World Bank Group Backs Largest Mini-Grid Project In Africa To Boost Electrification In DRC

The Democratic Republic of the Congo (DRC), the largest country in Sub-Saharan Africa by area, is endowed with exceptional natural resources. However, persistent conflicts and a challenging political and economic environment have hindered infrastructure development. With an electrification rate of just 19%, DRC has the second-highest number of people globally — about 77 million — without access to electricity, and less than 2% of rural areas are electrified.

La Société Nationale d’Électricité, the government-owned utility, has limited funds for grid expansion, hampered by the country’s vast size and dispersed population. Despite this, economic activity and potential electricity demand remain robust in remote areas.

In response, the Multilateral Investment Guarantee Agency (MIGA), the International Finance Corporation (IFC), and the International Development Association (IDA) are collaborating with the private sector to bring affordable and sustainable electricity to the country. A recently approved project will become the largest mini-grid initiative on the continent, featuring multiple city-scale mini-grids, or metro-grids.

Private sector-led mini-grids are central to the government’s strategy to accelerate access to electricity. However, private sector involvement has been limited, contributing only 5% of the installed capacity due to high country and regulatory risks and the absence of reliable data on demand and consumer willingness to pay.

Demand for electricity in the residential segment is expected to grow by 11%, while demand from mines and primary industrial consumers is projected to increase at a rate of 4% through 2030.

MIGA has provided a $50.3 million guarantee to Congo Energy Solutions Limited (CESL), which plans to expand operations across DRC to provide energy to up to five million people by 2025. This guarantee is supported by the IDA Private Sector Window and MIGA’s Renewable Energy Catalyst Trust Fund. In July 2023, IFC’s financing package included a subordinated quasi-equity investment through the Finland-IFC Blended Finance for Climate Program.

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CESL’s investment into Nuru SASU, a DRC-based company, will add up to 15MW of metro-grid capacity and has a future pipeline of another 39MW of mini- and metro-grids. As a result, over 28,000 households and businesses in eastern DRC will gain access to affordable and reliable electricity.

“Though it was a complicated transaction, MIGA worked diligently to innovate and provide guarantees to de-risk this metro-grid investment,” said Jessica Stiefler, Senior Underwriter and Distributed Energy Lead at MIGA. “We are committed to supporting private sector investment and accelerating access to clean and reliable sources of energy.”

Renewable electricity offers the DRC an opportunity to reduce poverty by unlocking new pathways for economic growth, facilitating investment in green solutions, and providing access to marginalized people. Additionally, it will displace diesel generators with a greener source of energy, reducing greenhouse gas emissions by an estimated 9,458 tons of carbon dioxide equivalent per year.

MIGA’s de-risking instruments are crucial for encouraging private sector participation in addressing DRC’s power deficits sustainably. MIGA’s guarantees will alleviate investors’ risk concerns in the fragile and conflict-affected DRC, providing additional benefits given the agency’s capacity to intervene in disputes or claims.

MIGA’s partial expropriation coverage is a novel aspect of the project, ensuring each mini-grid is separately covered from an expropriation perspective.

“As an African, it was exciting to work on this important project. This clean energy project with battery backup provides a stable power supply,” said Asenath Mutumbi, lead Underwriter for the Nuru project. “Stable power supply has already enabled SMEs and some MIGA projects to operate without interruption, and we hope this project is scalable and replicable across other regions.”

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Mutumbi also highlighted that the risk was too high in eastern DRC for the client to undertake the project without MIGA’s guarantee. MIGA’s support was facilitated by the risk-sharing mechanism provided by IDA Private Sector Window (PSW).

“IDA has emphasized the role of access to energy in poverty reduction and is increasing its electrification goals in Sub-Saharan Africa. The Nuru project exemplifies the type of high-risk, high-reward projects ideal for IDA PSW support,” said Federica Dal Bono, Lead for Private Sector Window at the World Bank.

“The MIGA facility extended to Nuru was critical in closing our investment. We could not have secured the capital without it,” said Jonathan Shaw, CEO of Nuru. “MIGA’s team was highly engaged and worked with our company and our investors to address the unique regulatory and contextual complexities of Congo’s market.”

The project aims to demonstrate the commercial viability of solar hybrid metro-grids in DRC as a green and reliable source of electricity and showcase the effectiveness of the regulatory framework, thereby increasing private participation in the sector.

The project features pre-paid power systems, where customers pay for energy consumption over time. With one mini-grid already operational, demand has not been an issue.

The 2018 WBG Systematic Country Diagnostic for DRC highlighted the need to expand access to electricity services and develop new business models to attract private investment, including locally operated mini-grids with hybrid solar or hydro technologies. In November 2022, the World Bank Group announced an initiative to accelerate electrification in Africa to achieve universal access by 2030, aligning with this project.

The World Bank Group is working with the government on DRC’s mini-grid strategy and focusing on delivering mini-grids at scale. IFC supports this effort through the Scaling Mini-Grid DRC advisory engagement and with MIGA through the Scaling Mini-Grid (SMG) initiative, a regional WBG platform designed to scale up private investments in the mini-grid sector. IFC has strengthened the project company’s financial model, conducted feasibility studies for new sites, and identified potential partners to bolster the project’s capacity.

“IFC’s, MIGA’s, and IDA’s support to Nuru exemplifies how the World Bank Group is expanding access to reliable energy in Africa,” said Sarvesh Puri, IFC’s Director for Infrastructure & Natural Resources, Africa. “Pioneering companies like Nuru in the mini-grids sector set examples for other private investors, which is crucial for achieving universal access to clean, reliable, and affordable electricity by 2030.”

This project showcases the One World Bank Group approach, where MIGA, IFC, and the World Bank collaborated to innovate and realize this investment.