UOMA Market Map - FullVersion 1 PDF
UOMA Market Map - FullVersion 1 PDF
Full version
2019 edition
Uganda Off Grid Energy Market Accelerator (UOMA) is a dedicated
and neutral intermediary, focused on scaling off-grid energy access
In partnership with:
1
UOMA is run by technical team supported by a cross cutting
advisory board representing govt, private sector and dev partners
Core technical team
Advisory Board
Increase access to local currency debt finance for solar operators, bridging a
Expanding access to
critical working capital shortfall and currency mismatch and enabling operators
finance
to increase affordability of units
Reaching unserved Reduce barriers to better target unserved populations in Uganda, improving
populations access for some of the hardest to reach and most in need communities
Expanding productive Support industry to test and validate productive use technologies that can
use technology achieve economic benefits for off-grid Ugandans while growing energy demand
Strengthening the Support public sector to create effective policies and a conducive enabling
enabling environment environment to increase off-grid energy uptake in Uganda
Facilitating Enable more effective communication and coordination in the off-grid energy
communication & sector in Uganda, resulting in better resource allocation and accelerated
coordination progress in achieving universal access
3
Table of contents
Context……5
Mini-grids……43
Productive use……63
Industry stakeholders……80
4
Context
5
Context
500
400
300 Rwanda 42
200
100
SSA World
0 Uganda 21
average average
2000 2004 2008 2012 2016
East Asia & Pacific
6 Sources: 1. World Bank Data, 2017 2. IEA, World Energy Outlook, 2017 (latest available data), https://www.iea.org/media/sdg/WEO2018-Electricity-Database.xlsx
Context
60%
40%
20%
0%
Despite projected growth of off- and on-grid connections, 30% of UG population forecast to lack
electricity access at current trajectory; off-grid solutions critical to reach unserved populations
• Uganda population expected to grow at ~3% per year, expanding from ~8M households in 2018 to over
11M by 2030
• Given planned additional connections under the Free Connections policy and growing uptake of off-grid,
millions of connections forecast to come online, however ~3M households (~16M people) will remain
unserved in 2030 (~30%)
Off-grid solutions will have to play a critical role utilizing
technologies such as solar home systems and mini-grids
7 Sources: 1. Catalyst report 2. Off-grid Strategy concept paper 3. Uganda Bureau of Statistics, Uganda National Household Survey, 2016/2017
Context
Interviews & research were tailored to understand objectives & how they interact with each
other
8
Context
Eastern
Raising consumer
Central awareness through
grassroot campaigns
Western
Scaling solar
Testing use cases to irrigation with
scale solar farmer groups
refrigeration Supporting solar ice-
making unit for
island fishing
communities
9 Source: UOMA, Annual Impact Report, 2018
Context
11
Solar home systems Overview Insights
Pico lamps
Increasing in size (kW)
12
Solar home systems Overview Insights
Refugee
Small retailers Manufacturers/importers
camps
like Sunshine solar
Operators such as Solar distribute products
Sister recruit women as Operators through retail kiosks
agents to sell to their prominent in villages
networks & small groups
Women Farmer
groups groups
Models like One Acre
Charity based Fund leverage their
orgs farmer cooperatives to
offer energy products on
Social enterprises like
credit
EnVenture recruit & train
grassroots organizations
to reach the last mile
14
Solar home systems Overview Insights
10,000 16 - - 12 4 $300
6,000 8 3 2 1 2 $131
Estimate represents
Rest of Market leverages agents across network, not enough data
~10,4003 multilight point SHS;
market on spread
GOGLA reports >1.5M
Total ~420,000 207 32 45 66 64 systems sold in UG to date
including pico
Sources:
1. UOMA interviews & consultations, supplemented by: http://www.fenixintl.com/uganda, http://www.m-kopa.com/products/ ,https://www.SolarNow.eu/solar-solutions/
2. Brightlife leverages the FINCA Uganda branch network but has an active agent at 8 of these branches
3. UOMA estimate of > Tier 2 products sold across the country by other distributors and small retailers
15
Solar home systems Overview Insights
This section aggregates research & insights from pilots and reports
covering UOMA initiatives
16
Solar home systems Overview Insights 1 Access to finance
17 Sources: 1. Lighting Global & Dalberg: Off-Grid Solar Market Trends Report 2018
Solar home systems Overview Insights 1 Access to finance
.
