ERC IFC mini-grids-Kenya-Oct 2015 PDF

Kenya Market Assessment for Off-Grid
Electrification
Final Report
October 2015
Carbon Africa Limited

Trama TecnoAmbiental S.L.
Research Solutions Africa Limited
Energy research Centre of the Netherlands
This report was prepared by a consortium of consulting firms that included Carbon Africa,
Trama TecnoAmbiental, Research Solutions Africa and ECN, for an assessment
commissioned by IFC for the Energy Regulatory Commission of Kenya, to understand the
potential market size privately-operated mini-grids in Kenya and to identify some of the
key challenges and possible approaches to expanding access to energy through mini-grids
in the country.
This report is a compilation of technical, financial and economic advice. The materials
contained in this report are presented as an overview of a study that was conducted in
Kenya.
The information contained in this report is presented in good faith for general information
purposes. Findings, interpretations, opinions and conclusions expressed in this paper are
of the authors and do not necessarily reflect the views of the Executive Directors of IFC
and the International Bank for Reconstruction and Development (World Bank) or the
governments they represent.
The report is not intended as an exhaustive presentation of the issues discussed in the
assignment. The report should not be used as a basis for the process of making business
decisions. Companies should always consult with their accountant, auditors or other
financial experts on all matters and financial problems. Please contact independent
technical experts for recommendations on all technical issues.
Acknowledgments
This study benefited from the comments and inputs of public and private sector
stakeholders. The contributions of the following organizations in particular is gratefully
acknowledged (in alphabetical order):
African Solar Designs Kenya National Bureau of Statistics
lAgence Franaise de Dveloppement Kenya Power
Council of Governors Kreditanstalt fr Wiederaufbau
County Governments PowerGen Renewable Energy

Busia, Homa Bay, Kajiado, Kisii, Kitui,
Marsabit, Siaya, Taita Taveta and West Pokot Powerhive Inc
Deutsche Gesellschaft fr Internationale Rural Electrification Authority

