Ugandan off-grid energy market accelerator mapping the market

Ugandan off-grid energy market
accelerator
Mapping the market
This material was prepared by Open Capital

Advisors, is confidential, and may contain
proprietary information. It is intended only for
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Open Capital has partnered with the Shell Foundation to increase
off-grid energy access & reduce market barriers
Substantial progress to-date Our goal is to facilitate further growth
• Uganda has seen considerable growth in off- • Partnership has been formed between Shell
grid energy access through innovative products, Foundation & Open Capital Advisors (OCA), in
strong investor and donor interest, & growing close collaboration with DFID/Energy Africa &
political will USAID / Power Africa
• Many stakeholders have invested time & • Goal is to support stakeholders to reduce
resources to advance access across tiers market barriers through direct initiatives &
• Substantial research has been conducted to improve energy access across tiers
identify barriers to continued growth • Accelerator will build credibility as a neutral
party to coordinate resources and provide
support to current & future initiatives
We believe there is an opportunity to accelerate energy access by reducing market barriers.
1
In 2017, the market accelerator seeks to identify key market
barriers, prioritize high-impact initiatives, & determine viability
Current focus
Short-term: Mid-term: Long-term:

Identify market barriers Prioritize initiatives Determine final form
• Interact with off-grid industry • Analyze paths to universal • Understand how the market
stakeholders to understand access in Uganda accelerator could continue its
current initiatives, identify gaps, • Provide support for programs work and impact in the future,
and gain alignment on which are already running either as part of an existing
most important to address organization or as a new entity
• Prioritize and coordinate
• Develop Market Map of current resources for ~3 high-impact
activities across industry initiatives
12 months
2
In assessing the state of the market, the OCA team drew from
consultations with 50 stakeholders across sectors
• MKOPA • Village Energy • Konserve • Off-Grid Electric
• Fenix • Solar Now • Bakulu Power • Mesh Power
Private Sector • Solar Today • Brightlife • Absolute Energy • Aptech Africa
• Village Power • Biolite • Azuri technologies • Energy Systems Uganda
• Ministry of Energy and Minerals Development (MEMD)

• Rural Electrification Agency (REA)
Government • Uganda Energy Credit Capitalization Company (UECCCC)
• National Environment Management Authority (NEMA)
• DFID / Energy Africa • WWF • Shell Foundation • Embassy of Sweden

• USAID / Power Africa • KfW • World Bank • Embassy of Netherlands
Development orgs • UNCDF • PATRP • ADF • Embassy of Norway
• GIZ • IFC • RECP / EUEI PDF • USAID / Global Dev Lab
Local banks Industry associations Consultants

• Stanbic Bank • UNREEEA • Energy for Impact • Rocky Mountain Institute
Other stakeholders (RMI)
• Equity Bank • USEA • UDET
• MIT D-Lab
• Diamond Trust • UNACC • Geo Gecko
Bank (DTB) • NRECA
• GOGLA • NARUC
3
Through consultations we were able to map relationships & off-grid
market initiatives
Interviews & research were tailored to understand objectives & how they interact with each
other
Private sector Government Development orgs Other stakeholders
• Understand • Understand • Review current • Build holistic view

available products, different sub- interventions, of facilitating
current market industry focus broader mandates, market actors &
share, growth areas, major preferred models their role in capital
plans, challenges initiatives and existing provisioning,
to scale and underway, plans / collaborations industry research,
strategic strategies, and & coordination
differences sensitivities
4
Industry overview
5
Industry overview Intro Private sector Associations Dev partners Government
Industry overview presents actors & activities across off-grid space
• The industry overview section is divided by the four categories of

industry actor: Private sector; Industry associations; Development
partners; & Government
Structure • In each sub-section, actors are presented along with relevant
industry activities
• In this section, we seek to provide a holistic & objective

description of the off-grid industry in Uganda across key
stakeholder categories
Purpose
6
SHS distribution is driven by the private sector, with majority of

sales coming from top int’l firms
Operator Geos Units sold Branches Price of PAYG enabled Capital raised
lowest cost
system
UG, ZM 105,000 70 $164 Yes >10M
UG, KE 80,000 32 $278 Yes >20M
$280
UG, KE 15,500 45 Yes <10M
UG, ZM,
10,000 12 $100 Yes NA
MZ, KE, TZ
UG 6,000 6 $300 Yes NA
UG 8001 25 $81 Yes NA
Other small local

Data not readily available
players
Sources: OCA interviews & consultations, supplemented by: http://www.fenixintl.com/uganda, http://www.m-kopa.com/products/ ,https://www.solarnow.eu/solar-solutions/,
7 1. BrightLIfe is a subsidiary of FINCA Intl. who has been selling small pico for a number of years, with sales over 24,000 units. These are not SHS and are not included in this summary.
Cookstove market is fragmented with over 77 manufactures /

distributors operating in Uganda; large variability in quality & cost
>75% of UG cookstove distributors NGO & SME Stoves range in quality, cost, & efficiency
Number of UG The majority of sales have come from low cost

30 distributors1 distributors, typically “charcoal improved” stoves
• Entry level clean cookstoves are made of ceramic clay with
few barriers to production
• Many small cookstove businesses produce & sell in rural
20 areas, making exact sales tallies difficult
Majority of high-
efficiency stoves Select number of firms command majority of investment
sold through int’l attention, importing highly engineered, efficient stoves
biz • Envirofit manufactures & distributes
10
energy-efficient charcoal & wood stoves
throughout East Africa
• BioLite produces & sells high-efficiency

biomass cookstoves
• Stoves are able to accommodate mobile
phone charging & LED lights
Unlike SHS, cookstove market is very fragmented
• Uganda’s cookstove market is dominated by smaller
• Ecozoom is a Kenya-based firm which
players, with no core contingent of companies dominant
manufactures simple & efficient Jiko
in the market
stoves
• Many smaller, SME distributors are located in rural areas,
• A recent partnership with SolarNow has
producing stoves domestically
brought these products to UG
Sources: 1. http://catalog.cleancookstoves.org/stoves
8 Firms: http://envirofit.org/product/cookstoves, http://www.bioliteenergy.com, http://www.ecozoom.co.ke/product-category/ecozoom-products/jikos/
Renewable energy associations represent private sector interests,

advocate policy to government
Uganda National Renewable Energy and Energy Efficiency Alliance
Mandate & description Membership & capacity
USEA • Seeks countrywide mobilization of solar • 60-70 members consisting of engineers running
Uganda Solar providers, coordinating stakeholders, playing an local businesses and solar product distributors;
Energy Association advocacy role and capacity building receives support from dev partners like RECP
BEETA
• Promotes biomass energy efficient technologies • 50 member companies involved in production of
Bio-mass Energy
through networking, sharing information, and biomass efficient technologies, such as briquettes
Efficient
developing knowledge among member & stoves, & institutions involved in research and
Technologies
organizations / individuals development of biomass energy
Association
HPAU
• Champions hydropower development in the • Membership open to private sector companies,
Hydropower
hydropower sub-sector through advocacy, organizations & associations, consumers, & policy
Association of
capacity devt & resource mobilization makers; receives support from GIZ, CREEC, & WWF
Uganda
EEAU
• Aims to foster provision for quality energy • Large capacity of technical members working to
Energy Efficiency
efficiency services, enhancing research, get association accreditation to certify Energy
Association of
innovation & knowledge transfer Efficiency Professionals in the country
Uganda
UNBA • Seeks to unite and support stakeholders as well • National umbrella organization of the UG biogas
Uganda National as existing regional associations in the biogas sector; four associations organized according to
Bio-gas Alliance sector regions, supported by partnership with GIZ
9 Source: OCA interviews & consultations, http://unreeea.org

The European Union is supporting a number of programs to

influence the private sector & advance off-grid access (1/2)
European Union Target Target action Approach Results to date Affiliated
(EU) Industry organizations
Scaling–up rural • Scale up the use of • Provide business • Set up pilot in Kasese Implementers:
electrification using solar PV systems at training & specific with CSOs like SACCOs WWF (under
innovative solar SHS schools, health solar PV energy Champion
• Scaling pilots to Arua
photovoltaic (PV) clinics, and business training to CBOs Districts
and Masindi
distribution models1 Mini- levels in the district Initiative)
• Implemented under
grids of Kasese by • Planning to develop 20
Champion District
building local mini-grids (5kw) in Funders:
Cook initiative
Ongoing capacity to install & Kasese after successful ACP-EU
stoves maintain solar PV SHS pilot
systems
Access to energy • Increase the energy • Locals groups are • Training in local Implementers:
services in rural and security of rural trained to create and communities on Church of
peri-urban areas in SHS households in Northern use sustainable and constructing and selling Sweden
Northern Uganda Uganda through more environmental clay stoves
(Teko Wa Project) 2 Cook increased availability of friendly energy sources, • Partnership with Funders:
stoves biomass, energy- like energy-saving ACP-EU
Barefoot power
Ongoing efficient stoves, and PV stoves and affordable providing solar lighting
solar units solar system and accessories in
Bio
Pader, Kitgum, Lamwo
fuels
and Agago districts
10 Source: OCA interviews & consultations, supplemented by 1. http://database.energyfacilitymonitoring.eu/acpeu/project/4624/, 2. https://www.barefootpower.com/projects/lwf.html