18 Sources: 1. UOMA analysis 2. Acumen: Accelerating Energy Access, The Role of Patient Capital
Solar home systems Overview Insights 1 Access to finance
2 Businesses lack internal capacity to manage 5 Limited finance industry capacity & sector
operations & obtain investor buy-in knowledge to assess SHS businesses
• Limited technical expertise to articulate • Investors have low understanding of
and implement growth strategies market players, products & trends
• Inefficient company systems & processes • Financiers like local banks lack personnel
for credit management particularly allocated to reviewing off-grid
businesses
19 Sources: UOMA interviews with local financial institutions & SHS operators
Solar home systems Overview Insights 1 Access to finance
Concessional • Operators are given loans with more favorable payment terms compared to
lending commercial loans; concessional loans offer lower interest rates, longer payment tenors
& grace periods that reduce default risk for investors and cost of capital for operators
• Local financial institutions are offered guarantees from dev’t organizations to cover
Guarantees portion of losses in case of default from operators; usually structured according to
level of risk exposure with guarantors heavily involved in due diligence
Sources: 1. Lighting Global & Dalberg: Off-Grid Solar Market Trends Report 2018 2. SNV: Innovative Finance for Renewable Energy Solutions 3. The World Bank & Climate Investment
20 Funds: Options for Developing Financing Instruments Using Public Funds
Solar home systems Overview Insights 1 Access to finance
Syndicated asset • SolarNow received $6M syndicated asset • Enhances focus on expansion of PAYG
financing financing arranged by SunFunder designed to to reach over 25,000 clients and tackle
facilities finance customer receivables; each financier unserved market
provided $2M
Local & multi • M-KOPA solar secured US$55M local currency • Presents a more cost-effective way to
currency debt debt equivalent, led by Stanbic Bank for PAYG fund last mile distribution while
facilities solar installations for 1 million households. delivering sustainable returns to
lenders
Investors are more inclined to offer debt financing to large companies, leaving smaller businesses to
struggle for more expensive debt:
• Since 2012, capital deployed has largely been allocated to already established businesses; over 80% of
capital financed was attributed to ~10 market leading companies
Sources: 1. “SunFunder closes $2m multi-currency debt facility in Mozambique with MFX Solutions for SolarWorks!,” SunFunder, https://sunfunder.com/news/solarworksdebtfacility
2. “SunFunder leads $6m syndicated receivables financing facility for SolarNow - SolarNow Uganda,” SolarNow Uganda, https://www.solarnow.eu/sunfunder-leads-6m-syndicated-
receivables-financing-facility-solarnow 3. “Breaking records in financing off grid,” M-KOPA Solar, http://www.m-kopa.com/breaking-records-in-financing-off-grid/
21 * UECCC = Uganda Energy Credit Capitalization Company is a government institution established to facilitate investment in the renewable energy sector
Solar home systems Overview Insights 1 Access to finance
• Limited number of bank personnel focused on off-grid lending; lack technical expertise to
2. Operational understand SHS trends, business models and evaluate investment risks
risk • Typical bank processes & systems are not synced to technology used by SHS businesses and
cannot capture relevant data to assess performance e.g. links to mobile money data
• Bank interpretation of reporting standards like IFRS 7* leads to more stringent collateral
3. Legal & requirements for SHS businesses to account for unsecured loans
regulatory risk • Single lender limit of USD 2M in Uganda hinders financing offered to larger SHS businesses;
also limits large international banks with local presence
• Due to high perceived risk of lending, banks offer small loans, with short tenors & high
4. Investment interest rates that are expensive for operators in comparison with social impact investors
risk • Majority of businesses are at growth stage and have high defaulting potential due to low
sales & evolving business models; uncertainty of credit worthiness limits bank financing
Sources: 1. UOMA analysis supplemented with consultations from local banks *IFRS 7 requires entities to provide disclosures in their financial statements that enable users to evaluate
22 the significance of financial instruments, the nature and extent of risks arising from them and how entities manage those risks
Solar home systems Overview Insights 1 Access to finance
• Review & assess current product design to better align with bank strategy
Design new products
• Onboard external capacity to support suitable product development
Awareness
Level of income Product pricing
Perception
Unable to pay
at any price
Low
Sales agents don’t perceive women as final To reach more women, operators are exploring
decision makers for SHS innovative women-focused distribution models
• Since majority of men are breadwinners in • Targeting women-led activities like market days
homes, sales agents usually focus on selling to – Market days are used to demonstrate & sell
them as they can make the purchase decisions SHS products to women; also help operators
identify potential customers
Women are not deemed creditworthy since they • Including women as part of sales teams
struggle to afford SHS & access finance – Operators like Solar Sister, have women as
• Operators are hesitant to sell to women since as part of their sales teams to influence other
they rarely manage income generating activities women purchase SHS
• Women are also not considered creditworthy • Leveraging women influencers to inform purchase
because they struggle to access finance due to decisions
lack of collateral – Community women influencers are used
mobilize other women and speak positively
Operators don’t include women as part of their about the purchase of SHS
distribution strategies • Increasing awareness through informal
• Operators usually focused on meeting sales community-based women financial groups
targets and don’t consider women when – Operators partner with women financial
developing sales & distribution strategies groups to distribute & offer credit for SHS
29 Sources: 1. Shell Foundation, A business first approach to Gender Inclusion, 2018, https://shellfoundation.org/app/uploads/2018/10/A-business-first-approach.pdf
Solar home systems Overview Insights 2 Unserved populations
Logistical
Impermanence of • Refugees are uncertain about • Refugee camps are located in
resettlement in countries of constraints to remote areas making it difficult
potential
origin hence don’t invest supply goods to to distribute & supply goods to
customers
heavily in energy products camps customers
• Operators are not certain about Low level of • Many don’t have phone access
Insufficient SHS demand in refugee camps and can’t access mobile
connectivity &
market in as much as the need is banking services to support
mobile banking
present PAYG models
Refugee ID’s not • Refugee ID’s are not accepted • Due to insufficient documents,
by some companies in UG Limited data on operators are unable to obtain
accepted by some
limiting registration for services refugees historical data on refugees to
companies
like mobile money, banking, etc. access their credit worthiness
