PUE Workshop 2 July 2019 Brief Final
PUE Workshop 2 July 2019 Brief Final
PUE Workshop 2 July 2019 Brief Final
at
the promotion of private initiatives in green
mini-grids
improving access to electricity in Kenya
Productive Use of
Energy Applications in
Off-Grid Energy
Systems
Brief
In association with
UNLOCKING ELECTRIFICATION & COMMERCIAL PRODUCTIVITY IN RURAL KENYA
Workshop Brief, July 2019
The following brief outlines highlights and take-aways from the workshop, titled “Productive Use of Energy
Applications in Off-Grid Energy Systems Workshop,” which focused on the opportunity and challenges in rural
electrification, economic development and mini grid businesses in Kenya. This event took place on 2 July 2019
and was hosted by the Kenya Ministry of Energy and the Green Mini Grid Facility Kenya, managed by AFD
(France) and the Managing Entity (IED, I-DEV International and Practical Action Consulting). The workshop was
attended by over 60 persons coming from the Ministry of Energy and related institutions, investors, private
developers and NGOs. The purpose of the workshop was to facilitate dialogue between critical public and
private sector actors needed to develop scalable, financially and environmentally sustainable solutions for
increasing access to electricity in rural areas, on grid and off grid, that create greater opportunity for Kenyans.
The workshops reviewed 1) Progress to date and what’s been done, 2) Constraints and challenges faced by
various shareholders, and 3) Opportunities to maximize social benefit. The workshop began with opening
remarks from Eng. Kiva, Secretary Renewable Energy of the Kenya Ministry of Energy, who emphasized
progress in Kenya toward electrification, the plan to reach everybody by 2022 and the roles of the public and
private sector.
Brief Contents
Mini grids are important to addressing the 0.5 billion people by 2030 who will need energy access,
especially those in Africa; this will require 10s of 1000s of people/year that need to be reached to
achieve targets.
Kenya is at the forefront of innovation and electrification rates for Sub-Saharan Africa, yet even Kenya
has a long way to go; and will need private sector and alternative off-grid energy solutions to hit its
Vision 2030 goals including universal electrification by 2022.
Productive Use of Energy (PUE) drives increased income generation via access to electrical equipment
to drive industrial and commercial activities. PUE 1) makes energy supply by KPLC and mini grids more
viable by raising energy load factor from 30% to 50%, 2) Helps support social services & increase market
access to lower income groups, and 3) helps these communities generate greater income.
AMDA, the Africa Minigrid Developers Association, gave the following statistics on members,
emphasizing that they can help the Kenya government identify viable mini grid sites and implement
them faster in unison. In addition, AMDA made a call to action to more regularly convene in follow on
workshops to ensure that collaboration and momentum continues between parties that are all critical
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to designing a long-term rural electrification solution for Africa, starting with Kenya.
AMDA Statistics: 133 – Number of Minigrids actively built out 2019-2020; 370 – Sites identified as viable
with GIS and site visits; 54,396 – Connections through visible pipeline; 2,850 – Additional sites identified
as likely viable through GIS tools.
Equity Bank announced a plan to launch a new lending product geared toward PUE equipment financing
in and around mini grid sites. Initial analysis was conducted by the GMG Facility Kenya with Equity Bank
to understand the opportunity for investment in Western Kenya. GMG Facility Kenya and Equity Bank
are now seeking a loan guarantee partner needed for the pilot of this new lending product that will
finance maize/wheat milling, irrigation, ice making, energy efficient cooling/refrigeration equipment,
other small appliances- and possibly e-vehicles.
Key follow on action items were proposed to keep momentum from the workshop:
o Host a financial modeling workshop between minigrid operators/developers, investors and
government to understand policies, tariffs and type of capital and investments needed to build a
viable model
o Provide information and opportunities for donors and DFIs to fund mini grid and PUE pilots via
direct grants and by backing loan guarantees to commercial and MFI lenders, capacity building to
ensure lending products are properly designed, promoted and sold while the right improved energy
efficient PUE equipment reaches small business operators to create long-term opportunities
o Collaborate and convene in open dialogue to design clearer mini grid policy that incorporates more
favorable terms to private mini grid operators including lower tariffs and longer operating
agreements
o Follow on sessions and similar workshops between public-private sector that foster partnerships
between the various organization involved in agricultural and rural development and promote
tactical, actionable solution building.
