Mini-Grids and Small-Scale Power Embedded Generation Facilities for Off-Grid Communities
Mini-Grids and Small-Scale Power Embedded Generation Facilities for Off-Grid Communities
Business Model Description
Provide small-scale off-grid / hybrid renewable energy infrastructure that offers access to marginalised communities, including embedded generation, or provide ground- or roof-mounted PV system bundling for household or business use with standardised Power Purchase Agreements (PPAs).
Expected Impact
Provide stable, affordable and clean energy to marginalised off-grid populations for consumptive and productive use.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Namibia: Countrywide
- Namibia: Omusati Region
- Namibia: Kavango West Region
- Namibia: Ohangwena Region
Sector Classification
Infrastructure
Development need
The Africa SDG Index and Dashboards Report 2019, on SDG 9 regarding Industry, Innovation and Infrastructure, indicates that Namibia has “major challenges” in achieving this SDG (VIII). The country's infrastructure performance is ranked 94 out of 114 countries in the WEF Global Competitiveness Report 2019 (XII).
Policy priority
The Government prioritises infrastructure development towards SDG achievement (I). Namibia's 5th National Development Plan (NDP5) highlights how the lack of infrastructure development results in bottlenecks for economic development (II). It committed to spending 42% (NAD 74 billion, USD 5.3 billion) of the country's GDP on infrastructure projects over five years (VII).
Gender inequalities and marginalization issues
Given that infrastructure projects are typically linked to large-scale construction, gender representation in the construction industry was used as a proxy to gauge gender equality within the infrastructure sector. Namibia’s construction industry is male-dominated; 92% of its workforce is male (XII).
Investment opportunities introduction
Namibia put in place the Public Private Partnership Act in 2018, which aims to address the country's critical infrastructure needs through participation from the private sector through leveraging public private partnerships (PPPs) (IX). It also established a dedicated infrastructure fund to support the sector's growth (X).
Utilities
Development need
Namibia's utility infrastructure, which includes access to electricity, quality of electricity supply, exposure to unsafe drinking water and reliability of water supply, is a challenge in the country, as it scores a low 68.7 out of 100 in the WEF Global Competitiveness Report 2019 (XII).
Policy priority
The Government's infrastructure focus includes energy and water infrastructure developments. Priorities for energy in Namibia feature generating capacity and renewable energy, such as solar, wind and biomass, as stipulated in the 5th National Development Plan (NDP5) (II).
Gender inequalities and marginalization issues
Namibia’s electricity, gas, steam and air condition industries are male-dominated; 76% of its workforce are male (XIII).
Investment opportunities introduction
The Namibian Infrastructure Fund (NIF) addresses infrastructure backlogs in the key sectors, including energy and water utilities (besides sanitation, ICT, transport and logistics, health and municipal services) (XI). The World Bank estimates that investments in infrastructure can generate economic returns of up to 11% for electricity projects (V).
Electric Utilities and Power Generators
Pipeline Opportunity
Mini-Grids and Small-Scale Power Embedded Generation Facilities for Off-Grid Communities
Provide small-scale off-grid / hybrid renewable energy infrastructure that offers access to marginalised communities, including embedded generation, or provide ground- or roof-mounted PV system bundling for household or business use with standardised Power Purchase Agreements (PPAs).
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Out of 248,142 electricity customers, 80,000 are located in the North, where needs are greatest.
Eliminating the existing backlog in addition to keeping up with growth and rural electrification will require a total investment of NAD 3.4 billion (USD 250 million) over the next ten years (7).
Considering the bulk of the electrification need exists in the Northern Region of the country, the Namibia’s Northern Regional Electricity Distributer (NORED) has 80,000 customers under its jurisdiction (out of a total of 248,142) with an average monthly bill of NAD 483.85, which represents a USD 33 million annual market for existing domestic customers (8).
According to the Electricity Control Board (ECB), NORED would require a capital investment of USD 47.71 million (NAD 708 million) over a ten-year period to realise the additional rural and peri-urban electricity connections, if fully funded by NORED (8).
Indicative Return
Return on equity of 12.3%.
The Electrify Control Board of Namibia (ECB) reports a return on equity return profile for the Tsumkwe Mini-Grid Solar-Diesel PV Hybrid Plant of 12.3% (23).
Investment Timeframe
Long Term (10+ years)
Based on market conditions and scale, the typical investment timeframe is 10-15 years for debt and / or equity (23).