Sources: 1. IFC, Kakuma as a Marketplace, 2018 2. USAID Power Africa, Implemented by Green Powered Technology, in partnership with Energy 4 Impact, De-Risking Pay As You Go
30 Solar Home Systems in Uganda Refugee Settlements Project
Solar home systems Overview Insights 2 Unserved populations
SCC will mobilize & organize stakeholders according to their core strength to address fundamental pillars
of connectivity, digital tools & energy access
• Connectivity: A recent study found that mobile phone and internet access is as critical to refugees’
safety and security as food, shelter & water
• Digital tools: Implementing agencies increasingly rely upon digital technology to reach refugees and
locals; digital tools open up new education, training, livelihood and information opportunities
• Energy access: Power is not provided in settlements as a service, so refugees rely on poor quality,
expensive diesel generators; SHS using PAYG models offer opportunities to enable livelihoods
1 Camps comprised of three key income segments, which include impoverished new arrivals, intermediate
residents & economically active residents; economically active refugees more commercially viable for PAYG SHS
2 Refugees that have spent a long period in the camp have a higher likelihood of transitioning from impoverished
to more economically active making them able to afford SHS
Most refugees that contributed to market research had smart phones, bought from local merchants through
3 installment plans; phones were particularly used to communicate with networks and receive funds. Access to
mobile phones will support payment collection through mobile money
4 Refugees prefer withdrawing remittances and saving in cash or mobile money; majorly use remittances for
food, lighting, education and purchasing business assets like sewing machines
Financial aspirations and desires of those in Kakuma and Kalobeyei are no different than higher-income
5
segments despite their complex financial situation
32 Sources: 1. MasterCard, Western Union. Using digital technology to create sustainable refugee economies
Solar home systems Overview Insights 2 Unserved populations
• Provide financing to SHS operators to de-risk initial credit systems offered to refugees,
given the uncertainty around their ability & willingness to pay as well as permanence
Humanitarian • Give operators local context on regulations and ensure they are aligned with
organizations humanitarian mandate
• Reduce free and low-quality solar systems being offered to refugees as they distort the
market and reduce willingness to pay
• Directly partner with SHS operators to use the MNO’s mobile services and networks as a
Mobile Network mode of payment for solar clients
Operators • Ensure mobile money access is within close proximity to refugee camps; for example,
(MNO’s) have mobile money agents close to the camps
33 Sources: 1. GSM Association, The case for pay-as-you-go solar home systems in Kakuma Refugee Camp, February 2019
Solar home systems Overview Insights 2 Unserved populations
Effective communication in this process should incorporate a concrete understanding of the target
audience:
• What cultures and norms influence purchase & ambitions around energy for this group?
• Who are the influencers and decision makers in the community?
• What value and benefits are most appealing to specific regions and groups?
34 Sources: 1. Soltherm Europe - Campaign Guidelines, van der Ree B., Mert W., 2003
Solar home systems Overview Insights 2 Unserved populations
2 On ground coordination by operators and local mobilisers was more effective in creating awareness
• It was important to have operator teams work with local community mobilisers who could easily influence
their fellow members and offer context on when to hold awareness initiatives
3 More effective to conduct trainings and info sessions through already existing community groups
• Easier to reach and mobilize large numbers of potential consumers through existing groups of farmers,
women, savings, faith-based groups, etc.
4 Information communicated ought to resonate with consumer needs and community characteristics
• Necessary for operators to understand characteristics of consumers in targeted communities of outreach
and tailor messaging to suit these groups
5 Follow up group meetings and one-on-one after sales services were key in influencing purchase
• Initial awareness campaigns needed to be coupled with subsequent on ground group visits to offer after
sales services and influence purchase decisions; these built credibility & trust in operators
Fiscal policy and product standards for SHS are a large focus in
creating a conducive enabling environment for off-grid acceleration
Section looks at current tax regime & fiscal Section looks at standards regulating quality of
interventions in order to: SHS products on the market in order to:
• Assess impact of current tax regime and draw • Assess current standards on product quality,
comparisons with various tax scenarios identify existing gaps and recommend ways
• Consider other fiscal policy interventions like to implement solutions
subsidies and assess their impact on SHS uptake • Develop strategies that can build consumer
• Goal is to obtain flexible tax structure that trust in suppliers & increase credibility of
balances tax revenues & consumer uptake products on the market
36
Solar home systems Overview Insights 3 Enabling environment
Findings from the analysis revealed that current regime is conducive for SHS growth
• Full VAT and import duty exemptions on solar products was not suitable due to difficulties in enforcement;
despite having the largest growth in connections, it also led to significant loss in gov’t tax revenue of >$18M
• Similarly, without any exemptions on solar products, government accrued tax revenue of ~15M but enabled
only 4% growth in connections
• Current tax regime with VAT and import duty exemptions only on solar generation accrued government tax
revenue of ~$18M and had a 10% growth in connections hence optimal and favorable for growth
While current tax regime is favorable for SHS growth, more efforts need
to be attributed to effective implementation
37 Source: UOMA, Fiscal Policy Analysis: An assessment of the tax and subsidy options to accelerate solar home systems in Uganda, 2018, Kampala Uganda
Solar home systems Overview Insights 3 Enabling environment
Lack of clarity on current tax policies & Industry stakeholders like Uganda Solar Energy
inconsistent application of tariffs across similar Association (USEA) plan to foster uniform
solar components application of taxes
• Operators report inconsistent taxes and • Currently developing a tax handbook with
exemptions being applied to similar product Uganda Revenue Authority (URA) to provide
components; for example: clarity on tax guidelines for market players
– Solar generation components like panels • Provides approval letters for several operators
& batteries are tax exempted when part to obtain exemptions when importing solar
of plug & play systems components
– However, in some cases, batteries are not – Operators will need to be registered
exempted especially when imported as members of USEA to obtain approval
stand-alone components letters
While interventions are helpful in increasing demand and supply of SHS products, they cannot fully serve
entire unserved population
• Interventions like working capital facilities will increase number of operators in the market and volume of
