Mini-grid consultancy - beneficial or harmful?

Mini-grid consultants support the establishment of regulation or grant funding programs for the sector, advise on transactions or conduct due diligences. However, recent years have seen growing tensions between consultants and mini-grid companies. 
 
Host Nico confronts consultants Moses Kakooza (independent consultant, Uganda) and Maylis Bravard (INENSUS, francophone team) with some of the frustrations mini-grid companies express. 

LinkedIn: https://www.linkedin.com/company/inensus-gmbh/mycompany/
Visit www.inensus.com for more info.

Transcript

Speaker 1 0:09

Solar mini-grids have turned from small pilots to an electrification wave. We were there when mini-grid regulation was established, when financial transactions were closed. We saw new technology thrive and companies fail. This is where we tell the stories. This is where we discuss the future the mini-grid business Powered by Inensys.

Speaker 2 0:35

Hello, this is Nico. Today we are talking about mini-grid consultancy. My guests are Moses Kakusa, who is an individual consultant based out of Kampala, and Meili's brava, energy access expert with Inensos, working mainly in francophone countries. Moses is a Ugandan mini-grid consultant with over eight years of experience on mini-grid projects. During his past work with GIZ, moses managed the ProMiniGrids project for the installation of 25 mini-grids in Uganda. As a consultant, he is currently involved in various mini-grid projects in Uganda and also works with regulators and ministries on mini-grid frameworks. Melis is an energy access expert with Enensis, overseeing policy and regulatory consulting, conducting feasibility studies and market analysis, as well as business plan development and financial modeling for mini-grid projects. Welcome Moses, welcome Meilis.

Speaker 3 1:38

Thank you for having us.

Speaker 2 1:39

Thanks, nico Moses. You know both worlds consultancy and project management under GIZ. Does it make a difference if you approach governments as a GIZ representative or as a consultant.

Speaker 4 1:54

Yeah, nico, it definitely makes a difference, because when you approach as GIZ, you have a big name behind you and also GIZ is supported by Germany and EU and all this. So of course, you are looked at differently by the government than when you approach them as an individual consultant.

Speaker 2 2:12

Consultants in general have a pretty bad reputation actually in the mini-grid sector, especially when you talk to mini-grid companies. So mini-grid company staff frequently complains about consultants that do not know what they are doing at least that's what the mini-grid people claim and somehow they complain that the frameworks and the funding structures are not structured in the way that would optimally support them. What do you think Is this true, like from a consultant's perspective? Do you think consultants don't know what they're doing?

Speaker 4 2:49

It's more like you know, judging all elephants because of some of the elephants you've seen, with particular colors.

Speaker 4 2:56

So I think it varies a lot. I do admit that there are some mini-grid projects which have not been designed well and there were consultants behind these projects. Probably maybe they were coming more from grid-grid projects which have not been designed well and there were consultants behind these projects. Probably maybe they were coming more from grid-based projects or grid-quoted projects and then they were into mini-grids. But I also think that there's a lot of really good experts I mean really good consultants, people who have given themselves to mini-grids over the last couple of years or even decades and have learned so much and have seen so much in different countries and can bring this into the projects. Because most times when the government's coming up with mini-grid projects, they are really coming from on-grid projects, from distribution projects, transmission projects and so on, and they need somebody who knows mini-grids to tell them how to structure these projects. And, yeah, in that case I think consultants really are needed and they do a needed job for the industry.

Speaker 2 3:55

Melis, what do you think?

Speaker 3 3:56

I think that consultants, they have an overall approach, they have a big picture and they can also bring something new other subjects, other aspects and I think that this holistic approach is very essential and benefits the whole sector. So I think as well that the consultants are playing a very interesting role in supporting the development of the sector. Also, we should not forget that the sector is still nascent and, of course, there are some mistakes that are made, but what is good is to learn from them and to move forward.

Speaker 2 4:29

Yeah, and I also think that there are some consultants as you already said Moses and Melis that have experience Like we. As Enensos, for example, we operate mini grids to just avoid those mistakes that other consultants would make when they don't know what operating a mini-grid is like, when they have never been to the field. Right, this would never happen to us because we know what it feels like to install, to structure, to develop, to operate mini-grids, to go through all these processes that government holds for mini-grids, that funders expect mini-grid companies to go through. We know that We've done it, so I think we are in a good position to change things. But I also understand that mini-grid companies are frustrated to a certain extent because it's really taking long for things to change and some of these many good companies are in the sector for 10 years or more and from their perspective, probably things are going way too slowly. Why is it taking so much time? Do you know?

Speaker 3 5:40

In my opinion, I would say that also, it's involving so many different actors with different interests, and that's why it's involving so many different actors with different interests and that's why it's taking time to find a solution that meets all expectations.

Speaker 4 5:49

Several reasons, but I must admit that it's not just mini-grid companies who are frustrated, to be honest. Consultants are frustrated and I mean even the people who are waiting for this and, at least from my experience here, the projects are so government-led and government is not the fastest mover. Just approving a document goes through so many bureaucracies and processes. I think that challenge is there and, as mini-grids are infrastructure projects, anyway, government will continue to play this kind of role. Anyway, government will continue to play this kind of role. I think probably the best thing is to move away from these smaller projects, to maybe do bigger tenders with bigger sites or many, many sites at the same time, because the other bureaucracies are really tough.