The European Union is supporting a number of programs to

influence the private sector and advance off-grid access (2/2)
European Union Target Target action Approach Results to date Affiliated
(EU) Industry organizations
Providing access to • Project focused on • Disseminate solar PV • Distribution of clean Implementers:
modern energy for increasing the use and improved stoves cookstoves to hhs GIZ
northern Uganda SHS of solar PV, • Build capacity for • Street lighting project
(PAMENU)1 improving Funders:
intermediaries & in Yumbe Town
On- household ACP-EU
training of local stove Council
Completed grid cookstoves and builders
mini-hydro power • Construction of the
Cook for small grids • Create awareness pico-hydro power sites
stoves campaigns
• Provision of health
• Coordinate centers with solar PV
installation of MHP & drug storage
and mini-grids
Scaling up access to • Working to scale up • Provide a number of • On track to provide Implementers:

modern electricity access, in the households and SMEs 8,200 households and Foundation
services on a SHS
predominantly rural, with access to energy SMEs in Cameroon, Rural Energy
regional scale in poor communities services via SHS and Mali, Uganda and Services
rural Sub-Saharan of the targeted solar mini-grids Guinea-Bissau with Funders:
Africa by means of a countries in access to electricity ACP-EU
fee for service • Facilitate bi-annual
Cameroon, Mali, through SHS
business model2 Mini- workshops for areas
Uganda & Guinea-
grids in the four countries
Bissau
Ongoing concerned
Sources: OCA interviews & consultations, supplemented by

1. http://energyfacilitymonitoring.eu/page/2/?option=com_docman&task=cat_view&gid=12&limit=15&limitstart=0&order=name&dir=ASC&Itemid=12;
11 2. http://database.energyfacilitymonitoring.eu/acpeu/project/4341/; http://database.energyfacilitymonitoring.eu/acpeu/project/4625/
World Bank has partnered with the government to implement the

15 year ERT initiative to improve lives of rural households
World Bank Target Target action Approach Results to date Affiliated
Industry organizations
Energy for Rural • Increase access to Rural energy • Financed extension of Implementers:
Transformation energy and ICTs in infrastructure: the existing REA, MOWE,
Phase II (ERT-2)1 rural Uganda, • Off-grid investments, distribution network, MOH,MOESD,
SHS concentrating on technical assistance & installation of UECCC, PSFU,
Completed three components: training household and MEMD
1. Rural energy • Credit support facility institutional solar PV
On- infrastructure through UECCC • Financed solar Funders:
grid 2. Broadband • Business subsidy installations for rural World Bank/GEF
extension through PSFU schools, health
3. Energy Energy development: clinics, water facilities
development • Cross sectoral links & & related costs for TA
impact monitoring and training
Energy for Rural • Increase access to Off-grid component: • USD 8.5 million Implementers:
Transformation SHS electricity in rural areas • Installation of solar PV fund to be REA, MOWE,
Phase III (ERT-3) 2 of Uganda, systems for public disbursed to local MOH,MOESD,
On- concentrating on 3 institutions in rural banks to provide UECCC, PSFU,
Ongoing grid components: areas working capital MEMD
1. On grid access • Business development financing to SHS
Mini- 2. Off-grid access support PAYG operators Funders:
grids 3. Institutional • Provision of credit World
strengthening facilities Bank/GEF
through impact • Quality standards
monitoring enforcement support

1. http://www.oag.go.ug/wp-content/uploads/2015/12/ENERGY-FOR-RURAL-TRANSFORMATION-ERT-PCU-II-REPORT-OF-THE-AUDITOR-GENERAL-2014.pdf
12 2. http://www.energyandminerals.go.ug/downloads/ERDreportERTII1.pdf; http://projects.worldbank.org/P133312?lang=en
Add’ly, World Bank runs independent programs to advance access

& create a conducive environment for private sector growth
World Bank Target Target action Approach Results to date Affiliated
Lighting Africa • Enable access to off- Catalyze the market • Market assessment Implementers:
Campaign1 SHS grid lighting and through: study to determine Broad global
Ongoing energy products for demand for solar alliance – imps.
• Market intelligence
250 million people products, market varying by
across sub-Saharan • Quality assurance bottlenecks, & country
Africa by 2030 • Access to finance assess options for
supporting the Funders:
• Consumer education growth World Bank /
• Business development • Consumer IFC
support awareness
• Policy & regulation campaigns
• Supporting UNBS in
adopting and
enforcing
internationally
recognized
standards
Source: OCA interviews & consultations, supplemented by

13 1. https://www.lightingafrica.org/country/uganda/,
USAID’s Power Africa is playing a crucial role in leading and

coordinating initiatives in Uganda (1/2)
USAID / Power Target Target action Approach Results to date Affiliated
Africa Industry organizations
The Scaling Off-Grid • Provide seed funding • USD 4 million to • Awards given to Implementers:
Energy Enterprise to solar start-ups to enable recipients to Greenlight Planet, US Global Devt
Awards1 support geographic expand home solar Village Energy, d.light, Lab through
SHS Fenix, Orb Energy,
expansion power solutions to Development
Ongoing throughout Africa, existing and new Vitalite, PEG Africa and Innovation
test new business African markets, Shinbone Labs Ventures (DIV)
models and tap into improve payment and
private and public distribution processes, Funders:
financing and bring down costs Power Africa,
for customers SOGE
The Off-grid Energy • Promote innovative • Awards grants of up • Awarded a number of Implementers:
Challenge2 SHS solutions that to USD 100,000 each Ugandan enterprises USADF
develop, scale-up or to African companies including Green Heat,
Ongoing extend the use of and organizations One Lamp, GRS Funders:
proven technologies providing off-grid Commodities Power Africa,
for off-grid energy – solutions that deploy GE Africa
Mini- reaching renewable resources
grids communities not and power local
served by existing economic activities
power grids

1. https://www.usaid.gov/news-information/press-releases/oct-14-2016-usaid-announces-4-million-solar-start-ups-african-grid-energy;
http://www.usadf.gov/power-africa/
14 2. http://www.usadf.gov/pressreleases/2016/9/21/us-african-development-foundation-and-ge-africa-announce-new-partnership-for-women-energy-challenge

Quality Assurance • Address some of the • Provide a flexible • Provided a formalized, Implementers:
Mini- root challenges of alternative to rigid common standard for NREL, DOE
Framework for
grids providing safe, top-down standards classifying energy
Mini-Grids1
quality, and by defining: consumers Funders:
Ongoing financially viable  Levels of service • Facilitated aggregation of Power Africa,
mini-grid power framework mini-grid projects & Global LEAP
systems to remote  Accountability unlock private investment
customers and performance from data generated
reporting • Supporting
framework implementation of
consumer protections,
thus a better consumer
service
REA Master plans • Rapidly increase • Develop five new • Developing the plan for Implementers:
project Mini- electricity access in its master plans for more 12 of the 13 service NRECA, REA
grids rural areas additional rural territories , all
Ongoing service territories in concessions to the private Funders:
On- Uganda sector Power Africa
grid • Identified 90 mini-grid
sites and distributed
600,000 SHS systems in
the last 16 months

15 1. http://www.nrecainternational.coop/where-we-work/uganda , www.nrel.gov/publications

Uganda Electricity • Support the • Develop a practical Held technical workshop Implementers:
Mini- development of a guide to the to: NARUC, ERA
Regulatory
grids regulatory and regulatory treatment • Examine international
Partnership1
policy framework for of mini-grids to best practices on mini- Funders:
Ongoing electricity access outline the practical grid technical USAID / Power
with focus on the issues and potential requirements (e.g. Africa
role of mini-grids to decision-making tracks interoperability,
address the for regulators compatibility)
electricity needs of • Implement a technical • Develop an outline on
rural customers workshop on mini-grid mini-grid technical
technical, performance requirements,
and interconnection interconnection to the
guidelines to assist national grid and
ERA in developing business models for
tailored technical and interconnection, power
performance quality, and service
guidelines for mini- quality
grid providers of
electricity in rural
service territories