sales, but only serve consumers that can afford these products in commercially attractive areas
• Demand stimulating subsidies run the risk of slowing down sector growth and can only be implemented in
specific regions in the country
39 Source: UOMA, Fiscal Policy Analysis: An assessment of the tax and subsidy options to accelerate solar home systems in Uganda, 2018, Kampala Uganda
Solar home systems Overview Insights 3 Enabling environment
• Operator incentives: Government agencies can incentivize operators to distribute to hard to reach
areas that are not commercially feasible
• Working capital facilities: Financial institutions can provide working capital to operators to finance
inventory for products offered to consumers on flexible credit terms
2 Stimulating demand by offering price subsidies to consumers to increase affordability
• Direct subsidies: Government can work directly with consumers to finance purchase of SHS products
at a lower price; this can be done through vouchers
• Partial subsidies: Government can incentivize operators to reduce prices by funding a proportion for
their costs that would have reflected in price
• Consumer financing: Financial institutions can offer affordable and flexible credit options to end
consumers to support purchase of SHS
40 Source: UOMA, Fiscal Policy Analysis: An assessment of the tax and subsidy options to accelerate solar home systems in Uganda, 2018, Kampala Uganda
Solar home systems Overview Insights 3 Enabling environment
Review & implement • Pilot subsidy delivery models provided either to operators or directly to
efficient subsidy delivery consumers; also market package models for operators. For example, offer
models subsidies for a single supplier to sell systems in a specific area
41 Source: UOMA, Fiscal Policy Analysis: An assessment of the tax and subsidy options to accelerate solar home systems in Uganda, 2018, Kampala Uganda
Solar home systems Overview Insights 3 Enabling environment
• UNBS doesn’t have sufficient • UNCDF & ERT III are in the process of
Limited
equipment to test quality of imported enabling UNBS purchase machinery to
equipment to
products and determine operator test product quality
test products
compliance of standards
• Lean inspection team unable to serve • UNBS is partnering with Pre-Export &
Limited team entire country; UNBS currently has 15 Verification of Conformity contractors
capacity personnel that work across all sectors to test product quality from country of
and regions in the country origin
• Operators, consumers and quality • REA will work with UNBS under ERT III
Lack of
regulators lack awareness of standards to promote quality assurance &
awareness on
guiding quality of various SHS awareness of solar products in rural
standards
components areas
42
Solar Home Systems Productive use Mini-grids
(SHS)
43
Mini-grids Overview Insights
60
• Sites were identified where:
50
– 50 or more households clustered (smaller
40 number where they may serve trading
30 centre)
20 – Clusters corresponding to grid expansion
but –ve NPV or cost per consumer
10 >$2000
- • The analysis also assumed consumption per
0 customer is inversely proportional to the
penetration level
• REA’s Master Plan forecasts that in the next 10 years, there will be opportunity to electrify up to 62,000
households across 10 service territories of Uganda through mini-grids
• Majority of sites noted in North, West, South Western, and Central service territories
• The business case highlighted in the Master Plan for electrification implies mini-grids will continue to play a
crucial role in the electrification of Uganda to achieve universal access
1
Mini-grids Overview Insights
22.5kW PV installed by
Two 13.5kW PV Krichner Solar in Luwero
developed through a
partnership between E4D
& REA in Kyenjojo District
Two 32 kW biomass
gasification projects
setup by Pamoja Energy Legend
Completed grids
230kW PV managed by
15 sites currently being Absolute Energy at Upcoming mini-grids
tendered by REA & GIZ Kitobo Island
Vast majority of UG projects are solar / battery hybrid grids, with some donors
considering mini-hydro pilots
45 Source: UOMA interviews & research supplemented by REA documents on mini-grid opportunities
Mini-grids Overview Insights
• Tech: Hybrid gen. station 600 kW (Solar) & Developer: Kalangala Infrastructure
1.6MW (Diesel) Services
Bukuzindu solar-
Partners: InfraCo, Nedbank, USAID,
diesel plant • Current connections: 40 villages (~2500 hhs) DFID, UDC, and Emerging Africa
Infrastructure Fund.
46
Mini-grids Overview Insights
47
Mini-grids Overview Insights
48
Mini-grids Overview Insights
49
Mini-grids Overview Insights
• Biomass plant
Pamoja Energy • Capacity of 50kW in Kamwenge District REA
Africa Ltd
50
Mini-grids Overview Insights
51
Mini-grids Overview Insights
• Sites are identified during master planning process • Sites are identified by private developers or
or service territory concessions allotted by community
government • Private operator has site surveyed, initial feasibility
• Tenders are awarded through a competitive studies conducted, and confirmation received
selection process for sites or concessions from REA before setting up or developing the
• Setup process is considerably shorter as upfront mini-grid
surveys & feasibility studies have already been
conducted by government
• Regulated tariffs in parity with central grid • Tariffs should cover all costs of the mini-grid
costs hence government subsidizes project to plus a margin; sites are likely applied in areas
ensure viability with higher willingness to pay
Mini-grids in Uganda are mainly identified by public sector but managed by private developers:
• Government-led projects result in several benefits for mini-grid developments:
– Clear planning in different territories to ensure economies of scale & reduced operational expenses
– De-risked projects with added predictability on when grid is likely to be extended
– More affordable utility for end-users through subsidies on distribution & connection
53
Mini-grids Overview Insights
1 Identify proposed project in line with rural After necessary regulatory requirements are met,
electrification master plan; project must be less than developers begin setting up the mini-grid
2MW & located more than 1km from the grid to • Mini-grid developers start constructing
qualify for an exemption necessary infrastructure required to run the grid
• Components are assembled at mini-grid sites;
2
Develop project feasibility study including detailed majority of developers usually import these
social economic assessment and environmental components
project brief • Local partnerships are instrumental in procuring
components, processing them through customs
3 and finding a construction company to develop
the infrastructure
Obtain clearance of project brief from NEMA
54 Source: UOMA interviews & research supplemented by ERA documents on license processing procedure
Mini-grids Overview Insights
4
1
3
2 0
1 2010 2011 2012 2013 2014 2015 2016 2017
Mini-grid
Many successful mini-grids have Businesses
partnered with government agencies like
REA for last mile distribution
Households
Distribution to low-density areas can take up to 30-40% of total project costs; mini-grid developers reduce these
costs by:
• Setting productive use zones (usually commercial centers where all businesses can access electricity) E.g.
