Africa: Reimagining Utilities As a Way to End Energy Poverty

If the world is to provide electricity to all by 2030, utilities and off-grid renewable energy providers must join forces

Selestino Babungi is managing director and CEO of Umeme. Kristina Skierka is CEO of Power for All.

For over a century, countries have struggled to find affordable and sustainable ways to ensure that all citizens have access to reliable electricity.

In sparsely populated regions in sub-Saharan Africa and developing Asia, utilities, in particular, have grappled with the challenge of finding a financially viable way to deliver affordable, reliable power to the unelectrified using centralized generation and transmission.

In fact, all but two utilities of 39 in sub-Saharan Africa are loss-making ventures. The majority of sub-Saharan Africa suffers grid inefficiencies that affect billions of people every day, including transmission and distribution losses as high as 50 percent, and service interruptions of over 500 hours per year in some countries.

At the same time, a reliance on the centralized utility model to deliver energy to rural and peri-urban areas has left nearly 1 billion people without access to energy.

Stepping into this market gap, hundreds of private-sector companies (focused on household solar and mini-grids) have emerged in the past decade to offer a different and decentralized approach. The companies have raised $1.7 billion to help end energy poverty (70% of that since 2016) and provided improved electricity to as many as 360 million people.

Yet utilities and the private sector rarely communicate with each other or collaborate on electrification projects, either viewing each other as competition or worse, inconsequential to national electrification plans.

This is one reason why the total number of unelectrified people hasn't seen a significant shift. Clearly, working in silos is not creating the desired global development outcomes.

If the world is to succeed in ending energy poverty by 2030 (the aim of Sustainable Development Goal 7), utilities in low energy access countries and private sector companies must join forces to permanently "move the needle."

Developing countries have the unprecedented opportunity to create smarter grids, increase energy consumption and accelerate access, while cutting state losses and better serving consumers.

Advancing a future of energy that is digitized, decentralized and data-driven will enable grid and non-grid energy to better collaborate, in order to maximize connections and improve human lives. This is not a traditional utility-scale approach; this is Utilities 2.0.

Utilities 2.0, a framework for the future of energy in emerging markets, conceptualized by Power for All and a coalition of partners including Umeme, is seeking to accelerate the end of energy poverty.

Utilities 2.0 is rooted in the belief that energy markets can be designed today that combine centralized and decentralized energy into an integrated, intelligent and interactive energy network that can deliver customer-centric, clean energy solutions at the lowest cost, in the fastest time.

Despite encouraging progress in recent years, we have not seen fundamental movement in absolute electrification levels since the 2012 launch of "Sustainable Energy for All". It is time for a shift in strategy.

Decentralized solutions have much to offer centralized power providers, including a comprehensive access strategy for unelectrified rural populations. Indeed, as data accumulates about the value of technologies like mini-grids in accelerating connections, more low energy access countries are developing policies to speed decentralized connections in peri-urban and rural areas.

At the same time, utilities have a great deal of experience to offer decentralized companies, including how to deal with the challenges of scaling-up electricity infrastructure with low-consumption customers.

Accustomed to working with donors on large-scale, big-budget projects, incumbent utilities are savvy to the realities of regulatory oversight for energy infrastructure, and can help the private sector mature and prepare to expand to the level needed to achieve universal access.

Alone, neither centralized or decentralized energy is purpose-built to end energy poverty at scale. Together, however, innovative private companies and established utilities have the power to create a new frontier in the fight to end energy poverty.

In Uganda, Umeme and a handful of leading private companies not only believe in this vision - we are trying to make it a reality.

Selestino Babungi is managing director and CEO of Umeme. Kristina Skierka is CEO of Power for All.

May 2019

all Africa