16 1. https://www.naruc.org/international/where-we-work/africa-middle-east/uganda
DFID initiatives work to increase investment in off-grid energy

firms, overcome regulatory barriers & foster innovation
DFID Target Target action Approach Results to date Affiliated
Energy Africa • Accelerate • Campaign to • Coordinated and Implementers:
Campaign1 expansion of improve policy and signed Energy Africa MEMD, DFID,
SHS household solar support conditions Compact with Uganda REA, SE4ALL,
Ongoing market to help bring to accelerate government and other USEA, USAID /
Mini- universal electricity market-based SHS stakeholders making Power Africa,
grids access in Africa delivery commitment to UNCDF, et al.
forward from 2080 • Core tool is Energy address several
on current trends to Africa Country challenges facing the Funders:
2030 Compacts matched SHS market DFID
with a coordinated
multi-donor support
offer
Transforming
• Address critical • Partnership with Shell • Shell foundation Implementers:
Energy Access
evidence gaps, test Foundation to support created market Shell
(TEA)2 SHS innovative technology private sector accelerator in Uganda foundation,
applications, business innovations to advance off-grid Innovate UK
Cook models, financing, & access
Ongoing • Support Innovate UK’s
stoves skills development to Funders:
Energy Catalyst to • Testing P2P Solar
accelerate the DFID
stimulate technology crowding platform
provision of
innovation • Scoping potential
Bio affordable, clean
fuels energy based services • Build other strategic partnership with Gates
to poor households & innovation partnerships Foundation on Mission
enterprises Innovation

1. https://www.gov.uk/government/news/energy-africa-campaign; https://www.contractsfinder.service.gov.uk/Notice/1a44f944-fe22-4e77-b300-2da4fbb6068e
17 2. http://energyaccess.org/news/recent-news/applied-research-program-transforming-energy-access/
Embassy of the Netherlands runs programs to support the private

sector & advance energy access
Netherlands Target Target action Approach Results to date Affiliated
Milking the Sun & • Provide dairy and • Subsidy to provide • 6,500 systems sold as Implementers:
Harvesting the Sun1 crop farmers and farmers with access to of October 2016 (NB: Solar Now,
SHS their households 37,000 solar products Harvesting the Sun Barefoot Power,
Ongoing with high quality, with reliable after started in July 2016) Uganda Crane
affordable and sales service Creameries
Solar sustainable solar Cooperative
agric. lighting systems and Union & other
app solar powered value chain
agricultural managers
appliances
Funders:
Government of
Netherlands

18 1. https://www.linkedin.com/pulse/milking-sun-barefoot-power
UNCDF’s global CleanStart program has partnered with other dev

partners to provide financing to local businesses & advance access
UNCDF Target Target action Approach Results to date Affiliated
UNCDF CleanStart1 • Supports low- • Risk capital • 2015 Energy Implementers:

SHS income hhs (performance-based Access Challenge UNCDF
transition to grant) to bring early funding five
Ongoing renewable energy stage business ideas to businesses in PAYG Funders:
Mini-
market solar and clean • RECF Uganda:
grids • Co-invests in early
cook stoves Embassy of
stage business ideas • Advisory services to
Cook through two-year Sweden in
of private companies address implementation
stoves partnership (2016- Uganda (RECF),
that can bring bottlenecks, facilitate
2017), cost share UNCDF
affordable clean linkages to partnership &
30% (cash & in-
Bio energy to under- funding opportunities • CleanStart
served markets kind)
fuels • Knowledge and learning Global: Austrian
• New round to fund Development
• Emphasis on the in the form of research
15 more SMEs - in Agency,
inclusion of women initiatives, M&E, &
clean cooking and Liechtenstein,
and youth in value networking events
solar (pico, larger Norad, Sida,
chain • Nationwide campaigns to SHS and micro- UNCDF
improve consumer grids) through 2 to
awareness & protection 3-year partnership,
• Partnerships with cost share TBC;
government, dev Clean Cooking
partners, & other Challenge Window
stakeholders to leverage Call for EOI
resources & strengthen launched in March
sustainability & impact (cost-share 40%)

19 1. http://www.uncdf.org/en/cleanstart
GIZ has provided support to both the government and private

sector to further advance access & support clean energy (1/2)
GIZ Target Target action Approach Results to date Affiliated
Promotion of • Promote sustainable • Support the Ministry Policy support: Implementers:

Renewable Energy SHS use of energy for of Energy in areas of • Energy programs GIZ, MEMD,
& Energy Efficiency social economic energy policy, structured in West Nile REA, ERA
program (PREEEP)1 empowerment, improvement of & Lango
increased access to market structures and • Quality management Funders:
Ongoing renewable energy, energy efficiency. system for the BMZ / GIZ
and efficient planning, steering and
• Support activities in
utilization of existing evaluation processes of
implementation of
energy resources MEMD
energy programs at
Focuses on three district level, • Fully operational GIS
areas: monitoring and lab
evaluation and Market development:
• Supporting clean
mainstreaming of
energy strategies • Capacity building
cross cutting issues
• Mitigating climate through associations
such as gender and
change HIV / AIDS • Awareness campaigns
• Promoting access to Licensing:
• Work through EnDev
energy to achieve advance • Standardized licensing
access procedures for small-
scale off-grid energy
projects with REA &
ERA

20 1. http://energyprogramme.or.ug/supporting-clean-energy-strategies
GIZ has provided support to both the government and private

sector to further advance access & support clean energy (2/2)
GIZ Target Target action Approach Results to date Affiliated
Promotion of Mini- • Promote Four components: • Created task force with Implementers:
Mini-
grids for Rural decentralized REA & the Ministry to GIZ,
grids 1. Develop off-grid
Electrification (Pro electrification strategy for the develop directive and MEMD,REA,
Mini-Grids)1 strategies such as support development ERA
National
Ongoing mini-grids to of mini-grid tender
Electrification Policy &
support mechanism Funders:
develop methodology
employment and BMZ/GIZ
to identify mini-grid • Ongoing support to
economic REA to promote
project locations
development development of site
2. Develop mechanisms identification expertise
• Develop for license
mechanisms to concessions, efficient
support private tenders
sector capacity for
installation and 3. Implement and award
operation of off-grid tenders to private
systems mini-grid
concessionaires in
villages
4. Promote productive
use in villages to raise
household incomes
& improve the
economic feasibility of
service providers’
business model &
tariff revenue
21 1. BMZ brief on “Promotion of Mini-Grids for Rural Electrification”
structure
The Shell Foundation has launched a number of Uganda-specific

initiatives to advance off-gird, support mini-grid development
Shell Foundation Target Target action Approach Results to date Affiliated
Off-grid market • Support off-grid • Create neutral body • Developed market map Implementers:
accelerator stakeholders - to coordinate stake report on Uganda off- Open Capital
SHS including the public holders and execute grid Advisors
Ongoing sector, private sector, high impact initiatives • Developing three high
Mini- and development that will advance off-
grids impact initiatives to
community - to grid access Funders:
reduce market barriers
Cook reduce market Shell
stoves barriers Foundation,
DFID
Catalyzing larger- Mini- • Provide support for • Providing project • Providing milestone Implementers:
scale solutions grids development of finance to pilot projects based funding to Absolute
specifically disruptive solutions • Supporting key Absolute Energy for Energy, others
designed to spur to increase the mini-grid at Kitobo
stakeholders in lobby
economic growth in availability of energy to articulate & pass key
rural areas Funders:
legislation governing
Shell
concessions,
Ongoing Foundation
guarantees, duties, &
feed-in tariffs
22 Source: OCA interviews & consultations

In addition to UG focused programs, GOGLA plays an important

role in working towards PAYG metric standardization globally
GOGLA Target Target action Approach Results to date Affiliated
Standardizing • Work with private • Work with • Held conference in Implementers:

reporting metrics sector operators & stakeholders to first Dubai in 2015 brought GOGLA
for PAYG SHS development harmonize around stakeholders together
partners to define & what metrics to discuss
Ongoing implement businesses need for Funders:
• Received support from
standardized investors GOGLA
SEAGAP & UNCDF
reporting on financial • Draw from business &
& impact metrics investor consultations,
will arrive at standard
metrics for key
financial & impact
definitions
Advocating for clear • Reduce and / or • GOGLA is assuming • Held call with private Implementers:
solar tax policy in establishing a clear an industry sector & USEA to GOGLA
Uganda SHS solar product tax association role, determine path forward
policy in Uganda coordinating with & gain alignment
Ongoing following the private companies & • Drafted a letter to the Funders:
governments dev partners to speak GOGLA
government making
decision to rescind as one voice to the argument for
tax exempt status government reinstating tax
exemption in Feb, 2017
23 Source: OCA interviews & consultations