Zusammenarbeit
SteamaCo
Industrial Promotion Services K Ltd
Strathmore University
Kenya Association of Manufacturers
Wind for Prosperity Kenya
Frontier and Vestas
Table of Contents
Acknowledgments...................................................................................................... 3
List of tables ............................................................................................................... 5
List of figures.............................................................................................................. 6
List of acronyms ..........................................................................................................ii
Executive summary .................................................................................................... iv
1 Introduction ........................................................................................................19
2 End-user survey ...................................................................................................21
2.1 Site selection overview .................................................................................................... 21
2.2 End-user survey implementation overview ..................................................................... 26
2.3 End-user survey summary of results ............................................................................... 27
2.4 Relevance of the findings................................................................................................. 40
3 Site characterization ............................................................................................42
3.1 Summary of site characterization analysis ...................................................................... 42
3.2 Pre-feasibility analysis of five sites .................................................................................. 46
4 Characterization of existing mini-grids .................................................................56
4.1 Analysis of existing mini-grids.......................................................................................... 57
4.2 Private mini-grid operators.............................................................................................. 65
4.3 Comparison of KPLC mini-grids and characterized sites.................................................. 71
5 Cost assessment ..................................................................................................78
5.1 Cost assessment methodology ........................................................................................ 78
5.2 Cost assessment results ................................................................................................... 83
5.3 Life cycle costs: LCOE and cost per customer .................................................................. 86
6 Market size potential ..........................................................................................96
6.1 Costs of mini-grids ........................................................................................................... 96
6.2 Consumer demand profiles ............................................................................................. 99
6.3 Estimate of market size ................................................................................................. 103
6.4 Stimulating mini-grid roll-out: subsidy analysis ............................................................. 110
6.5 Relevance of the findings............................................................................................... 117
7 Conclusions and recommendations ................................................................... 120
7.1 Conclusions .................................................................................................................... 120
7.2 Recommendations ......................................................................................................... 121
Annex I details of five characterized sites .............................................................. 126
1. Takawiri ............................................................................................................................... 126
2. Korr ...................................................................................................................................... 129
3. Kadaina Island ..................................................................................................................... 132
4. Dujis ..................................................................................................................................... 136
5. Lorugum .............................................................................................................................. 139
Annex II additional tables and figures ................................................................... 142
List of tables
Table 1: Overview of end-user survey main findings ......................................................... vii
Table 2: Projected customers at 5 sites by type and electricity consumption ...................ix
Table 3: Overview of estimated system size & RE potential at 21 surveyed sites ..............x
Table 4: Overview of sites characterized to "pre-feasibility" level ................................... xiii
Table 5: Variation of LCOE for Dujis mini-grid (KES/KWh) ................................................. xv
Table 6: Subsidy levels at three sites at 10% EIRR (minimum subsidy scenario).............. xvi
Table 7: Site selection criteria ........................................................................................... 22
Table 8: Site selection scoring calculation ........................................................................ 23
Table 9: Ranking of top (weighted scoring) sites .............................................................. 23
Table 10: Selected sites with existing KPLC mini-grids ..................................................... 24
Table 11: Selected sites with specific interest .................................................................. 24
Table 12: Overview of main economic findings ................................................................ 27
Table 13: Lighting Africa 2008 & the present assessment - kerosene, candle & battery
expenditure (in KES)................................................................................................... 34
Table 14: Overview of end-user ability to pay for energy (monthly values) .................... 37
Table 15: Typical connection cost & electricity expenditure as % of income .................. 39
Table 16: Overview of 5 sites characterized to "pre-feasibility" level .............................. 44
Table 17: Mini-grid system configurations at the 5 pre-feasibility sites........................... 45
Table 18: Household end-user consumption sub-segmentation...................................... 46
Table 19: Site base case growth scenario (scenario 1) ..................................................... 48
Table 20: Site higher growth case scenario (scenario 2) .................................................. 49
Table 21: Sites with higher & moderate potential based on demand .............................. 54
Table 22: Estimated public mini-grid diesel generation capital costs (USD) .................... 59
Table 23: KPLC mini-grid RE generation capital costs as at 2013 ..................................... 60
Table 24: KPLC mini-grid transmission and distribution details ....................................... 63
Table 25: KPLC mini-grid customer categorization ........................................................... 64
Table 26: Overview of some private mini-grid developers in East Africa ......................... 67
Table 27: Comparison of mini-grid projections at 4 sites ................................................. 73
Table 28: Mini-grid costing reference cases ..................................................................... 81
Table 29: Life cycle cost indicators.................................................................................... 82
Table 30: CAPEX per cost category for solar PV ................................................................ 84
Table 31: CAPEX breakdown per kW (USD/kW) ............................................................... 85
Table 32: Mini-gird reference cases and characterized sites CAPEX comparison ............ 85
Table 33: Projected customers per site by type and electricity consumption ................. 87
Table 34: Mini-grid system configurations at the five pre-feasibility sites....................... 87
Table 35: Mini-grid fixed O&M assumptions .................................................................... 88
Table 36: Components lifetime and replacement schedule ............................................. 89
Table 37: LCOE & monthly cost per customer 10% equity IRR ...................................... 90
Table 38: LCOE & monthly cost per customer 20% equity IRR ...................................... 90
Table 39: Comparison of monthly cost/customer at 5 sites with ATP & WTP ................. 92
Table 40: Influence of the solar fraction on costs at Takawiri 20% equity IRR .............. 93
Table 41: Variation of LCOE for Dujis mini-grid (KES/KWh) .............................................. 97
Table 42: Average household income at the five analyzed sites .................................... 103
Table 43: Impact of variation in income, WTP & energy demand on price levels .......... 103
Table 44: Household income levels at surveyed sites .................................................... 108
Table 45: Impact on market penetration by variations in income/WTP and CAPEX ...... 109
Table 46: Subsidy levels at three sites at 10% EIRR (minimum subsidy scenario).......... 111
Table 46: Demand segmentation at Takawiri ................................................................. 128
Table 47: Demand segmentation at Korr ........................................................................ 131
Table 48: Demand segmentation at Kadaina Island ....................................................... 134
Table 49: Demand segmentation at Dujis ....................................................................... 138
Table 50: Demand segmentation at Lorugum ................................................................ 141
Table 51: End-user survey sample versus estimated population at the 21 sites ........... 143
Table 52: Overview of some usage & expenditure findings ........................................... 145
Table 53: Projected customers at 5 sites by type and electricity consumption ............. 145
Table 54: Takawiri at 89%, 10% and 50% solar fraction configurations ......................... 145
Table 55: Overview of estimated system size & RE potential at 21 surveyed sites ....... 146
Table 56: Tentative potential at the 21 sites based on selected parameters ................ 148
Table 57: Overview of KPLC mini-grids assessed in this study........................................ 150
Table 58: Electricity generation and maximum load demand in 2014 ........................... 150
Table 59: Annual electricity generation and peak load demand growth rates .............. 151
Table 60: Recent diesel fuel generation costs at selected KPLC mini-grids .................... 152
Table 61: Overview of renewable energy resource availability at KPLC sites ................ 154
Table 63: Summary of electricity use at Mpeketoni ....................................................... 155
Table 63: Installed capacity and customers per site ....................................................... 156
Table 64: KPLC & potential off-grid site distribution lines & customers ........................ 156
Table 65: Mini-grid CAPEX categories and items ............................................................ 157
Table 66: Mini-grid OPEX categories and items .............................................................. 157
List of figures
Figure 1: Map of sites 21 sites surveyed and characterized ...............................................vi
Figure 2: LCOE & cost per customer per month at five sites 10 & 20% EIRR................. xiii
Figure 3: Supply cost & demand curve at Dujis ................................................................. xv
Figure 4: Map of sites where end-user surveys were implemented ................................ 25
Figure 5: View of Napeitom village in Turkana County ..................................................... 26
Figure 6: Mean monthly household income (KES) by site ................................................ 28
Figure 7: Mean monthly business revenue (KES) by site .................................................. 29
Figure 8: Mean monthly institution income by site (KES)................................................. 29
Figure 9: Primary household energy source for lighting................................................... 30
Figure 10: Main business source of lighting (%) ............................................................... 31
Figure 11: Institution main source of energy for lighting (%) ........................................... 31
Figure 12: Household mean monthly expenditure on energy by site (KES) ..................... 32
Figure 13: Business mean monthly expenditure by site (KES) .......................................... 32
Figure 14: Institution mean monthly energy expenditure by site .................................... 33
Figure 16: Household mean monthly WTP for electricity (KES) ....................................... 36
Figure 17: Business mean monthly WTP for electricity (KES) ........................................... 36
Figure 18: Institution mean monthly WTP for electricity (KES) ........................................ 37
Figure 19: Spatial distribution of monthly non-electricity expenditure (KES) .................. 40
Figure 20: Location of 5 potential mini-grid sites for pre-feasibility analysis ................... 43
Figure 21: Cumulative total costs of 3 mini-grid solar fractions at Takawiri .................... 45
Figure 22: PV hybrid configuration used as a reference in this study .............................. 51
Figure 23: Location of KPLC mini-grids assessed in this study .......................................... 57
Figure 24: KPLC mini-grid customers & nominal and effective capacities........................ 58
Figure 25: KPLC stations grouped by specific fuel consumption ...................................... 61
Figure 27: Powerhive solar PV-battery mini-grid plant in Kisii County ............................. 67
Figure 29: Typical functions in a decentralized electricity delivery scheme..................... 79
Figure 30: Mini-grid CAPEX per kW (USD) by technology (PV, wind, hydro) .................... 84
Figure 31: CAPEX per cost category (%) ............................................................................ 84
Figure 32: Cost per kW installed (USD) ............................................................................. 85
Figure 33: Distribution of CAPEX & OPEX over 20-year period (%) .................................. 93
Figure 34: Cost curve for Dujis .......................................................................................... 99
Figure 35: Demand curve for Dujis.................................................................................. 102
Figure 36: Kadaina cost & demand curves and distribution of users ............................. 105
Figure 37: Dujis cost & demand curves and distribution of users .................................. 106
Figure 38: Lorugum cost & demand curves and distribution of users ............................ 107
Figure 39: Impact on market size of 80% investment subsidy at Dujis. ......................... 115
Figure 40: Korr Price Sensitivity Measure results ........................................................... 116
Figure 41: Map of sites in selection database ................................................................. 142
Figure 42: Typical daily load curves at 4 smaller KPLC off-grid stations ......................... 152
Figure 43: Typical daily load curves at 4 larger KPLC off-grid stations ........................... 152
Figure 44: Renewable generation (MWh/year) and share (%) ....................................... 153
List of acronyms
AC Alternating Current
AFD lAgence Franaise de Dveloppement (French Development
Agency)
ANSI American National Standards Institute
ATP Ability to Pay
BSI British Standards Institute
CAPEX Capital Expenditures
CDR Child Dependency Ratio
DCE Discrete Choice Experiment
DIA Development Impact Assessment
ERC Energy Regulatory Commission
GHG Greenhouse Gas
GHI Global Horizontal Irradiance
GIZ Deutsche Gesellschaft fr Internationale Zusammenarbeit
(German Development Cooperation)
GWh Gigawatt hour
HH Household
HHD Hand Held Device
HOMER Hybrid Optimization of Multiple Energy Resources (software)
Hz Hertz
ICT Information Communication Technology
IEC International Electrotechnical Commission
IFC International Finance Corporation
IPP Independent Power Producer
IRR Internal Rate of Return
ISO International Standard Organization
KAM Kenya Association of Manufacturers
KenGen Kenya Electricity Generation Company
KfW Kreditanstalt fr Wiederaufbau (formerly, Reconstruction Credit
Institute)
KIPPRA Kenya Institute for Public Policy Research and Analysis
KNBS Kenya National Bureau of Statistics
KPLC Kenya Power & Lighting Company
kV Kilovolts
kW Kilowatt
kWp Kilowatt-peak
kWh Kilowatt-hour
LCOE Levelized Cost of Electricity
LED Light Emitting Diode
LV Low Voltage
MoEP Ministry of Energy and Petroleum
MV Medium Voltage
MWh Megawatt-hour
M&O&M Management and Operation and Maintenance
ERC-IFC Kenya mini-grids market assessment final report ii

