Strengthening commercial viability through greater inclusiveness in rural mini-grid deployment: Insights from Nigeria and Kenya

Abstract

Amidst the prevalence of energy poverty in sub-Saharan Africa, mini grids have emerged in recent years as a promising solution, not only to bridge lingering electricity access gaps, but also to revitalise rural economies. The realisation of this promise however depends on the extent to which business models, i.e., the value that mini-grid companies offer to different customer segments, are able to respond to the peculiar needs of the largely low-income, agrarian contexts in which they operate. Private developers across the region have been especially innovative in evolving mini-grid business models over time; nonetheless, achieving the goal of commercial viability while serving the majority of rural dwellers remains elusive. Our paper analyses how two private mini-grid developers in Nigeria and Kenya have approached this challenge, introducing business models that address the needs of small-scale farmers for growth while targeting increased revenue for their respective companies. These cases provide evidence for the added value of employing a “KeyStarter” model – one in which developers begin to facilitate inputs early on in agricultural value chains, in addition to the latter-stage investments emphasised in conventional approaches to powering the agriculture-energy nexus. Our analysis is grounded in the premise that broad-based development should be pursued in tandem with electricity access provision in low-income agrarian communities across Africa. We conclude that significant financial and policy support, as well as further research and iteration, will be required to realise the potential of the KeyStarter model to resolve the twin challenges of mini-grid viability and inclusiveness at scale.