Shell Foundation operates a number of global initiatives which

touch Ugandan market, enable private sector development
Shell Foundation Target Target action Approach Results to date Affiliated
Accelerating the • Support • Provide grants, • Creating blended Implementers:

growth of entrepreneurs in the innovative financing working capital facility DFID, OPEC /
early-stage SHS off-grid sector by products & OFID, et al.
• Built Odyssey - tech
partners1 working with partners technology
Mini- platform to help
to provide
grids • Support development standardize how
Ongoing investment, business Funders:
of business skills projects are valued
Cook skills and market Shell
training & market
linkages in order to • Helping to broaden Foundation
stoves linkages
scale their businesses range of products
and deepen impact beyond household
on BoP energy solutions to
include productive use
Working with other • Create greater • Improve ability to • Investigating various Implementers:
actors in the social SHS
‘syndication’ with measure impact ways to measure, price DFID, OPEC /
investment impact investors to • and sell impact to OFID, et al.
ecosystem1 Mini- Develop robust
grids reducing the risk and various organizations
performance
transaction cost of interested in results- Funders:
Ongoing evaluation
Cook securing growth based financing Shell
methodologies to
stoves capital track the cost- Foundation
efficiency of the
impact

24 1. https://www.shellfoundation.org/ShellFoundation.orn/new/media/Shell-Foundation-Reports/Access_to_Energy_Report_2014.pdf
Many development partners have partnered on initiatives to further

accelerate progress towards shared goals for access (1/6)
Multi-lateral Target Target action Approach Results to date Affiliated
Energizing • Achieve sustainable • Rural partner synergy • Increased access of BoP Implementers:
Development access to modern & private sector to improved cook GIZ – PREEP
(ENDEV)1 SHS energy services for development stoves – with more than
19 million people by approaches for cook- 500 rural stove artisans, Funders:
Mini- 2019 stoves & solar market trained and able to sell GIZ, SDC, DGIS,
Ongoing grids development higher number of DFID, MFA,
EnDev Uganda:
stoves – and to increase SDC, SIDA
Cook • Improve cook stoves • Implement innovative their income
stoves financing &
for 550,000 people
distribution schemes • Supported solar co.'s to
On- • Provide energy for implement end user
• Grid densification
grid lighting/electrical financing such as PAYG
applications for projects targeting no-
and consumer financing
pole connections &
157,000 people with local institutions
implement micro-
• Provide cooking hydro power projects • Implemented micro-
energy for 500,000 hydro power projects in
people Bwindi and Saum and
• Provide modern handed over to REA
energy services for connecting more than
1100 social 200SMEs, tourist lodges
institutions and and a local hospital
1600 SMEs

25 1. https://www.giz.de/en/worldwide/24209.html, http://endev.info/content/Uganda

accelerate progress towards shared access goals (2/6)
Africa-EU Catalyze development • Policy advisory to • Provided critical Implementers:

Renewable Energy of markets to: support the information on energy EUEI PDF
Cooperation SHS development of markets through in-
• Promote access to
Programme (RECP)1 regulatory depth studies
Mini- energy, supporting
grids sustainable economic frameworks • Helped identify Funders:
Ongoing Africa-EU
growth • Private sector concrete project
Energy
• Develop value chains, cooperation by
Cook opportunities through
Partnership
stoves facilitating co- on the ground scouting
providing (African Union,
investment and and matchmaking btw
employment European
On- opportunities sharing of expertise project developers, tech
Union)
grid suppliers & service
• Enhance energy • Access to finance by
providers
supporting
security and mitigate
development of • Organized networking
the impacts of
bankable projects and information events
volatile fossil fuel
prices • Innovation and skills • Supported access to
development through finance through
• Mitigate climate
African-European targeted advisory
change by
network, including services and an online
substituting clear
research and private database of funding
energy sources for
sector institutions instruments
fossil fuels

26 1. https://www.africa-eu-renewables.org/about-recp

Scaling OffGrid • Accelerate growth in • Platform for leading • Support companies by Implementers:
Energy (SOGE): the off-grid energy donors and investors helping geographic KPMG Finland
Grand Challenge for SHS market to provide 20 to incentivize expansion, test new
Development1 million households in technological business models and
Mini- sub-Saharan Africa innovation, fund early tap into private and Funders:
grids with access to clean stage companies, and public sources of USAID / Power
Ongoing and affordable support critical finance Africa,
Cook modern energy elements of the off- • Encourage innovation DFID / Energy
stoves services grid ecosystem Africa,
in products and
Shell
services customers
Foundation
want and need,
including energy
efficient household
appliances, energy
storage, and digital
financial services.
• Promote policy and
regulatory reforms,
spurring the growth of
mobile payment
systems, and building
capacity in local
markets
Source; OCA interviews & consultations, supplemented by

27 1. http://www.cleanenergyministerial.org/Events/scaling-off-grid-energy-grand-challenge-for-development-new-funding-opportunity-80276; https://www.scalingoffgrid.org/

Energy and • Contribute to • Funding projects in all • Providing sustainable Implementers:

Environment reduction poverty by fields of renewable energy and agro hubs KPMG Finland
Partnership/ SHS promoting inclusive energy and energy in Kamwenge district
Southern and East and job-creating efficiency, bridging • Providing clean energy
Africa1 Mini- green economies, the gap between a Funders:
for the Ugandan dairy
grids and by improving good idea and a Ministry of
industry, biogas for
Ongoing energy security in the bankable project Foreign Affairs
milk cooling
Cook Southern and East of Finland, DFID
stoves Africa regions while • Projects are selected • Providing sustainable and The
mitigating global through two funding energy services for Austrian
climate change windows from early Kitobo island Development
stage to market ready Agency
projects, including last
mile feasibility
studies, pilots,
demonstrations,
commercial scale-ups,
replication and
rejuvenating projects

28 1. http://eepafrica.org/projects/uganda/

Off-Grid • Seek to catalyze new • USD 600,000 • Have closed application Implementers:
Refrigeration technological competition to window , finalists going Global LEAP
Challenge1 SHS advancements and increase the through lab and field
identify best-in-class availability of off-grid testing of products Funders:
Mini- commercially energy refrigeration • Will announce winners USAID / Power
Ongoing grids available off-grid solutions in August 2017 Africa,
refrigerators US Global Dev’t
Cook Labs, DFID / Ideas
stoves • Increase the
to Impact, Global
availability of these
LEAP
high-demand
products, and in turn
increase demand for
appropriate solar
home systems.

29 1. https://www.scalingoffgrid.org/refrigeration-competition; http://globalleap.org/refrigerators/
The Government has dedicated capacity and resources to initiatives

to advance access to energy and participation of private sector
Mandate in industry Off-grid initiatives & partnerships
• Has the overarching mandate to promote • Implementing several initiatives

Ministry of Energy development of sustainable-use of energy and through ERT, in partnership with the
and Minerals mineral resources World Bank
Development
• Renewable energy department serves under this • Coordinating cross lateral projects
(MEMD)
directorate and runs a number of the programs for with other ministries such as MoE,
access both on and off the grid MoH
• Promotes equitable rural electrification access with • Implementing UG’s Rural

special regard to marginalized communities Electrification Strategy and Plan
(RESP) on behalf of MEMD
Rural Electrification • Provides oversight on how projects are designed and
Agency (REA) sequenced to provide appropriate energy services • Developing UG’s Rural Electrification
based on their value to advance access & economic Master Plan with NARUC and USAID
development
• Facilitates investments in renewable energy sector by • Provides various products in

providing innovative financing products and technical partnership with dev partners and
Uganda Energy Credit assistance local financing institutions such as:
Capitalization
• Channels investment to projects as the administrator • Solar refinancing facility
Company (UECCCC
of Uganda Energy Capitalization Trust, the framework • Guarantee fund
for pooling resources from gov’t and development
partners • PAYG solar working capital
facility

30 http://www.rea.or.ug/functions.html , www.ueccc.or.ug
The Government has dedicated capacity and resources to initiatives

to advance access to energy and participation of private sector
Mandate in industry Off-grid initiatives & partnerships
• Issues licenses for generation, transmission, • Provides licensing for Absolute

distribution or sales of electricity, as well as ownership Energy’s island mini-grid
Electricity Regulatory or operation of transmission systems • Involved in licensing negotiations for
Authority (ERA)
• Establishes tariff structures and investigates tariff additional mini-grids & mini-grid
charges, approves rates, terms, and conditions of pilots, including those by GiZ & WWF
electricity services provided by transmission and
distribution companies
• Responsible for coordinating, monitoring, regulating • Responsible for producing regulations
and supervising environmental management in UG on Environmental Impact
National Environment Assessments (EIA) & reviewing
• Focuses activities on providing support to sustainable
Management submitted reports; EIA are required
development through the National Development Plan
Authority (NEMA) for mini-grid construction
(NDP)
• Formulates and promotes the use of standards • Working with Lighting Africa on
adopting and enforcing
• Enforces standards to protect public health and safety
Uganda National internationally recognized standards
Bureau of Standards • Ensures fairness in trade and precision in industry
(UNBS) through reliable measurement systems
• Assures the quality of locally manufactured products
to enhance the competitiveness of exports in regional
and international markets.

