Kenya shows that the global microgrid market is ready for significant private investment. There are now enough viable business models to provide early stage, strategic or even crowd investors with commercially attractive opportunities.
The medium-term growth potential for the microgrid market in Kenya, as well as in other energy access markets including in Africa, South and South-East Asia, is very high. We base our analysis on the following observations from several years of on-ground work in Kenya. Here is the full report “The World’s Microgrid Lab“.
- Businesses create commercially viable returns: The microgrid industry is becoming less and less driven by development organizations and NGOs and increasingly by private companies. Microgrid developers have learned from the growing number of successful as well as from the many failed projects. There are now a number of localized and proven microgrid business models. Many of them proactively catalyze the productive use of electricity for new, electricity-based enterprises that in turn bolster the revenues of microgrid operators. We also see specialization in the sector, from dedicated investment instruments to companies specializing in microgrid specific technical hardware.
- Technology drives down cost: Whether it is locally designed smart meters, rapidly falling solar module costs, mobile payment solutions or the use of satellite imagery – technology plays a key role in bringing down the costs of microgrid systems as well as those of running the business. This reduces the cost of electricity for the end consumer, speeding up adoption rates and encouraging greater electricity consumption. As a result, microgrids offer higher returns to investors and become a more attractive option for governmental electrification strategies.
- Technology drives down risk: The best potential sites and customers can be identified through data analytics and remote mapping. Power usage and payments are easily tracked using metering and control technologies. Tariffs can be adjusted in realtime to optimize the use of installed assets and increase operator revenues. In general, technology makes “remoteness” less remote by bridging the informational, operational and psychological gap between the end customer, the microgrid developer and the investor.
- Government drives down risk: Governments, including Kenya’s, increasingly see microgrids as a key piece of their electrification strategies. They understand that this requires proactive risk reduction and the development of dedicated regulations and planning for a transparent, stable intersection between the microgrid and national grid expansion. It also means giving microgrid operators a clear legal status and operational freedom. Should governments decide to subsidize microgrid power, there are technological and regulatory ways to achieve this that avoid excessive bureaucratic interference.
For more, read our full report here (scroll down)