Rockefeller Foundation Teams Up With CrossBoundary Energy to Launch Mini-Grid Innovation Lab for Sub-Saharan Africa
The Rockefeller Foundation and CrossBoundary Energy recently announced the launch of the Mini-Grid Innovation Lab for Sub-Saharan Africa, an early stage, “green” energy and sustainable development initiative that combines applied business model research and development with Africa's first commercial-industrial mini-grid investment fund.
Rural households and small businesses across Sub-Saharan Africa have been signing up for and installing mobile pay-go solar energy systems and energy-efficient devices in great numbers. Sustainable commercial “ecosystems” are emerging, linking ambitious, internationally funded start-ups with tech and systems developers, equipment and services vendors and a growing range of investment, finance and financial services providers.
*M-KOPA Solar, Kenya
CrossBoundary and The Rockefeller Foundation aim to provide the spark that fires up interest and investment in commercial and industrial mini- and microgrids across Sub-Saharan Africa, setting the nascent “green,” distributed energy sector on a similar path of development and growth. CrossBoundary and The Rockefeller Foundation see an USD11 billion investment opportunity in the nascent market sector today, with the potential to grow substantially in coming years.
Energy Central interviewed CrossBoundary Energy associate Lucy Shaw, the Innovation Lab's global coordinator, to gain and share greater insight into the Lab's founding, its mission and how realizing its goals and ambitions can benefit rural electrification and sustainable development throughout Sub-Saharan Africa.
Fostering development and growth of distributed, renewable energy mini-grids in Africa
CrossBoundary Energy entered the distributed energy market space in 2013 when it began working to invest in and develop commercial and industrial solar power projects in Kenya. The company engaged The Rockefeller Foundation in an advisory capacity in late 2016-early 2017 as it sought to determine what was need to foster and support growth of mini-grids across the continent.
*Sierra Leone, Lomo School, IBIS
Billed as “the first R&D fund for Sub-Saharan Africa that focuses exclusively on testing new business model innovations for mini-grids to provide more power, to more people at less cost,” the Mini-Grid Innovation Lab for Sub-Saharan Africa flowed directly from their collaboration, Shaw explained. Part and parcel of their joint efforts, an initial set of partnerships with academic institutions, NGOs and developers began in mid-2017. Those have become more formalized with the signing of agreements this year in advance of the Mini-Grid Innovation Lab's launch.
However, “governments, policy makers and donors do not see mini-grids as a viable substitute to the main grid. This deters investors, who also struggle to understand the business case,” according to CrossBoundary.
Africa's top five mini-grid developers raised less than USD100 million in capital from 2012-2017, according to Crunchbase. That contrast sharply with Africa’s pay-as-you-go solar home system providers, which raised more than USD750 million, CrossBoundary points out.
Serving as the Lab's administrator, CrossBoundary released new African mini-grid data that highlight renewable and hybrid energy mini-grid market prospects and benefits. According to CrossBoundary:
- Private, renewable energy mini-grids are the cheapest way to electrify 100-plus million Africans today, and up to 290 million to 2030;
- Rural mini-grids demonstrate 98% power reliability vs 47% for main grid connections.
The Mini-Grid Innovation Lab for Sub-Saharan Africa has two main objectives, Shaw explained:
- Support mini-grid developers to improve their unit economics and be able to deliver more power to more people at less cost
- Build the evidence base for mini-grids as a viable electrification option, for donors, investors and government
The two Sub-Saharan Africa Mini-Grid Innovation Lab founders have assembled an impressive group of organizations to realize the Lab's mission, and they bring an impressive range of resources to bear on the key questions and issues the Lab intends to resolve. The recently launched African Mini-Grid Developers Association (AMDA), Energy4Impact, Duke University, Carnegie Mellon University, the University of Massachusetts at Amherst, and Power for All have signed on as Mini-Grid Innovation Lab partners.
Three principles distinguish the Lab's mini-grid business model R&D, Shaw explained:
- “Putting developers in the driving seat – they know the most about their business and most successful R&D efforts come from businesses themselves”;
- The Lab's R&D methodology “is rooted in data – we are proving or disproving long-held hypotheses about the mini-grid sector so that interventions that work can be scaled up and interventions that don't are deprioritized”; and
- “We iterate our approach – great ideas on paper can fall down when tested in the real world and we work with developers to adjust prototypes to ensure that they are working as well as possible.”
Mini-grid developers have the last word regarding the pilot projects they want to carry out, Shaw explained. That said, the Lab works with its academic institutional partners, who are conducting leading-edge, off-grid energy market and industry research, to design pilots that are deemed likely to produce results “the sector can stand by,” Shaw elaborated.
Furthermore, the Lab has partnered with Energy4Impact to conduct baseline and follow-up surveys on the trial mini-grid project sites. These are being segmented into experimental (those who purchase appliances) and control (those who do not). “We can compare baseline information about customers with data that developers provide on their changes in consumption and payment patterns as the pilot progresses,” Shaw said.
In addition, CrossBoundary has developed “Big Data” capabilities to manage day-to-day data coming in from developers, she continued. “We already have over 20 million data points on consumption and payments and more to come over the course of 2018. We are using tools like Tableau and 'R' to manage this work by a dedicated team member,” Shaw explained.
Developing and testing innovative mini-grid business models in the field
Rockefeller Foundation is providing the initial funding for the Innovation Lab in 2018, as well as providing a wealth of experience and resources associated with the foundation's global sustainable development and sustainable energy programs. More specifically, experience and data from The Rockefeller Foundation's Smart Power India program should prove valuable as the Lab carries out its R&D initiatives, Shaw noted.
At present the Lab is testing new mini-grid business model innovations in Kenya and Tanzania. It's also preparing to launch others in Nigeria and Zambia, Shaw told Energy Central. Furthermore, CrossBoundary, E4I and mini-grid developers are already working to answer two, key questions:
- Does appliance finance increase electricity consumption? And
- Do people use more power if electricity prices are lower (so-called elasticity of demand in microeconomic terms).
Looking out over the course of 2018, the Lab intends to pilot four prototype mini-grids in two to three countries by year-end. Developers will then scale up one to two if they prove successful.
“We are delighted to be partnering with the Cross Boundary Group,” Ashvin Dayal, associate vice president and managing director, Smart Power, for The Rockefeller Foundation, stated in a news release.
“The ultimate goal of this effort is to equip governments, investors and developers to dramatically accelerate rural electrification in an integrated manner, unlocking new economic opportunities for millions of households".
Added CrossBoundary Group Managing Partner Matt Tilleard: “We’re launching the Mini-Grid Innovation Lab at a time where when momentum is building for the sector. Achieving the Lab’s objectives could potentially accelerate the ability of mini-grids to provide power to millions of people in Africa and deliver on SDG7 [UN Sustainable Development Goal 7]. We are especially proud to partner with The Rockefeller Foundation, whose interests are aligned with ours, to see this through."