NREL National Renewable Energy Laboratories
OPEX Operating Expenditures
PPA Power Purchase Agreement
PSM Price Sensitivity Measure
PV Photovoltaic
RE Renewable Energy
REA Rural Electrification Authority
RF Renewable Fraction
RTAP Regional Technical Assistance Program
SFC Specific Fuel Consumption
SPSS Statistical Package for the Social Sciences (software)
SREP Scaling-Up Renewable Energy Program
tCO2 Tonne of carbon dioxide
V Volt
VAT Value Added Tax
WB World Bank
Wh Watt-hour
WTP Willingness to Pay
ERC-IFC Kenya mini-grids market assessment final report iii

Executive summary
The Government of Kenya (GoK) has expressed interest in exploring private, sector-driven
models for mini-grid development and operation. Private participation in the sector,
either via purely commercial or hybrid public-private models, could help increase the
impact of existing public funds, attract further international mini-grid expertise to Kenya,
and boost local entrepreneurs, thereby accelerating the pace of electrification and
reducing costs to GoK.
In order to better understand the options and the opportunities for privately-operated
mini-grids in Kenya, the Kenya Energy Regulatory Commission (ERC) requested IFC
support in order to help identify the demand for, and costs of, commercially sustainable
mini-grids, assess the level and structure of any needed financial support and incentives,
and identify key legal and regulatory requirements for private participation in the sector.
This market report contributes towards these efforts.
The Kenya Market Assessment for Off-Grid Electrification report provides an analysis of
the prospects for private mini-grids1 to provide off-grid electrification at selected sites and
the overall market potential in off-grid, rural areas, based on a demand and cost
assessment. The study is comprised of four volumes of which this is the main report. The
study outputs include:
A report on the selection of 21 off-grid and grid-connected sites.

The findings and analysis of the results of 2,153 end-user surveys of households,
businesses and institutions across 12 counties in Kenya.
The technical and economic characterization of five potential mini-grid sites to a
study level of detail and a further 16 sites to identification level.
Analysis of the situation with existing public and private mini-grids in Kenya.
A cost assessment based on the characterized sites and reference cases, with a
focus on solar PV mini-grid systems, to evaluate mini-grid life cycle costs.
An estimation of the market potential for mini-grids in off-grid, rural areas based
on the analysis of mini-grid cost of supply and end-user demand curves.
Parties that could use the data contained in the study include: policy makers and
regulatory bodies, such as MoEP, ERC, the Privatization Commission and County
Government officials, that could benefit from insights into the extent that, and at what
level, the private sector can make a greater contribution to rural electrification and
connectivity, and identify areas where synergies and opportunities for partnership may
exist; the private sector, REA and KPLC, that could possibly use this information to better
understand end-user segments and plan system expansion over time, and; potential
investors, that can use the findings to identify opportunities.
1 The term mini-grid is used in this report to refer to multi-user isolated grid systems of all sizes, although sometimes
the word micro-grid is also applied. It should be further noted that KPLC and REA refer to mini-grids as off-grid
stations.
ERC-IFC Kenya mini-grids market assessment final report iv

The assessment focuses on mini-grids as these have potential for private sector
participation to complement rural electrification efforts via grid extension and stand-
alone systems, with an emphasis on renewable energy-based mini-grids due to expected
lower lifecycle costs among other factors.
The report is structured into five main sections, each of which is briefly described here:
(1) end-user survey, (2) site characterization, (3) characterization of existing mini-grids,
(4) cost assessment and (5) market size potential.
End user survey

Key Household, business and institutional income, energy usage and
messages expenditure and ability and willingness to pay for electricity vary from site
to site and among end-users within sites. However, on average a
connection cost of KES 5,000 KES 10,0002 and a monthly charge of KES
1,000 or less would likely make electricity service accessible to most
potential customers.
Twenty-one potential mini-grid sites in Kenya were identified and selected for
assessment, between March and April 2015. The selection was guided by two principles:
(i) maximizing representativeness of the Kenyan mini-grid potential market and (ii)
addressing sites with good potential for commercially viable mini-grids. The focus was on
greenfield sites but some existing mini-grids were included for comparison.
To identify areas to be surveyed a database of 178 potential sites was developed based
on existing information (e.g. MoEP, REA, KPLC, KNBS, KfW, GIZ, AFD reports, databases
and site scoping studies), interviews with stakeholders and a review of Google Earth
imagery. The final twenty-one sites were selected through a multi-criteria analysis that
filtered, scored and ranked site parameters such as distance from the grid, electricity
service status, number of potential customers, building density and economic activity,
among others. The selected sites are shown in Figure 1 below.
2 For the purposes of this report an exchange rate of USD 1 = KES 100 is used.
ERC-IFC Kenya mini-grids market assessment final report v