Pamoja Energy Ltd.'s agroprocessing hub in Kamwenge
• Setting up business hubs with all appliances (carpentry, milling and the like) and charging service fees
• Setting up battery charging stations for consumers who live too far from the grid (near common market
place/commercial center) E.g. Kisiizi Hospital Power Ltd.'s battery charging outlets
Samuel Booth et al, Productive use of energy in African micro-grids: Technical and business considerations(Location: National Renewable Energy Laboratory and Energy 4 Impact, August
56 2018), https://www.nrel.gov/docs/fy18osti/71663.pdf Opportunities and Challenges in the mini-grid sector in Africa: Lessons learned form the EEP portfolio, [, 38]
Mini-grids Overview Insights
Source: Opportunities and Challenges in the mini-grid sector in Africa: Lessons learned form the EEP portfolio, [, 27] Pol Arranz-Piera, Benchmarking study of Solar PV mini-grids
57 investment costs(USA: The World Bank, Climate Investment Finds and Energy Sector Management Assistance Program, December 2017[,14]
Mini-grids Overview Insights
Private operator Often have dedicated team to Often have technical team
respond to customer queries dedicated to providing efficient
after-sales services
Community operator Often have team members Often lack technical skill required to
handling a variety of tasks including deliver efficient after-sales service
responding to customer queries
• Long distances between customers are a key challenge across all operators; mini-grid customers are often far
apart, making it difficult to efficiently provide good after sales services to all of them
• Mini-grid operators often lack technical skill required to deliver good quality services to customers
58 Source: UOMA interviews & research supplemented by GIZ documentation on mini-grids in Uganda
Mini-grids Overview Insights
• SACCOs provide loans to customers that enable them afford the initial setup
Local community • Operators partner with local community leaders to manage operations of the
partners mini-grid & accelerate buy in from local community members and businesses
• Uganda Rural Electrification Agency supports with infrastructure dev’t and last
mile consumer connection
Gov’t agencies
• Government electricity agency subsidizes price of mini-grid to customers, making
it more affordable to make a connection
• Technology partners support with operating the grid; they provide a platform
Technology used to collect payments, monitor different components of the grid and
partners consolidate data collected
Source: Opportunities and Challenges in the mini-grid sector in Africa: Lessons learned form the EEP portfolio Samuel Booth et al, Productive use of energy in African micro-grids:
59 Technical and business considerations
Mini-grids Overview Insights 1 Access to finance
0
Grant Equity Grant + Equity Debt
Households Businesses
UOMA is looking to support more research and pilot work with mini-grids this year. Do reach out if
interested in partnering
62 Source: Green Mini-Grids in Sub-Saharan Africa: Analysis of barriers to growth and the potential role of the African development bank in supporting the sector
Solar Home Systems Productive use Mini-grids
(SHS)
63
Productive Use Overview Insights
Through increased productivity, energy access can be stimulated by private sector revenue
• In the long term, increased energy access stimulates economic activity in communities, which in turn
increases income and proportion of income spent on energy, creating a continuous virtuous cycle
Expanded energy
access
Investment Finance and
in training – are
productive needed to spur
tech enterprise
investment2
Increased
Clear government utility
regulation and policy revenue
on tariffs helps with Increased
consistency in revenue productivity
& income
Increased
energy demand
Sources: UOMA analysis & interviews supplemented by 1. GIZ’s “Productive Use of Energy – PRODUSE A Manual for Electrification Practitioners”:
https://www.giz.de/fachexpertise/downloads/giz-eueipdf-en-productive-use manual.pdf 2. ESMAP “Maximizing the Productive Uses of Electricity to Increase the Impact of Rural
64 Electrification Programs”: https://www.esmap.org/node/714
Productive Use Overview Insights
66
Productive Use Overview Insights
• Specific technologies should be adapted to power generation, production quantities, and local technical
capacity to install, maintain, and repair
• DC appliances considered more energy efficient and compatible with most SHS & mini-grid providers,
however, are more expensive and less accessible on the market
• AC appliances are most readily available on the market especially for large appliances where consideration
for grid connection is made
67
Productive Use Overview Insights
Employment by sector
Irrigation Coffee
Agriculture
Percentage
80
Fishing 70
Maize & rice
60
50
40
Carpentry Welding 30
20
Industry
10
Shops & 0
Bakery
businesses Agriculture Services Industry
• Agricultural sector employs over 70% of
Uganda’s work force and has the significant
potential for value addition across the country1
Services
This section aggregates research & insights from pilots and reports
covering UOMA initiatives
69
Productive Use Overview Insights 1 Access to finance
70
Productive Use Overview Insights 1 Access to finance
2 More concessional and grant financing to support businesses run pilots and incentive programs to
encourage innovation for high-potential industries
Providing more concessional financing, grants & equity required by industry players and manufacturers to
test opportunity within significant industries like agriculture; opportunity exists to encourage manufacturers
through challenge competitions & local testing
3 Develop innovative financing mechanisms like guarantees to stimulate private sector sales
Developing innovative financing mechanisms to incentivize businesses to supply productive use appliances;
opportunity exists to use guarantees to mitigate a portion of default risk equipment providers face when
appliances are offered to customers on credit
4 Further market research needed to help identify investment gaps and explore productive use
opportunities
More information in this nascent sector will help operators and investors fully understand and take
advantage of potentially large market, and stimulate innovation of highly-scalable business models
71
Productive Use Overview Insights 2 Unserved populations
How affordable is the purchase & installation of productive use technologies for
Affordability consumers?
