Benchmarking and comparing effectiveness of mini-grid encroachment regulations of 24 African countries ✦ A guide for governments and energy regulators to develop effective grid encroachment regulations

Abstract

The mini-grid market in Africa is steadily growing and solar PV, wind, hydro or biomass-powered mini-grids are expected to be a major factor in the electrification of rural areas. However, mini-grid markets cannot realize their full potential as most energy regulators do not provide an appropriate answer to the simple question “What happens when the main grid arrives?”. The lack of regulatory security of tenure and potentially subsidized tariffs for main grid-sourced electricity risk stranded investments when the main grid arrives and thus threaten private sector participation and investment.

Effective grid encroachment regulations should provide adequate (i) technical requirements, (ii) legal protection, (iii) variety of business models for the post encroachment period, (iv) financial compensation mechanisms for mini-grids, and (v) protection of customer interests upon changes of supplier, should this result from grid encroachment. The research developed a set of objective benchmarks for the above five categories and tests the effectiveness of mini-grid encroachment regulations of 24 African nations against these benchmarks.

The inter-comparison study amongst grid encroachment regulations highlights the gaps in existing regulations of the African countries. It demonstrates that Zambia meets 80% of the developed benchmarks while most other nations lag significantly in offering fair treatment to mini-grid investors in case of grid encroachment. The findings also demonstrate that Zambian regulations have potential usefulness for other countries in and outside Africa to further develop or streamline mini-grid encroachment approaches and regulations towards workable regulatory frameworks that could contribute towards achieving a world-wide goal of 100% renewables.