The Global Energy Alliance for People and Planet (GEAPP) is a collective movement for change, working to unlock renewable energy access in emerging economies.
Formed on a spirit of radical collaboration, GEAPP over the years has brought together philanthropy, including its founder partners the IKEA Foundation, The Rockefeller Foundation and the Bezos Earth Fund, governments, development partners, and the private sector to accelerate a renewable energy tipping point that powers progress for people and planet.
Here in Ethiopia, the Distributed Renewable Energy – Agriculture Modalities (DREAM) initiative was set by the Alliance to build the first solar mini-grid powered large scale irrigation systems in Africa, providing famers with reliable, affordable, and sustainable irrigation. Currently, the initiative has nine renewable energy mini-grids and irrigation systems across Ethiopia.
In a recent soft launch, partners involved in the project including Ethiopia’s Ministry of Water and Energy, Ministry of Irrigation and Lowlands (MILLs), Ministry of Agriculture (MoA), Agriculture Transformation Institute (ATI), Global Energy Alliance for People and Planet (GEAPP), The World Bank, European Investment Bank and African Development Bank – Sustainable Energy Fund for Africa met to look assess the progress made. At the event, Capital’s Groum Abate caught up with some of the leaders pertinent to the project for insights in the complex initiative. The following are excerpts from the series of round table interviews;
Capital: Can you give us a snapshot of the program?
GEAPP Representative: This program is highly complex with multiple stakeholders. It seems relatively easy because we’re just digging wells and availing energy. But it actually comes with ensuring that these nine pilot sites could be scaled up to 100 or 200 sites across the country. This is a huge program and requires capacity building, finding the right resources and the right financing to actually maximize the program potential whilst ensuring it is private sector led. We aim to make it a commercially viable mini-grid option so as to actually electrify and completely transform villages. So to this end we have an electrification aspect, irrigation aspect as well as provision of drinking water aspect. All in all, we plan to electrify households and businesses and communities.
Capital: What can you tell us about the series of engagements that we had today?
Per Heggenes, GEAPP FUNDER and IKEA Foundation CEO: First of all, I was very encouraged to see the enthusiasm of the people and the expectations they have towards the program as well as their views on how it is going to transform their lives. For us, as funders we believe from a GEAPP perspective that access to energy is absolutely essential for economic development, and of course community development. So the way we can combine things like irrigation, access to clean water, access to energy for productive use is pivotal for our program. It’s a fundamental way of building the resilience of a community and helping them lift themselves to a new level. So it seemed like where we were today the opportunities were great to actually do that, and actually drive quite a big change in a relatively short amount of time for all the people.
Capital: Can you tell us about your observation of the project and its effect on the people?
Per Heggenes: Well, the effect on the people is clearly positive and impactful. This is because not only does having access to energy help irrigate the land but it can also help other several rain fed crops throughout the year not to be dependent on rain. This then brings in the aspect of sustainability in the form of safety and security. This is vital especially in these days where climate change is having such a negative impact on smallholder farmers in this area. In addition to the agricultural aspect, the project opens up the opportunity to do so many other different things in building resilient jobs and communities. As we all know, access to energy is integral in building any small business or large business. And of course on top of that it increases significantly the quality of life for the people in households. So this project plays an instrumental role for the people of these areas to have access to energy as part of their daily life.
Capital: So many views and issues have been raised by the community. How is GEAPP working to provide solutions for this both now and in the near future?
GEAPP Ethiopia representative: Majority if not all of the community issues that were raised, will be solved as the program becomes unlocked. Most of the issues are centered on bringing the project to life as fast as possible and on our end we are pacing to get this done. What I sensed was that the community would want that initiative delivered today. And in essence, we are moving as fast as possible. And I think in the next few months, they will get what they’re looking for. In the short term we can avail drinking water since the wells have been drilled. We envision that by the beginning of next year, that is 2024, we will have the mini-grids up and running. And we will connect the irrigation schemes to the mini-grids and electrify the villages, whilst also availing irrigation to the farmland and drinking water and power to businesses and homes as well.