• Many consumers such as rural farmers that require technologies to increase productivity,
don’t have stable incomes to make high capital investments; need credit financing
Are consumers aware of products available & their impact on businesses? Do consumers
Awareness & have skill required to spur enterprise sustainability?
training • Consumers ought to be aware of products & value of productive use to utilize available
opportunities; require technical & business training to manage enterprises effectively
What are the most effective distribution strategies for productive use technologies?
Distribution • Operators require cost effective distribution channels that increase uptake while
maintaining affordability of technologies; need to be coupled with technical & ongoing
consumer support
72
Productive Use Overview Insights 2 Unserved populations
Important to understand factors driving high costs Operators can leverage PAYGo model used for SHS
of productive use technologies to increase affordability of productive use
• Most products are imported and have high • Learnings from PAYGo solar solutions can be
initial costs of production and distribution transferred to productive use to increase
– Operators transfer cost burden to affordability
consumers in form of high prices, reducing • To do this, operators would need to understand
affordability consumers and sector-specific nuances for
• Locally manufactured products are often successful implementation
inefficient and of poor quality – What is the revenue potential and income
– Ongoing costs incurred to cater for repairs cycle of the consumer?
& maintenance are expensive in the long run – What payment structures will positively
– Foreign products run risk of high impact customer cashflows and increase
maintenance costs due to lack of skilled ability to pay?
technicians – How do operators assess credit worthiness
• Productive use tech requires supplementary of customers and potential impact of
costs to be effectively maximized default?
– Additional costs like installation, technical & – Is use of productive use asset economically
training costs also contribute to overall feasible and viable, etc.?
affordability
73
Productive Use Overview Insights 2 Unserved populations
Operators require in-depth knowledge of business needs, target consumers & product types to develop
sustainable payment structures
Understand business models of consumers, production processes and income cycles
• Businesses have varying income cycles and revenues based on products / services offered, business
stage (early stage, mid sized) and market available
• Operators need to assess cashflows for different consumer groups like farmers who are more inclined
to seasonal payments during harvests
Assess willingness & affordability to pay of target consumers through product pilots
• From surveys, some customers were willing to pay installments outstanding during after sales services
as opposed to mobile money payments as they found it more convenient
• Important to also assess income levels and social factors that influence affordability & willingness to
pay when developing PAYGo structures
Modify products to suit businesses across size, functionality & capacity, etc.
• From our surveys, product features like size, and complexity in functionality informed prices; usually
larger sized appliances with difficult functions were more expensive than small, easy-to-use products
• Operators will need to align products to match affordability & needs of customer groups
74
Productive Use Overview Insights 2 Unserved populations
• Consumers easily adapted to technologies they deemed valuable; for example, farmer
Consumer
change in technology was influenced by technical training though demonstrations or
Adaptation
perception
successful pilots with neighboring farmers
Other factors like availability of land, water & technical expertise need
to be considered
75
Productive Use Overview Insights 2 Unserved populations
Sources: 1. Energy for Development, GIZ. An Overview of Technology Options and Approaches for Promotion, http://www.euei-
76 pdf.org/sites/default/files/field_publication_file/Productive_Use_of_Thermal_Energy_Overview.pdf
Productive Use Overview Insights 2 Unserved populations
4 Products work best with entrepreneurs that had received both technical & business training
• Such consumers understood the benefits of the product and were willing to increase uptake as well as
influence other community members
77
Productive Use Overview Insights 2 Unserved populations
3. Agent models
78
Productive Use Overview Insights 3 Enabling environment
Develop • Develop policies & standards to increase credibility of the market and attract
policies & financiers to support innovations
standards
79
Industry stakeholders
80
Industry stakeholders Operators Financiers Dev partners Government Others
There are a number of private sector players in both the SHS &
productive use technologies in the off-grid energy space
P Mandulis
L Energy
A
Y
E
R
S
The private sector plays a vital role towards achieving universal electricity access through off-grid in
Uganda
• UNREEEA is an NGO for profit incorporated 2014 as result of the private sector
players in the various renewable energy and energy efficiency sub-sectors signing
a memorandum of understanding to come under one umbrella body. The primary
role of the Uganda National Renewable Energy and Energy Efficiency Alliance
(UNREEEA) is to avail a platform for consolidating the renewable energy and
energy efficiency private sector wing as well as improving its business
environment
To further its’ objective, USEA has partnered with the following organizations:
• USAID’s Power Africa Uganda Electricity Supply Accelerator – supporting
USEA in solar market development, public awareness and promotion, creating
linkages through the supply chain, business development and capacity and
monitoring and evaluation
• UNCDF/DFID – market sales data collection in collaboration in with GOGLA &
Dalberg data insights to run a data collection pilot for the sector, business
development services, media and PR campaign to increase visibility and reach
and tax advisory services in conjunction with URA & government to develop a tax
handbook
• PSFU/WORLD BANK - Through the World Bank Energy for Rural Electrification
project (implemented by PSFU), USEA has obtained support in setting up the
secretariat infrastructure, hiring staff and providing HR & Finance Expertise as
well as TA in business strategy and financing models to adopt for an association
10M DFIs
Dev partners
Foundations
Local banks
1M
Concessionary Commercial
Grants Equity Quasi
debt capital
85
Industry stakeholders Operators Financiers Dev partners Government Others
86
Industry stakeholders Operators Financiers Dev partners Government Others
88
Industry stakeholders Operators Financiers Dev partners Government Others
Provide commercial
$75M SSA
capital and advisory to
SIMA Fund for High risk, earlier Debt
energy businesses with
Off-grid Solar stage businesses
financial, social, and env.
impact.