Figure 1: Map of sites 21 sites surveyed and characterized
The twenty-one selected sites are fairly evenly dispersed between the northwest and
southwest and east and southeast of the country. The majority are in areas that are far
from the national grid or have a number of island sites. The twenty-one sites represent a
range of types and sizes: fishing communities, tourist areas, agricultural zones and
pastoralist communities. Load centers with different average levels of income, kerosene
consumption, and mobile phone and radio usage are included.
The end-user data collection instrument was developed in the form of a questionnaire
suitable for face-to-face interviews. The purpose of the end-user survey was to gather
primary data on the characteristics of existing and potential electricity customers, at the
twenty-one sites, in order to enable the profiling of selected sites for potential mini-grids
and to feed into the overall off-grid market assessment. A total of 2,153 end-user surveys
were conducted across 1,540 households, 477 businesses and 136 institutions.
A summary of the results of the end-user survey is as follows:
Households
Average household size was 6.1 people. Self-employment at 35% was the most
common occupation. Fifteen percent of people are farmers and another 15% are
employed. 31% of respondents are unemployed. Mean monthly household
income was KES 16,238.
The main household use of kerosene, vehicle batteries, solar home systems and
grid-powered electricity was for lighting. Thirty seven percent used kerosene as
their primary source of lighting, 26% use solar lanterns or solar home systems and
one in five households flashlight/batteries are predominant.
Mean expenditure on energy from all sources across all sites was KES 1,402 per
month. Households that have electricity service pay on average KES 909/month.
In response to the question: what is the maximum you are willing/able to pay
upfront to connect to a source of electricity? households indicated a mean
Willingness to Pay (WTP) of KES 9,906. Mean monthly WTP was found to be KES
ERC-IFC Kenya mini-grids market assessment final report vi

521. This increased to KES 725 when respondents were asked the maximum they
would pay for increased electricity service or demand.
Businesses
There are businesses based at all sites except Napeitom. Most of the activity
involves small shops (27%) and commercial retail shops (16%). Mean monthly
business income across all sites was KES 23,387. Apart from Napeitom, each site
has commercial activities with electrical demand such as the phone charging,
tailoring, hairdressing and grain milling. However, not all sites have potential
anchor load customers (larger energy consumers with consistent demand).
The main source of lighting for businesses is solar power (solar home systems and
solar lanterns) at 38% (25% and 13%, respectively). Fifteen percent of businesses
use kerosene as the main source of lighting and 10% use dry cell batteries.
Mean monthly business expenditure on energy from all sources across all sites was
KES 2,279. Businesses with a diesel generator have the highest average monthly
costs at KES 4,158 when fuel and maintenance are combined (23 samples),
followed by grid/mini-grid electricity at a mean cost of KES 2,074 per month.
Business mean WTP upfront for a connection was KES 11,640. The mean monthly
WTP for electricity was KES 758. In the case of increased electricity service,
monthly mean WTP across the 21 sites reached KES 1,029.
Institutions
Institutional activity varies significantly across the sites, in part due to the small
sample size. Religious organizations, schools and health facilities made up the
majority of the respondents.
The primary source of energy for lighting was stand-alone solar systems, which
was reported by 39% of respondents, followed by kerosene and various others.
Average energy expenditure by institutions is KES 4,771/month, although with
significant variation from site to site. Twenty-three institutions use grid or mini-
grid electricity, with mean expenditure of KES 5,413/month.
Institutional mean WTP upfront for an electricity connection was KES 19,400 and
mean monthly WTP was KES 2,299. When monthly WTP was linked to increased
electricity service or demand, the mean increased to KES 3,539.
An overview of main results from the 21 sites surveyed is provided in Table 1Error!
Reference source not found. below.
Table 1: Overview of end-user survey main findings
Households Business Institutions

Monthly income (mean) KES 16,238 KES 23,387 *KES 100,325
Monthly income (median) KES 10,000 KES 15,000 KES 18,417
Monthly expenditure on energy (mean)** KES 1,402 KES 2,279 KES 4,771
Mean energy expenditure as % of income 8.6% 9.7% 8.9%
Monthly ATP @ 10% of mean income KES 1,624 KES 2,339 KES 10,033
Existing user monthly electricity cost (mean) KES 909 KES 2,074 KES 5,413
ERC-IFC Kenya mini-grids market assessment final report vii

Monthly electricity expense as % of income 5.6% 8.9% 5.4%
Main source of lighting Kerosene Solar Solar
Main source of cooking Firewood Firewood Firewood
Would like to be connected to electricity 70% 73% 69%
Maximum WTP connection (mean) KES 9,906 KES 11,640 KES 19,271
Maximum monthly WTP initially (mean) KES 521 KES 758 KES 2,299
Maximum monthly WTP higher service (mean) KES 725 KES 1,029 KES 3,539
Note: ATP = Ability to Pay, WTP = Willingness to Pay; *Known outliers not removed due to small sample
size; **Average across all sites and all sources of energy
Key findings (non-exhaustive):

Usage: kerosene, batteries, solar lanterns, generators are used for 3 hours/day-8
hours/day. Mini-grid electricity is most likely to displace these sources and candle
use at households and vehicle battery use by businesses and institutions, especially
for lighting, cell phone charging and radio usage. Load profiling can take this into
account.
Income and energy expenditure is most often weekly or more frequently. It is only
monthly for institutions. This has implications for electricity bill payment frequency.
When households and businesses lack funds to pay for electricity, the most common
response is to postpone payment or borrow money, which should be taken into
account for mini-grid operator cash flow planning.
Stated willingness to pay (WTP) upfront for an electricity connection and monthly
charges is lower than the cost of service in many cases. However, actual monthly
electricity expenditure by existing customers is higher than stated willingness to
pay, indicating that ability to pay (ATP) based on income may better reflect real
customer behavior in the presence of electricity service.
Not all potential un-electrified end users want electricity service (average 75%-85%)
because of concerns about cost, safety, reliability and other reasons. This may change
as users see their neighbors connect and initial connection rates could be higher than
anticipated. However this may not always be the case.
Potential sites should be subjected a detailed assessment prior to an investment
decision being made to assess site-specific factors and because of the possibility of
recent changes to the situation at a site. For example, at one site (Napeitom in Turkana
County) it was found that the population has shrunk in recent years and there are very
few if any businesses at the site.
Site characterization
Key Appropriately sized mini-grid systems at most sites assessed range from
messages 40 kW to 400 kW and can serve between 30-1000 customers. Solar PV is
the most applicable renewable technology. The demand and commercial
potential for private mini-grids is site specific and depends many factors.
Anchor load customers are not present at all sites.
Of the twenty-one sites included in the end-user survey, five sites (Takawiri, Korr, Kadaina
Island, Lorugum and Dujis) in different parts of the country were selected for a pre-
feasibility level of characterization and analysis.
ERC-IFC Kenya mini-grids market assessment final report viii

