Peter Ballinger, director of the Overseas Private Investment Corporation (OPIC), the U.S. government’s development finance institution, says that after years of funding large grid-connected projects it has become clear because of their costs that off-grid solutions are a cheaper alternative with greater potential for electrification.
Off-grid in Africa
In a studio interview at African Utility Week 2015, Ballinger draws a parallel with mobile telephony, saying this has taken off in Africa, with many people having catapulted over landlines to the extent that Africans are often more technologically advanced with their mobiles than are Americans.
“This is being replicated in the off-grid sector and rather than waiting for the grid to come to them, in areas with for example agriculture or small industry, off-grid solutions are being installed - and they really work.”
Ballinger says the greatest risk for off-grid solutions is the absence of regulation. Investments are being made without knowledge of what regulations may be promulgated. The Power Africa initiative has a programme to work with governments and regulators to put in place a regulatory framework. This will be essential for the ‘second wave’ of investors, who are more likely to be local and will look to a framework to assure the viability of their investments.
Notably, payment is not a major risk, Ballinger notes. He says in his experience people who have previously not had power supply will pay for it when it is delivered. In any event this risk can be mitigated by prepayment.
OPIC in Africa
Ballinger says that OPIC is interested in working with investors on solutions that can scale up to villages across a region or country, rather than on solutions for just one village.
As an example he cites Husk Power Systems in India, which was funded initially by OPIC. This initiative is focused on converting rice husks to energy and is currently working with around 300 villages.
“Such solutions can potentially create mini-grids which can be connected without necessarily connecting to the national grid,” says Ballinger.