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Analysis conducted by the GMG Facility Kenya identified key opportunities to unlock productive use in Kenya
through a series of field visits, interviews and market mapping. These core opportunities for wide-spread
development, and that will need strong grant, impact investor and commercial investment to scale include:
Ultimately PUE helps to boost economic development with mini grids or electricity as its base. Supporting GMG
development and PUE activities in parallel will help Kenya to achieve its priorities for Vision 2030, and universal
electrification by 2022 faster.
Critical to PUE and green mini grid success are these factors:
Higher and ideally growing energy usage to drive down costs and increase base load- without this,
neither KPLC or mini grid operators can make a profitable business case
Compatible PUE appliances and equipment e.g. 3-phase AC, rugged for rural settings, fit to cultural
contexts, energy efficient (as mini grid power is still higher cost), size and capacity to fit use cases
Financing for community members to purchase PUE appliances and equipment – from banks and
microfinance institutions (MFIs) to equipment purchasers, or to mini grid operators who can then build
an asset financing and lending program in-house
Grants and other patient capital to finance more pilots on PUE + mini grids to perfect the cost effective,
scalable and sustainable model, including help standalone solar or standard equipment manufacturers
conduct the R&D to adapt products to mini grid contexts; and other capital that will help to de-risk
and prove out the longer term profitability model for commercial lenders
Stronger linkages between PUE equipment distributors, financing mechanisms/banks/lenders, mini
grid operators and other ecosystem enablers
Mini grid operators including Jumeme (Tanzania), Kijiji Power, PowerGen (Kenya), PowerHive (Kenya) and
RVE.Sol shared their stories.
PowerHive. PowerHive has explored a broad range of productive use activities over the years. Key lessons
learned are to focus on highly scalable/transferable activities rather than everything. It is hard enough to
conduct and run efficient business in rural areas. Too many programs means too disparate and small results
that are hard and inefficient to manage. Powerhive has since honed in on key PUE activities of Poultry, Internet
Access, High Value Agriculture and…Electric Vehicles!
Poultry incubation, a project called Kuku Poa, initially focused on 1-off households supplied with small
incubation units powered at the home, they discovered this caused too high a death rate of chicks. Today,
women’s groups can take out a loan and Powerhive will provide training on proper rearing and inputs such as
the cages and incubator that are placed in a central location. Any woman in the community is eligible to
participate and form a group. Powerhive also manages the sales, marketing and access to a committed buyer
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of the chickens. This drives 40%
ARPU for families, between poultry
sales and use of manure to increase
crop yields 3-fold.
Powerhive has tested the promotion of electric cooking equipment in one of its sites and found a big increase
in ARPU and benefits for the users in terms of clean air and convenience. However, load management is
challenging and the company is developing technical options.
High value agriculture including tomatoes, onions and watermelon allow rural farmers to get access to a
national, more lucrative vs. local market. Powerhive is piloting on its 1st farm this model that delivers a kit of
agricultural improvement inputs that they believe can generate additional $10,000 income per acre per year.
For now, with an estimated upfront cost of $6,000 per acre for improved inputs including irrigation equipment,
fertilizer and pest control, grant funding and perfecting the pilot is critical before full roll out.
However, much of the effort is much beyond the capacity of the mini grid and the public utility companies and
requires the active engagement of other stakeholders and institutions engaged in agriculture, livestock,
fisheries, rural development etc.
