Solving Sub-Saharan Africa’s Electrification Challenges through Energy Democratization

A cleaner, united, and sustainable Africa is attainable when we band together and translate our communal sense of living into solving our electrification problems.



There is an increased case for energy decentralization globally. In Sub-Saharan Africa, the electricity deficit is gory. More than 97% of people living without electricity live in Africa and developing Asia. Particularly, an estimated 635 million people live without electricity in sub-Saharan Africa. This electrification crisis contributes to the slow pace of development in the region.


Recent trends in developed societies show a move towards energy sharing. This is often termed energy democratization. Energy democratization refers to decentralizing control of energy resources. This leads to citizen participation and local control over energy decision-making.[1] The goal is to ensure that citizens have controlling rights over production, sharing, and collective use of energy resources.[2] This article explores the concept of "energy democracy" through the lens of community co-ownership and energy sharing. In exploring this concept, the author provides lessons and recommendations for sub-Saharan Africa.


1. What is Community Co-ownership?


Community co-ownership of energy resources arises when individuals jointly own grid and off-grid power systems with energy developing companies. These individuals could also own the energy systems and projects. Energy co-ownership refers to a group of people with shared energy needs, goals or aspirations (also known as an energy community). Energy resource co-ownership is prevalent in Europe where the clean energy revolution is on the rise. Germany, Scotland, and Denmark are remarkable examples of such countries in Europe.

a. The Scottish models

The Scottish community ownership system allows both direct ownership and ownership through an investment scheme in energy projects.[3] The Scottish government forecasts a target of 500MW in community ownership by 2020. The Neilston Community Wind farm is an example of joint ownership of power systems. The wind farm has a capacity of 10 MW, built through a joint trust between the Neilston Development Trust (NDT) and Carbon Free Developments Ltd. NDT owns up to 28%, with an option of raising its stake to 49.9%. The community formed the NDT in 2009 to chart the course for the regeneration of the Neilston community. The Community’s 28% ownership came from social loans, rather than grants. Proceeds from the investment go towards repaying the loan and accomplishing the community’s 2030 vision of a “sustainable, economically robust, well-planned, and well-connected small town.


The success of this project has placed the energy fate of the Neilston community in their own hands. Dispensing with the reliance on a central grid brings energy installations closer to end consumers, thereby reducing the transmission cost. Residents of the Neilston community do not have to rely on a central utility company for their energy needs. Thus further democratizing ownership.


The Gigha community in Scotland developed a wind farm through a more direct ownership system. ‘The dancing ladies,’ three windmills owned by the Isle of Gigha is the first directly owned grid-connected wind farm in Scotland. The project (commissioned in 2005) cost the community approximately £400, 000. The cost included grants, loans, and equity holdings. Annual profits from the wind farm stand at £80,000. Some benefits of the Gigha Isle project include employment generation, energy efficiency and awareness, and providing funds for other community concerns. Energy co-ownership produces other benefits like environmental awareness and sustainable energy for communities.


The Scottish model is not without challenges. Some challenges include access to capital, lack of knowledge and expertise, regulatory barriers, and land ownership problems.[4]

b. The Danish model

In Denmark, ownership could mean limited or full stake holding in projects. Energy project developers must give an option of owning a 20% stake in wind farms (with wind turbines taller than 25 meters).[5] This option is however limited to private individuals who live at a distance of no more than 4.5 km from the installation site. If they decline, the larger municipality will receive the option. This Danish model has resulted in a bottom-up market where individuals wholly own small wind turbines. The grant of options to own is a mechanism for allowing greater participation of citizens in the energy decisions that affect them.


Based on the examples above, community co-ownership and sometimes individual ownership of energy resources is a way of bringing energy closer to the people. The benefits provide a stronger case for energy democratization.


2. What is Energy Sharing?

Energy sharing is a direct product of the sharing economy. Investopedia defines the sharing economy as “an economic model in which individuals are able to borrow or rent assets owned by someone else.” Sharing of assets is useful when asset prices are high, or assets are not used up to full potential.We can appreciate the value of sharing in models like Airbnb and Uber. Imagine a replication of that model in the energy sector. Energy sharing involves sharing under-utilized energy assets for a fee. This ensures energy consumers gain economic value in their unused energy resources. Millennials have championed the sharing phenomenon because it promotes a culture of access and convenience over ownership.


Energy sharing is closer to us than ever before because of the blockchain technology. On November 22, 2016, Siemens and LO3 announced plans to use blockchain technology to birth the shared energy economy. Blockchain technology can cryptographically secure and track energy generated and distributed to end-users. It also enables peer-to-peer sharing of energy resources. Blockchain technology can promote community focused energy systems, such as micro-grids and reduce pressure on upstream networks. Thus, smaller participants can transact energy in the wholesale and retail marketplace.


Energy sharing could create an opportunity for citizens to synchronize power production and consumption, thereby maximizing the energy needs of a community. In the words of Lawrence Orsini, Principal of LO3, “Any energy system that is running high on renewables, in combination with non-renewables and storage, needs to move to a market model that recognizes the value of a “negawatt” (the power you don’t use) as well as the value of megawatt”.