31 http://www.era.or.ug/, https://www.unbs.go.ug
Market insights
32
Market insights Intro Solar Home Systems Mini-grids Financing
Market insights section aggregates research & consultations to

assess state of off-grid in Uganda
• The Market insights section takes a data-driven approach to

industry analysis, seeking to present the state of off-grid
development by looking at the two leading solutions – SHS &
Structure mini-grids – & the financing landscape that enables their growth
• In this section, we seek to provide dimension & context to the off-

grid industry’s key players
Purpose
33
SHS operator branches typically located in higher-density regions;

SHS sales total ~260k units, with 93% of market unserved
Majority of SHS branches built in higher-density regions Only ~7% of addressable off-grid market is served
Total population 39 M
% of population off-grid 85 %
Total population off-grid 33 M
Grid extension
Existing grid
% of population above poverty line 62 %
Proposed gird Northern
Addressable market 21 M
Population density
Equivalent households 4M
Low High Units sold:
Fenix 105k
Eastern M-Kopa 77k
Central
SolarNow 15.5k
Village Power 10k
Other market 50k
Western
Total units sold 257.5k
Addressed market 7%
Unaddressed market need 93%
SHS operator distribution branches are located

predominately in higher-density areas, with few Figure does not include Chinese generics;
distribution or service centers in Northern & Eastern low-cost units are popular but low-quality – quickly
provinces requiring replacement
UG electricity grid & population density map: http://data-energy-gis.opendata.arcgis.com/
Population estimates from UN ESA 2015 estimates; Population off-grid estimates from IEA, World Energy Outlook 2014; Poverty line defined as <$1.25 per day from UN HDR
2014; Off-grid populations assumed to have same poverty rate as general population; Households assumed to be comprised of 5 people, UNFPA Kenya Estimate, July 2013; All
34 SHS PAYG unit sales are estimates based on OCA consultations
Leading operators sell to upper market, with lower income

populations unable to afford, left to buy low-quality units
Poverty line Typically on-grid
High
Unable to pay at any

price
Unable to afford high

Service level*
quality / service-level*
products
Unit cost
Quality retail Currently served by

Cost limit of tech + services offering
Typically on-grid
Cost limit of tech
Low
Low Customer household income High
High cost to provide service means many households unable to afford,

left to buy cheap units or continue with traditional fuels
* Service-level defined as products offered by businesses able to provide servicing & warranties. These products are of higher quality and are more expensive than Chinese generics.
35 Source: OCA analysis
Although a small band of income, these unserved populations

represent large portion of the Ugandan population
Percent of
population
Unable to pay at any

Though a narrow band in income, price
significant proportion of market
unable to afford high-quality units
Unable to afford high
quality / service-level
products
~25% of
Ugandan Currently served by
population offering
below
poverty line
Typically on-grid
Dividing income
varies, not clearly
~20% of population on-grid
defined
Low Customer household income High
36 Source: OCA analysis, income thresholds from the World Bank IBRD-IDA (http://data.worldbank.org/indicator/EG.ELC.ACCS.ZS)
The SHS ecosystem is the most developed, offers range of products

& price points
1,200 Unit cost USD

<10W 11-50W 50-100W >100W
1,000
800
600
400
200
Source: OCA research and interviews, http://www.fenixintl.com/uganda, http://www.m-kopa.com/products, https://www.solarnow.eu/solar-solutions,

37 http://www.greenlightplanet.com/shop, http://power4all.org/products, https://www.lightingglobal.org/products
Ugandan SHS supplier landscape divided, with price driven by unit

quality, warranty provisions, & after sales services
Off-brand generics High-quality retail High-quality service-level
• Ultra-low cost solar systems, • Brand-name, reputable • Brand-name, reputable

generally sold piece-by-piece systems sold retail or resold systems sold directly through
Description • Offer similar specs to brand- through distributors PAYG operators
name products, but often • Specs and quality equal to • Highest cost due to PAYG &
mislabeled, w/short life-span brand-name PAYG operators after-sales support systems
• Typically sold through • Sold through kiosks & shops, • Typically sold through
hardware shops, general as well as NGOs & donors, operator-ran network of
Distribution channels stores in both urban & rural often times with heavy shops & service centers
areas subsidy for to final customers
• No aftersales service or • After sales service limited to • After sales services (hardware
warranties provided implementing org. / NGO & PAYG support), as well as
After sales services • Warranties supplied through warranties provided directly
manufacturer from distributor / operator
• Labeling varies, often • Manufacturers: Barefoot • Fenix, M-Kopa, SolarNow,

intentionally misleading Power, Greenlight Planet, Village Power, Solar Today,
Ex. operators in UG d.light, and others and others
• Distributors: Village Energy,
Solar Energy Distributors and
other local businesses
38 Source: OCA research and interviews

PAYG companies offer financing periods of between 6 & 36 months,

with large variance across price ranges
Longest payback
period (months)
36
30
24
18
12
100 200 300 400 500 600 700 800 900

Retail cost of
SolarNow SolarToday unit (USD)
M-Kopa BrightLife
Fenix Village Power
Note: Longest payback periods are listed for each unit. For example, if a company’s USD 300 unit can be financed at 3, 6, & 12 months, only 12 is presented.
39 Source: OCA analysis & interviews
PAYG monthly payments on cheapest units are typically above the

avg monthly displaced spend, with two Fenix units falling below
Monthly payment2 (USD) Affordability of SHS is key market constraint; those who
lack ability to pay have two main options:
30 1. Purchase lower-functionality ‘pico’ units:

• Pico units provide basic light & phone charging at
25 lower prices than SHS
• Some see pico as an important entry to the ‘energy
20 ladder’ where displaced spending on kerosene /
phone charging will allow savings & eventual
purchase of larger systems
15
2. Purchase low-cost off-brand generic SHS:
Avg monthly
10 household • Low-cost, off-brand generics can cost up to 8x less
spend on than higher-quality & service-level products
kerosene, • These units are often mislabeled (e.g., a 5w panel
5
phone labeled as a 7w), break easily, & have short lifespans
charging1 relative to higher-quality products
• Their prevalence in the market harms consumer
confidence & is thought to slow uptake of higher-
quality, higher-priced units
1. Kerosene estimate; p.8, fn 7 at USD 71 per year; phone charging estimate p.14, at USD 0.26 per week: https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-
files/10229.pdf
2. Some operators (e.g., M-Kopa) offer financing that is paid per-day or per-week; in these instances payments were scaled to compare total monthly spend.
40
There is opportunity for cookstoves to leverage synergies with SHS

providers to reach more rural & unserved populations
Clean cookstoves face a number of sales challenges that SHS are well placed to address…
• Though popular in urban & peri-urban areas, cookstove • SHS operators are among the most successful service
operators struggle to sell to rural customers, where providers in East Africa, with well established channels to
traditional cooking methods are preferred & incomes are rural customers
lower
• Many SHS are PAYG enabled, allowing operators to
• To reach lower-income customers, some operators offer
remotely control the function of the unit; this
financing, but have difficulty accommodating customers
functionality enables SHS to be used at “collateral” for
without existing credit histories (e.g., outside of SACCOs)
other assets that are not well-suited to PAYG technology
…while providing potential solutions to some of the key challenges faced by SHS operators
• Unlike SHS, cookstoves are often purchased by women • SHS operators have expressed desire to increase sales
directly, enabling a sales channel that SHS operators have volumes to women, but struggle to develop reliable sales
struggled to secure paths to reach women
• Further, many low-income urban & peri-urban areas are • Additionally, SHS operators see opportunity in high
off-grid, providing possible route to a difficult-to-serve density urban & peri-urban communities, but have
demographic struggled to properly serve these populations
Together, cookstoves & SHS offer strong synergies, with a number of orgs & operators joining the products:
• UNDP is working with MEMD on the NAMA-Green schools project, which seems to provide clean energy technologies in
schools to provide a more holistic solution economic, health, & environmental challenges
• In the private sector, cookstove & SHS operators are begin to leverage the respective advantages of the two technologies to
reach a wider range of customers & extend commercial relationship by offering products in series, leveraging the PAYG ability
to SHS to allow broader financing of cookstoves
Source: http://namanews.org/news/2017/01/12/funding-opportunity-for-uganda-green-school-nama,
https://unfccc.int/files/focus/mitigation/application/pdf/nama_presentation_uganda.pdf
41
Energy efficient appliances increase value-prop to customers, can