The number of potential customers (of all types)3 at the five sites ranges from 64 at
Kadaina Island, Kilifi County, to almost 1,000 at Lorugum, Turkana County. Mini-grids at
the sites will need to be designed to supply between 50,000 and 450,000 kWh of
electricity per year by the fifth year of operations (see Table 3).
Table 2: Projected customers at five sites by type and electricity consumption

Site Household Business Institution Anchor Total
customers customers customers customers
No. Wh/d/ No. Wh/d No. Wh/d/ No. Wh/d/ No. kWh/
user / user user user year
(avg) (avg) (avg) (avg)
Takawiri 300 945 23 4,319 4 6,812 2 68,072 329 199,395
Korr 800 945 60 3,626 17 7,948 6 19,093 883 446,536
Kadaina 42 945 13 5,033 8 2,965 0 0 63 47,029
Dujis 600 945 44 3,541 8 7,689 0 0 652 286,324
Lorugum 914 945 42 3,505 11 8,630 1 28,800 968 414,221
Of the five sites, Korr was modeled with the highest projected number of both institution
(17) and business (60) customers by year 5 of operations. Kadaina Island had the lowest
number of business customers at 13, and the fewest institutional customers were found
at Takawiri (4). Both Kadaina and Dujis were modeled without any anchor load customers.
In contrast, Korr was assumed to have up to 6 anchor load customers including a
telecommunications base station, and Takawiri could have two anchor loads (tourist
lodge and cold storage centre).
Based on renewable energy resource availability, solar PV is the most applicable

technology at most of the potential sites (it can be deployed almost anywhere in Kenya).
Therefore, in order to meet the anticipated demand, solar PV-battery storage-diesel
backup genset mini-grids were modeled in HOMER software4 with a number of input
assumptions and for two distinct scenarios (base case and growth).
The results from the five sites were then extrapolated to the other sixteen sites. Table 3
gives an overview of the estimated system configuration needed to serve the potential
customers at all twenty-one sites, which are grouped by region: western, northwest,
northeast and southeast.
3 The terms customer and end-user are used to refer to existing or potential (i.e. new) electricity users connected
to electricity service at the household, business and/or institution unit level. One connected dwelling or building is one
customer. Where a residential compound has more two or more households the compound is taken to be one
household customer based on the assumption of a shared connected and meter. Customer or end-user does not refer
to an individual. One household customer can thus mean electricity service to more than one person. The terms
people, individuals or population are used instead when referring to number of individual persons served by
electricity.
4 Optimization software for hybrid renewable energy systems, www.homerenergy.com
ERC-IFC Kenya mini-grids market assessment final report ix

Table 3: Overview of estimated system size & RE potential at 21 surveyed sites
Daily Peak PV Genset
Site HH BS IN BC load load size size RE potential
(kW) (kW) (kW) (kW)
Mageta 1,743 175 9 300 1,766 381 561 405 Solar
Mfangano 5,574 142 9 n/a 5,326 1,149 1,690 1,222 Solar
Near Ogembo 4,954 36 11 361 4,797 1,034 1,523 1,100 Solar & hydro
Ngodhe 418 22 5 100 447 96 143 103 Solar
Takawiri 346 41 4 160 410 109 180 110 Solar
Alale 540 59 8 297 678 146 216 156 Solar
Kargi 876 32 10 260 950 205 302 218 Solar
Korr 837 36 13 200 1,108 244 350 250 Solar & wind
Lorugum 914 40 8 600 1,106 226 300 250 Solar
Napeitom 120 0 14 120 130 28 42 31 Solar
Tamkal 345 102 20 160 603 130 192 139 Solar & hydro
Bahadale 937 58 9 358 532 114 169 122 Solar
Chardende 861 81 6 50 985 212 313 227 Solar
Dujis 539 55 5 170 784 156 220 160 Solar
Hola 7,370 310 28 n/a 7,301 1,574 2,317 1,674 Solar
Ijara 525 52 7 500 672 145 214 155 Solar
Kaivirya 376 27 9 135 480 103 153 111 Solar
Zombe 924 57 6 200 986 212 314 227 Solar
Kadaina Island 42 14 6 50 128 25 40 30 Solar & wind
Rukanga 942 85 15 460 1,067 230 339 245 Solar
Wasini Island 965 49 18 196 1,005 216 320 231 Solar & wind
Sources: (1) households, 2009 census, 2013 SREP or 2015 chief interviews, (2) businesses & institutions,
chief interviews, (3) RE resources, HelicoClim, SWERA, SREP & others
Note 1: HH = households, BS = businesses, IN = institutions, BC = buildings counted on Google Earth
Note 2: Four of the sites (Mfangano, Hola, Rukanga, Zombe) already have KPLC electricity service, system
sizing in these cases is for illustrative purposes.
Key findings:
Appropriately sized mini-grid systems at most sites assessed range from 40 kWp
(Kadaina Island, base case) to 400 kWp (Korr, high growth case) and can serve
between 30-1000 customers.
The number of customers, their distribution and demand at a potential mini-grid is
site specific. Systems can be planned to meet anticipated demand in a given year
with expansion factored over time depending on how much uptake and growth
actually materialize.
Anchor load customers, where present, can make a significant difference to
demand, consumption (and revenue). Generally, larger consumers such as cold
storage facilities, telecom base stations, tourist lodges, etc., act as anchor loads
lowering the LCOE and thus making such a site more attractive for mini-grid
construction. However, because anchor load customers are not present at all sites,
mini-grid operators may need to plan for a greater number of smaller customers.
ERC-IFC Kenya mini-grids market assessment final report x

