Policy Brief - December 2020

Lessons for Modernizing Energy Access Finance, Part 2 – Balancing Competition and Subsidy: Assessing Mini-Grid Incentive Programs in sub-Saharan Africa

Falling costs and improved technology have made mini-grids a high-impact electrification solution for up to 490 million people currently without access. With the capacity to power commercial and industrial loads and provide 24/7 service, mini-grids can bring a grid-like experience to places that are unlikely to be serviced with a reliable grid in the near future. In order to scale-up mini-grid deployment, governments and development partners are rapidly putting in place financial incentives, which aim to reduce risk for developers, attract private capital, and lower connection costs for rural populations. This recent explosion of mini-grid incentive programs offers an opportunity to explore different approaches and consider initial lessons to inform future programs. This brief reviews 20 mini-grid incentive programs in sub-Saharan Africa that primarily use auctions or results-based financing to incentivize developers. While there is extensive experimentation going on, and it is too early to draw hard conclusions around impact and effectiveness, this report offers reflections on some clear trends that are starting to emerge.
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