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Today it includes 16 full time dedicated fishermen, and 20 seasonal. Fish are frozen on site and then shipped
and sold in Dar es Salaam. They are now exploring cage fishing whereby fishermen will own some of the cages
themselves, and others will be contract hires. Jumeme currently has 18 commissioned or new sites in the works
with a target of 1 ton of fish per day production. Focus is on producing local tilapia to replace over 50% of
tilapia consumption in East Africa being imported from China today. Jumeme estimates the greater solar
aquaculture equipment potential market in Africa will reach $3B by 2030 with a current estimate at $732M.
Kijiji Power on Lake Victoria has taken up the full value chain from market assessment, capacity building,
financial literacy and entrepreneurship trainings to clients. Currently focused on improving agriculture and ice
making/refrigeration. For agriculture, they have tested 4 sites with drip irrigation and sprinkler systems to
improve crop yields. For ice making, the company tested 6 sites and 12 chest freezers to find that ice making
or cold storage works best. When people hear a mini-grid is coming, they buy massive machines which aren’t
compatible with mini-grid. The upside: pilots showed that only 52% of people reported food shortage during
the project instead of 92% previously, and there was a 74% increase in income to women in the community.
RVE.Sol has also discussed its pilots in PUE activities, focused on Kinyozi (local barbers), egg incubation and
cinema halls.
Key challenges highlighted by all developers were: Huge upfront costs – hence need for government subsidies;
high costs of electricity produced by GMGs and thus why energy efficient products and the right sized units to
fit demand will be key; and of course, more time and resources to continue to pilot and perfect models in the
local community and geographic context.
Stand Alone Solar, PUE and the Future Potential for Integration with Mini Grids
The standalone solar sector e.g. home solar lights and kits gained traction and wide spread use several years
earlier than mini grids. Not surprisingly, there has been more progress to-date regarding products designed for
a rural context. Standalone solar is often DC powered, which causes a critical compatibility issue in trying to
adapt these products to mini grid settings which are typically AC powered. Separately, even many standalone
solar units have much to improve in product quality, lifetime, fit to market, and fit to willingness and ability to
pay. Alternatively, financing mechanisms need to be in place that make purchase of this equipment more
palatable to the target low-income rural populations. Companies actively interested and seeking to pilot (or
currently piloting) with the GMG sector include Sunculture (solar powered drip irrigation), Agsol (milling
equipment), InspiraFarms (cold storage units) and SunDanzer (solar refrigerators).
Crop Irrigation: Africa can increase agricultural productivity by 20x by moving water to where it needs
to go, as was stated by one of the participants. Production of milk and grains all require a lot of water.
Cold Supply Chain. Cold storage is critical to dairy, flower and fresh vegetable produce for export
sectors. If communities want to play in these sectors, effective cold storage solutions- cold rooms in
some cases, ice or smaller refrigerators in others. No cold storage, no export market. Also, realistically,
there is a need for stronger market linkages for rural communities to access these opportunities, and
this will require capacity building for this type of productive use and developing a working cold supply
chain.
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Financing Models to Unlock Greater Opportunities
Figure 4. Tsakane Ngoepe, Portfolio Manager, AHL Venture Partners speaks on the opportunity and ongoing challenges of mini
grid business models, which much act as energy providers as well as equipment financing and PUE training partners to
communities.
Access to capital for mini grid development or productive use activities continues to be a challenge, and in part
because the concept of green mini grids paired alongside productive use is still nascent- in the early discovery
years. Furthermore, high tariffs on mini grid energy, short-term operating licenses and other policies that signal
concerns to private investors and the fact that these models are meant to reach the last mile and rural low
income communities with limited access to higher margin sales and distribution markets makes this all the
more complex. Mini grids and installation of high quality commercial grade PUE equipment comes with these
prohibitive expenses: High capex costs to build the mini grid systems, negotiation for land/rights/terms that
appeal to the local community leaders, and cost to modify, deliver and maintain PUE equipment, then connect
with or build PUE lenders and more. Because of this, government support is critical to open the market
opportunity faster and make GMG models financially viable; grant funders and donors are critical to helping
GMG operators and PUE equipment providers test and perfect a viable model, and prove to commercial banks
and MFIs the business case for them to lend toward these models.
