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Why small and off-grid power projects are key to powering Africa

In this rural region of western Tanzania, OPIC is supporting a project to deliver electricity through a series of smaller power plants feeding into “mini-grids.”

 

Three years ago President Obama launched one of the most ambitious development initiatives of his presidency and enlisted the support of OPIC in Power Africadesigned to bring more electricity to the hundreds of millions of people in Sub-Saharan Africa who have none.

To date, OPIC has committed $1.7 billion in financing and political risk insurance across 19 projects, more than one-third of which are small renewables or off-grid projects. While the scale of Africa’s energy poverty is vast – an estimated 600 million Africans lack access to electricity – the sheer size of the continent and the fact that so many people live in remote locations means that small, off-grid projects can often be the most effective way to expand access to electricity.

The Power Africa Beyond the Grid sub-initiative is aimed at reaching the estimated 20 million African households that live off the grid, many in areas so remote that they may never be connected to a central utility grid. While major utility-scale power plants are essential to addressing the scale of Africa’s electricity shortages, off-grid solutions are needed to reach certain groups. These are some of the ways OPIC is supporting projects to reach remote and off-grid populations.

Off-grid solar projects. OPIC supports multiple projects that provide home solar solutions that are affordable, portable and easy to install, enabling individual homes and small businesses to have light after dark and a power supply to support appliances like refrigerators and air conditioners. In Nigeria, an OPIC loan is helping Lumos introduce its portable solar stations, which are about the size of a small suitcase, connect to rooftop panels and incorporate cell phone payment systems. OPIC financing is also providing financing to Greenlight Planet, which makes affordable solar lighting and phone charging devices and will use the financing to expand its global distribution network in Africa and Asia.

Mini-grids. The landscape and population distribution of western Tanzania underscores why major power plants cannot reach all communities. Less than 10 percent of the population here has access to a reliable source of power and diesel, which is the main source of power in the region, and must be delivered by truck in a time-consuming and costly process. However, because this region is so far from other urban centers in the country, extending the country’s main electrical grid is considered cost prohibitive. Smaller “mini-grids” are often seen as the best solution for reaching rural populations. OPIC financing is supporting NextGen Solar, which developed a technology to build a series of small power plants feeding into “mini-grids” in remote diesel-dependent regions of Africa.

Support for financial intermediaries. Because limited access to finance is a common hurdle for many of the small businesses that can be best suited to deliver smaller power solutions, OPIC has also committed financial support to financial intermediaries that can support lending. OPIC financing to a new investment vehicle managed by SunFunder, will provide financing to companies operating in developing countries that manufacture, distribute and install solar lighting and energy systems. Through its Beyond the Grid Solar Fund, SunFunder estimates that millions of individuals will benefit by switching from kerosene and diesel to solar, reducing their energy expenditures and significantly reducing CO2 emissions. OPIC has also provided financing to the microfinance network Pamiga S.A. to support lending to small African farmers for the purchase of home solar kits.

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