, they have been testing two separate approaches. The first has been to switch the telecoms mast generators from diesel to solar, thus providing big CO2 savings. The second has involved developing a lease-to-buy model for solar lamps to replace kerosene lighting in houses, providing much more and better light with none of the dangers to health.
In India, CDKN has been working with cKinetics and TARA to test out a franchising model for converting diesel-based generators powering rural mini-grids to solar power. This approach aims to address two problems simultaneously: ensuring a consistent ‘last mile’ presence for energy access and ensuring sustainable economic development for rural entrepreneurs. The challenge has been to convince diesel-based generator operators in villages that the shift to solar energy will be more profitable for them in the long run. Government subsidies for kerosene and diesel and a longer payback time for renewable energy technology posed barriers to overcome.
Researching and tailoring approaches for local markets
Understanding what makes business models for decentralised renewable energy successful was an important focus of the learning event. For both pilot projects the priority was to develop an in-depth understanding of the communities’ needs, economic behaviours and the local market. For cKinetics, using an iterative engagement approach with diesel generator operators was an important lesson learned. They framed community engagement around partnership rather than competition and provided clear evidence of the operator as a viable ‘last mile’ distributor. A key enabler was also the opportunity for diesel generator operators to own the renewable energy technology. Of course, developing relationships of trust and transparency is an up-front investment of time. However, helping communities articulate their economic development aspirations in the light of decentralised, renewable energy provides them too with further business opportunities.
For cKinetics, working with master diesel generator franchisers, who were already well established in communities, enabled them to build on existing relationships of trust. An interesting approach for businesses to test in Uganda will be working with village electrification committees. This allows the embedding of the project within the community rather than having it sit with individuals, which can help to ensure greater buy-in and accountability.
Differing roles for government
One area where the two projects differed greatly was around need for government intervention. In India, government dialogue is key to addressing policy ambiguity and providing clear plans around rural electrification. Subsidy reform, in particular, is required in order to make decentralised renewable energy competitive with some of the lowest electricity tariffs available. There is an ongoing debate about the level of regulation that is needed and it is seen as the biggest risk for investors. In Uganda, The absence of subsidies on kerosene mean that solar is highly cost competitive and minimal government intervention is the preference. Still, there is room to encourage decision makers at the national level to support the scale up of solar technology rather than just focussing on extending the grid.
Cross-regional dialogue highlights new options
Despite the operating environment for both projects being quite different there were opportunities for cross regional learning between the two. Africa Power previously was not convinced about the viability of mini-grids. From their experience, mini-grids are expensive to build, operate and maintain, particularly in the sparsely populated areas that Africa Power has typically operated in. cKinetics and TARA shared a positive story of converting existing diesel generator powered mini-grids to solar power. They introduced new technology to manage the mini-grids and ensure the viability of the business model. For example, they fitted load limiters to help prevent electricity theft and used mobile applications to support revenue collection from customers. This has opened up new doors and possibilities for Africa Power. Whilst there are only a limited number of mini-grids in Uganda, they now feel it is worth exploring whether those that exist might be candidates for conversion. Even petrol station diesel generators might be converted to solar, of which there are many more: this could provide the entry point for a mini-grid roll-out that is more focused on small businesses. “Interesting how views, even mine, can be changed with exposure to successful working projects” commented Jonathan Treacher, Chairman of Africa Power.