Speaker 2 6:40

Yeah, or very large scale PBG, like performance based grants programs, rbfs that have also shown to be very successful, rather than MSTs, I believe, because in MSTs, like government tenders that you mentioned, I believe the government involvement and the decision-making process, regarding site selection, for example, is very extensive. Yeah, all right. This brings me to another subject. When I talk to mini-grid companies, many of the representatives from the private sector, from the mini-grid companies themselves, think that consultants determine what will later be in the policy documents. But this is not the case, right, can you?

Speaker 4 7:25

clarify. Yeah, I mean, in the end, consultants are hired to work for the government. We do not commission ourselves. You are given a particular contract with particular terms of references and it's clear that whatever you will produce is not a consultant's product, it's a government's product. So the government has to own it and I mean, even from my experience with the work we did at GIZ, this government ownership is very, very important. You can develop a very nice looking regulation document, but if the regulator knows, they will take it to their board and they will just say it won't work. Yeah, I mean, it will just not help. They will keep it nicely, put it in their shelves, thank you very much and wait for somebody who does what they feel is acceptable politically in their environment, is somehow aligned to the sector, and so on. So even if consultants have great ideas I can give you an example, nico, like concession periods, for example.

Speaker 4 8:29

There's a lot of discussions about concession periods in countries. How long should a mini-grid concession period go? Should it be 10 years? Should it be 15 years? Should it be 20 years? Should it be even 50 years, as strongly advocated by most of the infrastructure financial projects? And some governments might tell you sorry, we make it 10 years. Leave it or take it, that's it, and so there's not so much really you can do in that regard. So, while, yes, consultants play an important role in bringing all this knowledge, all these perspectives and all these good things which are needed for the industry to scale, in the end they are really doing something for the government, and the government has to take some and leave some as they decide, but I don't know what, melys, from your experience, you see or think here.

Speaker 3 9:19

I totally agree with you. We are playing definitely a role as consultants in shaping the sector, but we don't dictate what they have to do. We are just providing our experience. We are sharing also good practices from other experiences in other countries, and I think it's essential for the development of each electrification sector but we are supporting them in their decision-making process, so we are not really dictating anything. I want to share an experience in Madagascar where we provided some technical assistance to the regulatory authority on tariff regulations and it was really a work hand-in-hand with the regulator where we really looked at all the current legal regulatory framework legal documents in designing the tariff tool and then afterwards from this tariff tool again the regulator made all the changes in the regulatory framework. So it was really open communication with the regulator and to work hand in hand with them and to provide them with a very good tool that fits at the end their needs and also their regulatory framework and the direction they wanted to go.

Speaker 2 10:29

Yeah, that's a nice example for how such a consulting assignment may actually go and how it may work. Usually, when you're called into such an assignment as a consultant, you just go there and then you listen. You listen to what the government wants to achieve, and the government has a much wider view and interest than just electrification or even just mini grids right, it's much, much wider than that. Just mini grids, right, it's much, much wider than that. And then you listen and try to understand where the priorities are. And then you look into the existing legal and regulatory framework, you look into the history of the country, you look into the governance structures, you look into the decision-making structures and then you potentially come up with some idea of how the objective that was presented by the government to the consultant in the first place, how that could actually be achieved. And then you present to government and then usually you got small little pieces wrong. And then they turn everything upside down and you start from the beginning, because there are some little interrelations that you have not discussed before that you need to take care of, some budget allocation subjects or some socioeconomic aspects that need to be considered which you don't know of, right? And then, yeah, you come up with a structure that doesn't work and then you start again and the main workload that a consultant performs that a good consultant performs let me say that the main workload is actually communication projections. So, for example, if the government comes and says we want to achieve this, we want to achieve that, we want to take this route or that route, then the consultants are usually expected to present projections of what it will cost, how long it will take, how effective it will be, as you just said, compare with similar approaches from other countries and how successful they have been and what mistakes they made and learn from those and then develop a further improved implementation strategy. That is actually the work that consultants do.

Speaker 2 13:12

In the TORs. You probably read draft regulation. It's not that we pick a blank paper and then we write article one, article two. No, it's not like that. It's much more listening, it's much more discussions, it's much more projections, it's understanding targets and aims of governments and conflicts also potential conflicts that may arise within the country. Yeah, did I summarize correctly or do you have anything to add here?

Speaker 4 13:48

Yeah, nico, you summarized correctly actually, but there's something really to add. I mean, developers versus consultants right, and you know the perspective of the consultants are not advising the governments, right? I do think that developers have a key role to play in advising and influencing policy and I like, for example, platforms like Amda, if developers can find a way of bringing their voice more into the government, even about projects. I mean, I don't know how best they could do this, but I also think this is very, very respected In some of the work. Of course, consultants do have the possibility to involve developers and ask them their views and report these views to the government, but I also think developers have a role to play.