Provide local
currency lending for Debt $100M Africa
Solar Frontier PAYG companies
pay-as-you-go off-
Capital grid solar companies
across sub-Saharan
Africa.
The household
Catalyze local financial energy access Debt SSA
Off-grid Energy markets’ support for sector including $500M
Access Fund innovative energy distributors,
access strategies manufacturers &
credit providers
Dependent
Invest in solar energy in on co. & SSA
Solar Energy Crowdfunding funds
TRINE growing markets
refrigerators raised
89
Industry stakeholders Operators Financiers Dev partners Government Others
Support, scale, and learn Energy generation Common & $20M East & West
Pioneer Energy (SHS, Solar & hybrid Preferred Equity, Africa
from innovative energy
Investment mini-grids) & Energy Convertible Debt
companies over the next
Initiative usage (Innovations
three years.
for energy use)
Solar, biomass,
Provide working capital Equity & Quasi- Kenya, Ug, Tz
ResponAbility geothermal & wind
to manufacturers & equity $30M &Rwanda
Energy Access distributed
Fund distributors of modern generation (captive
energy products generation & mini-
grids)
90
Industry stakeholders Operators Financiers Dev partners Government Others
91
Industry stakeholders Operators Financiers Dev partners Government Others
Supporting private-
Sustainable sector led economic Grant and equity $95M SSA
Clean energy
Energy Fund for growth through the
Africa efficient utilization of
untapped clean
energy resources.
92
Industry stakeholders Operators Financiers Dev partners Government Others
93
Industry stakeholders Operators Financiers Dev partners Government Others
Not EA and
Providing early stage & Grant available Southern
EEP Africa catalytic financing to €200k – Africa
innovative clean energy Solar PV
500k/co.
projects, technologies
Developing,
Equity or SSA
constructing and $60M
Frontier Energy II Renewable energy mezzanine
operating renewable
Fund debt
energy generation
projects
94
Industry stakeholders Operators Financiers Dev partners Government Others
Access to energy • Sustainable • Provide a no. of social • 2924 ha of woodlots & Implementers:
services in rural and SHS management of bio institutions with energy orchards established Church of
peri-urban areas in – energy resources, efficient cooking stoves within by the project & Sweden in
Northern Uganda increasing use by and solar systems a no. of tree Partnership
(Teko Wa Project) 2 Cook households and • Disseminate, in co-op seedling biz. set up with Lutheran
stoves social institutions of with private co.’s, SHS &
cooking stoves to • 35,366 households & 24 World
Ongoing solar PV energy and Federation
households institutions accessed
energy efficient
Bio
• Inc. awareness & build energy efficient stoves Uganda
fuels cook stoves
capacities of • 25,750 households & 24 Funders:
local communities in institutions accessed EU
sustainable mgmt. of with SHS for lighting
bio- energy resources
95
Industry stakeholders Operators Financiers Dev partners Government Others
Scaling up access to • Working to scale up • Provide a number of • The project has 3460 Implementers:
modern electricity SHS access, in the households and SMEs new SHS customers in Foundation
services on a predominantly rural, with access to energy Mali and Uganda (42% Rural Energy
regional scale in poor communities services via SHS and of the target). Target Services
rural Sub-Saharan of the targeted solar mini-grids achieved in Mali and Funders:
Africa by means of a countries in 60% customers ACP-EU
• Facilitate bi-annual
fee for service Mini- Cameroon, Mali, recruited in Uganda.
workshops for areas
business model2 grids Uganda & Guinea- in the four countries • 4,496 SHSs have been
Bissau concerned installed in Mali,
Ongoing Guinea-Bissau and
Uganda.
96
Industry stakeholders Operators Financiers Dev partners Government Others
Lighting Africa • Enable access to off- Catalyze the market • Market assessment Implementers:
Campaign1 SHS grid lighting and through: study to determine Broad global
energy products for demand for solar alliance – imps.
