Types of supported projects
Support financing for mini grid developers can be available through the Rural Energy Fund (REF), which is managed by the Rural Electrification Agency (REA). REF support is technology neutral. Projects should comprise a least cost approach to serving new areas with electricity, i.e. a least cost solution among comparable alternatives. Categories of rural energy projects that can be supported are:
- Distribution line extension projects: This category comprises projects for the extension of existing distribution lines to cover new and/or previously unelectrified areas. These types of projects can be justified, as a least cost option, when the volume of demand over a 15 year time horizon is such that an extension of existing distribution lines to new areas implies savings in diesel operations.
- Mini grids or isolated grids: This category comprises grids that are sufficiently far from the national grid to be cost effective solutions to providing certain areas with electricity. The least cost technology option could be renewable energy capacity, agro-industrial generating capacity currently used for self-generation (e.g. bagasse cogeneration), hybrid solutions, etc. depending on the specific context of the area to be served.
- Stand-alone systems: This category comprises photovoltaic (PV) systems which have limited capacity and offer less scope for income generating activities than the two aforementioned categories. Typically, they can be the only viable option for households, small commercial establishments, health centres, schools and community halls in isolated and dispersed rural areas.
- Embedded generation: This category comprises electricity generation plants connected to the distribution network (33 kV and lower). Generally, embedded generation comprises smaller generators that use a variety of generation technologies, e.g. biogas, biomass, PV, wind turbines and small hydro.
Funding WindowsThe following funding windows are currently available:
- Matching grants
The matching grants are typically not investment support but rather support to preparatory work and/or support to developing new and innovative approaches on a cost-share basis (co-financing) with a Project Developer.
Indicative activities eligible:
- Market development activities (e.g. market studies, promotion, education)
- Business improvement (e.g. staff training, business plan preparation)
- Product development activities (e.g. assembly optimization study, testing)
- Pre-investment and preparation activities (e.g. preparation studies for licenses)
- Market Entry (e.g. establishing new outlets and networks, demonstrations)
- New initiatives (e.g. new alliances and partnerships, new territories)
- Performance grants This comprises Investment support on a cost-sharing basis (co-financing) with a Project Developer. Financing or acquisition of existing assets (including land) or refinancing of existing debts or accrued interest is not eligible for performance grants.
Project IdentificationRural energy projects can be identified through a variety of means such as:
- Requests for energy supply submitted to the Ministry of Energy and Minerals (MEM), the REA or a DNO from communities, social service centres and individuals.
- The Government may indicate priority projects
- The REA may, as part of its work, identify potential project
- Projects identified by a DNO such as a transmission/distribution line extension project.
The Project Developer submits a Concept Note to the REA in order to get a preliminary assessment of whether the planned project is eligible for support from the REA or not. The Concept note should, inter alia, include:
- The background of the prospected project
- Market assessment
- Energy resource assessment
- Technical assessment
- Management & institutional aspects
- Financial assessment
- Environment and social assessment
- Risk Analysis
Concept Note Appraisal
The Concept Note submitted is assessed by REA in order to ensure that it is aligned with the REA mandate and objectives and that it is eligible for support. REA will provide feedback to the Project Developer on the Concept note within one (1) month from the submission date.
The project will be categorized according to the same project sizes used by EWURA if applicable and in other cases by investment costs and technique.
Prefeasibility Study and draft Business Plan
The Project developer prepares a pre-feasibility study and a draft business plan for the proposed project to determine the project’s technical, economic, financial, social, environmental and operational viability. It should be noted that only projects which are non-financially viable without capital support but otherwise viable shall be eligible to receive capital support from REA.
Application for Grant
The project developer submits a Grant Application Form to the REA together with the pre-feasibility study and draft business plan in order to get a provisional reply from the REA on the indicative amount that the REA could make available for the project. These three documents comprise the project package submitted by the Project Developer in order to grant access to financial support by REA.