Influence and Coordination in Energy Development

Speaker 2 14:39

Moses. When I think back of Inensos in 2009, 2010 or 2011, when we were starting first private sector mini grids in Senegal and there was no regulatory framework in place, we were trying to advise the regulator and the Ministry of Energy in how to set up the framework to make investments possible, but what they did was, in many cases, the opposite of what we recommended. And I believe from their perspective, it makes a lot of sense to not do what the private sector asked them to do, because the private sector wants to earn money right and wants to earn money from their voters, so they are considering themselves to be tasked to protect their voters from private sector companies. And I believe that, of course, amda's positions and Amda's contributions are definitely heard and welcome by governments. But even today, I hear from various government representatives frequently well, we are not here to support the private sector. We are here to build a country and to develop a country and we're here to also protect the electricity customers from exploitation.

Speaker 2 16:12

And, yeah, I still believe that the private sector has a role to play in advocacy and in setting expectations right and so on. But it needs people like us who have the trust of the government representatives to calculate projections to advise on what has worked and what has not worked in other countries. And that was also the reason why Inensos shifted from a pure mini-grid company in 2008, 2009, 2010, to a mixed company, a consulting company with experience in mini-grid development and operation in 2013, 2012, 2013,. Because we understood that, as a private sector company, there is no way we could influence governments in a way that actually works out and makes sense for private sector and investors in the mini-grid space.

Speaker 3 17:13

And I think it's also the role of the consultant to really make the bridge of all the stakeholders involved and to really try to meet all expectations from everyone that could be government, private sector and donors, so then at the end, finally, the end user is also benefiting from electrification.

Speaker 2 17:33

True, and that is what we're trying to do. We're trying to keep relationships to Amda, to the developers. This podcast is one of the channels where we want to give a voice to the mini-grid companies, but also to all the other stakeholders, and make sure that they talk to each other and understand each other better. And, at the same time, we must make sure that we have a good, a very solid and good trust relationship with the government representatives that we're working with, a trust relationship with the government representatives that we're working with. So now, who, after all, is then in charge of determining the aims? Is it the funders or the governments? Because I also hear from mini-grid companies a lot that all these grant funding programs are so messed up because every funder has got his own idea and political message to be delivered so that they set up their own structures, and then everything is so weird, and every time, many great companies have to adjust to new frameworks and new requirements and so on. Now, who decides? Is it the funders? Is it the governments?

Speaker 3 18:51

I would say it's governments first. Yeah, they are the decision making owners, but of course, the funders can strongly influence how it is done. So, for example, funders they have some expectations in terms of regulatory framework to be sure that at the end the project will be viable and meet their objectives, whereas the government has the final word about it and say, ok, we do it, but in that way, because it has to fit our context and our frameworks. What do you think, osses?

Speaker 4 19:26

Yeah, I think definitely governments are really in the lead. I agree with you, especially for governments, projects where government has the money or is bringing the money maybe from their own budgets or maybe from a loan from a donor and so on. But I've also seen in many other projects, especially grant projects, where the funders I mean they will never put it like that that they are really in charge, but you can clearly tell that they are in charge they say let the project start, it starts. They say all right, it ends on this date and you're not finished, sorry, I go, and so on. I give you this amount of money and you should target these regions, for example. We've seen funders also decide what regions, for example, funds should cover and so on, especially for grants. But I think it depends a lot on the source and type of money. But definitely the government can still send no to a grant from a donor if it's not something which they want, even if it's free, and so on.

Speaker 2 20:35

Yeah, and I think you touched upon a very important and sensitive point here where governments borrow from African Development Bank, World Bank or other development banks, it is like any other person or entity borrowing from a bank you pitch your ideas to the bank and then the bank tells you, after proper due diligence, if they are ready to fund. And this means that well, also, the money needs to be paid back over time and the investment that the government makes needs to be profitable, meaning that it must generate some tax income. If you put money into deep rural areas that don't generate any significant development fast enough, which after all leads to increase in tax revenues, that it may not make sense from a macroeconomic perspective. So that is that angle. And therefore, for these deep rural areas, governments tend to ask for donations from developed countries, from Europe, from the US, from Canada, from Japan, from other Asian countries, South Korea and so on, Australia, to just mention some.

Speaker 2 21:54

But I think what we need to understand is that there is no free money in this world. Even if there are donations coming, these donations are coming with expectations and usually are subject to bilateral agreements between the governments of the maybe African country and then the government of Australia or government of Germany, and then the government of Australia or government of Germany, and then after all, in these bilateral agreements of course also the German, the Australian, the European, whatever interests will be represented. And well, there are relations between Africa and Germany, trade relationships and then of course also refugees coming to Europe. We are all interconnected through climate change. So all these kinds of things will somehow be considered in these agreements and they will be transported into the African government's considerations through this bilateral contract. And that is what also influences, after all, the structure of these sometimes a little bit awkward grant programs.

Speaker 4 23:09

But I mean, Nico, what's ideal? What should we push forward? I mean I really would like that governments are really deciding everything and are really in control. It's really unfair. I mean, you're right, there's no free money in this world, and so on. But yeah, if the government does not have its own plans and does not follow its own plans for developing this nation and people bringing money into that port, whether it's debt or grants, yeah, we'll just continue doing exactly what you're saying, like another donor comes and does something here, another one comes and does something here, and so on. Or maybe we just accept that we can't change that and that is something which, yeah, out of our hands.

