Grid expectations: How service design and business model innovation can support mini-grid development in Kenya

Abstract

Achieving universal access to electricity is central to the Agenda for Sustainable Development. However, over half a billion people in Sub-Saharan Africa are currently at risk of being left without electricity access by 2030. A rapid scale up of off-grid renewable electrification is needed to close the energy access gap, requiring innovation and new collaborations between private actors, the public sector, and service users. Several critical challenges to scaling access to mini-grids remain, most notably a lack of investment, and the uncertain regulatory environment in many sub-Saharan African countries. This study aimed to provide evidence about how external risks affect mini-grid business models and the strategies that developers apply to manage challenges. We compared two case studies of private sector-led mini-grids in Kenya interviewing a range of key stakeholders for each case. The data were analysed using a framework informed by business model innovation, frugal innovation, and the service design concept of value co-creation. We found that value co-creation is influenced by factors including political interference, regulatory uncertainty and customers' previous experiences with other energy services and their expectations of the new service. The strategies that developers use to address these challenges can have both positive and negative consequences for value co-creation. The ability to maintain focus on delivering a service that incorporates the core frugal aspects of reliability, affordability, simplicity and adaptability appears to be a key factor determining how well a firm navigates external pressures, influencing the overall viability of the business model.