3. Bringing energy democracy to Sub-Saharan Africa


A key impediment to electrification in various African countries is the shortage of gas supply, compounded by the liquidity crisis. Most of these nations face recurring political and economic instability. Technical glitches caused by inadequate and inconsistent metering systems have also contributed to the shortfall in viable energy options for the region. Given the capital-intensive nature of on-grid energy projects, the significant challenges to on-grid energy efficiency seem to be financial and technical.


Off-grid power could be a viable alternative to addressing power shortage in sub-Saharan Africa. REN21 (a public and private sector group network covering 155 countries) reports that the new renewable energy capacity installed worldwide shot up by 10% between 2015 and 2016. Solar provided the highest boost, followed by wind and hydro power. It further reports that at the end of 2016, 24% of global electricity came from renewables.


More consumers are enthusiastic about using renewable energy. Deloitte reports that 60% of businesses want to have some on-site generation, with 35% stating their desire for micro-grids. Sub-Saharan Africa’s electricity needs could gain insight from these stats as on-grid power generation, and distribution have hit various roadblocks.

Nigeria

Over the past few years, Nigeria’s liquidity problems have made power companies unable to source for gas. This problem, in turn, affects the government’s efforts towards electrifying the country. The government issued a regulation granting leave to generating companies to sell electricity directly to consumers. The law aims to reduce unnecessary intermediation in the power sector. Unfortunately, it only applies to specific consumers who meet certain stringent conditions. These conditions include:


i) Consumption of not less than 2MW per hour with a connection to a metered 11 kV or 33 kV delivery point on the distribution network;

ii) Consumption of more than 2MW/ hr on a monthly basis with a direct connection to a metered 33 kV delivery point on the transmission network under a transmission use of system agreement.


This regulation prevents citizens with fewer consumption rates from receiving electricity directly. Hence, the need for more localized off-grid solutions to meet the needs of households and small businesses.


The Gambia

In the Gambia, technical glitches and unmetered connections result in 40% loss of the generated energy. PV systems were installed to meet the energy gap. Since 2006, through the Gambian Solar project, seven schools, one health post, and one animal laboratory have witnessed PV installations at a rate of one or two installations per year. The sustenance of this project would drive scalability in the future.


Malawi


In Malawi, community ownership helps address electrification challenges in the education and health sectors. The result brings about technical, social, economic, institutional and environmental sustainability. For example, communities installed Photovoltaic (PV) systems in two primary schools and three health centers in rural areas. The PV systems provide lightning in the evenings which enables evening study classes. Over 10, 730 students are beneficiaries of these classes. The health centers were also able to get lightning in the treatment room and refrigeration for vaccines.


Before the installation, an energy committee was set up from the Community and trained. The PV system generated £360 over the first 14 months after installation.


Social benefits of the project include the broader reach of education to schoolchildren in the community and the human resource development of the energy committee members.


When rural communities get more involved in the energy decisions of their community, it gives them a sense of belonging. It also ensures security and maintenance of energy installations.


What are the real problems and their solutions?


A significant issue in attaining energy democracy in Africa is funding. Crowdfunding could address this challenge. Crowdfunding is attractive to non-profit and profit based organizations because of its flexibility. It represents an example of the benefits of the sharing economy. Through crowdfunding, communities can raise large amounts of capital for projects to accomplish their energy goals through crowdfunding.


While the benefits of energy sharing are immense, its technologies are still developing. It would take time before reaping its fruits in Africa.


Currently, affluent communities can benefit from community co-ownership by subscribing to the Scottish model described above. Community co-ownership can help bridge the financing gap that usually exists in energy projects in the sub-Saharan region. Flexible project financing models should be encouraged. For instance, financing could be in the form of equity or debt. So just like the Scottish model, upon revenue generation, profits go into repaying the loan and interest, or distributed as dividends to equity owners.


Sub-Saharan Africa by nature has a communal culture. This culture when adapted to collective ownership of an off-grid energy system brings immense advantages. A cleaner, united, and sustainable Africa is attainable when we band together and translate our communal living into solving our electrification problems. Energy democratization thus presents the solution to sub-Saharan Africa’s power crisis.

[1] C. Kunze and S. Becker, Energy Democracy in Europe: A Survey and Outlook (2014); J. Farrell, Beyond Utility 2.0 to Energy Democracy (2014)

[2] Id.

[3] Aileen McHarg, Community Benefit through Community Ownership of Renewable Generation in Scotland, in Sharing the Costs and Benefits of Energy and Resource Activity: Legal Change and Impact on Communities 297–316 (Lila Barrera Hernandez et al. eds., 2016).

[4] Kunze and Becker, n.3

[5] Anita Ronne, Opposition to Windfarms and the Possible Responses of a Legal System, in Sharing the Costs and Benefits of Energy and Resource Activity: Legal Change and Impact on Communities 173–191(Lila Barrera Hernandez et al. eds., 2016).

Owanate is keen on issues concerning energy project finance, sustainability and commercial transactions. An LL.M graduate of the University of Houston Law Center's Energy and Natural Resources Program, he is a member of the Association of International Petroleum Negotiators (AIPN), and is devoted to developmental research in the energy sector

#Energy #SubSaharanAfrica #Energydemocracy #Energysharing #communityownership #crowdfunding

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