The Quest for Scalable Business Models for Mini-Grids in Africa: Implementing the Keymaker Model in Tanzania

Abstract

Achieving universal electrification in sub-Saharan Africa requires creative solutions. Renewable mini-grids are a promising technology to electrify remote communities with a substantial productive demand, mainly from agro-processing. Mini-grids have experienced fast growth and there are now around 2,200 systems in the sub-Saharan Africa region. However, their economic case in the sub-continent is unclear. Most mini-grids are struggling not only to obtain a profit but also to recover costs. This Research Report describes the case of a private company in Tanzania implementing a business model for mini-grids that promotes productive uses of energy to achieve financial sustainability (the ‘Keymaker model’). A group of researchers worked jointly with the mini-grid developer to procure equipment for fish processing activities, support local entrepreneurs to use electricity productively, and to document and learn from the process. Although the business model was ultimately unsuccessful – facing high regulatory risks, high initial tariffs required to recover costs, and complex management of agro-processing activities – the project offers useful lessons and considerations for future efforts to promote mini-grids, and how public–private partnerships can help improve affordability and reduce regulatory risks.

The elusive quest for sustainable off-grid electrification: new evidence from Indonesia

“…Several very recent contributions have improved the evidence base considerably: Both Pueyo et al (2022) and Zigah et al (2023) examine mini-grids in Tanzania and diagnose profound sustainability issues. , also for mini-grids in Tanzania, observe very low consumption levels.…”