Market Risks & Scale Obstacles
Capital - Requires Subsidy
Capital - Requires Subsidy
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
As of 2016, only 51.8% of Namibia's population has access to electricity (1). Electricity coverage in rural parts of the country stands at only 18% (2).
Of Namibia's 74,000 peri-urban households, only 23% are located in areas that have benefitted from town planning, which make them lack formal and safe access to electricity (3).
The number of peri-urban households without access to electricity is projected to grow by 5,500 households per year due to migration and population growth. Connecting these new peri-urban households to the electricity grid would cost USD 85.71 million (NAD 1.27 billion) over ten years (3).
Gender & Marginalisation
Marginalised communities, including women and other disadvantaged groups, are most likely to suffer from the lack of electricity access.
Expected Development Outcome
Greater provision of clean energy at household- and small business-level, which improves the environmental balance of Namibia's energy consumption through the reduction of greenhouse gas emissions by replacing fossil fuels with renewable energy.
Enhanced generation of economic value. The actual economic value generated per new connection depends on whether electricity is used to generate new economic value or is mostly or solely used for consumptive purposes, as well as on how much electricity is consumed per connection.
Gender & Marginalisation
Improved supply of clean energy especially for marginalised areas not currently benefitting from formal grid options.
Greater income generation opportunities especially for women and other marginalised groups thanks to the stable supply of electricity.
Primary SDGs addressed
7.1.1 Proportion of population with access to electricity
7.1.2 Proportion of population with primary reliance on clean fuels and technology
7.2.1 Renewable energy share in the total final energy consumption
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Indirectly impacted stakeholders
People
Outcome Risks
Mini-grids and small-scale power embedded generation facilities are area consuming and can cause environmental damage in the disposal of PV installations, if not recycled carefully (7).
Impact Risks
If the facilities are used solely for consumptive purposes, the impact is limited as the energy does not directly generate economic value.
If the generated electricity has the same or higher tariffs as the grid energy, it may be unaffordable to targeted end consumers.
If the facilities are not managed professionally, the power supply may be unstable and not serve the needs of the population, especially if used for productive purposes.
Impact Classification
What
The outcome is likely to be positive, important and intended because mini-grids and power facilities provide clean energy to households that are not connected to the grid.
Risk
While distributed solar generation technology is becoming increasingly efficient, external factors like a potential slowdown in solar component imports may disrupt the ability to deliver impact.
Impact Thesis
Provide stable, affordable and clean energy to marginalised off-grid populations for consumptive and productive use.
Enabling Environment
Policy Environment
National Renewable Energy Policy, 2017: Supports the adoption of a market structure in Namibia that enables Independent Power Producers (IPPs) to generate and sell electricity to off-takers other than the Single Buyer and enables Small Scale Distributed Generation (SSDG) from various resources (18).
Draft Off-Grid Electrification Policy, 2016: Addresses Namibia’s intention of advancing mini-grid and off-grid electrification, regulation thereof, as well as grid encroachment aspects (18).
National Connection Charge Policy, 2014: Governs the connection of new small-scale distributed generation to the transmission grid (18).
Rural Electricity Distribution Master Plan, 2010: Guides the social upliftment of especially poor and rural communities, and supports economic development of the nation (21).
Off-Grid Energization Master Plan, 2007: Seeks to provide access to appropriate energy technologies to everyone living or working in off-grid, pre-grid and “gray” areas (18).
Financial Environment
Financial incentives: The Solar Revolving Fund, delivered by the Ministry of Mines and Energy, is a credit facility that stimulates demand for renewable energy technologies; it offers subsidized loans to Namibian citizens at a fixed interest rate of 5% per annum for five years (27).
Financial incentives: Local authorities provide "compensation" for locally generated electricity being fed into the national grid in the form of receiving electricity tariff credits or discounts for excess power fed back into the grid (6).
Regulatory Environment
Electricity Act 4, 2007: Establishes the Electricity Control Board (ECB) with its functions, provides for the requirements and conditions for obtaining licences for the provision of electricity, and provides for the powers and obligations of licensees (26).
Electricity Control Board (ECB) Rules for Net-Metering, 2016: Makes provision for customers who generate their own electricity from solar power to 'store' their excess electricity produced in the distribution grid and then balancing out their grid consumption with the stored electricity (6).
Namibian Distribution Grid Code, 2018: Provides standards and codes that impact the specifications and design of small-scale distributed generation plants connected to the transmission grid, as well as their operational compliance (18).