• Market intelligence
Ongoing 250 million people products, market varying by
across sub-Saharan • Quality assurance bottlenecks, & country
Africa by 2030 • Access to finance assess options for
supporting the Funders:
• Consumer education growth World Bank /
• Business development • Consumer IFC
support awareness
• Policy & regulation campaigns
• Supporting UNBS in
adopting and
enforcing
internationally
recognized
standards
• 2M people
impacted, ~920k
quality veified
products sold &
~185k GHG gas
emissions avoided
The Power Africa • Facilitate the • Supports • Organized the 2nd Implementers:
Uganda Electricity SHS increase of clean generation and Project East Africa Energy and
Supply Accelerator energy electricity access projects summit in Security Group
Mini- generation and through grants, collaboration with
grids electricity access transaction the Office of the Subcontractors:
Ongoing among rural and advisory support, Prime Minister NRECA
On- urban short term International,
grid technical • Supporting REA in Nexant, African
communities in
assistance and the promotion of the Solar Designs
Uganda by
linkages with ECP* by supporting and Konserve
working with
other Power publishing/airing of Advisory
clean energy
Africa partner public information Services
generation and
tools messages
access project
developers to • Supported USEA and Funders:
reach financial UNCDF effort to Power Africa,
close and project create solar GE Africa
commissioning, awareness hotline
• And enhance the • Supported Mandulis
enabling Energy in technical
environment for proposal to AfDB
clean energy
investment
Quality Assurance • Address some of the • Provide a flexible • Provided a formalized, Implementers:
Mini- root challenges of alternative to rigid common standard for NREL, DOE
Framework for
grids providing safe, top-down classifying energy
Mini-Grids1
quality, and standards by consumers Funders:
Ongoing financially viable defining: • Facilitated aggregation Power Africa,
mini-grid power − Levels of of mini-grid projects & Global LEAP
systems to remote service unlock private
customers framework investment from data
− Accountability generated
and • Supporting
performance implementation of
reporting consumer protections,
framework thus a better consumer
service
Last Mile • Incentivize solar • Exploring results- • Work will soon begin Implementers:
Distribution Results- home system based incentives after approach is EnDev
SHS companies to finally defined
Based Finance • Approach to be
more rapidly defined in the Funders:
Beginning expand into coming months USAID
commercially
viable last-mile
markets
• Connections policy
& implementation
plan developed
Milking the Sun & • Provide dairy and • Subsidy to provide • Over 10,000 systems in Implementers:
Harvesting the Sun1 crop farmers and farmers with access to collaboration with lead Solar Now,
SHS their households 37,000 solar products partner Solar Now Barefoot Power,
Ongoing with high quality, with reliable after Uganda Crane
affordable and sales service Creameries
Solar sustainable solar Cooperative
agric. lighting systems and Union & other
app solar powered value chain
agricultural managers
appliances
Funders:
Government of
Netherlands
110
Industry stakeholders Operators Financiers Dev partners Government Others
111
Industry stakeholders Operators Financiers Dev partners Government Others
Village Academy • 48 young men & • In-village • Held MCE Sales Implementers:
SHS
women trained to trainings for Agent Training on Village
Ongoing be PV solar youth on September 2017 Academy
electricians by technical skills, where 20 youth were
2018 sales & soft skills trained as solar sales Funders:
• 60 out-of-school necessary to agents and equipped Philips Lighting
Ugandan & urban enter the solar with stock in Foundation
refugee youth industry partnership with
trained to be by MCE Uganda and
• Tailor made
2018 d.light
courses for
• 20 of small/ energy • Conducted Soroti
medium size companies on Solar PV Training on
business owners capacity building May 2016 where 10
trained in and soft skills young men and
productive use of women were trained
energy by 2019 • Facilitating access
and certified, 8 of
• At least 60% of to start-up
whom found work in
graduates placed financing, high
the solar industry in
in employment quality solar
Soroti
and/or have products &
increased income mentorship on
by 3Q2018 scaling for SMEs
• At least 50% of
trainees targeted
being female
graduates
Source: UOMA interviews & consultations, supplemented by
114 https://www.villageenergy.com/village-academy/
Industry stakeholders Operators Financiers Dev partners Government Others
Scaling Off-Grid • Accelerate the growth • Platform for leading • 50+ companies & Implementers:
Energy (SOGE): SHS of a dynamic, donors and investors market enablers USAID
Grand Challenge for commercial off-grid to incentivize supported across 18
Development1 Mini- energy market to technological countries in sub-
grids provide clean, innovation, fund early Saharan Africa Funders:
modern, and stage companies, and • USAID / Power
3.75 million expected
Ongoing affordable energy support critical Africa,
connections
access to the millions elements of the off- DFID / Energy
of households and grid ecosystem • $435 million in private Africa,
businesses beyond investment catalysed Shell
the grid in sub- Foundation
Saharan Africa
• Regulates the electricity supply industry and issues licenses for generation,
Electricity transmission, distribution or sales of electricity, as well as ownership or
Regulatory operation of transmission systems
Authority (ERA) • Establishes tariff structures and investigates tariff charges, approves rates,
terms, and conditions of electricity services provided by generation,
transmission and distribution companies
Provides executive oversight Provide policy direction Official relationship and reporting
requirements
Frequent interaction, no official
Cabinet Parliament reporting requirement
Ministries
• Focuses on the thematic areas of rural electrification, energy for productive use,
household energy and energy entrepreneurship
• Has two departments: testing services for product development & independent
testing of cookstoves & solar, and project engineering for project implementation
and consultancy
123 Source: UOMA interviews & consultations, supplemented by http://creec.or.ug http://energyincubator.org , http://www.psfuganda.org
Industry stakeholders Operators Financiers Dev partners Government Others
• Partnered with REA to define the country’s electrification strategy through the
Uganda Accelerated Rural Electrification Program. Funded by the World Bank,
developed a master electrification plan for one new electric service territory in
Uganda
• Today, the team is on a path to lay the groundwork to produce master plans
for all 13 of the country’s electric service territories funded by the
USAID/Power Africa
124 Source: UOMA interviews & consultations, supplemented by www.energy4impact.org , East African Business Week , NRECA
Industry stakeholders Operators Financiers Dev partners Government Others
• Research and policy effort that aims to address the challenges around
increasing access to modern energy solutions to underserved populations
around the world
• Supporting the development of new, disruptive tools, such as the means to
evaluate electricity access through machine learning techniques applied to
aerial imagery data
125 Source: UOMA interviews & consultations, supplemented by https://www.rmi.org/ , Catalyst, , NRECA
Industry stakeholders Operators Financiers Dev partners Government Others
• The E4D Network is run by the Sustainable Energy Research Group (SERG)
at the University of Southampton.
• It’s aim is to enable a step-change in collaborative research and project
development addressing the energy needs of rural communities in
developing countries
• In Uganda, it has installed (2) mini-grids with a capacity of 13.5 kW
[email protected]
https://uoma.ug/