Investors like AHL, who spoke on the Finance panel, shared experiences investing in PowerGen, a Kenya mini
grid operator several years ago; as well as investments in Rent-to-Own, an asset finance company; and MKopa,
a pay-go home solar company.
Some take-aways that arose in the Finance panel moderated by Patricia Chin-Sweeney, IDEV, with Kevin
Schreiber, Customer Success at PowerGen; Tsakane Ngoepe, Portfolio Manager at AHL Venture Partners; and
Jane Dougherty from CrossBoundary Energy’s Mini-Grid Innovation Lab, include:
Companies like Powergen have had to be opportunistic in getting grant funding as there are few
mechanisms specific to addressing this gap in Access to Asset Finance for Mini Grid Ecosystems
combination. Grants have been secured by PowerGen to pilot offering appliance financing to allow low
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income rural communities to pay for larger appliances, whereby the mini grid operator acts as an asset
finance lender
Pilots for financing have been offered by USAID, DFID, World Bank to name a few
Beyond proof of concept
which grants can support,
there are simply not enough
parties offering asset
financing and debt for this
type of model – whether it
be a lending facility housed
within the GMG operator
business model, or external
to it e.g. a local MFI,
commercial bank, impact
investor or other
AHL suggested that while
many of the early concerns
around mini grid business
model viability in general
are lessening as GMG
operators begin to prove
success, the sector is still in Figure 5. Eric Naivasha, Equity Group Foundation speaking on the opportunity to
unlock commercials loans for PUE equipment near mini grid sites in Western Kenya
early stages and PUE
models and industries/activities of focus must be tested broadly to ensure a fit with the local
community, culture, context and market demands and linkages to a larger market that can be made. If
GMG operators can 1st leverage grant funding to do testing & pilot – not just to test ability to develop
credit history but also ability to deliver --then other private impact and financial investors will feel better
about getting results & performance of program. Ultimately these companies then need debt financing,
not equity to fuel the ongoing asset financing model.
All these specific points are well aligned with findings from the GMG Facility Kenya’s recently analysis on high
potential PUE markets that tie in with the mini grid companies they’ve supported mostly in Western Kenya.
The analysis findings identified 3 key challenges to unlock and catalyze the PUE financing ecosystem: 1) Lack of
Linkages and Active Dialogue Between Mini Grid Operators, PUE Equipment Manufacturers and Distributors,
and Financing to Ensure Viable Solutions are Developed; 2) Risk Mitigation Strategies to Attract Commercial
Lenders and Investors, 3) Availability of Financing Mechanisms Designed for GMG business models and
contexts, and that ultimately will require capacity building to train loan officers, lenders, etc. on the product
and why it is compelling.
Equity Bank and Equity Bank Foundation also gave an exciting announcement, presented by Eric Naivasha,
General Manager- Energy and Environment of Equity Group Foundation. As a result of close work with the
GMG Facility Kenya to identify key opportunities for PUE financing tied to mini grids, and the strongest PUE
sectors of growth – Equity Bank will develop a new lending product that provides asset finance for PUE
equipment purchase for Milling (Maize, Wheat and other higher value grains); Cooling/Refrigeration
(beverages, meats, etc); Ice Making (for fish and other preservation from loss); Irrigation; Small Appliances
(other electric tools to boost productivity and income to local shops); and if possible, e-vehicles, such as those
that Powerhive will soon be piloting in Kenya! This addition of e-vehicles was added after hearing the case
studies of operators who presented during the workshop, demonstrating the importance in more frequent
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convenings! Of course, two challenges to realizing this model and proving the business and financial case to
other commercial lenders will be: 1) National interest rate caps on commercial lenders mean commercial banks
must reject any overly risky loan, and thus the business case must be fully proven via a subsidized pilot- or risk
not being approved by bank management; and 2) as a solution to this, the GMG Facility Kenya has worked with
Equity Bank to structure an initial draft model of the loan product, and a loan guarantee facility that requires
to look to DFIs and donors to fund. For now, given the GMG Facility Kenya’s initial due diligence and research
into the market opportunity, the proposed loan guarantee and pilot only equates to less than $1M needed
from a guarantor to Equity Bank. This pilot could then be the case study that drives other commercial banks,
MFIs and other lending groups in a similar direction to unlock local rural productive use and build new mini-
hubs of economic growth.
