New integrated business model for African rural utilities

24-11-2009, Kampala, Uganda

A recent REEEP project looked into building a business case for rural integrated energy service utilities (IEU) in several African countries. The basic idea was to look at how a rural utility there could supply on-grid, off-grid and thermal energy needs in rural communities in a way that could present a viable business model. The project budget was €114,850.

The concrete output was to develop guidelines and reference materials for governments, regulators, donors and investors/implementers to use in planning and operating a rural IEU. The resulting template IEU business plan outlines the types of information required for investment decisions and provides growth paths.

“In developing this model, there wasn’t much in the way of previous examples to be able to benchmark or best practices to analyse,” notes Robert Aitken of Restio Energy, who implemented the project, “it was more an exercise in looking at conditions on the ground in South Africa, Tanzania and Uganda and coming up with two case studies for a new integrated utility concept – integrated in the sense that it brings together off-grid and on-grid energy sources. It meant looking at the policy environment in each country and the types of technologies that were being supported, and developing a rural utilities business model to match the reality.”

Some countries are more amenable than others to off-grid solutions generally, and this project has shown Uganda to be particularly receptive to the idea. In June 2009, a workshop was held in Kampala which brought together a range of stakeholders, including private concessionaires of rural utilities, other NGOs, and most crucially senior participants from Uganda’s Rural Electrification Agency.

The workshop was presented with the complete integrated rural energy utility concept, in effect a generic template business plan that includes technical aspects of an integrated rural utility, its financing, and how to get it up and running.

The Ugandan government is likely to work with REEEP to take this concept to the implementation stage, and discussions are under way between the two to facilitate this. “Now having developed the general business model for an integrated rural utility, we are now looking for an opportunity to actually implement one,” says Aitken with a smile, “This would be a natural conclusion to the work we’ve done so far, and we are looking at a future REEEP funding round with this in mind.”

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