Workshop on socio-economic impact of off-grid electrification

So far, electrification has been made principally on-grid, and the benefits for population of grid extensions were considered as relatively obvious.

However, according to the International Energy Agency (IEA), off-grid electrification should provide, in decades to come, the bulk of new electricity access for remote populations, notably in rural Africa. But off-grid electrification raises specific questions not yet asked with on-grid electrification. 

The solutions proposed are very heterogeneous in terms of technology, governance or business model and to hope that this diversity can be scaled up, this diversity must lead to research for the best practices fitting local circumstances. However, this approach requires a better impact measurement of these solutions on development, especially if electrification is no longer considered independently (satisfying SDG 7) but rather as a key instrument in the development process.

This is indeed the case in rural areas, particularly in Africa, where most of the population does not have access to electricity. The availability of electrification through decentralized systems, most often from photovoltaic origin, could trigger a radical change and accelerate the achievement of the sustainable development goals. To this end, all actors involved in the implementation of these decentralized projects should be able to design them in such a way as to maximize their development impact.

Moderator : Patrick Guillaumont, FERDI
Panelists : Jean-Claude Berthelemy, CES – Paris 1 Panthéon Sorbonne, Ferdi • Jörg Peters, Leibniz Institute for Economic Research

Jean-Claude Berthelemy, CES - Paris 1 Panthéon Sorbonne, Ferdi, presented the "Collaborative Smart Mapping of Mini-grid Action" (CoSMMA) database. This collaborative database lists research articles on the impacts of decentralized electrification published in recent years. The database now includes 125 papers to collect information on the characteristics (technical and governance) and effects on the SDGs of just over 400 projects in all developing countries. The database provided a meta-analysis indicating that the most popular systems used (Nano sized solar technology, including Solar Home Systems - SHS) have few significant positive effects, as the small size of projects tends to decrease the average frequency of positive impacts of photovoltaic systems currently used. Thus, the results show the need to work more on the development of mini-grids rather than on individual solutions.

In addition, the meta-analysis shows that project governance has a significant impact on the achievement of development benefits. Projects decided at national level are as successful as projects decided at local level. The interest of decision-making at the national level is to be able to mobilize more expertise; the interest of decision-making at the local level is to be better able to identify the needs and expectations of the population and to take them into account.

Jörg Peters, Leibniz Institute for Economic Research, presented a literature review that provided additional insight to CoSMMA on access to electricity. 

This review notes a high geographical concentration of studies conducted on the Indian subcontinent, which raises questions about the generalization of results for the African continent. In addition, the results of the studies are very mixed: for some authors, decentralized electricity has a strong impact on development, while for others, the conclusions are much more modest. This difference in result can be explained by the methods used (the RCT method - Randomized Controlled Trials - gives less positive results for example). However, some results are significant: for example, it seems clear that on the African continent mini grids and individual solar systems (SHS) are economically more appropriate than grid extension to meet the needs of populations. However, the expected positive effects of these solutions are greatly diminished by the lack of sustainability of the programmes (there are few examples of programmes beyond the pilot project stage), by the lack of quality of the proposed solutions, and by the price of electricity. The latter remaining a major concern for users, and even more so for poor populations mainly in rural areas. Thus, one of the crucial points to accelerate access to electricity for all is the provision of subsidies to help decentralized mini-grid projects to be economically viable.

Moderator and panelist : Angus Vantoch-Wood, Carbon Trust
Panelists : Carsten Hellpap, Innovative Infrastructure Development • Clément Silavwe, Agence d’électrification rurale de Zambie • Jens Weinmann, ESMT, Berlin

The Multi-Tier Framework (MTF) developed in 2011 as part of the Sustainable Energy for All initiative results from a need for a clear and measurable definition of access to electricity. Indeed, a simple binary definition of access to electricity was unsatisfactory. The MTF framework is based on the 8 measures of capacity, duration, availability, reliability, quality, cost, legality, convenience, health and safety, allowing access to electricity to be scaled into 5 levels.

Why an MTF framework? 

Although this framework is difficult to put in place and measures difficult to implement, it allows governments to set targets at different levels and for different audiences (households, communities, businesses).

Thus, for example, while access to information and communication technologies is important for the economic development of SMEs, it requires little electrical power. However, in a rural context, simple access to electricity is not sufficient for economic transformation and additional measures must be considered. 