The potential for private mini-grids is site specific and depends on external factors.
On the demand side, overall 8 of the 21 sites have good potential for mini-grids
based on an analysis of electrification status, ability and willingness to pay. Island sites
are generally found to have higher potential due to (a) the isolation factor, (b) higher
current expenditure on kerosene and diesel generators and (c) higher WTP in some
cases.
The commercial potential of a mini-grid at each site will depend on developer-
specific costs, business delivery model, grid extension plans (which are not always
known) and the tariff that can be charged versus willingness/ability to pay, among
others.
Characterization of existing mini-grids

Key Electricity demand/growth at the KPLC mini-grid sites is variable
messages although it is generally high (10%-25%/year) whereas some private
micro-operators have seen lower growth. Private developers target high
potential areas/customers first, whereas KPLC/REA efforts focus on wider
energy access and reaching public institutions. Public rural electrification
efforts are fast providing access although not always connectivity to
many areas.
Data from fifteen existing KPLC mini-grid sites was analyzed to provide a characterization
of demand, performance and other parameters for supply to off-grid customers. The sites
range in capacity from 184 to 3,400 kW serving 80 to 4,100 customers. All the systems are
diesel-based but nine of the 15 sites have been hybridized with solar and/or wind
generators. The average annual growth in electricity generation over the 2011-2015
period ranges from 10% to 25% with the exception of four sites, three of which are the
most recently commissioned. Higher growth rates are more noticeable in the initial years
of mini-grid operation and generally decrease over time. The generation and demand
growth rate is important to consider because the number of users and the load affect the
planning for and commercial sustainability of a mini-grid. Based on an estimated
disaggregation of KPLC off-grid station customers an indicative range of demand per
customer is 200 to 400 W with most monthly consumption between 50 to 100 kWh.
Diesel-based system cost estimates for the REA/KPLC mini-grids range from USD
3,235/kVA to USD 8,279/kVA installed for systems ranging from 270 to 800 kVA. The bulk
of this is for civil and mechanical works, and does not include distribution costs. Average
fuel costs for the most recent six months available for the five KPLC mini-grids that are
closest geographically to the five sites characterized to pre-feasibility level in KES/kWh5
are: 57 (Mfangano), 30 (Mpeketoni), 29 (Marsabit), 37 (Habaswein) and 29 (Lodwar).
Renewable energy investment costs for hybridization of KPLC stations with solar PV
depends on economies of scale and other factors, with costs ranging from USD 5,100 to
13,575 per kWp.
5 Exchange rate of KES-USD 100.
ERC-IFC Kenya mini-grids market assessment final report xi

There are more than ten private and community mini-grid developers active in or
targeting Kenya. These include larger established companies and small entrepreneurs
such as IPS Kenya, PowerGen, Powerhive, RVE.SOL, SteamaCo, Wind for Prosperity Kenya
(consortium of Vestas, Frontier Investment Management and Maara Energy),
Greenpower Engineering, Ofgen, KMR Infrastructure and Skynotch Energy Africa. A
variety of business models, e.g. PPA with KPLC, concession and grid proximate
approaches are found. These need to be considered when setting policy/regulations due
to differences in scope/role, extent of operations, costs, risks and other factors one size
does not fit all. Private operators generally charge a lower upfront connection cost and
higher monthly electricity cost than KPLC. This means that they often experience higher
initial uptake than KPLC but target a smaller number of customers, and demand can taper
off over time once end-users with the most willingness and ability to pay are served. The
estimated aggregate capacity of operational projects that supply households and are not
internal mini-grids at agricultural estates is approximately 500 kW. Solar, wind, biomass
and small hydro technologies are used and the private sector and community
organizations currently serve more than 1,000 customers.
Key findings:
There is large variation in demand/growth projections at sites. KPLC mini-grids have
experienced 10%-25% generation and demand growth per annum, whereas some
private micro-operators have seen slow demand growth after a core cluster of
customers is connected. The uncertainty in demand projections can lead to system
over or under sizing. This can be partially managed through responsive expansion
planning and modular system design.
The community-run Mpeketoni Electricity Project had customers paying KES 37/kWh
plus a fixed monthly charge of KES 700 for businesses and KES 350 for households.
This provides an additional indication of customer willingness and ability to pay,
although site-specific factors may have also played a role.
REA and KPLC progress towards extension of the national grid and from existing
mini-grids means that the spatial area of off-grid customers who may be served by
commercially viable mini-grids under some business models is shrinking
considerably. On the other hand, even where there is power network there may be
opportunities for private delivery models (e.g. grid-proximate mini-grids) that
address some of the reasons for low electrification rates.
Cost assessment
Key Larger mini-grid systems generally have lower costs per unit delivered.
messages Renewable energy-based systems may have lower lifecycle costs than
diesel-based mini-grids. Investment costs range from KES 500,000 to KES
1.2 million per kW installed and the LCOE for solar PV from KES 65 KES
80/kWh at a 20% EIRR.
The cost assessment for off-grid electrification focused on vertically integrated mini-grids
that generate and supply electricity to customers with 24-hour service. Solar PV systems
were modeled as they can be placed virtually anywhere in Kenya. See Table 4 below for
details of the investment costs in base and high growth case scenarios. All cost estimates
ERC-IFC Kenya mini-grids market assessment final report xii

incorporate both generation and distribution components, i.e. the investment required
to produce and deliver electricity to end-users.
Table 4: Overview of sites characterized to "pre-feasibility" level

Site Scenario A base case growth Scenario B high case growth
Site name Potential Installed Cost Cost Cost Installed Cost Cost Cost
County customers capacity 1,000 USD/ USD/ capacity 1,000 USD/ USD/
(no.) kW USD kW customer kW USD kW customer
Takawiri
329 180 960 5,336 2,919 200 1,057 5,285 3,213
Homa Bay
Korr
883 350 1,924 5,497 2,179 400 2,110 5,276 2,390
Marsabit
Kadaina
64 40 305 7,631 4,770 85 469 5,520 7,331
Kilifi
Dujis
652 220 1,274 5,789 1,953 240 1,474 6,282 2,313
Garissa
Lorugum
968 300 1,866 6,221 1,928 370 2,047 5,532 2,114
Turkana
Operational, maintenance, financing, taxes and other costs were then included to
determine the Levelized Cost of Electricity (LCOE) in KES/kWh and the monthly cost per
customer over a 20-year project lifetime at 10% and 20% internal rate of return (IRR) on
equity cases. Concessional debt at 6% interest and a 10-year loan period was assumed
due to the early stage of the mini-grid sector in Kenya and the availability of non-
commercial finance, which may be phased out as the market matures. This resulted in a
LCOE ranging from KES 51 kWh- KES 60/kWh at a 10% equity IRR and KES 66-79/kWh at a
20% return (as well as a simple payback period of 4-12 years). A 20% return on equity
expectation therefore increases the LCOE by about KES 15-19/kWh over the 10% EIRR
case. In all cases the LCOE remains below KES 80/kWh (USD 0.80/kWh). Figure 2 gives the
results.
100 3,000
KES/customer/month
79 77 78 2,408
80 68 2,500
66 2,018
60 58 59 2,000 1,827
KES/kWh
60 51 52 1,535 1,446
1,412
1,500 1,092 1,229
40 1,074 932
1,000
20 500
0 0
Takawiri Korr Kadaina Dujis Lorugum
Cost/Costumer - 10% E-IRR