enable income generating activities
Appliances greatly increase SHS value-prop to consumers… …and can create opportunities for income generation
Operators report TVs & other entertainment drive value Certain appliances enable micro-business, income growth
• SHS operators & other stakeholders report that consumer- • Hair clippers, sewing machines, & refrigerators, among
value is driven by luxury items, primarily televisions others, have the potential to be used to create micro-
businesses
Energy efficient apps reduce cost barrier to SHS purchase
• The ability to increase income distinguishes this classification
• Specially designed energy efficient televisions are able to
of appliances for other uses of SHS, which are designed to
operate off lower-wattage systems
increase lifestyle & provide long-term savings
• Because the unit size – and associated payments – are
Income-generating apps help hhs climb energy ladder
reduced, the “barrier to own” is lower than it would be
through a less-efficient appliance • Of central concern to operators across the industry is the
ability of customers to climb the “energy ladder”, increasing
their energy demand over time
Energy eff. apps. + falling PV cost greatly incr. affordability1
• UNCDF is conducting research to understand if savings from
USD / displaced fuels leads to increasing demand for energy in UG;
unit currently, both SHS & mini-grid operators struggle to
991 Appliances increase energy demand off displaced fuels alone
1,000
Balance of system
Lights
644 Batteries
Operators agree primary barrier is awareness of potential
PV
500
354 • Though appliances can increase incomes, operators report
that hhs often don’t fully understand opportunity
193
• However, targeted training has been said to increase
demand & uptake of these appliances, raise incomes
0
2009 Std apps 2014 Std apps 2014 EE apps 2020 EE apps
Source: Africa Progress Panel Paper: Lights Power, Action: Electrifying Africa (http://www.africaprogresspanel.org/policy-papers/lights-power-action-electrifying-africa/)
42 1. Retail cost trends of SHS with 19” TV, radio, and two lights.
Mini-grids are positioned to complement SHS, provide productive-

use & appliance grade power
Mini-grids are best positioned to supply
power in higher-demand regions, further
from the grid
Distance from grid
Mini-grids
Solar Home Systems (SHS)
On-grid connection
Power demand (kW peak)
OCA industry interviews & consultations

43
To date, only a small number of mini-grids have been installed, with

majority using solar / battery hybrid systems
Today, only a single private sector mini-grid is
operational in Uganda
• Of private operators, only Absolute Energy has secured
Single, 3.5MW mini-grid the licensing & investment required to build a mini-
in West Nile region; grid
facilitator GiZ / KfW • Absolute Energy builds on islands in Lake Victoria, thus
enabling a more straightforward concession from the
government for generation rights
However, efforts are underway by the Ministries &
donor agencies to support growth
• USAID & GiZ are working closely with REA to design
20 mini-grids pilots will
master plans for all 13 of UG’s service territories
be built in Kasese region;
implementer WWF • WWF is conducting a pilot of 20 mini-grids in effort to
prove market
• GiZ is releasing tenders for 15 mini-grids under a pilot
program, to be developed by the private sector
Solar / battery hybrid grids preferred technology

Only operational private • Mini-grids can be powered on a number of technologies,
sector grid; Absolute incl. solar, wind, mini-hydro, biomass, & biogas
Energy, Kitobo Island
• Due primarily to climate & tech cost, the vast majority of
UG projects are solar / battery hybrid grids, with a few
donors considering mini-hydro pilots
OCA industry interviews & consultations

44
Mini-grids have the potential to offer power cheaper than SHS, but
face a number of operational & political hurdles
Typically, mini-grids offer power at lower rates that SHS However, mini-grids face variety of operational challenges
Effective tariff ($ / kWh) Mini-grid operators must navigate extensive licensing
8 • Building & operating a mini-grid requires lengthy

regulatory approval, often taking >1yr & involving a
number of resource-intensive filings (e.g., Environmental
Impact Assessments)
6 Site identification is intensive, key for success
Small solar is ~30%
less than kerosene, • Mini-grid operators invest heavily in the locations in
*
which is paid which they build & are unable to easily move assets
4 Typical mini-grids indefinitely
offer power ~40% • Finding locations with sufficient long-term demand is
less than large SHS1 central to reaching profitability
• Site selection relies on a number of inputs, including
2 expected arrival date of the central grid, anchor buyers, &
residential & commercial demand within the area
When uncertainty is high, investors hesitate
0 • In cases where mini-grid operators are able to navigate
the licensing procedures & identify a strong location,
200w 8w Kerosene
Mini-grids investment is generally required to finance Capex
SHS SHS
• When the regulatory landscape is not established, &
• In addition to supplying power at lower per kilowatt-hour policies surrounded concessions, feed-in tariffs, & duties
rates that SHS, mini-grids are capable of powering high- are uncertain, operators often struggle to secure
demand anchor buyers and productive-use facilities, necessary investment
including industrial refrigerators & mills
* Bars boundary the least & most expensive tariffs seen for mini-grids. Generally, tariffs move with capacity, with larger capacity grids able to offer cheaper power, and vise versa.
Kerosene $/kwh equivalent from Azuri Power: http://www.huffingtonpost.com/pierce-nahigyan/solar-power-is-freeing-ru_b_10564586.html
1. It’s important to note that though mini-grids generally offer lower $/kwh price than SHS, then normally operate a utility model, meaning customers pay this rate as long as they want access;
45 with SHS, units are paid off over time & the $/kwh becomes 0 once the unit is owned
While mini-grid operators remain nascent, many SHS operators are

experiencing strong growth, with some securing local debt
Revenue
Most SHS operators
Mature
Though some SHS have

secured local debt, no
Growth
Growth operator has reached maturity
Most mini-grid operators
Early
Concessionary Commercial
Grants Equity Quasi
debt capital
Donors Impact investors & development banks Banks & PE
46
Financial institutions & donors provide capital to enable scale;

especially for PAYG businesses, where working capital is limiting
Ticket size (USD)
Large PE funds
10M DFIs
Dev partners
Impact investors
5M
Foundations
Local banks
1M
Concessionary Commercial
Grants Equity Quasi
debt capital
47
Though banks still require guarantees and / or high collateral, a

number of deals have been made, with increasing frequency
Banks require track-record, guarantees
PAYG is a nascent & sophisticated technology

• The consumer financing enabled by PAYG
technology has been in the market for less than ten
years, & has seen meaningful growth only in the
last five
• Many banks remain unfamiliar with the SHS PAYG
industry & the sophistication of the business model Despite challenges, a select number of debt
deals have be finalized in Uganda around the
Historically risk averse, banks require assurances region, suggesting key obstacles are being
• Ugandan banks are traditionally risk averse; overcome
requiring financial assurances that many companies
are unable to access or provide, limiting deals:
– Guarantees: Enabled chiefly through dev
partners like USAID & SIDA, guarantees
provide mechanisms to reduce risk to banks
– Collateral: In the absence of sufficient
guarantee, banks require collateral – typically
cash or property – to secure a loan; many
PAYG companies – particular early-stage – are
unable to provide collateral outside of their
stock, which banks are unwilling to accept
48 OCA industry interviews & consultations