The MTF framework allows the evolution of electricity access models to be monitored, with solutions outside the national grid, individual or mini-grid solutions, that can provide access to electricity at an intermediate level of the MTF, where access to level 5 via the grid is currently impossible to achieve.  

In both developing and developed countries, a new path to electrification now seems possible with the emergence of decentralized electrification, which involves new models of ownership and financing rights on renewable energy power generation units. The energy cooperative models have made it possible to mobilize subsidies and raise investments totaling €1.2 billion. In a context of non-existent infrastructure, this approach may eventually lead to the creation of a national network through the progressive networking of local grids. Crowdfunding platforms are also alternative sources of financing, which coupled with crypto-currencies open the way to peer-to-peer value exchanges without the need for a centralizing agency. Asia and Europe are now leaders in terms of proposing innovative business models in renewable energy and Africa could be the main beneficiary in the long term.

The MTF framework and pricing.

Finally, it should be noted that under the MTF, the pricing of kWh remains important. Indeed, pricing remains a complex issue and users, once connected, will have different uses depending on their ability to pay. Moreover, consumers do not value the different uses that can be made of electricity in the same way. Consumers are, for example, willing to pay a higher price per kWh for access to information and a mobile phone.

Moderator : Hary Andriantavy, Club-ER
Panelists : Irène Calve Saborit, Sunkofa Energy • Anna Creti, Université de Dauphine •Malick Gaye, Agence Sénégalaise d'Electrification Rurale (ASER) • Yann Tanvez, IFC Infrastructure MEA, World Bank Group • Cyril Renault, Agence Française de Développement

This session starts from the observation that the success of a rural electrification project depends on the regulation of the sector and the harmonization of electrification projects with development policies.

The regulatory framework and the call for projects procedures ensure that the electrification project is in line with development policies and the achievement of a certain number of Sustainable Development Objectives (SDGs).

Indeed, a call for projects may contain for instance clauses requiring the connection of certain public services such as schools or health centers. Similarly, technical constraints may be imposed in order to ensure a minimum share of production by renewable energies and minimize the impact on the climate. In addition to these conditions for project developers and investors, a framework regulating network prices and reliability is needed to ensure the quality and viability of the service provided.

However, regulation cannot overshadow the need for return on investment and profitability for investors and private producers of decentralized electricity. Subsidies and incentives are often insufficient to initiate electrification in remote areas.

Numerous examples of regulation and governance in several African countries were cited by speakers, showing the diversity of approaches, successes and failures, suggesting that adaptation to the context seems to be the most appropriate approach. 

Introduction by Arthur Contejean, IEA, on decentralized electrification on the African continent.
Moderator : Kenneth Houngbedji, AFD
Panelists : Hervé Gouyet, Electriciens Sans Frontières (ESF) • Iris Nicomedi, ADEME • Salouhou Hamidine, Niger rural electrification agency • Frédéric Pfister, NeOT• Anjali Shanker, Innovation Energie Développement (IED)

As a preamble to the session, it was recalled that about 70% of the world's population does not have access to electricity. However, the International Energy Agency (IEA) notes in its African Energy Outlook report that access to electricity is accelerating through the extension of networks but also and even more importantly through the development of decentralized energy. In 2018, the report estimates that 5 million people gained access to electricity through decentralized solutions compared to 2 million in 2016. If the current trend continue, several countries such as Ghana, Tanzania, Rwanda and Senegal could achieve universal access to electricity by 2030. The question arises for practitioners as to how to support the acceleration of countries' efforts and which solutions are the most appropriate.

As the practitioners present were able to testify, the challenge is to take into account the needs of the targeted population, to offer adapted and innovative (or even sometimes visionary) solutions, and to ensure the sustainability of projects through training in the maintenance of installations in a context where the adoption of new technologies, particularly photovoltaics, requires specific technical skills. The sustainability of projects also depends on their governance at the local level, which must guarantee their appropriation by the populations concerned. Another key element in the design of projects is the consideration of the energy efficiency of the electrical appliances used. Finally, another aspect that is often neglected is to inform the population about the different possibilities of electricity use in order to optimize usage and thus maximize the positive impacts of projects.

For both practitioners and donors, the evaluation of projects and their impacts is essential. Various evaluation tools and methods are used, such as the "Rex Grid" - evaluation grid for decentralized electricity projects - used by ADEME. The difficulties associated with evaluations lie in their duration, the time horizons being different from those expected by donors, and their cost, which can represent 10% of the total cost of the project for small projects. However, the evaluation costs are not bearable by private operators for whom profitability and long-term economic viability are the primary decision-making criteria. Currently, for a project to be profitable for an operator, the amount of subsidy required is estimated at about 50% of the investment cost. However, once the investment has been made, it is relatively easy for operators to provide consumption data that can be used to carry out evaluation studies on their projects.

