Minigrids can be the least-cost option for electricity access for millions of people who lack access to reliable electricity, however market penetration remains low.
A concerted effort by private, public and development sectors can unlock the potential of minigrids. The addressable off-grid market in four leading African countries (Senegal, Kenya, Tanzania, and Uganda), of which minigrids will compete for a share, is currently $750 million in annual revenue. Reducing costs by 50 percent doubles the addressable market size to $1.5 billion.
Why This Matters
Of the 1 billion people living in sub-Saharan Africa in 2015, approximately two-thirds do not have access to power. An additional 400 million people in South Asia, primarily India, also lack access to reliable electricity. For a significant portion of those over 1 billion people, minigrids may be the least-cost option for electricity access compared with the two main alternatives: grid extension and solar home systems. While the promise of minigrids is high, current market penetration, even in the most promising markets, is below 1 percent. The purpose of this report is to explore the reasons for the slow growth of the minigrid market, what can be done to speed it up, and the roles of different participants to accelerate market growth. This report includes a competitive analysis of minigrids as an option for providing power for basic services and economic development in Africa while drawing on lessons from India where systems are more mature. To be successful, minigrids must compete with solar home systems and grid extension on cost and reliability. This report targets the best markets for minigrids in Africa. Using current energy access rates and ability-to pay data, we estimate the total addressable market for off-grid energy access in four leading African markets, of which minigrids will compete for a share. Finally, we provide an actionable road map with a set of recommendations for private sector, government, and nonprofit actors to reduce costs and accelerate market growth.