Speaker 2 23:54

Yeah, but there are also these donor coordination groups right where donors coordinate among each other at and then they somehow join hands or don't, because they find overlap or they don't. But that is largely not covered by any consultancy and there is no advice there. Maybe some overarching knowledge hub would be required to steer these funder groups and make sure that there is more harmonization of processes, maybe even more coordination in the earlier stages, while the bilateral negotiations between the governments are taking place, which after all will trickle down to the conditions under which the grants will be dispersed, which during the bilateral negotiations probably nobody recognizes and nobody considers. But maybe some advice and maybe some guidance would help improve the situation here. But this is just one quick idea. It's a big subject that needs to be discussed further.

Speaker 3 25:20

But what I see also is sometimes the donors are collaborating. For example, I was working for a project again in Madagascar, where we had the AFD working alone on one project and then they also shared all the results and all the processes that were used to the EU. And then I saw that in another project the EU was requiring the same and then they were openly discussing about it, saying yeah, because we would like to adopt the same approach that has been adopted previously by the IFD. So I see some collaboration here, and not only coordination but also collaboration. We see sometimes a lack of communication, coordination among the units and also within the same units also. Sometimes there are some gaps and some inconsistencies. But I think it's also our role it's, of course, at the lower level, but it's also our role as consultant to inform also the donors of what has been done previously with this one and so on, to at least try to share it and to inform them about how is the sector.

Speaker 2 26:26

Mélis, would you say that in francophone countries this coordination between donors and development banks among each other, but also with governments, works better than in anglophone countries?

Speaker 3 26:40

I guess it depends. I had some experience in Madagascar, where I think the sector is rather smaller and with the GIZ doing a really great job in really trying to bring all together, all the donors, so then they could share and collaborate and coordinate efforts. But in some other country like DRC, where it's really big and you have a lot of initiative and project everywhere, there I see a bit of lack of coordination among donors. So I guess it depends on the context politically, but also in terms of if there is someone at some point that is taking the lead in the coordination, but also in terms of if there is someone at some point that is taking the lead in the coordination.

Speaker 2 27:29

Sometimes I even hear from mini-grid companies that they want consultants to stop innovating, to just use the current level of knowledge and reach scale using the current level of knowledge. From their perspective, I fully understand that for them it's urgent it's really urgent to scale now, because scale means profitability for the mini-grid sector. But I also believe that there is a lot to change in the way we are currently financing, we're currently regulating, we're currently managing mini-grids in general. From a political perspective. What do you think? Where are the main subjects that need to be changed still, and why do you think it may actually make sense to stop innovating at some point?

Speaker 3 28:16

Me, I'm really in favor for innovation. I think the sector really benefited from innovation and I think there is a lot of room for improvement. First of all, we saw the technological innovation that really benefited the sector, making, for example, solar mini grids viable for electrification. But now we can see some new innovative business models, some digitalization that is also really helping the sector to develop, and so for me, I would say that innovation is crucial for the development of the sector and we should never really stop innovating. Of course, scaling up the project is really important, but I see it more like an innovation, like trying to see how it would benefit the companies in the sector and the end users.

Government Considerations for Mini-Grid Funding

Speaker 2 29:06

Yeah, melis, but in your experience in the countries you've been active in so far, do you think that innovation retards scaling like retards, the large scale rollout of mini grids scaling like retards, the large scale rollout of mini grids? If we as mini grid consultants come up with new ideas, then the government of course would say, yeah, but this has never been tried before, let's try it first before we roll it out. In some cases I even hear oh, we cannot even publish this because it has not been tried. We first need to try it before we can publish it and then potentially it can be scaled to a certain extent before we can then say now let's roll it out. And this is, of course, very much retarding the process, not just by month, we're talking about years, we're basically talking about decades here. Right? So do innovations help?

Speaker 2 29:58

I'm thinking about, for example, allocation of grant funds according to the actual need for grant levels at certain sites. At the moment, in RBFs, everyone gets the same dollar amount per connection. Now we're thinking about changing that and providing more grant funding for more rural places, less grant funding for semi-urban places, more grant funding for smaller places, less grant funding for larger places, more grant funding for poorer places, less grant funding for wealthier places and so on and so on, and this is just one example, but still it is something new that needs to be tried. We're probably going to try this in Nigeria under the Nigeria DAREs program in the large scale straight away, but in other countries you would not go to scaling with that idea. Right from the start People would say where's your pilot?

Speaker 3 30:59

Of course you need pilot and of course you need time to be able to test it, but then at the end, in the short and medium term, then of course it's hampering the development of mini-grids, but at the end it would benefit the whole sector in the future. So of course I can imagine that mini-grids companies are frustrated, but also it's for their benefit and also it can help other mini-grid companies to enjoy it. Personally, from my experience, the mini-grid market is not homogeneous. We have different players. They have some that are really more advanced, taking the lead, but also you have to support all the private sector and companies. So then it benefits everyone, and so of course you have to do some pilot tests and so on to be able to have a bigger impact, and then at the end, thinking about the end users.

