Strategic Investment to Increase Access to Finance Among Mini-Grid ESCOs : Perspectives from sub-Saharan Africa

Abstract

Across sub-Saharan Africa, 590 million people continue to live without electricity, 80% of which live in rural areas. Renewable energy mini-grids are increasingly regarded as viable approaches to rural electrification. However, despite this potential, mini-grid energy service companies (ESCOs) in sub-Saharan Africa are faced with financing challenges, which emanate from unattractive risk-return profiles. Thus, this study sought to explore the potential of strategic investment as a way to attract additional funding to mini-grid ESCOs in order to advance the sector to a commercially viable phase. Indepth interviews were conducted with executive managers of mini-grid ESCOs and potential strategic investors. It was found that there is a need for strategic investment among mini-grid ESCOs. The study contributes to the evolving best practices of viable mini-grid business models, by recommending that mini-grid ESCOs should build competencies in customer relationship management, rural distribution practices and the extrapolation of rural households’ uptake of electricity and electricity dependent products and services from consumption data to commercial applications. Indeed, the study has shown that potential strategic investors attach value to these focus areas, with the implication that when mini-grid ESCOs can demonstrate these competencies successfully, the probability of successfully attracting strategic investment would increase. Considering these implications, the study offers a contribution to the development of pathways to attract investment to mini-grid ESCOs, the achievement of which will facilitate energy leapfrogging in the region.