Improving energy supply in rural areas

Project description

Title: Energising Development (EnDev) Rwanda
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ); Directorate-General for International Cooperation of the Dutch Ministry of Foreign Affairs (DGIS); Norwegian Ministry of Foreign Affairs (MFA); UK Department for International Development (DFID); Swiss Agency for Development and Cooperation (SDC) and Swedish International Development Cooperation Agency (SIDA)
Country: Rwanda
Lead executing agency: Rwanda Energy Group (REG); Energy Development Corporation Ltd. (EDCL)
Overall term: 2009 to 2019

Solar lamps are a reliable source of light that does not pose a health hazard. Photo: GIZ/Razvan Dumitru Sandru

Context

Only 25 per cent of Rwanda’s population – and in rural areas even less than 3 per cent – has access to electricity. During the genocide of 1994, most of the infrastructure for energy generation and supply was destroyed. Economic sectors with the best growth prospects, such as agribusiness, tourism and IT, are the hardest hit by the inadequate power supply. Households not connected to the power grid use expensive sources of light such as candles, kerosene and battery-run lamps, which pose health hazards.

The Government is working to rebuild the energy infrastructure and, in doing so, to use hydropower, methane gas, peat, solar power and geothermal energy sources. In addition, rural households are to be supplied by means of decentralised technologies such as solar lighting and village grids. The country aims to achieve this in collaboration with the private sector.

Objective

109,340 people have been connected to the local power supply. Small and medium-sized enterprises are able to install micro-hydropower plants and operate them sustainably. More than half a million people have access to electricity thanks to the sale of 220,000 solar systems, and 22,000 people in off-grid villages are served by isolated grids.

Approach

Energising Development (EnDev) is a global programme that operates in 26 countries. The initiative is implemented by GIZ and funded jointly by the Netherlands, Germany, the United Kingdom, Norway, Switzerland and Sweden. EnDev Rwanda is carrying out two projects to improve access to sustainable energy for the rural population.

The first of these is the PSP Hydro Project. It was launched in 2006 to attract private sector investment in micro-hydropower plants for rural development, thus securing electricity access for small and medium-sized enterprises. The project provides advisory services, training and a limited amount of funding to assist private companies in building and operating micro-hydropower plants. The project is also supporting the development of a regulatory framework that promotes private investment in renewable energies.

In 2014, EnDev Rwanda set up an innovative financing mechanism for solar systems and isolated grids. Referred to as 'results-based financing', this approach creates financial incentives for private firms to sell these technologies to rural households and enables them to fund the additional cost of extending their operations to rural areas. The Rwandan Urwego Bank pays out the subsidies to the firms once they have provided evidence of the results achieved. This approach facilitates the dissemination of solar systems and the establishment of isolated networks in rural areas and helps develop sustainable market structures.

Results

The first three privately operated micro-hydropower plants in Rwanda have been connected to the national power grid. With a capacity of 500 kW, 438 kW and 96 kW, they supply more than 20,000 people with electricity. Four further plants are in the development stage. Privately operated micro-hydropower plants exhibit a higher level of efficiency and capacity utilisation compared with state-operated plants.

The PSP Hydro Project has fostered the emergence of an active private sector. Back in 2006, there were no private firms in Rwanda’s micro-hydropower sector. Today, there are more than 30 companies, both Rwandan and international. Feed-in tariffs for micro-hydropower and regulations such as environmental standards and licensing procedures have been introduced with support from the project. Rwandan banks, which had no previous experience with energy projects, have begun to grant loans to micro-hydropower plant developers. International investors are also injecting funds in companies assisted by the project.

Rwanda’s Ministry of Infrastructure has integrated promotion of the private sector into its strategy to expand power supply. In 2015, it privatised five publicly financed micro-hydropower plants. The privatisation of additional plants is planned.
The results-based financing fund for solar systems and isolated grids was launched mid-2014. At present, 14 solar companies are involved in the programme, which has successfully supported two projects with isolated networks in 23 villages. Some 24,000 people have already gained access to renewable energy thanks to the fund.

Solar panels can supply homes with electricity, even in remote areas. Photo: GIZ/Razvan Dumitru Sandru

The Scaling Up Renewable Energy Programme led by the World Bank builds on the work of EnDev and supports the Development Bank of Rwanda in granting loans to companies operating in off-grid electricity supply systems. The earmarked funds of 50 million US dollars serve to improve their access to financing. Companies can thus obtain loans through the World Bank’s programme as well as subsidies via EnDev. The aim is to increase electricity connection rates as quickly as possible. The two programmes are closely harmonised, with EnDev contributing its experience gained on the ground to the programme of the World Bank and the Development Bank of Rwanda.