Ministry of Energy (MoE) responsible for strategy and planning in the energy sector such as Integrated
Energy Plan (national plan to ensure counties, communities and national governments align on a
common goal and efforts), EPRA (Energy and Petroleum Regulatory Authority),
Government Initiatives: KOSAP (funded by World Bank)
Intermediaries/NGOs/Associations: Africa Minigrid Developers Association (AMDA), CLASP, Mini-Grid
Innovation Initiative/Crossboundary Energy, Energy4Impact
DFI-Funded Initiatives: Green Mini Grid Facility Kenya (GMG Facility Kenya), DFID Access to Clean
Energy Program
The Government Perspective: The workshop began with opening remarks from Eng. Kiva, Secretary Renewable
Energy of the Kenya Ministry of Energy, who emphasized progress in Kenya toward electrification. The Kenyan
Government is committed to addressing this issue and engaging public and private actors to do so. They rely
on the feedback from private sector and operators to understand policies/regulations/strategies needed to
incentive growth and ensure success and to improve productive use of energy. On the upside, according to
Nickson Bukachi from the Energy and Petroleum Regulatory Authority (EPRA ) new green mini grid regulations
can be expected to be released soon and with more focus on embracing the benefits in collaboration and
strengthening private mini grids. There will be a public review period for the proposed regulations. When asked
how the EPRA regulation will look in a few years, Nixon said “ new things every day mean we must be more
adaptive” signaling a change in government’s willingness to collaborate and adapt to achieve the universal goal
of universal energy access and long-term sector financial sustainability. Munguai Kihara, Ministry of Energy,
also added that government’s focus has pivoted from grid extension to a mixed solution that incorporates
alternative off-grid solutions including mini grids. He and Nixon encouraged private operators and investors to
see government as a partner.
Ministry of Energy in their GIS mapping and 5- year investment horizon projects 870,000 new
connections in Year 1, 1.2M IN Year 2, 1.63 in year 3, 710,00 in year 4 and 890,000 new connections
per annum on the year 5 and onwards.
Through the KOSAP programme component 1, a $40M initiative backed by World Bank, core focus is
on 14 northern counties categorized by the Commission of Revenue Allocation (2013) as marginalized:
Turkana, West Pokot, Samburu, Marsabit, Isiolo, Mandera, Wajir, Garissa, Tana River, Lamu, Kwale,
Kilifi, Taita Taveta and Narok.
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Figure 6. Figure 5. A full house gathered to hear ecosystem enablers- government to AMDA- discuss how better to
collaborate toward GMG PUE solutions.
Challenges in these marginalized communities include insecurity and land ownership structure which
is communal; Community engagement and acceptance is therefore important. Another challenge is
that new connections drive rapid increase in energy use, but also a quick plateau in consumption vs.
in urban areas, where there is continual increasing demand in consumption.
in addition, the consumption of new consumers is low. The KPLC presentation showed a 7.2M
connected customers in 2019 from 1M in 2003 but that the consumption per connection has reduced.
This could be because the last mile project brought in more rural customers whose average
consumption is 8-13 kWh per month as compared to the urban population whose consumption per
capita is 40-50 kWh per month. This is partly because of differences in income but also because rural
populations don’t have access to equipment due to lack of financing to acquire them, due to
unavailability of the products in rural areas and lack of information.
Increasing access and use of PUE applications in rural areas to increase demand is critical to creating
an attractive, viable business model. Demand can be increased by introducing newer and more energy
efficient electric cook stoves, introducing mobility products like electric vehicles, Tuk-tuks, trains etc.
The PUE Equipment Company & GMG Operator Perspective: Green mini grids are a complex business model
but one that is an effective and comprehensive solution to rural electrification and rural Kenya economic
development. Some solutions for government posed by these players were:
Friendlier and more adaptive tariff models that factor in the realities and high cost of mini grid energy
would significantly unlock growth, attract investors by signaling stronger profits potential and more.