Challenges facing off-grid development
49
Challenges Summary 1 2 3 4 5 6 7 8
Consultations with industry stakeholders have revealed eight

market challenges
1 Local SHS businesses struggle to access capital, 5 Businesses struggle to effectively manage
management talent, & financial expertise currency risk, despite broad, cross-sector
required for scale attention
2 Despite growth, certain populations remain 6 A lack of defined & enforced product standards
unserved, including the urban poor & rural creates low consumer confidence by allowing
regions low-quality products & servicing to persist
3 Unclear & inconsistent tax policy on SHS 7 Development & investment in mini-grids is
imports hurts business case, prevents operators limited by lack of policy around concessions,
from planning pricing & orders feed-in tariffs, guarantees, & duties
4 Lack of standardized PAYG portfolio 8 Research for productive-use technologies is less

performance definitions & reporting methods developed than for SHS & mini-grids; potential
limit investment benefits & capital requirements are not well
understood
50
Local SHS operators struggle to access the tools, training, & capital
needed to reach scale
Local businesses struggle to access Entrepreneurs unable to access
expertise, retain talent local, int’l capital
Key systems remain out of reach for local businesses Local operators unable to access local debt…
• SHS are a low cost, high volume market; to reach scale • Local operators have not developed track record required
businesses must employ robust logistical systems; to secure financing from local banks
requiring expertise & capital
• Further, local players are typically unable to
• For businesses using the PAYG model, the provide the type & quantity of collateral banks
Lack of Cycle limits Lack of
technical expertise required to develop requisite require
expertise growth capital
systems is considerable; most local operators do • Donor guarantee programs that provide a
not have the capacity, technical expertise, or substitute for collateral to SHS operators are rarely
capital necessary to build these systems given to local players, in favor of the larger multi-
nationals
Businesses need training to build technical & mgmt. capacity
• Local SHS companies often lack skills to execute key …and struggle to access global capital markets
technical & operational tasks • Local operators struggle to access global capital markets
typical leveraged by int’l firms for early growth
• Technical assistance programs & accelerators are unable to
offer the long-term support needed to develop this • Local entrepreneurs are typically not investment ready,
expertise lacking materials global financiers rely on when
performing due diligence
• Broadly, some industries have begun developing
• Finally, many entrepreneurs are unversed in the language
embedded talent models to facilitate training & technical
of impact investing & struggle to communicate their
development, though these remain rare
narratives for impact & growth to investors
A tailored technical assistance pool could provide the type of support local businesses require; focusing on
building key business competencies, developing growth strategies & narratives, building capital usage plans,
& supporting investor approach & pitching

Despite donor efforts to incentivize, providing energy to certain

segments of the off-grid populations remains a key challenge
Urban-poor Very rural
Urbanization incr. urban off-grid Of 31M unserved & off-grid4, majority are rural
50 3.0
Pop density
40 2.5 <5 ppl / km
6 – 25
30 2.0
26 - 250
>250
Urban pop. Urban off-grid1
• Population growth & urbanization trends mean • SHS companies target rural areas surrounding
nearly 3M (~10%) of Ugandan’s off-grid population secondary cities, allowing a hub for sales & servicing
will be urban by 2020 • Hard to reach & sparsely populated regions, particularly
• Informal urban settlements are poorly suited to in Northern Uganda, significantly change the value
modern connectivity & SHS operators struggle to proposition for SHS operators
provide service • A number of donor programs, including the World
• Efforts have been made by REA, ERA, & donors to Bank’s ERT II have sought to encourage business to
reach the urban poor but electrification rates remain expand their reach, but a concerted, long-term solution
low has not been found
1. World Bank report, 38% of urban population connected to grid, 2013: (http://www.worldbank.org/en/news/press-release/2015/03/03/managing-rapid-urbanization-can-help-uganda-achieve-
sustainable-and-inclusive-growth)
2. Population growth rates from CIA Factbook: (https://www.cia.gov/library/publications/the-world-factbook/fields/2212.html)
3. On grid population from World Bank: (http://data.worldbank.org/indicator/EG.ELC.ACCS.ZS)
52
4. Total off-grid pop. is 31M, with 7% penetration, 28M are unserved
Unclear & inconsistent tax policy on SHS imports hurts business

case, prevents operators from planning pricing & orders
International operators claim taxes on SHS kits ruins Uncertain state of tax environment, & knowledge that tax
business case; local players less affected can change without notice prevents planning
Recent revocation of SHS kit exemption eliminates business With tax uncertain, some companies have reduced imports
case for most established players • The change in business case is sufficiently large to substantially
• In June of 2016, the Government of Uganda rescinded the tax affect how operators price their units; operators say the required
exemption status of SHS kits, exposing the products to import price to accommodate tax burden would be untenable for their
duties & VAT customers
• The tax was retroactive, applying to all imports for the 12 • Reportedly as a direct result of the change in tax policy, affected
months preceding the new law operators have reduced imports to Uganda, with M-Kopa
• Many major operators claim that with their current margins, this ceasing shipments all together
tax would eliminate their unit economic profitability
• Operators continue to sell under assumption the tax will be
To fight the tax, many operators have struck one-off deals
lifted, and have not passed cost on to customers
with the government; leading to a chaotic & uncertain tax
With the tax only applying to SHS kits, larger-unit operators & environment, where duties are enforced inconsistently &
local players are less affected unequally among operators
• The change in tax-exempt status affected SHS kits only; A recent initiative lead by GOGLA is working to unite
individual solar products (e.g., panels, batteries) remain exempt operators & present to government with one voice
• This means that smaller system operators who import their
products pre-packaged, like M-Kopa & Fenix, are affected, while
operators that sell larger, installation systems, like SolarNow &
some local players, are less affected
Broad sentiment across industry is that a known tax is preferable to sustained uncertainty.

Lack of standardized PAYG portfolio performance definitions &

reporting methods limit sector growth & development
In today’s market, PAYG companies define own metrics & do Standardization offers opportunity to increase market
not disclose portfolio health data visibility, allow outsourced financing, & grow investment
PAYG space lacks uniformity in metric collection Standardization would allow benchmarking, tailored financing
• Though some third party companies offer PAYG-as-a-service • If PAYG operators adopted standardize collection metrics &
solutions – like Angaza in Kenya & Village Energy’s upcoming portfolio health definitions it would be possible to anonymously
product – most PAYG companies develop systems in-house collect data across operators to assess the state of the industry
• These platforms collect different sets of information about • This would enable businesses, investors, & donors visibility into
customer demographics, usage habits, & payback, making the broader health of the industry
inter-company comparisons difficult • Shared data would allow capital providers to better assess the
Key metrics are defined differently for different companies true needs of the industry & design tailored, more effective
• PAYG companies often have very different definitions for key financial products
financial metrics, including ‘default,’ ‘Portfolio at Risk (PAR),’ Portfolio standards would enable outsourcing of consumer
‘grace period’, ‘write-off ratio’, & ‘Lifetime Revenue Ratio (LRR)’ financing; enfranchising small players & increasing investment
• Because there is no standardization across businesses, it is • Standardized reporting would allow PAYG operators to
difficult to compare the performance of operator portfolios outsource consumer financing to specialty third party entities
such as the World Bank, SunFunder, & Lendable
• This would allow operators to focus on their core business of
selling units, passing risk management to an entity specifically
designed to manage it
A number of programs are underway focusing on • Consumer financing expertise – a key barrier to entry – would
metric standardization, including Village Energy / be removed, enabling smaller businesses to enter the market
UNCDF’s PAYG platform & KPI harmonization; • Finally, aggregating consumer financing lines to a specialty firm
& a global initiative from GOGLA would allow tranching & more accurate pricing; paving the way
for much larger capital investments

Managing currency risk continues to be major challenge, despite

broad cross-sector attention
All off-grid operators face same currency challenges FX risk remains central challenge
Large & small operators alike buy units from China In-house hedging is expensive, requires substantial
expertise & is out of reach for smaller businesses
• Regardless of size or technology, virtually all solar products
are purchased from Chinese manufacturers • Larger, international businesses have developed in-house
hedging systems; these systems remain expensive, often
>12%
Chinese product purchases are made in dollars
• Further, developing in-house hedging requires
• Though terms of sale vary, manufacturers require payment considerable technical expertise, creating a major barrier
in hard currency, almost always U.S. dollars smaller operators
Accessing local currency debt from local banks remains
Sales are made in Ugandan Shillings elusive, even for established players
• Off-grid product providers sell in Ugandan shillings • The most effective way to hedge currency risk is to not
need to; however, the majority of local capital is unwilling
• For operators that sell units in cash, foreign exchange
to take on the risk profile of offered by today’s off-grid
exposure is relatively limited, existing only between the
businesses
time of payment to the manufacturing & sale in Uganda;
generally this is between 4 & 6 months • In recent months, some direct investments have been
made by local banks to SHS companies, suggesting that
• Operators who offer financing to consumers face much
local capital may be warming to the industry; however,
greater exposure since revenues from sales are realized
substantial collateral (provided via guarantees by donors
over the financing period
or with business owned property) was required to enable
the deals
In the last 24 months, UGX has • Outside of direct investment, local banks are more willing
depreciated ~40% against the USD1 to establish ancillary financial facilities (e.g., trade
financing) that is perceived as lower risk than providing
direct debt
55 1. Currency depreciation statistics from XE.com: (http://www.xe.com/currencycharts/?from=USD&to=UGX&view=2Y)