LCOE - 10% E-IRR LCOE - 20% E-IRR
Cost/Costumer - 20% E-IRR
Figure 2: LCOE & cost per customer per month at five sites 10 & 20% EIRR
The LCOE of higher diesel-based generation (10% and 50% renewable fractions - RF) was
tested against the 89% RF reference case for Takawiri. The 89% RF results in the lowest
costs over the 20-year period, with a LCOE of KES 79/kWh or KES 2,018/customer/month
versus KES 93/kWh (KES 2,357/customer/month) and 97/kWh (KES
ERC-IFC Kenya mini-grids market assessment final report xiii

2,461/customer/month) for the 50% and 10% RF scenarios. This shows that even though
diesel systems have lower upfront costs, the life cycle costs can be more than for
renewable energy-based systems due to higher operational (especially fuel) costs.
Key findings:
Larger systems serving more customers are generally cheaper per kW installed and
per customer than smaller ones (but not always).
Typical mini-grid systems are in the range of 10-400 kW installed capacity will serve
30-1,000 customers and cost between USD 12,000 (KES 1.2 million) and USD 5,000
(KES 500,000) per kW installed (including both generation and distribution costs).
Renewable energy systems even with higher upfront investment costs may be
cheaper than diesel-based systems over a project lifecycle.
The LCOE at the five sites assessed to pre-feasibility level are in the range of what
existing private mini-grid operators charge and customers pay, and likely in the
approximate range of estimated cost of supply at existing KPLC diesel-based mini-
grids.
Market potential
Key The commercial potential for mini-grids is relatively low at an estimated
messages 10-15%. The market size for commercial enterprises could be increased in
a number of ways, including structuring service agreements with KPLC;
reducing the cost to supply power; covering the viability gap through
incentives or subsidies applied either at the operator level, or at the end-
user level
The assessment of market potential was based on the five sites characterized in detail and
information from the other sixteen sites surveyed. The results may be broadly reflective
of the off-grid, rural market and can provide insights to the Kenyan market in general.
Cost supply curves

The LCOE is not a fixed value, but differs depending on the kWh to be delivered and
associated capacity of the mini-grid. Once a mini-grid of a certain capacity becomes more
utilized (i.e., increased load), expansion of the mini-grid is required to maintain a reliable
supply of electricity. As the cost of expanding a mini-grid depends on its initial size,
different levels of market penetration i.e. electricity consumption from the mini-grid
show different cost levels for expanding the grid. This was accounted for by constructing
a LCOE curve based on expansion between the reference case mini-grids of 10 kW, 50 kW,
180 kW and 350 kW.
The supply curves were constructed for the five sites characterized in detail. An example
of the LCOE obtained for Dujis is presented for four market penetration levels (100%, 75%,
50% and 25%) at two rates of return (10% & 20%) on the equity-financed part (30% of
total amount of financing). As can be seen (Table 5), the LCOE increases with lower market
penetration, as the CAPEX per kW installed increases with smaller sized systems. This
increasing trend is typical. The difference in LCOE between the two Equity Internal Rate
ERC-IFC Kenya mini-grids market assessment final report xiv

of Return (EIRR) cases illustrates the sensitivity to financing costs. A 10% increase in EIRR
results in a 32% increase in the LCOE.
Table 5: Variation of LCOE for Dujis mini-grid (KES/KWh)

Market penetration level 100% 75% 50% 25%
Total consumption/month 23,860 kWh 17,895 kWh 11,930 kWh 5,965 kWh
Number of customers 600 households 498 households 306 households 140 households
connected 44 businesses 20 businesses 20 businesses 14 businesses
8 institutions 0 institutions 0 institutions 0 institutions
LCOE 20% equity IRR 78.35 81.75 91.05 100.45
LCOE 10% equity IRR 59.15 61.45 68.15 74.85
Customer demand curve

Demand curves were constructed for the same five sites. The curves were based on three
variables from the end-user survey data: (a) ability to pay ATP at 10% of reported
income, (b) ATP at the share of income already spent on electricity 5.6% for households,
8.9% for businesses and 5.4% for institutions and (c) willingness to pay WTP based on
the price level that respondents said was expensive, but worth considering. The
demand curves reflect the price range for electricity that is acceptable for users at the
sites and the pricing bandwidth within which a viable business case for mini-grids may be
feasible.
Market size potential

Figure 3 below shows the supply and demand curves for Dujis.
Market
penetration 25% 50% 75% 100%
Cumulative
energy
consumption 5965 11930 17895 23860 kWh/month
Households
connected 140 306 498 600 # of connections
Businesses
Insitutions
Estimated
system size 55 110 165 220 kW
Figure 3: Supply cost & demand curve at Dujis
ERC-IFC Kenya mini-grids market assessment final report xv

