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Accounting for finance in electrification models for sub-Saharan Africa

Author

Listed:
  • Churchill Agutu

    (Energy and Technology Policy Group, ETH
    Kigali Collaborative Research Centre (KCRC))

  • Florian Egli

    (Energy and Technology Policy Group, ETH
    UCL Institute for Innovation and Public Purpose (IIPP))

  • Nathaniel J. Williams

    (Kigali Collaborative Research Centre (KCRC)
    Rochester Institute of Technology)

  • Tobias S. Schmidt

    (Energy and Technology Policy Group, ETH
    Institute of Science, Technology and Policy, ETH)

  • Bjarne Steffen

    (Institute of Science, Technology and Policy, ETH
    Climate Finance and Policy Group, ETH)

Abstract

Electrifying 600 million people in sub-Saharan Africa will require substantial investments. Integrated electrification models inform key policy decisions and electricity access investments in many countries. While current electrification models apply sophisticated geospatial methods, they often make simplistic assumptions about financing conditions. Here we establish cost of capital values, reflecting country and electrification mode (that is, grid extension, minigrids and stand-alone systems), and specific risks faced by investors and integrate them into an open source electrification model. We find that the cost of capital for off-grid electrification is much higher than currently assumed, up to 32.2%. Accounting for finance shifts approximately 240 million people from minigrids to stand-alone systems in our main scenario, suggesting a more cost-effective electrification mode mix than previously suggested. In turn, electrification models based on uniform cost of capital assumptions increase the per kWh cost of electricity by 20%, on average. Upscaling and mainstreaming off-grid finance can lower electrification cost substantially.

Suggested Citation

  • Churchill Agutu & Florian Egli & Nathaniel J. Williams & Tobias S. Schmidt & Bjarne Steffen, 2022. "Accounting for finance in electrification models for sub-Saharan Africa," Nature Energy, Nature, vol. 7(7), pages 631-641, July.
    • Handle: RePEc:nat:natene:v:7:y:2022:i:7:d:10.1038_s41560-022-01041-6
    DOI: 10.1038/s41560-022-01041-6
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    Cited by:

    1. Jeuland, Marc & Babyenda, Peter & Beyene, Abebe & Hinju, Gabriel & Mulwa, Richard & Phillips, Jonathan & Zewdie, Samuel A., 2023. "Barriers to off-grid energy development: Evidence from a comparative survey of private sector energy service providers in Eastern Africa," Renewable Energy, Elsevier, vol. 216(C).
    2. Jacob Dalder & Gbemi Oluleye & Carla Cannone & Rudolf Yeganyan & Naomi Tan & Mark Howells, 2024. "Modelling Policy Pathways to Maximise Renewable Energy Growth and Investment in the Democratic Republic of the Congo Using OSeMOSYS (Open Source Energy Modelling System)," Energies, MDPI, vol. 17(2), pages 1-27, January.
    3. Müller, Leander A. & Leonard, Alycia & Trotter, Philipp A. & Hirmer, Stephanie, 2023. "Green hydrogen production and use in low- and middle-income countries: A least-cost geospatial modelling approach applied to Kenya," Applied Energy, Elsevier, vol. 343(C).

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