Capital: How many people benefit from the Murche site?
GEAPP Ethiopia Representative: So right now, we’re actually working on nine pilot sites, which actually looks to what I believe to benefit about 200 farmers across about 150 or so hectares of land.
Capital: What are some of the challenges you have faced to implement this initiative?
GEAPP Ethiopia Representative: This project is a multi-year project from the initial conceptual stage. There’s been a lot of work in the history of Ethiopia to actually electrify villages, but about three years back, the laws changed allowing private sector involvement in the generation and distribution of power. That directive was only released in 2020. So ever since then, there’s only been one mini-grid license issued to a private sector development. And before that, as you know, EEP were the sole state-owned monopoly in the sector. So since this change actually came about, this program has been in development.
And some of the challenges we face is the challenge I think most of the community, us, and everybody else also faces, which is inflation. So the price of drilling costs, or the price of the procurement costs of goods and services, have really increased drastically, increasing the overall budget and the cost of the full project, And because it is a private sector-led project, where it has to be commercially viable, or else we can’t scale it up to 100 or 200 sites. We have to ensure that the numbers actually make sense. So part of the major challenge was the increase we saw of just living costs with across the board. So if you receive a quotation today to do drilling work in the south, if you try to implement it in six months’ time, that quotation has increased by 30%. This is because they can’t access the right imported gear to actually do the drilling, and that has a knock-on effect across the project. So that’s one of the major challenges I would say that we have faced to date.
Capital: So how do you envisage changing that? Do you hope for more funding?
GEAPP Ethiopia Representative: Well, not so much in additional funds. So as the funders, and I’m sure Per Heggenes can jump in here and add, is that we’re committed to this project as GEAPP. Our funders, including the IKEA Foundation, the Rockefeller Foundation, are all committed to actually ensuring that this project is actually seen through. What we’ve done is, in order to sort of cut costs or save money is by actually trying to be a little more nimble. For example, the casing sizes of the pumps in terms of the drilling fall under a particular sizing, which are available locally. However, if it’s above a particular size, then you actually have to import it. So we actually tweaked our technical specification to actually ensure that we can maximize the locally available goods and services instead of actually importing them from overseas. And then on top of that, especially when we look at the procurement of goods on the energy side of the equation, we introduced an aggregated procurement process where we can actually pool all of the purchasing and ensure that the prices that the developers, including even on the irrigation side, is the lowest ever possible globally. So we essentially use a program called DART, which is an aggregated procurement tool, to ensure that we get the best prices for any of the quantities in the BOQ. But still we have to import goods, I mean, on the energy side, it is an investment.
Capital: How has the security situation both globally and locally affected your initiative?
GEAPP Ethiopia Representative: We manage it just like everybody else. I mean, we have been working through this project for the last three years, which is arguably one of the most challenging times that Ethiopia has faced recently. So we’re very well aware. We work very, very closely to our government counterparts that give us the all-clear as to whether we can go out to the sites. And we all work together to ensure that we’re protecting all of our staff and implementing partners.
Capital: Are you going to sell these suitable power grids to the community? And if so, will that depend on the price limit of the EEU?
GEAPP Ethiopia Representative: To the community, sounds about right. Well, as the directive actually states, one can charge a commercially viable rate, which has to be for us through a tripartite agreement. So in order for this to happen, the community actually has to agree to pay a tariff. The developer has to agree to actually sell you energy at that tariff rate. And EEU’s local team here also has to agree that this tariff is also reasonable. This agreement is also signed across the board. And that tariff rate will then become the rate that the community will pay. Like there’s a negotiable rate also to be taken into account. Is it sustainable for the investment, for like the mini-grid developer? Yes, indeed. So like if the mini-grid developer actually says that at this tariff rate they have a commercially viable investment into say our site like Murche or Lelicho. And if the government actually also agrees that this rate is actually acceptable, then, like will have a whole checklist of things like they have to sign off on. The community is also willing to actually pay that rate because they know what their cost benefits sort of is in terms of either using diesel or like having continuous access to say electricity or like irrigation or like drinking water.