Speaker 2 31:48

Yeah, but well, we're running out of time, right? When do we want to electrify Africa if not now? Do we want to run another 10 years of pilots before we then go into scaling? But at that point in time the problem would be out of control, most likely no chance to actually interfere anymore. Yeah, so we need to find some middle ground here, or we need to find the courage to start with new ideas. With scaling, what do you think, Moses?

Speaker 4 32:17

Yeah, I mean I do agree with this frustration, and I think the frustration is not just from developers, but I mean we should not forget that there are people who don't have electricity and they keep waiting and waiting and waiting and they you know, the schools probably don't have printing materials and so on for the exams, the hospitals don't have. So electricity is such an important need that I think we really need to to move very fast. I mean, on the other hand, I think that innovation can go in parallel with scale. I don't think we need to, so to say, fast pilot and then scale. And while maybe governments are saying these or countries are saying this, I think there are ways of doing the same. I'll give you an example.

Speaker 4 33:03

We implemented this pro-mini-grids project with 25 mini-grids. It took us ages in Uganda, but now there's a bigger project called GetAccess, which the government is implementing best on this model but improving it. So they are not fully copying everything which it was before. There's still innovations there which are coming in, but at least it's at a bigger scale. I think they're aiming for 100 to 150 mini-grids and I'm also a bit involved in that project. So I think it's possible, even with these RBFs, Nico that you mentioned, it's possible to maybe tweak a bit a bit of the scale and just test a bit as you keep moving, instead of completely putting everything on hold.

Speaker 4 33:47

The other thing I thought about is the mini-grid project has a development process where there's all these tender documents or site selection or due diligence and so on. We have the construction and financing and then we have the O&M. And I also think if we consultants told developers to stop Innovate, I think this is just wrong, because then where would all these cost savings that Melis has talked about, all this digitalization and all these profitability possibilities come from? Because they do control a bigger part of making mini-grids viable and scalable, which is making them profitable from that perspective, and they have to keep innovating, and it's the same for us. We should keep innovating all these policy regulation, how to structure projects and so on. Yeah, it's a bit of a mouthful, but yeah.

Speaker 2 34:45

Yeah, that's a good perspective to take. Yeah, don't stop innovating on no end. Just make sure that it's somehow fluently integrated into all your processes and doesn't stop the rollouts.

Speaker 4 34:59

Yeah, that's a perfect summary.

Speaker 3 35:01

So then you make some small changes in the approach that then you scale up.

Speaker 4 35:05

Yeah, yeah.

Speaker 3 35:06

For example, in Uganda. Yeah, of course. Yeah, If it's small changes, of course. I think it's also possible to do both together Scaling up and innovating.

Speaker 2 35:15

Yeah, but we must be aware that we are actually asking the private sector for really a lot of commitment If we make changes from one to the next tender and every tender is different and all the time the private sector has to adjust. But yeah, this is an evolving industry. We are not fully established yet as an industry. We are not profitable in the large scale yet. Not everyone is profitable. And, yeah, we need to innovate, we need to change right to get there.

Speaker 3 35:50

And I can imagine the effort is required for private mini-grid companies, but it's also for their benefit, because maybe if we do these changes, for example about the grants, maybe they would get more funding from donors and so on. So I guess it's also it's changes. It's requiring a lot, but then it's for the benefit of everyone.

Speaker 2 36:11

Yeah, I would now like to take the step back to where we had started from earlier and put ourselves into the shoes of government, thinking about the mini-grid sector and if and how much money they should actually spend on funding, grant funding mini-grids, providing grant funds to private sector most likely private sector that may not even be domestic companies, but may be international companies. Now, as somebody from a ministry, you have your sector. As an energy ministry, you have to think about okay, do I need to extend the main grid, where do I need to set up mini grids and where are the solar home system areas? Basically, a national electrification planning exercise. If you are one step higher, if you are on the presidential level, for example, or in the planning commission, or so, this is a different subject, right, because you have to think about whether you want to allocate your funding to education, schools, teachers, which definitely has a mid and long-term positive effect on the development of the country. To what extent do you want to allocate your budget rather to the health system, for example, and is health service more important than electricity service? Of course it goes hand in hand to a certain extent, but well, you could, for example, decide I'd rather equip all my rural health stations and hospitals with fridges and some solar electricity. Or you could say well, let's build a mini-grid and let's hope that these fridges will come automatically.

Speaker 2 37:56

All these kinds of considerations. They are not limited to one sector, they are actually larger than the sector. Now, how could governments potentially think about providing grants to international private sector companies from funds that could also be used for education or for health or for economic development activities that potentially provide an earlier and quicker and faster response on the tax revenue, like the construction of a port or of an airport or something like that, or the establishment of a railway? These kind of things also need funding, right? Or the exploration of oil and gas, right? These are all options that governments need to consider. What do you think? You have all been working with governments, we all have. We, as consultants, have relatively little to say here, but we need to understand how governments think. How do consultants make a point on okay, we need funding for mini-grids now.

