PUE offers a pathway to universal energy access
Although access to electricity has grown rapidly from 27% in 2015 to 57% in 2021, mostly from off-grid energy sources such as solar home systems (SHS), Uganda is still significantly behind in achieving its goal of universal energy access by 2030 with only a couple years out. The average annual electricity consumption per capita in Uganda still remains one of the lowest in the world at 215 kWh compared to 552 kWh for the rest of sub-Saharan Africa often making the extension of access to electricity to the last mile through both the grid and mini-grid commercially unattractive to electricity distributors even with Uganda running an electricity surplus of 750 MW. Productive use of energy (PUE) presents a dual opportunity to improve the economics of electricity access to the last mile through growing energy demand and also improving livelihoods of rural communities by empowering them with assets to earn income.
PUE traction in Uganda is still low
GOGLA’s latest Global Off-Grid Solar Market Report Semi-Annual Sales and Impact Data shows that although sales have been trending upwards for the last half year, the Uganda PUE sector is yet to fully rebound from the impact of Covid-19. 5,038 PUE appliances including fans, refrigeration units and TVs were sold in the last half of 2022 which was a 171% increase compared to the first half of 2022. The total PUE appliance sales in 2022 were 50% lower compared to 2021 and 146% lower in 2019 prior to the pandemic according to analysis of GOGLA’s member data. Although GOGLA members represent 18-20% of the Uganda market share it is still clear the more initiatives are needed to support the recovery of the PUE sector. There is need for various sector actors to collaborate to ensure that the sector scale significantly to support universal electricity access by 2030 in line with Uganda’s National Development Plan III.
Collaboration between PUE companies and electricity distributors provides a pathway to scale access
PUE companies in Uganda often struggle to distribute their products effectively due to the sparse nature of rural populations that drive up distribution costs and limited working capital of PUE companies. Collaboration between PUE companies and electricity distributors such as mini-grid operators and on-grid energy distributors who have the mandate to extend electricity access to the last-mile can be mutually beneficial supporting PUE companies expand their distribution footprint making it easier to reach potential customers but also support electricity distributors grow their energy load and demand making extension of services commercially attractive. The three main areas of collaboration between PUE companies and electricity distributors in the short-term include the following:
- Collection of payments: Electricity distributors often have robust payment infrastructure such as smart meters that are integrated to mobile wallets and banks. Electricity distributors can collaborate with PUE companies to support integration of payments for PUE assets on their platforms making it possible for customers who are interested in acquiring assets to make singular payments for their monthly electricity consumption and the amount owed for the asset. This would reduce the cost and time required for PUE companies to develop independent payment platforms and systems which can lead to a reduction in the end-user price and ensure a more positive overall customer experience as the end-user has a singular touchpoint.
- Marketing support: Electricity distributors can support PUE companies implement targeted marketing campaigns of PUE solutions through text messages and emails leveraging contact details for customers that have opted in for marketing messages. One of the biggest obstacles to the scaling of PUE solutions remains the lack of awareness by potential end-users. Collaborating with electricity distributors on marketing initiatives provides a pathway to address this barrier.
- Revolving Fund: Electricity distributors who are often more capitalized than PUE companies have the potential to bridge the affordability gap for end-users through providing a revolving fund to support customers acquire PUE assets on credit. However, despite having capital to potentially setup such a fund independently, electricity distributors are usually restricted by their licensing from engaging in commercial operations beyond distribution of electricity. In addition, they often don’t have the internal capacity to implement PUE business models. To overcome these barriers the electricity supplier and PUE companies have an opportunity to explore avenues of collaboration co-implementing the revolving fund providing access to credit to last mile end-users to acquire PUE assets.
As Uganda looks towards implementing an integrated approach to electrification, a collaboration between electricity grid distributors, mini-grid operators, and PUE companies is expected to become even more important. There has been a recent uptick in these types of collaboration. Utilities 2.0 through its Twaake pilot implemented in partnership with EnerGrow, UMEME, Equatorial Power, and East Africa Power has reported exciting results and laid out a blueprint of what these types of collaborations can deliver. In its short time of implementation, the pilot has grown energy demand in one of the pilot sites by 3,000%. In another example of what collaboration could look like going forward, AVSI Foundation, an NGO providing PUE assets and training implemented a pilot with Winch Energy through which appliances were subsidized to end-users. The pilot is still ongoing, but results show a significant grow in energy demand. Given the early successes of these pilots, there is great potential collaboration between electricity distributors and PUE companies to drive energy access.
The article is authored by Jonathan Maraka, a Project Leader at Open Capital, and Perez Magoola, an Associate at Open Capital