By Basil Malaki & Frederick Mushi
Following the July 2017 ‘Productive Use of Energy - Problem Solving & Innovation Workshop’ held in Dar es Salaam, the Energy Change Lab has been progressively engaging with multi-stakeholders through technical advisory, brokering and networks. Over the past few months, stakeholders who attended the workshop with support from the Lab have been implementing small interventions to test what works in terms of fostering productive use of energy (PUE) in rural Tanzania. The Lab in partnership implements ‘prototyping’ of ideas with mini-grid developers Power Corner and Rafiki Power as well as other related stakeholders.
The Lab has been actively championing a culture of collaboration, creating connections and sharing information valuable to the stakeholders who took part in the workshop. Furthermore, the Lab introduced the learnings thus far to participants of the 2018 Energy Safari, a youth led innovation initiative targeting young energy change-makers.
One year on, the Energy Change Lab has hosted a follow-up workshop to track and reflect on the progress of the ideas. Designed as a peer-to-peer learning journey in Dodoma, the workshop was attended by decentralised energy providers, PUE champions and other stakeholders who promote PUE in Tanzania.
Maisha Finance, Hitech International and Energy 4 Impact are working on this prototype and even agreed on a loan guarantee deal; the group is still developing a model around this initiative.
Present status of the PUE prototypes
In this blog, we are happy to share progress update of the prototypes that were identified in July 2017 and are being implemented by various participants of the workshop that include partners of the Lab.
Detaching donor funding from bureaucratic process
This group identified the bureaucracy of certain government agencies and financial institutions needing to be improved in order to stimulate PUE especially where donor funding is channelled. They suggested detaching the funds by bringing together development partners and financiers to set up a revolving fund for developers that would be used to catalyse PUE investments.
We spoke to Robert Wang’oe, a member of this group from Jumeme Rural Power Supply; he shared with us his experience on how they came up with their own financing scheme to support PUE since financial institutions were unwilling and unable to provide credit for PUE on acceptable terms. Many developers including Rafiki Power and Power Corner have their own financing schemes of lease-to-own models for PUE appliances, often based on microfinance principles. Though this approach seems to work for many developers, it is also a potential burden to the companies as they lack the right skills and resources for credit assessment, monitoring and following up on repayments. This calls for the involvement of third parties such as a local financial institution or suppliers of appliances. In the case of Jumeme, the prototype calls for more funding to bridge the financing gap for PUE investments including the stimulation of demand.
In response to this, a new initiative, Appliance Financing and Tariff Buy-down Subsidy was launched by CrossBoundary Group and Energy 4 Impact with the support of the Rockefeller Foundation. Since October 2017, this prototype is being implemented in an effort to stimulate demand and decrease the cost of electricity among mini-grid customers. Diana Kollanyi from Energy 4 Impact says, “a tariff-buy down facility enable consumers to afford and utilise more power; and a working capital facility for mini-grid developers enables them to finance the purchase of income generating appliances to be sold on credit to their customers”.
A finance initiative for PUE equipments
This group, similar to above, believed that access to finance is a critical component of PUE development especially when it comes to income generating appliances (IGAs), where capital costs of some electrical equipment can be relatively large compared to the financial capacity of the local enterprise. The group wanted to develop incentives to asset financiers to provide loans and electrical equipment to local entrepreneurs connected to the mini-grid enabling them to use electricity for income generating activities. Maisha Finance, Hitech International and Energy 4 Impact are working on this prototype and even agreed on a loan guarantee deal; the group is still developing a model around this initiative.
Inclusive micro-financing framework focused on PUE
This group also agreed that access to finance is a critical component of PUE development and are exploring ways in which they can promote affordable and inclusive financing frameworks. Notwithstanding the fact that it may not be easy to find financial institutions willing and able to lend to entrepreneurs in remote rural areas where mini-grid developers operate. With or without reasonable collateral requirements, credit guarantees and interest rates, this group believes positive action is possible especially where a microfinance institution (MFI) is located near the project site. The group has recommended creation and promotion of an affordable and inclusive financing framework focused on PUE, which brings together project developers and MFIs. Mwenga Hydro and Mama Bahati Foundation have rolled out the prototype as their local entrepreneurs are receiving loans to buy electrical appliances for their income generating activities. So far, more than 10 entrepreneurs have benefited from this initiative.
Currently, SimuSolar has designed a framework that matches this prototype. Their initiative provides accessible, affordable, and energy-efficient solar systems, i.e. fishing lights and water pumps that enable the end users to have a payment plan of up to 18 months. This initiative has enabled the company to sell more than 2000 fishing lights in the Lake Zone region.
Productive use information portal for Tanzania
This group has been working on solving challenges pertinent to lack of collaboration with PUE information sharing as a main challenge. The group suggested to integrate all information related to PUE in one platform for stakeholders to learn and share experiences and catalyse the development of PUE investments in Tanzania. A good example of this kind of platform is the GMG help desk http://greenminigrid.se4all-africa.org where stakeholders can find adequate information on mini-grids in Africa. This includes regulations, business models, financing, and licenses among others.
In response to this, the International Finance Corporation (IFC) is currently conducting a study on potential PUE sites and opportunities in Tanzania that can be powered by mini-grid and standalone solar home systems (SHS). All this information will be shared through the portal/database and will serve as input into discussions with developers, suppliers and other Lighting Africa programmes later this year.
Efficient use of excess heat from solar dryers
This group had an idea of adapting the use of existing solar food dryers to dehydrate food while tapping the excess heat generated for other purposes such as heating houses, egg incubation and powering electrical appliances. So far, this prototype has not materialised and the Lab is following up to understand the challenge and provide support where needed.
The Energy Change Lab created a closed Whatsapp group as part of its commitment to create a vibrant community of PUE Champions to fast track progress, share experiences, and lessons learnt. The group is currently open for anyone working on PUE. If interested to join the group, please contact - email@example.com.
Additionally, the Lab is working on a Guidance Note on the process of prototype implementation and the evolving lessons. Similarly, Energy 4 Impact is working on a PUE Toolkit that will be shared publicly to bridge the information and knowledge gap.
The Lab has also positioned itself to help the groups/companies to secure necessary information and advisory needed to test their prototypes. Currently, we are working in partnership with two mini-grid developers (Rafiki Power and Power Corner) to implement two prototypes on strengthening capacity and supply of equipment in Lindi, Mtwara and Manyara region. A peer to peer learning journey was held from the 4-6th of July 2018 to highlight some of our own learnings in the field with various stakeholders. We will be sharing this experience in our next blog.