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Help to scale productive use appliances by looking at models in India, Bangladesh and the US (several
decades ago), where government provided PUE and solar equipment subsidies to drive rapid adoption
and scale of clean energy solutions; and subsidies that factor in timebound results, clear KPIs and
effective displacement of costs from one aspect of Kenya’s productivity to another (e.g. subsidize clean
energy and PUE equipment delivery, while increasing costs of imported bananas or tilapia- PCS- I made
this up…should check I understood right)
Subsidies on capex (capital expenses) intensive improvements that help Kenya achieve its energy
goals. For example, the upfront cost to purchase and install a solar cold storage facility or cold room
(capex) means many cannot do this, yet a cold room or larger unit proves much more effective in
driving export value than a small refrigeration or ice making unit for industries like green beans,
flowers.
Consider additional criteria on mini grid site selection – for example, since agriculture and agricultural
exports are a key driver of Kenya’s growing economy, encourage mini grid operators to develop their
sites in areas where export produce can further expanded or where mini grids can rely on existing
large agriprocessors and exporters as their anchor energy customer, then develop PUE activities
alongside large companies to develop their produce supply chain. This model creates a win-win
scenario where technical assistance to local communities on producing to an export standard is shared
by the mini grid operators and large agriprocessor buyers.
Below are some of the actions proposed to continue momentum and timely progress to keep Kenya on target
to achieve universal electrification supported by mini grids.
Host a financial modeling workshop between GMG operators/developers, investors and government
to understand policies, tariffs and type of capital and investments needed to build a viable model
Provide information and opportunities for donors and DFIs to fund GMG and PUE pilots via direct
grants and by backing loan guarantees to commercial and MFI lenders, capacity building to ensure
lending products are properly designed, promoted and sold while the right improved energy efficient
PUE equipment reaches small business operators to create long-term opportunities
Collaborate and convene in open dialogue to design clearer mini grid policy that incorporates more
favorable terms to private mini grid operators including lower tariffs and longer operating agreements
Follow on sessions and similar workshops between public-private sector that foster partnership and
tactical, actionable solution building
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Attendees List
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Agenda
10:40 – 10:50 PUE Appliances: Solar water pumps market support CLASP
program
10:50 – 11:00 Q&A MC: Patricia Chin-Sweeney
11:00 – 11:40 Financing Panel: Discussion on existing financing Moderator: Patricia Chin-Sweeney
models, sources of financing, learnings from pilot Panelists: CBEA, Powergen, AHL
programs Venture Partners
Q&A MC: Patricia Chin-Sweeney
11:45 – 12:15 Ecosystem Panel: What role do eco-system enablers Moderator: AMDA
have to play in promoting PUEs? Panelists: Ministry of Energy/ ERC,
RVE Sol, SunCulture, Inspira Farms
Q&A MC: AMDA
12:20 – 12:50 GMG Facility Presentation: Mini-Grid PUE Guides and GMG Facility, Equity Group
Access to Finance Pilot Program Foundation
Q&A MC: Patricia Chin-Sweeney
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List of Presentations
Presentation Presented by
1 PUE Workshop 2 July 2019 – KPLC Samson Ondiek
2 PUE Workshop 2 July 2019 - KOSAP Myra Mukulu
3 PUE Workshop 2 July 2019 - Powerhive Rik Wutz
4 PUE Workshop 2 July 2019 - JUMEME Robert Wang'oe
5 PUE workshop 2 July 2019 -Kijiji Geoffrey Mburu
6 PUE Workshop 2 July 2019- E4I Diana Kollanyi
7 PUE Workshop 2 July 2019 – CLASP Makena Ireri
8 PUE Workshop 2 July 2019-AMDA Aaron Leopold
9 PUE Workshop 2 July 2019 - Financing Patricia Chen-Sweeney
Available on https://gmgfacilitykenya.org
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