Speaker 4 39:08

I think it's very hard to compete with sectors like health. I mean, we must accept that some sectors are looked at differently and if something is lacking there, then we're talking about life or death, and sometimes electricity is not the major need. I think a couple of surveys have been done in villages which show that if you go to a mini grid village and many times we have also done that and we ask them okay, what is your real need? Yes, we are bringing mini grids and electricity, but what would you rather the government brings? And some of them have said water, for example. And if you think about the need for water and the need for electricity, then of course the government should prioritize water, as you said.

Speaker 4 39:54

Maybe, nico, the best thing is to see how we can couple electricity to these other services. I mean, personally, that's how I see a mini-grid. I really see a mini-grid as more or less a heart, a heart of a life, of a community, so to say, pumping blood in different parts of a body of a community. A health facility needs electricity, a school needs electricity, a water pump needs electricity and so on. So I think if we as consultants sell mini grids this way and the good thing with mini grids is they don't have to run transmission lines and extension lines all the way. They can get this health budget which they have. And just think more innovatively about, instead of me providing an individual solar system to each of these individual buildings on a health facility, what if I set up a mini grid which can power more things like that? That's what I can think of. It's easier thinking about it than really pushing for it and getting success with it. I've not been with it before, but yeah, just just a thought.

Speaker 2 41:02

Yeah, I mean, I think all of this also puts the role of the consultant into perspective, and I think this visualizes to a certain extent that consultants need to listen, because we, as consultants, we're not in the position to take any decisions about where the funding is supposed to flow and what the actual policy aims and targets are, so we can just listen and then implement what the government tells us and then break it down to levels where then finally yeah well, the procurement documents can be, the regulation documents can be derived from. And I think this is how people who have not been involved in mini-grid consultancy should understand the role of the mini-grid consultant Listen, compare with realities on the ground, project outcomes of certain measures and then help the government find a decision on what's supposed to be done and then help implement.

Speaker 3 42:10

Also what you said previously. There are several initiatives Now we are talking about mini grids, but you have also some initiatives coming in African countries providing some support with health and electricity. So for example, with the COVID, with Gavi and UNICEF bringing fridges into health centres. So we also have to, as consultants, help and inform governments of such initiatives that maybe a mini-grid in this case cannot be beneficial for the health sector or for this community, but rather go with Gavi or UNICEF and at least to be able to answer the first needs of the community.

Speaker 2 42:47

Sectors are one aspect that governments need to decide on. Another aspect is geopolitical and geographical regions. Where is the ground or where is the money supposed to flow to? Is it the north, the south, the east, the west of the country? In many cases, the answer of policymakers is distributed equally right.

Speaker 2 43:14

In Ethiopia, you often hear the word equity. They want equity for all regions of their country. They want equity for all regions of their country and all regions should benefit equally from money that's coming into the sector. But on the other hand, this means that clusters of mini-grids are very small and economies of scale cannot easily be achieved, which is an issue for mini-grid companies. So now we, as consultants, we try to push back and say, hey, well, now you're setting up something that is too small for the private sector to operate. They cannot do it profitably. But then governments say, yeah, but I cannot provide the largest part of the funds to one region. I need to distribute Well, and this is how we end up with all these mini projects here and there. Yeah, but I don't have a solution to this, do you?

Speaker 3 44:14

Yeah me, I do not have a solution. I can only share my experience from Francophone countries, where usually the political decisions are more centralized, I would say, and where I saw that the government was prioritizing regions based on their needs and not only, like in Ethiopia.

Speaker 2 44:35

Yeah, in some regards the centralized governance system may have some advantages, I agree. But yeah, well, we've also seen, for example in Togo, where we have supported GIZ and the government for a long time, the centralized decision making was also not that easy right, it took a very, very long time. I'm not sure if they're on a good track yet, but at least it was very hard work for our team to somehow steer the discussion to a certain extent, to make one step forward and two step back at times and provide the projections about decisions that they have taken and say well, if you take this decision and you sign off on it, then this will most likely be the results. Do you want it or do you want to reconsider what you just decided? Yeah, so in some francophone countries, I believe, decisions to allocate funds to certain regions may be a little bit more straightforward, but in others it's also very complicated.

Speaker 4 45:41

Nico, maybe just.

Speaker 4 45:42

I mean, I agree, but in addition to what really came to my mind is, again, the role of a consultant, this kind of planning and forecasting that you've been talking about. In Uganda, we've done some exercises, for example, to see, okay, yes, you need to provide power to everyone, and I know many countries, african countries, are doing this. You need to provide electricity to all these people and they all need to have access. But what's the best solution for each of them? And really putting the right solution where it should be, and I think this kind of you know exercise, electrification planning and so on.

Speaker 4 46:17

Yes, indeed, there are always issues that these plans are not as followed as they are planned, but at least it's good to have something in place which has been prepared, which shows where it's more viable to put mini-grids, because, honestly, if you put one small mini-grid in a rural area, I mean you're just wasting money. This has been done many, many times and they just keep failing. So I think we need to advise these kind of options, yeah, to make sure that we do not again put mini-grids further and further in a bad reputation.

