Utilities operating in countries with low energy access rates face several challenges in delivering affordable and reliable electricity, which is thought to be a contributory factor to the world not being on track to meet Sustainable Development Goal (SDG) 7 (access to affordable, reliable, sustainable and modern energy for all by 2030).

In response, a new, innovative approach has emerged in recent years. Known as Utilities 2.0, it is designed to draw on the strengths of centralised and decentralised technologies, combining traditional utility models with learnings from over a decade’s worth of decentralised energy rollout. The objective is to create an integrated, intelligent, and interactive energy network that can deliver customer-centric, clean energy solutions and reliable service delivery to end energy poverty at the lowest cost, in the fastest time.

Power for All advocates for the market-based growth of decentralised renewable energy (DRE) as the key to achieving universal energy access. Power for All has established the Utilities 2.0 collaborative in Uganda, an integrated, intelligent and interactive energy network of public and private actors, that delivers customer-centric clean energy solutions to end energy poverty at the lowest cost in the fastest time. Alongside Konexa (an energy company pioneering an integrated utility model) and Rocky Mountain Institute (an independent non-profit aiming to transform global energy use to create a clean, prosperous, and secure low-carbon future), Power for All is working directly with utilities from across the African continent, exploring viability and demonstrating the value proposition of novel integrated approaches.

However, while these cutting-edge initiatives are necessary first steps, much more is needed to galvanise practitioners, donors, investors, and policy makers to accelerate integrated approaches to energy access at scale.

In June 2020, EEG sponsored a Power for All webinar called Utilities 2.0 – Better Services, Better Connections – Lessons from Uganda and Nigeria. Organised in collaboration with Umeme (Uganda’s main electricity distribution company), Konexa, Rocky Mountain Institute and Duke University, the webinar aimed to shed light on the challenges facing utilities in Uganda and Nigeria, the business models being deployed today and the role of financiers in de-risking integrated approaches to electrification.

The 146 attendees were able to engage directly with researchers and utility experts working in Uganda and Nigeria to learn lessons from the field.

Key insights on the challenges facing utilities in Sub-Saharan Africa were covered, including that only two utilities in the region are profitable and that low performance is a result of two common themes: the inability to access affordable capital to invest in infrastructure upgrades, and low revenue collection rates (due to factors such as poor billing practices and non-payment).

Other discussion points included transmission and distribution losses in low energy access countries (which can be five to 10 times higher than in developed ones) and service interruptions (most low energy access countries suffer over 500 hours of interruptions per year). In addition, across the continent the average utility deficit is US$ 0.12 per kWh (and can range as high as US$ 0.49 per kWh) which compromises on average 1.5 per cent of a country’s GDP. It was highlighted that even as a profitable utility, Umeme experiences financing and reliability challenges.

The webinar also covered business model innovations, with examples from Uganda and Nigeria, and discussions on how to achieve scale using these innovative approaches. In Nigeria, Konexa gets a sub-concession within the utility services territory, the model aims at investing across the value chain to improve quality of service, including DRE and other technologies to bring transparency and build a strong customer relationship. In Uganda, the Utilities 2.0 pilot models are focused on each party’s advantages. Utilities have the expertise to support with engaging the regulator, while mini-grid and the private sector can focus on customer development and increasing productive use. The Uganda, U.2.0 model takes the view that the utility can consider partnering with mini-grids, whether that is working in partnership or being a sub-contractor for the areas where the utility is an expert, or whether the utility considers opportunities directly in the DRE space that will see it seeking permission from the regulator to be allowed to do business outside the regulated utility business. Productive use is a key component to the utility business model, which is made up of the 80:20 rule – 80% of the end-use consumption is driven by a small number of industrial and commercial customers; the remaining 20% of the consumption comes from rural household customers. The importance of large commercial and industrial customers is clear even to the traditional utility. In both the Nigeria and the Uganda U.2.0 models productive use plays an integral role in the business models being explored.

Further information on the webinar is available below in the form of a summary, presentation slides and a Q&A. There is also a link to the full recording of the webinar.