Staying put or pulling out? How mini grid developers use business model innovation to overcome challenges and barriers in Kenya

Abstract

Using a sustainable business model innovation framework, this paper employs a case study approach to investigate why private mini grid developers have remained resilient and competitive in Kenya's electricity market despite changing market and policy conditions. Although mini grids in Kenya date back to the 1970s, significant rural mini grid development by the private sector began post-2010. These developments have encountered numerous technical, systemic, and social challenges. This study examines the reasons behind their resilience, competitiveness, and sustainability by interviewing five prominent mini grid developers, collectively representing 87 % of privately owned mini grid sites in Kenya.

The analysis reveals how private mini grid developers have exploited innovative approaches within the mini grid electricity product-service systems. It found that private sector mini grids have effectively utilized business model innovation to deliver and capture value. The primary service provided is sustainable electricity for domestic and productive uses to residential and institutional customers, though many developers have also benefited from supplementary products. Over the years, they have leveraged transformative innovations such as smart meters and the Internet of Things to enhance productivity and efficiency. Additionally, the relationship between users and mini grid developers has improved, boosting their competitiveness. Through innovative payment and billing methods, developers have reduced the financial burden on users, decreasing disconnection rates while increasing income. Thus, the paper argues that sustainable business model innovation is key to their ability to navigate shifting competition and policy pressures.