Mini-Grid Consultants and Sector Development

Speaker 2 46:55

Yeah, I fully agree. It's decisions that have effects and these effects can sometimes also backfire onto the policymakers who have taken the decisions. If projects fail. Yeah, all right. Let me come to one of our last points mini-grid companies that say you, consultants, you make so much money, while many mini-grid companies are struggling to become even EBITDA positive, meaning trying to cover their ongoing cost with the revenue that they make. And well, as long as you cannot do this, you need ongoing capital injections to survive, and that is the stage that many mini-grid companies are still in. They require continuous capital injections, on a monthly basis or on a yearly basis at least, to survive.

Speaker 2 47:55

So now there are some consultants who say well, no, I don't want to operate mini-grids, I want to earn money now. And well, of course, if you are a good consultant and you're booked, well then. Yeah, well, you make money, right, it's profitable, it's a profitable business. I cannot deny that. Yeah, but are we harming the sector? Is this discussion maybe harming the sector? Should we overcome this envy to a certain extent, or what can we do as consultants to overcome this envy that we're seeing?

Speaker 4 48:31

Yeah, nico, this is a very tough question. Yeah, I mean we have talked about the role of a consultant in this podcast. No, I mean we have talked about what needs to be done and what role a consultant should play, and I do believe part of all this innovation is also to ensure that the mini-grid sector is profitable at the end. So, yeah, and in many ways, you will always need much less consultants than developers. Yeah, you will always need a lot more developers. So, in my view, I think we need to coexist. We can't say that because consultants are profitable and because what they're doing is making money and the other guys are not. I think we need to both coexist and we can only coexist if we are profitable. I mean, if consulting is not profitable, then it's even more challenging to actually raise grants. It's very, very hard. I don't have a straight answer. I'm probably rambling around with no clear feedback, but I would say the benefit we are providing to the industry is justifiable for our existence.

Speaker 4 49:36

But the other point which now comes to mind is the point of scale. If you do these RBFs at a really, really large scale and develop them very well, so to say, there's not so much feeling about a consultant being around, because whatever they are doing is contributing to projects. Or if we start developing big projects, 1,000 mini grids and so on role for us consultants to do, to really do things which avoid us doing something again for the sake of you. Know, I'll make money in another country if I do this from scratch and I'll know everything, but I think we should develop things which are at scale and replicable.

Speaker 2 50:16

Yeah, yeah, moses, I do find some good points in what you just said. Like, on the one hand, we can say, yes, consultants are making money right now, but if the consultants do a good job and if the mini-grid companies do a good job and we work very well together, then the mini-grids companies can be commercially successful too, and then the profit from that, I believe, can be magnitudes higher compared to what we are earning right now. So we are earning now, but in the future maybe successful mini-grid companies will earn much, much more than what we are earning right now, and a mini-grid consulting the way we have discussed today is actually a means to an end. So this business model that we're running right now may not be there forever. In some 10 years from now, regulation drafting will not be required anymore. Ground fund structuring, which is one of our largest revenue positions in Enensis, will not be required anymore, because there are templates out there, the innovations that we are bringing in in each and every project, one little step at a time. They will not be required because we may will most probably have achieved an equilibrium. We will probably have reached a steady state where you just take what has worked well in the past and you just copy, replicate and scale. So therefore, at that point in time, the consultant's work that we describe today will have changed, and Inensis is already preparing for that.

Speaker 2 51:56

Well, we know that after some time we will not do what we're doing today anymore, like we are now looking into due diligences because mini-grid transactions will always be there. We are looking into transaction advisory because the more mature the market becomes, the more transactions will take place, the more demand for financing will be there, the more equity and debt will be required. And we are here. We know the market, we know how it works, we know all perspectives and little bits and pieces of it and we believe that we're in a good position to serve also that need. Yeah, but the market will be changing for mini-grid consultancy and we must change with the market.

Speaker 2 52:41

There's some synergy to be harvested between mini-grid operators and mini-grid consultancies. If one becomes successful, the other will most probably also become successful. So we should rather join hands instead of envy each other. Well, I envy some of the larger successful mini-grid companies. Sometimes I think, okay, maybe this would have been a nice path for me to develop a large mini-grid companies. Sometimes I think, okay, maybe this would have been a nice path for me to develop a large mini-grid entity also, but yeah, well, I've decided to work on the mini-grid consultancy side At the moment.

Speaker 2 53:15

at the moment, not in the future, maybe All right. And then there is one last aspect I would just briefly like to discuss with the two of you, and that is the presence of many non-africans in the mini grid consultancy sector. Well, melis, you're from europe, basically right? Yeah, I'm from europe. There are many US-based consultants.

Speaker 2 53:44

There are people who are like very international staff, coming from Asia, living in Europe, living in the US. Nairobi is positioning itself as a very strong knowledge hub where a lot of international people and staff and consultants are also gathering, because all the international organizations are represented there. But after all, africans like you, moses, are a little bit underrepresented in the mini grid consultancy space. Do you know why that is?

Speaker 4 54:18

yeah, no, I mean, um, well, I think it's a knowledge issue.

Speaker 4 54:25

I'm not saying that Africans are less knowledgeable they really do have a lot of product knowledge but I think it takes time to build your own confidence, to say, all right, I'm building a consulting company in a space of mini-grids, but I also think it has to do with the number of projects around and a couple of things moving and who is bringing the money.