Capital: With the certain amount of money that you can charge going forward, is that profitable for the private developers?
GEAPP Ethiopia Representative: So part of what GEAPP has done, in partnership with the KF Foundation, is also de-risk the project. We have provided grant funding to the developers, where they can actually be able to not only charge the full cap cost of the actual investment, but also charge operations and maintenance, and a particular amount of cost that would be calculated to be actually included into the tariff rate. So it wouldn’t be the full rate, which is why we’re here. So we want to see an increase in energy access, an increase in usage of productive use of energy, and the way we do that is by de-risking it. And that’s where our investment is actually coming from.
Capital: Have you had an agreement with the EEU or any other organization?
GEAPP Ethiopia Representative: Not yet. So as you know, since the directive came out, there’s only been one license issued to date. So we are hoping that we are the second license to be issued.
Capital: What if you don’t reach an agreement with the EEU, do you have to invest till then?
GEAPP Ethiopia Representative: I think we’re very hopeful. All of our discussions with the community, with EEU, with the ministry actually points to the fact that we will reach an agreement. So absolutely we still have to invest but the risk we’re taking is somewhat of an uncharted territory. Because this is a new thing for Addis Ababa and it is a private sector development of course. So what’s happening here requires investment to actually de-risk it and actually make it viable for a mini-grid developer to actually come in and say, hey, what’s going on? How are you going to help me? And there’s a whole range of different modalities that we’re working with to ensure that their investments will work out at the end of it.
Capital: Do you have any kind of price estimate per kilowatt?
GEAPP Ethiopia Representative: That’s still in the works and a bit early to say for now because we just finalized the capex sizing of the mini-grid. So depending on the capex sizing, and also estimate of what the operation maintenance cost is, will have a role to play in the pricing. Additionally, you also have to estimate what the other running costs are to actually come up to the tax cost.
Capital: How do you manage the maintenance?
Per Heggenes: We have an international developer that’s responsible for operations and maintenance for the next 20 years. But there’s a risk to anything, as is always. What we can do, because we have a blended finance model, we have a combination of grant money and investment money at different levels, we can make the effort to develop the project. So we look into what it takes to develop the project with different partners. And then de-risk whatever it takes to get the development banks primarily to actually finance and provide concessional financing. So that’s the role we play as an organization. We take out that risk that otherwise would probably prevent the project from being born and raised in the first place.
Capital: Do development banks have some concerns about the security? Are they willing to finance this project? Will they be willing to loan money?
GEAPP Ethiopia Representative: I believe so. So the co-financier for this project is the African Development Bank. They used to be. Well, right now, for the DREAM project, for the nine sites, it’s GEAPP. GEAPP is an alliance of funders, including the IKEA Foundation. And the co-financier of the project, especially on the energy side, is the African Development Bank. What I can say is the banks are committed to the DREAM project. And like I said, this commitment has been ongoing for the last two to three years. I think our colleagues can probably share more details on the same.
Capital: How are you involved in this project?
Dagnachew Lule – Senior Director of Agricultural Commercialization Clusters (ACC): In this building, we primarily focus on the agriculture sector. Our mandate is to identify critical challenges in agriculture and design projects to address them. We also provide implementation support and recommendations. Our main aim in agriculture is to increase production productivity. We have adopted a strategy of clustering farmers together to enhance surplus production. We provide inputs such as fertilizer and extension services to these clusters. The government has already fully adopted this cluster approach, with close to 8 million hectares of land being planted in clusters. The aim is not only to bring farmers together temporarily but also to promote sustainability and encourage subsistence farmers to produce surplus and transform into commercial enterprises. The clusters are expected to pass through five stages, with some potentially transforming into company-level operations. We are currently in the third year of the agriculture commercializing cluster project. One of the means to increase production productivity is to produce high-value commodities like bananas twice a year with the help of irrigation systems. We are engaged in promoting this approach, and other stakeholders are also involved. When we say commercializing subsistence farming is not just to reduce surplus production but also to change the livelihoods of small farmers. By providing energy, clean water, and irrigation, we hope to facilitate this transformation.