SHS growth stunted by lack of product standards & awareness of

standards, contributing to low consumer confidence
Lack of product standards means consumers don’t Lack of technical certification for servicers means customers
know what they are buying are unaware of where to go when units break
Consumers are most sensitive to unit price “One-size fits all” solar systems require minimal servicing…
• Even with financing, SHS units are a major purchase for many • Solar mini-kits have few moving parts and do not require
off-grid consumers; leading to strong preference for low cost significant technical expertise for servicing
units
• Low-cost units are often miss-labeled (e.g., advertising a 5w unit …while larger, tailored systems require significant expertise
as 7w) & low quality, breaking soon after purchase • As units grow in functionality, the expertise needed to service
Cost the unit increases
(USD) Off-brand systems are ~80% • Expert servicers struggle to distinguish themselves for low-cost,
150 cheaper, driving up-take untrained technicians
100 • Low-quality servicing damages consumer trust in the market,
making them and other hesitant to purchase products in the
50 future
~10w system ~10w Chinese

from top biz generic
Unknowingly buying low-quality units erodes consumer trust
• Consumers struggle to distinguish high- from low-quality units,
& when a unit does not perform or breaks, market confidence is
damaged
Creating a standardized certification for units would help Creating a certification process for technicians would
keep customers informed of what they are buying, allow service providers to distinguish themselves &
increasing trust in the market improve relationship with customers
Development & investment in mini-grids is limited by lack of policy

around concessions, feed-in tariffs, guarantees, & duties
Mini-grids require alignment across four Though early, substantial progress is underway
key areas to scale to create ecosystem conducive to growth
1 Clear & credible master plan for grid extension USAID / GiZ working with REA to build master plans
• Developers need a long-term outlook on grid • Across the 13 service territories, USAID & GiZ are
extension in order to know regions remaining off-grid working with REA to design off-/grid master plans
2 Strong evidence of demand, quality grid sites GiZ, WWF executing pilots across UG to prove market
• Chief concern of developers & investors is the ability • WWF is currently building 20 grids to prove biz
to secure quality sites with adequate long-term models, consumer demand
demand in regions outside of grid extension • GiZ will launch 15 tenders to test up-take, demand
• Donor-supported piloting often required • USAID has ID’ed 90+ high-potential sites for grids
3 Clear path to profitability & risk management
REA, Ministry working with donors to define key policies
• Before placing capital, investors want to see a path to
financial return – requiring clear policy on concessions, • In collaboration with USAID & GiZ, REA & the
tariff guarantees, & duties Ministries are working to articulate & pass key
legislation governing concessions, guarantees, duties,
• Policy on feed-in tariffs needed to provide security to
& feed-in tariffs
investors in event of grid arrival
4 Investor understanding of financial return profile Donors seek neutrality, leaving gap in investor outreach
• Return timeline, financial structuring, & investor • Only a single privately held grid operates in Uganda
expertise for mini-grids differs from SHS • While donors & government push to subsidize
• Investors generally have less experience with mini- development & encourage investment, little outreach
grids, leading to hesitance in placing capital has been made to educate investors on opportunity in
effort to maintain neutrality in tendering process

Potential of productive-use solutions is not well understood in the

Ugandan context, despite interest
Productive-use can extend / increase agric. value chain Productive-use opp. less researched than residential
Large opportunity for improved efficiency & increased The opportunities of productive-use technologies are less
output across agricultural production chains researched, less mapped than SHS & mini-grids
Extending cold chain to reach 5 milk regions of UG Map opportunities for productive-use in Uganda
• Milk production in 2011 was at 1.6-1.8 billion liters from • The business case for productive-use is less
38 central processing plants across 5 UG regions researched & mapped than for SHS or mini-grids
• Estimated that 20-50% of all milk production is wasted • Coordinated research on rural agriculture value
due to lack of timely cooling chain would allow better sizing of the market &
• Strategically placed off-grid collection centers can service potential long-term benefit to farmers
these processing points, increasing effective production &
farmer income by >20% Work with businesses to understand viable models
Enabling irrigation in off-grid, low water regions • Though a number of businesses in UG focus on
productive-use, they have not succeeded in
• Ugandan produce is supplied largely by small-holder
attracting capital to the same extent as SHS
famers, with great density in the Western & Eastern
regions • Further, the major UG SHS companies do not
provide productive-use products
• Solar irrigation systems are able to reduce labor costs by
30%, increase annual yields by 40% and further increase
To grow, opp. needs to be linked w/biz, funding
famer incomes by 30% per month
Improving ag processes across industries, crops • To reach scale, the UG opportunity must be
• Many agricultural processes require or would benefit from accurately mapped & tied to operators
access to electricity • From this, capital needs can be defined &
• For example, the drying process for tea – representing financing can be secured
$100 million in UG annual export – is significantly
expedited from low-capacity, electric driers
Sources: Biogas-Powered_Evaporative_Cooling_for_Uganda’s_Dairy_Industry#Overview, Dairy Cattle and Dairy Industry in Uganda: Trends and Challenges ,
58 http://www.ifcnnetwork.org/media/pdf/AN-milkproductionUganda.pdf, National Survey and Segmentation of Smallholder Households in Uganda

Ugandan off-grid energy market accelerator mapping the market

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Ugandan off-grid energy market

This material was prepared by Open Capital

Substantial progress to-date Our goal is to facilitate further growth

We believe there is an opportunity to accelerate energy access by reducing market barriers.

Short-term: Mid-term: Long-term:

• Ministry of Energy and Minerals Development (MEMD)

• DFID / Energy Africa • WWF • Shell Foundation • Embassy of Sweden

Local banks Industry associations Consultants

Private sector Government Development orgs Other stakeholders

• Understand • Understand • Review current • Build holistic view

Industry overview presents actors & activities across off-grid space

• The industry overview section is divided by the four categories of

• In this section, we seek to provide a holistic & objective

SHS distribution is driven by the private sector, with majority of

UG, ZM 105,000 70 $164 Yes >10M

UG, KE 80,000 32 $278 Yes >20M

UG 6,000 6 $300 Yes NA

UG 8001 25 $81 Yes NA

Other small local

Cookstove market is fragmented with over 77 manufactures /

Number of UG The majority of sales have come from low cost

• BioLite produces & sells high-efficiency

Renewable energy associations represent private sector interests,

9 Source: OCA interviews & consultations, http://unreeea.org

The European Union is supporting a number of programs to

10 Source: OCA interviews & consultations, supplemented by 1. http://database.energyfacilitymonitoring.eu/acpeu/project/4624/, 2. https://www.barefootpower.com/projects/lwf.html

The European Union is supporting a number of programs to

Scaling up access to • Working to scale up • Provide a number of • On track to provide Implementers:

Sources: OCA interviews & consultations, supplemented by

World Bank has partnered with the government to implement the

Sources: OCA interviews & consultations, supplemented by

Add’ly, World Bank runs independent programs to advance access

Source: OCA interviews & consultations, supplemented by

USAID’s Power Africa is playing a crucial role in leading and

Sources: OCA interviews & consultations, supplemented by

USAID’s Power Africa is playing a crucial role in leading and

Source: OCA interviews & consultations, supplemented by

USAID’s Power Africa is playing a crucial role in leading and

Source: OCA interviews & consultations, supplemented by

DFID initiatives work to increase investment in off-grid energy

Sources: OCA interviews & consultations, supplemented by

Embassy of the Netherlands runs programs to support the private

Sources: OCA interviews & consultations, supplemented by

UNCDF’s global CleanStart program has partnered with other dev

UNCDF CleanStart1 • Supports low- • Risk capital • 2015 Energy Implementers:

Sources: OCA interviews & consultations, supplemented by

GIZ has provided support to both the government and private

Promotion of • Promote sustainable • Support the Ministry Policy support: Implementers:

Source: OCA interviews & consultations, supplemented by

GIZ has provided support to both the government and private

The Shell Foundation has launched a number of Uganda-specific

22 Source: OCA interviews & consultations

In addition to UG focused programs, GOGLA plays an important

Standardizing • Work with private • Work with • Held conference in Implementers:

23 Source: OCA interviews & consultations

Shell Foundation operates a number of global initiatives which

Accelerating the • Support • Provide grants, • Creating blended Implementers:

Source: OCA interviews & consultations, supplemented by

Many development partners have partnered on initiatives to further

Source: OCA interviews & consultations, supplemented by

Many development partners have partnered on initiatives to further

Africa-EU Catalyze development • Policy advisory to • Provided critical Implementers:

Source: OCA interviews & consultations, supplemented by