Marketplace Participants
Private Sector
Funds such as the Namibia Infrastructure Development and Investment Fund (NIDIF), Mergence Unlisted Investment Managers, Old Mutual Alternative Investments Expanded Infrastructure Fund. Projects such as the Tsumkwe Mini-Grid Solar-Diesel PV Hybrid Plant and wind farm project WindNam.
Government
Ministry of Mines and Energy (MME), Electricity Control Board (ECB).
Multilaterals
The Environmental Investment Fund (EIF) is the local partner for the Green Climate Fund (GCF), which provides funding for the development and implementation of environmentally sustainable development projects and renewable off-grid solutions (25).
Non-Profit
The Agency Française de Développement (AFD) SUNREF Namibia programme provides a green credit line, with technical assistance, for businesses through partner banks like FNB, Bank Windhoek and Nedbank (20).
Public-Private Partnership
Pathway to Renewable Off-Grid Community Energy for Development (PROCEED) implements "island networks" (24).
Target Locations
Namibia: Countrywide
Namibia: Omusati Region
Namibia: Kavango West Region
Namibia: Ohangwena Region
References
- (I) Republic of Namibia, National Planning Commission, 2018, Implementation of Sustainable Development Goals, Voluntary National Review, https://sustainabledevelopment.un.org/content/documents/19880New_Version_Full_Voluntary_National_Review_2018_single_1_Report.pdf. II) Republic of Namibia, National Planning Commission, 2017, Namibia's 5th National Development Plan (NDP5), https://www.npc.gov.na/?wpfb_dl=294. III) Republic of Namibia, Office of the President, 2016, Harambee Prosperity Plan 2016/17 - 2019/20 Progress Report, Goals and Outcomes, https://op.gov.na/documents/84084/572904/HPP+Report+2019/66c2eef8-3b23-45be-bc2c-5e728699057e. IV) African Development Bank Group, 2020, Namibia: African Development Bank approves $121.7 million loan, Euro 3 million grant to support water and sanitation sector, https://www.afdb.org/en/news-and-events/press-releases/namibia-african-development-bank-approves-1217-million-loan-euro-3-million-grant-support-water-and-sanitation-sector-34727. V) Canning, David & Bennathan, Esra, 2000, The Social Rate of Return on Infrastructure Investment, The World Bank, Policy Research Working Paper Series, https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-2390. VI) Republic of Namibia, Public Private Partnership Act 4, 2017 Section 40(1), https://laws.parliament.na/cms_documents/public-private-partnership-act-4-of-2017---regulations-2018-353-c96b676b6f.pdf. VII) African Development Bank Group, 2018, 2018 African Economic Outlook, https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/country_notes/Namibia_country_note.pdf. VIII) SDG Center for Africa and Sustainable Development Solutions Network, 2019, Africa SDG Index and Dashboards Report 2019, Kigali and New York: SDG Center for Africa and Sustainable Development Solutions Network, https://sdgcafrica.org/wp-content/uploads/2019/06/SDGS_INDEX_REPORT_2019WEB.pdf. IX) Republic of Namibia, Public Private Partnership Act 4, 2017 Section 40(1), https://laws.parliament.na/cms_documents/public-private-partnership-act-4-of-2017---regulations-2018-353-c96b676b6f.pdf. X) World Bank, 2020, Leveraging Pension Fund Investment for Domestic Development: Namibia’s Regulation 29 Approach, http://documents1.worldbank.org/curated/en/125241594367606090/pdf/Leveraging-Pension-Fund-Investment-for-Domestic-Development-Namibia-s-Regulation-29-Approach.pdf. XI) Ino Harith Capital, Our Partners, https://www.harith.co.za/our-partners-2. XII) Schwab, K, World Economic Forum, 2019, The Global Competitiveness Report 2019, http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf. XIII) Republic of Namibia. Namibian Statistics Agency, 2018, Labour Force Survey 2018 Report, https://d3rp5jatom3eyn.cloudfront.net/cms/assets/documents/NLFS_2018_Report_Final_.pdf. XIV) United Nations, 2018, Accelerating SDG 7 Achievement Policy Brief 12 Global Progress of SDG 7 - Energy and Gender, https://sustainabledevelopment.un.org/content/documents/17489PB12.pdf. XV) Republic of Namibia. Namibian Statistics Agency, 2016, Namibia Household Income and Expenditure Survey (NHIES) 2015/2016 Report, https://d3rp5jatom3eyn.cloudfront.net/cms/assets/documents/NHIES_2015-16.pdf. XVI) DNA Economics, 2021, SAM Multiplier Analysis for the SDG study in Namibia, Six Capitals.
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