Isabelle Kocher, CEO, Engie: Interview

Interview: Isabelle Kocher

To what extent might off-grid solutions improve rural electrification rates in Africa?

ISABELLE KOCHER: African countries are very different from one another in terms of geography and economy. Some are already entirely electrified, but in many countries rural populations have little or no access to electricity. Electrification of remote rural areas based on centralised generation (grid connected) would be too expensive and would require a very heavy investment in transportation and distribution infrastructure that neither the public budget nor the final customer can afford. That is one of the reasons it has not happened until now.

In Africa there are currently around 620m people in need of electricity. With an electrification rate of 32% in sub-Saharan Africa, the goal for 2040 cannot be anything other than 100%. So there is a real challenge in unlocking the development potential of rural areas and providing affordable, reliable and sustainable energy services through different solutions like solar home systems and smart mini-grids. Once you have electricity many other services can be developed such as water, etc.

In this regard, off-grid (one customer) or mini-grid (one village) solutions should allow access and reduce the investment cost in heavy transport and distribution infrastructure, while providing cleaner and safer solutions. The products can be customised to better meet the customers’ specific needs, whether they are a remote farm, industry, village, etc, and enable social and economic development. The good news is that thanks to the drop in decentralised power costs, especially for solar, those solutions are becoming less and less expensive and should develop quickly. However, improved technology, comprehensive legal frameworks, capital expenditure reduction, access to finance and integration of solutions in digital platforms will likely be the decisive factors for the success of those solutions, especially for power storage.

How can renewable technologies ensure their competitiveness in price-sensitive markets?

KOCHER: It is crucial that investments be made in technologies that are most cost efficient. This is a strong demand from African authorities, when taking into account the local availability of renewable energy systems (RES). Local conditions such as wind speed, solar irradiation, water flow and biomass yield have a major impact on the competitiveness of RES. Recent examples of independent power producer tenders clearly show that wind and photovoltaic can have a very attractive cost for large-scale projects, if they also have very good locations. This implies, however, in many cases that the electricity grid needs to be further developed to bring power from where it is produced to where it is consumed. Furthermore, a clear technological advantage for renewable energy is the flexibility of its development. There is a limited need for auxiliary utilities and systems like cooling water and logistics for fuel supply, compared to conventional power generation options. Renewable technologies can thus be installed where conditions or natural resources are best fit to achieve an optimal (technical-economic) efficiency. They are also quick to build, without very long amortisation times and no exposure to energy commodities’ global prices – these are interesting upsides for African countries.

Also note that capital costs for RES may be high compared to combined-cycle gas turbines, but not compared to other generation options, such as coal-fired power. Renewables are competitive with electricity produced by diesel generators. Off-grid power systems can become hybrid (mixed with diesel and storage) or full RES. We need a market design that optimises and secures the investments in RES, both centralised and off-grid. It is important to have tariffs which are full cost reflective and hence artificial subsidies to thermal energy should be dropped, without impacting low income citizens and remote areas.