Nestled against the hills near Lake Magadi in the south of Kenya lies the small village of Entesopia. Although the village is bustling with a myriad of regional tribes, Entesopia is not supplied with grid electricity. Instead, the community is powered by an 8.5 kW modular solar microgrid, owned by Vulcan Philanthropy and managed by SteamaCo. It supplies more than 60 homes and businesses, including a petrol pump operator, a small cinema and a number of welding shops.
These renewable microgrids are cropping up all around the world as developing and developed countries alike turn to them for their increased resiliency and flexibility. The speed with which they can bring electricity to the unelectrified makes them decisive for countries with lower electrification rates. In Kenya, for example, it is highly unlikely that the vibrant fishing islands in Lake Victoria or remote communities in Marsabit will be connected to the national grid anytime soon. Microgrids offer an opportunity for these communities to move up the energy ladder quicker and with greener energy than expansion of a central grid.
As it grows, the microgrid industry is becoming less and less driven by development organizations and NGOs and increasingly by private companies. While there remain some challenges — especially around the regulatory framework and aggregation of projects — there are now enough businesses with viable business models to provide early stage, strategic or even crowd investors with commercially attractive opportunities. But in order to truly make a difference, these microgrids need to make money.
In order to profit, the microgrid needs to be the right size to fit the usage. Too big a system will lead to underutilization and higher per unit costs. Too small a system will forego revenue and scale effects, again leading to higher per unit costs.
This is not as simple as it sounds. For instance, sizing the system not to the peak power but slightly lower allows demand side management technologies to reduce the cost and support full utilization of the generated electricity. The development of digital technologies really makes a difference here. Satellite imagery and sophisticated automated algorithms are now being used to find and characterize potential microgrid sites. This concept could be enhanced to optimally design microgrids based on village patterns and sizes and types of houses.
To really get the most out of a microgrid, it’s key to have some heavy power users in the portfolio. This might be a single anchor load, like a telecom tower or a small industry or shop. Or — to reduce risk — could be a variety of heavy users such as maize mills or welding shop. Often, the most profitable businesses are not the most obvious. In rural Kenya, hair salons or incubating hen eggs can be very lucrative, both of which require steady, reliable electricity.
"In Kenya, we have seen a home-made hydro-electric microgrid, built by a teacher with old barbed wire. It was distributing power to the local school as well as households and several shops."
The microgrid operator stands to benefit through proactive interventions that increase electricity usage across the site. This could be something along the lines of appliance leasing or other service-based mechanisms. If the microgrid operator shifts focus from selling kWh to selling a service and is providing the appliances used to deliver it, she also has an incentive to use efficient appliances.
Electrification can easily be coupled with other technology investments to provide all kinds of services, such as entertainment, cold storage, local transportation, or water pumping and irrigation — to name just a few. Along the coast of Lake Victoria, the addition of a community fridge or freezer can make a huge difference to the livelihood of resident fishermen. By not needing to sell their catch immediately, their incomes rise exponentially.
A workshop or connected cyber café could even be connected to the microgrid. With suitable training, access to the internet opens up a vast array of potential new revenue streams by unlocking access to the online market for simple outsourced jobs offered through sites like Amazon’s Mechanical Turk or Fiverr. This work is available year-round and provides a hedge against the uncertainties of seasonality: reduced fish populations or failed crop harvest, for instance.
Schools are another heavy energy user that really helps to push development sustainably. Somewhat crude, informal microgrids power the many islands dotting Lake Victoria. In Kenya, we have seen a home-made hydro-electric microgrid, built by a teacher with old barbed wire. It was distributing power to the local school as well as households and several shops. Bringing power to a school can make a huge difference to the lives of the residents. Unleashing the power of the internet brings vast knowledge to even the most remote locations.
As Emily Moder, Chief Operating Officer at SteamaCo explains, “light from roof systems can improve quality of life, but only microgrids can lift people out of poverty. By allowing people to build businesses and another source of income, they improve the resilience of rural communities against drought or climate change.”
For a more in-depth analysis and other perspectives on the microgrid market in Kenya and globally, download TFE Consulting’s full report, Kenya: The World’s Microgrid Lab here.
Dr. Tobias Engelmeier
Tobias is an entrepreneur and advisor with experience in organizational change and growth-oriented business models. He has founded Bridge To India, India Goes Solar, and a project development company focusing on distributed energy. Over the years, he has worked for investors, technology companies and governments on managing industry transitions in Asia, Africa and Europe. In 2016, he founded TFE Consulting to provide consulting services on industries that are undergoing rapid transformation.
Dr. Sam Duby
Sam is an influential technology developer and Africa expert with many years consulting and publishing in clean-tech and robotics. Sam co-founded the Ashden Gold Award winning SteamaCo Ltd in Kenya, which provides the tools required to build and manage financially viable power grids in remote areas of emerging countries. Sam has worked across the spectrum of renewable energy research in academia, consulting firms and start-ups in the developing world, and now leads projects at TFE Consulting.
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