Energy inclusion for rural households in Africa: A case of Rwanda
Lack of electricity connection and regular power outages are cited as some of the leading causes for slow growth and businesses failure in most African countries. This then results to the vicious poverty cycle in rural communities across the continent. To deal with this perennial challenge, the government of Rwanda has implemented electrification programmes in the past; and it has audacious plans for the future.
As of 2009, only 10% of the total population in Rwanda had access to electricity. Fast forward as of 2020, official statistics show that access to electricity in Rwanda had risen to 56% of the population. Of the 56% who have access to electricity, 15% are using off-grid solutions.
Government of Rwanda Electrification Plan
Looking into the future, the government of Rwanda has a national electrification policy targeting 100% coverage of the country by 2024. The goal is to have 52% of the population connected to the grid; while 48% of the population mostly in the rural areas get covered through off-grid solutions. The country targets to make about 1.7 million off-grid connections by 2024.
To set the pace for this rapid off-grid electrification plan, in 2019 the government of Rwanda published the National Electrification Plan (NEP) and the Ministerial Guidelines on Minimum Standards of Solar Home Systems (SHS). These two policy documents provide clarity and guidelines on the types of SHS that are eligible for installation in Rwanda, and the off-grid areas where they can be sold.
The government went a step further and commissioned the development of the Off-Grid Monitoring Information System (OMIS) to be used to track all the SHS deployed in the country. The system is being managed by the Energy Development Corporation Limited (EDCL) to ensure only quality SHS are installed; and track areas that have been covered as the installation continues across the country.
Private Sector Involvement
Government initiatives from the policy perspective seem to be working out well; however, the government needs the private sector stakeholders for SHS deployment across the country to succeed. Currently, there are about 20 companies licensed to procure and install Stand-Alone Solar (SAS) systems in Rwanda. However, only 4 leading companies (Bboxx, Ignite, One Acre Fund and Mobisol) are most active due to financial constraints for the smaller players.
The Pay As You Go (PAYG) model used by the suppliers has left most of the smaller players struggling with low liquidity. Collections from the households are slow since they are still recovering from the economic cooling off caused by the Covid-19 pandemic. In addition, raising of the quality for SHS eligible for installation in Rwanda made the new systems unaffordable to most rural households, hence slowing down the number of new connections.
According to the Multi-Tier Framework survey done in 2018, 78% of the rural households in Rwanda spend less than one dollar per month on lighting and mobile charging bills. 91% of them spend less than USD 1.8 per month on their lighting and mobile charging bills; while only 5% spend more than USD 3 on the same.
The above household expenditure is grossly misaligned with the PAYG pricing provided by most of the SAS suppliers in Rwanda. Due to the high quality standards required by law, the suppliers have to pay higher prices for the systems they install; and transfer the cost to their customers. This raises the average monthly installment for a household to USD 3.9; which is way above what 95% of the rural households can afford.
Affordability therefore becomes the main hindrance to the fast connectivity envisioned by the government and the electrification targets set for 2024.
Development Partners Interventions
To deal with the affordability challenge, the government of Rwanda in collaboration with the World Bank and other partners have introduced subsidies to enable the households to acquire the SHS. Through the Results Based Financing (RBF) model, the government is subsidizing the cost of acquiring the SHS for the poor rural households.
Under this model, the government pays the subsidy amount to the suppliers who have signed memorandums of understanding with the Energy Development Corporation Limited (EDCL) after confirmed successful installations. The remaining small amount is paid by the households directly to the suppliers through the PAYG model.
It is this hybrid model of using the RBF to subsidize the cost of the SHS and having the households pay the remaining balance through PAYG model that is expected to boost demand going forward. Ultimately, this will help the government of Rwanda to achieve its target of electrifying 1.7 million households through off-grid solutions in the next couple of years.
Having been implemented successfully in Rwanda, the RBF model is ripe for replication across other African countries as the world transitions into a green recovery powered by clean energy in 2022 and beyond.
Author: Jeremy Riro