Capital: Do you think this will be successful?
Dagnachew Lule : Yes, the adoption rate and acceptance from the government side have been very good. We are piloting projects and encouraging farmers to use digital agriculture. Our aim is to make agriculture a professional and attractive field, encouraging urban dwellers to engage in farming. By clustering farmers together, we can make mechanization easier and more efficient. Through this approach, we have already gathered around 86,000 farmers in cluster farmers. Agriculture has already expanded across the regions, particularly in four regions. Currently, we have six regions, including Sidama and South West Ethiopia. Within these six regions, we have 300 districts of woredas and we are working with 11 commodities. The total number of clusters we have is approximately 86,000.While we do not expect all 86,000 clusters to transform into companies. We have observed successful transformations in certain cases such as the avocado cluster to which we have started exports. This cluster approach is implemented in Amhara region, as well as in Sidama region, integrated through the agro-industry of Sidama. Our expectation is that some farmers will be able to transform their productivity with increase through the support and input we provide. By supplementing with irrigation and utilizing the available water resources, we can further enhance productivity.
Capital: For the case of avocado, are you supplying say seedlings in the overall facilitation?
Dagnachew Lule: The seedlings, yes, where grafted varieties are used to ensure resistance to pests and diseases. These grafted varieties have shown early maturity and high productivity. Our approach focuses on maximizing yields and promoting early maturity. We believe this strategy is effective and are working towards its implementation.
Regarding the ACC (Agriculture Commercialization Cluster), the project started in 2019 with the support of the international primary initiative of the German government. Collaboration with the ministries of water, education, and energy has been instrumental. Commercial immigrates have been introduced at a cost of 10 cents, significantly reducing expenses for households. It is worth noting that in other parts of the continent and the world, household tariffs for electricity are typically higher, around 50 cents or more. In summary, our efforts in cluster farming have expanded across multiple regions and districts, targeting various commodities. We aim to transform productivity through input provision, irrigation, and strategic approaches. The avocado cluster is one successful example, and we are optimistic about the potential for further transformations. The collaboration with the ACC and government ministries has been vital in driving progress and reducing costs for households. The government wanted equity, ensuring that the cost is less than 4 cents. If commercial immigrates are pursued, there will be a decline. The only way to achieve this is by finding economies of scale for commercial demand, as discussed earlier. The agriculture commercial cluster is not limited to commercial demand alone. It includes five cereal crops and five horticulture crops. There are approximately 30,000 serial clusters and 600 horticulture clusters. Horticulture demands significant upfront infrastructure, which farmers typically cannot handle by themselves. The ACC was chosen after considering various programs in Ethiopia. Ethiopia, unlike other countries, makes substantial investments in rural farming. In Kenya, Nigeria, Togo, smallholder farmers do not have more than 10-20 hectares together. The government in Ethiopia has provided extensive support and created an enabling environment for the private sector to lead.
Capital: Is it sustainable to sell to farmers?
Dagnachew Lule: If it’s not sustainable, they won’t do it and if it is sustainable it grows a lot faster for investment. Its nominal support, they are not building it for free, if you are looking for them to build it for free it will take 10 years. If this model works and becomes commercial sector, you won’t be able to stop them.
We are not always right but it has been shown to work. The support on this has been massive and the grant support and consultant support that has been coming from GEAPP, for a country that is very hard to invest in, the government has really stepped up and proved incredible kind of support.
The ACC is a pilot project, and it is welcomed for further follow-up and clarification. The project is managed by a team that initially collaborated with the German government international climate initiative and later received support from Rockefeller and GEAPP. The project manager coordinates the efforts, ensures a pipeline of 100-150 sites, and provides technical assistance and capacity building for local companies that can be involved in the DREAM program.
