implication for tariffs. Table 1.3 below summarises pros and cons of each model from the perspective of different stakeholders. Table 1.3 | Comparison of Mini Grid Business Models Considered in this Report Business Utility/ Private Sector Retail Strengths Weaknesses Model Government Customers Public Highly reliant No significant Benefit of “Business as Requires larger Model on cross role for private lower-cost Usual”; lower subsidies and/ subsidies, sector, only electricity than tariffs for mini or higher increasing ECG/ NEDCo alternatives grid tariffs for main electricity (e.g., customers; grid prices for all kerosene) for operator customers; ECG/ NEDCo mini grid already known financial customers customers, but burden on higher-cost utilities; slower electricity for pace of main grid electrification customers Private Cost-reflective First movers More Faster pace of Tendering/ Model tariffs ease needed; expensive electrification; marketing pressure on revenue electricity (but lower subsidy process public funds or collection risk; better than no required; close required; no cross subsidy bankability is a electricity); contact with precedent of schemes; issue concern; private sector customers to licensed of affordability burdensome, concession increase operators; of tariffs unclear can be more demand for higher tariffs licensing involved in power for customers procedures; encouraging unclear opportunities mechanisms for productive for allocation use of of subsidies electricity Mixed If O&M by Private sector Same as Lower cost of Possible Model 1 concession, exposed to private model capital; slightly conflicts over there is an revenue risk above; tariffs lower tariffs large opportunity for from collection potentially maintenance cost-reflective of tariffs but lower due to works, tariffs, thus does not need government reinvestments reducing to recover developing and upgrades burden on capital and owning (especially cross-subsidy investment infrastructure relevant for schemes
implication for tariffs. Table 1.3 below summarises pros and cons of each model from the perspective of different stakeholders. Table 1.3 | Comparison of Mini Grid Business Models Considered in this Report Business Model Utility/ Government Private Sector Retail Customers Strengths Weaknesses Public Model Highly reliant on cross subsidies, increasing electricity prices for all ECG/ NEDCo customers No significant role for private sector, only ECG/ NEDCo Benefit of lower-cost electricity than alternatives (e.g., kerosene) for mini grid customers, but higher-cost electricity for main grid customers “Business as Usual”; lower tariffs for mini grid customers; operator already known Requires larger subsidies and/ or higher tariffs for main grid customers; financial burden on utilities; slower pace of electrification Private Model Cost-reflective tariffs ease pressure on public funds or cross subsidy schemes; issue of affordability of tariffs First movers needed; revenue collection risk; bankability is a concern; burdensome, unclear licensing procedures; unclear mechanisms for allocation of subsidies More expensive electricity (but better than no electricity); private sector concession can be more involved in encouraging opportunities for productive use of electricity Faster pace of electrification; lower subsidy required; close contact with customers to increase demand for power Tendering/ marketing process required; no precedent of licensed operators; higher tariffs for customers Mixed Model 1 If O&M by concession, there is an opportunity for cost-reflective tariffs, thus reducing burden on cross-subsidy schemes Private sector exposed to revenue risk from collection of tariffs but does not need to recover capital investment Same as private model above; tariffs potentially lower due to government developing and owning infrastructure Lower cost of capital; slightly lower tariffs Possible conflicts over large maintenance works, reinvestments and upgrades (especially relevant for
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