Moderator : Remi Bazillier, Université Paris 1 Panthéon Sorbonne
Panelists : Jean-Louis Arcand, Graduate Institute of International and Development Studies • Jérémy Gallet, Electriciens sans frontières (ESF) • Shahnaz Khan, 60 Decibels • Yann Tanvez, IFC Infrastructure MEA, World Bank Group • Henri Waisman, IDDRI 

In a context of rapidly expanding global data sources, however, there is currently little electricity data available in Africa. This lack is a real barrier to planning and investment, creating either an additional cost of data creation or a high risk due to uncertainty. In order to overcome this obstacle, it is therefore important to strengthen the capacity of countries to produce data, in particular through national statistical institutes and information available in the various ministries. This data should also be used in project evaluations, as many geolocated data are now available, which should make it possible to diversify and enrich the evaluation methodologies used.  

Regarding evaluation methods, alternative approaches to the Randomized Controlled Trial (RCT) have been developed to reduce evaluation costs and assuming that RCT is not the only scientifically valid evaluation method. A first alternative was to involve local NGOs already implicated in project evaluation. However, this approach carries a risk of bias given the proximity of NGOs to projects.  Reductions in data collection costs can also be achieved by using tablets with adapted questionnaire software, thus increasing efficiency in conducting the evaluation and increasing robustness by interviewing a large number of people on harmonized questionnaires. This approach has been adopted by ESF and 60 Decibels. Harmonization then makes it possible to create large databases for different kinds of quantitative analysis.

In addition, many studies have been conducted over the years in micro-economics, making it possible to produce databases covering several years. It may be interesting to capitalize on these data in different fields than their initial production (health, education, etc.). Finally, satellite data open up new avenues of analysis and measurement at a lower cost when combined with other common data sources. It is therefore important to identify the right tools to link these satellite data with measurements made by field-collected data. However, all these approaches are dependent on the availability of these data and their dissemination in the public sphere.

Moderator : Matthieu Boussichas, Ferdi
Panelists : Arianna Ardesi, Association International des Maires Francophones • Stéphanie Bouziges-Eschmann, Fonds Français pour Environnement Mondial (FFEM) (tbc) • Thomas André, REN 21 • Romain Cres, GERES • Samuel Monteiro, Investisseurs et Partenaires

It seems obvious that projects seeking to impact SDG 7 "Access to energy" also have an impact on concomitant SDGs, such as the SDGs, 11 "Sustainable Cities", 13 "Combating Climate Change" and 17 "Strengthening Partnerships". However, electrification projects also impact more “distant” SDGs, such as those related to health (SDG 3), education (SDG 4), or gender equality (SDG 5). By providing for the connection of schools or health centers, the achievement of the "Access to Energy" SDG then has an impact on SDG 3 for health and SDG 4 for education. There are also many solar projects offering water pumping solutions for direct or agricultural consumption, impacting  SDG 6 "Clean Water and Sanitation" and SDG 2 "Food Security". Finally, the Electrified Activity Zone projects proposed by GERES, targeting SMEs and productive activities, have impacts on SDG 8 "Decent work and economic growth" as well as on SDG 9 "Industry, innovation and infrastructure". Currently, about 11 million people are employed in the renewable energy sector, with solar energy accounting for the largest share and China being the largest employer in this sector. Only 32% of the employees in this sector are women, which is low but much higher than the percentage employed in the historic energy sector of gas and oil. These figures are encouraging for the achievement of SDG 5, and many of these jobs are qualified and relatively well paid. Renewable energy is therefore a driving force for employment in developing countries.

Finally, the SDGs provide a measurement framework for impact investors who seek to produce development effects on the same level as financial profitability.

However, these effects of electrification on all SDGs require in most cases additional actions. It is therefore important if these effects are to be achieved to integrate electrification projects into a coherent local public policy framework, in which local authorities should play a central role.

Presentation by Yasmine Arsalane of the World Energy Outlook and the new publication dedicated to Africa, African Energy Outlook by the International Energy Agency (IEA).

Presentation by Sarah Vignoles of the book  Électrifier l'Afrique rurale published by Energies pour le monde.