Powering Productivity: Lessons in Green Growth

EEP Africa has published a new in-depth study on Powering Productivity: Lessons in Green Growth from the EEP Africa Portfolio.

For close to a decade, EEP Africa has played a key role in early stage testing and refining of innovative applications of clean energy and productive use in Southern and East Africa. By enabling companies to pilot new business models for mini-grids and stand-alone systems, EEP Africa is contributing to the financial sustainability of the clean energy sector and providing valuable lessons learned in delivering green growth in local economies.

This study, based on interviews with projects in the EEP Africa portfolio, presents an analysis of selected case studies in which project developers are supporting productive activities such as agri-processing, light manufacturing and entrepreneurial services. These highlight an evolution in productive use business models, and identify some of the key innovations taking place in the next generation of projects and companies combining clean energy and green growth.

In the mini-grid sector, the business models adopted by EEP Africa project developers have evolved to meet demand and market challenges. The level of engagement by the energy service provider depends on which model they adopt and where they position themselves in the local value chain.

The evolving business models for mini-grids can broadly be described as follows:

  1. Energy Supply Model: The energy service provider produces and supplies reliable and affordable electricity to consumers via a small distribution grid. The mini-grids are designed to accommodate a primary offtaker or to convert existing users from diesel to electricity. Potential primary offtakers are largely linked to local agricultural production and operations are site specific.
  2. Business Acceleration Model: The energy service provider combines energy supply with appliances and equipment, through direct sales and/or financing. In some cases, this is combined with targeted business development support. This has been shown to boost revenue generation for both the developer and the user.
  3. Supplier-Offtaker Model: The energy service provider fills the demand gap by establishing and operating a commercial or industrial activity, serving as the primary offtaker. Initiating a productive activity (such as producing ice for fishermen) that supports revenue generation can be more profitable for the energy supplier than providing energy to end consumers.

In comparison to mini-grids, stand-alone systems are designed for a particular activity, such as irrigation or refrigeration, and provide targeted, small-scale solutions for productive use. The innovation visible in the EEP Africa portfolio in the stand-alone category is in the expanding variety of applications, covering everything from motorbikes to mills to water pumps. These technologies are either turning existing productive activities green or bringing sustainable solutions to off-grid markets.

Summarised recommendations

Driving green growth:

  • Expand early-stage financing to test productive use applications and innovations
  • Support the potential for productive use through the value chain

Facilitating green growth:

  • Adapt project design to the local context
  • Address the impact of tariffs and demand management on productivity
  • Incorporate innovative financing mechanisms for appliances
  • Commit to long-term business development support
  • Develop partnerships to draw on institutional strengths

Promoting inclusive green growth:

  • Strengthen the role of women and youth as agents of change in productive uses
  • Expand financing mechanisms that facilitate productive use and clean energy affordability for the bottom-of-the-pyramid