Speaker 4 54:48

We see a lot of mini grids monies I think we talked about this already. There's a lot of donors coming in and it's easier to meet their requirements when you're an international consulting company bidding to do a consultancy with them than a local consulting company. But I look at mini-grids and compare it with solar home systems in this case, or even compare it with grid extension and in these other components we see there's still international consultants, but we see more local consultants involved. So I'm also hopeful that we will not be few going forward and we will definitely increase, because if guys are implementing these projects in their countries for five, ten years, trust me, after some time they are going to move out and become consultants. So I think it might be looking different now, but I think for me.

Speaker 2 55:41

I'm very, I'm very hopeful, yeah, that it will develop yeah, and even on the innanzas side, we are hiring more and more african stuff. Well, I believe that a large part of the, the knowledge that has been generated over the last 20 years of our existence, still is within the brains of the people who started this 20 years ago. But we're sharing we're sharing that knowledge, we're training staff, we're training African staff, we're training international staff to spread the understanding of how mini-grids work and how mini-grid regulation works, how mini-grid funding structures work, how you create trust with policymakers, how you create trust with development banks, with funders, with financiers, investors and so on and so on. And, yeah, well, I think it's a process that's ongoing and, yeah, we have staff in Inensos from Kenya, from Madagascar, from various other countries also, if not long-term, then at least short-term for certain projects.

Speaker 2 56:51

Yeah, and I think it's going into that direction that potentially, the non-Africans will probably move out and, from my perspective, sooner or later, we'll probably rather work with their knowledge for their respective domestic governments in Europe, in the US, in Australia, japan and so on, and support those governments to take good steps for a solid relationship with the African electricity supply sector and then maybe, as there will be international investors, also even work for those, but probably not focus too much on understanding African priorities, because if you're African then probably you have a much better understanding of that compared to somebody coming from Europe or a different part of the world.

Speaker 4 57:47

And Nico. I mean also to add there that the trust that an African consultant has with their government is also very beneficial to intentional companies. The way I actually see it, in my view it should not be this or the other, it should not be this or the other. I think it should be even in the long-term, cooperating, because I am working in Uganda and I know Uganda very well and I know the people and I can even go to their doors and get any information I need. But it's also very useful to have knowledge from what's happening in Nigeria, what's happening in Madagascar and so on, and in that case it's good to even have a few consultations or guidance from somebody like Melys, for example, who is working in different countries and okay, how did that work? How did that work To see how this can improve. So even that part, I really find it very beneficial, this kind of benchmarking from what's happening to improve what you're doing in your country your country.

Speaker 3 58:46

Yeah, I totally agree with you, and also I ran into cases where I saw that as a European person, as a French person, I was having difficulties to really have a good communication at the beginning with governments because they were having already, due to our history or past, having already some difficulties in the communication, and I think that African consultants are really, really important for not only communication but also for doing all this work that we are doing. Of course, we can bring a bit of different knowledge from different experience from also sometimes Europe, because we can see in other sectors something happening and we can also share things also. So I think, yeah, it's where we would come into play in a later stage. But I'm also happy to see that there are more and more independent African consultant in projects with whom we are working. So it's not really big companies like right now. It's mostly European, american.

Speaker 2 59:49

Asian companies. But yeah, at some point it will come. Are there any messages that you would like to send out to our audience before we close?

Speaker 3 1:00:09

Mia. I would say that our role as a consultant, to conclude, it is really to really facilitate partnership within the sector and to really provide expertise, bring innovation and so to really benefit to the entire ecosystem and not really taking into consideration everyone's expectations and expectations for their end users.

Speaker 4 1:00:23

Yeah, maybe actually one point which I wrote down. So this is how I see the role of consultants, at least personally, but I think in general we should probably start to talk more about the good things mini-grids are doing, and really a couple of successes, I mean, there are not.

Speaker 3 1:00:41

There are many yeah.

Speaker 4 1:00:43

Yeah, there are many, but most times, when you're in all these sessions and so on, it sometimes feels like what's not going right, what's not going right and it's not profitable, and so on, especially with the government, we really need to, I really need to talk about the benefits of mini-grids, to grow this buy-in, because if government does not believe in mini-grids, if governments do not believe in mini-grids, it's just a struggle. So, yeah, in addition, of course, to all the things we are doing and have to do, that is a good point to be made at the end of this episode.

Speaker 2 1:01:26

Thanks a lot, Moses. Thanks a lot, Melis. I really enjoyed discussing mini-grid consultancy with you and I hope to be working with you, Moses, soon again. We are already working together basically on a weekly basis and, Melis, of course you're part of our team. We basically see each other on a daily basis, more or less. Thanks a lot, both. Talk to you soon.

Speaker 3 1:01:50

Thank you very much. Thanks, Nico. Bye-bye.

Speaker 4 1:01:52

Thanks, malice, bye-bye.

Speaker 3 1:01:54

Bye-bye.

Speaker 1 1:01:57

This episode of the mini-grid business has been brought to you by Enensis, your one-stop shop for sustainable mini-grids. For more information on how to make mini-grids work, visit our website, enensiscom, or contact us through the links in the show notes. The mini-grid business powered by Enensis.