In the example of Dujis (middle income site with average household monthly income of
KES 12,155) at the 50% penetration level ATP/WTP ranges from about KES 8/kWh-KES
17/kWh and at 100% penetration WTP/ATP is approximately KES 0.80/kWh to KES 5/kWh.
As the LCOE at 50% and at 100% penetration is significantly higher than this, there is no
commercial market potential. Only at the 0-10% penetration level does the ATP demand
curve at 10% of income cross the supply curve at a level close to KES 100/kWh (10% EIRR).
At this penetration level at Dujis, the mini-grid would be a small system, with an installed
capacity of about 22 kWp solar PV supplying 2,386 kWh per month to less than 75
customers. This suggests that in the absence of any support measures, opportunities for
a purely commercial mini-grid at this site are limited (would serve 10% or less of the
market).
In terms of overall market potential, about a third of the twenty-one sites surveyed have
household monthly income levels above KES 16,000, the estimated threshold for mini-
grid uptake. Averaged over all sites with some market for mini-grids, commercially viable
market penetration reaches 15-30%. Based on this, a rough estimate is that the market
potential for mini-grids is about 5%-10% of the off-grid, rural market in Kenya (i.e. one
third of 15%-30%).
Subsidies and other support mechanisms (as are already the case with the KPLC/REA mini-
grids) could help increase investor returns and/or reduce costs to end-users, thereby
increasing mini-grid commercial viability and market penetration. Both investment and
operational subsidies (or a combination thereof) could be considered. The design of such
subsidies and support mechanisms was not examined in detail in this market assessment.
Nonetheless, as an indicative indication, Table 6 provides an example of the impact of an
operational subsidy at a 10% equity return and the highest of the three demand curves
(ATP at 10% of income) a minimum subsidy scenario at the 75% market penetration
level for a higher, middle and low-income site.
Table 6: Subsidy levels at three sites at 10% EIRR (minimum subsidy scenario)
Site Access Required Final LCOE Additional KWh / Subsidy
target subsidy consumer (KES/kWh) month consumed volume
(%) level price with subsidies (KES/
(KES/kWh) (KES/kWh) month)
Kadaina 75 49 17 66 From 1528 to 2939 69,139
Dujis 75 54 7* 61 From 2386 to 17895 837,486
Lorugum 75 47 8* 55 From 0 to 25231 1,185,857
*This is below the KPLC tariff and is thus a theoretical calculation
It should be noted that subsidy levels are site specific, and are not only related to mini-
grid size and type, but also consumer ATP/WTP. This means that a blanket subsidy may
not be the most efficient means of achieving access. There are many subsidy options:
Capital / investment subsidies targeting the initial investment. Most of lifecycle

system costs are upfront for RE mini-grids.
ERC-IFC Kenya mini-grids market assessment final report xvi

Operational subsidies cover operation of the system, and are delivered to the
power producer. This is meant to cover the gap between affordability and cost
recovery. This approach may require a strategy for phasing-out. However, without
the subsidy the incentive to extend connections may decrease since the return on
investment may not cover costs.
Output-based or results-based subsidies are given in exchange for a service to
encourage occurrence. Such subsidies can be linked to a target number of
connections or level of production.
Lifeline rates subsidize energy use for poorer consumers and cross-subsidies can
be applied, where richer consumers subsidize poorer consumers.
Determination of the subsidy to be applied, or combination thereof, involves calculating

the subsidy volume (how much money to give), but also delivery channels (to the
consumer versus the operator), subsidy sources (cross subsidisation, climate finance) and
timing (upfront investment subsidy, continuous operational subsidy, phased subsidies).
Interaction with the tariff scheme is also a critical consideration for subsidy
determination.
Key findings:
Demand and merit order of customers is site specific. Nevertheless, the demand
curves all show a strong decrease in WTP between 0 and 10% market penetration.
This reflects the fact that at initial market penetration levels there are a small
number customers willing to pay a much higher amount than other end-users.
Potential mini-grid sites can generally be categorized as high (KES >16,000), medium
(KES 12,000 KES 16,000) and low (KES <12,000) income, based on average monthly
household income. About 1/3 of the 21 sites surveyed have household monthly
income levels above KES 16,000, the estimated threshold for mini-grid uptake.
At the five sites assessed in detail, for solar PV-battery-diesel back up mini-grids the
LCOE ranges from KES 50/kWh-KES 80/kWh at high (75%-100%) market penetration
levels at 10% and 20% return on equity scenarios. However, in the cases studied
market penetration is limited to 15%-30% of customers at higher income sites, and
at lower penetration levels (15%-50%) LCOE increases to KES 60/kWh-120/kWh
depending on the site and equity return expectation. The LCOE is likely similar to that
of existing KPLC mini-grids, but more expensive than national grid service.
Some customers, between 10%-40% of off-grid, rural market, may not be able to
afford the KPLC tariff, let alone connection costs or cost-reflective mini-grid tariffs
charged by private developers.
Based on the assumptions described above, the potential market for electrification
via private mini-grids in Kenya is approximately 5%-10% in off-grid, rural areas.
Conclusion
Private mini-grids are one of many solutions to increasing energy access in Kenya grid
extension, public and community mini-grids and stand-alone systems all have a role to
play. Private mini-grid developers are likely to first target higher potential sites and
customers to achieve a commercial return on investment. Without subsidies and other
support mechanisms, mini-grid rollout and market penetration will be limited to these
ERC-IFC Kenya mini-grids market assessment final report xvii

areas. Nevertheless, overall, private mini-grids can provide an important contribution to
off-grid electrification efforts in Kenya, perhaps serving 5-10% of the rural market.
Recommendations
Based on the findings, the following recommendations have been made
Nine of the twenty-one sites surveyed are considered to have higher or moderate
potential for a private mini-grid. These should be further assessed with a view to
implementing projects.
Connection costs of KES 5,000 KES 10,000 and a monthly charge of KES 1,000 or
less would likely make electricity service accessible to the majority of potential
household and business customers. However, based on the five sites studied in detail,
revenue requirements to deliver a 20% return on equity for a private mini-grid
operator range from an average of KES 1,229 to KES 2,408 per customer per month.
This implies a gap that needs to be addressed through the identification of areas for
cost reduction, a portfolio approach for developers to reach economies of scale,
subsidies and other measures (e.g. differentiated end-user tariffs).
Subsidies would increase private mini-grid roll-out/uptake and help achieve higher
market penetration levels. The impact depends upon the level and type of subsidy,
other approaches to electrification and other policy measures. Complementary
approaches to subsidies could be considered: such as flexibility to charge cost-
reflective tariffs, front-loaded tariffs that decrease over time, Build-Operate-Transfer
(BOT) arrangements to provide capital investment support and allocate resources and
risks efficiently, provision of incentives for increasing connectivity, among others.
Since mini-grids are relatively site specific, a uniform tariff or subsidy may not be
appropriate. Instead support measures could be based on a segmentation of the
market, e.g. by service delivery model, typical mini-grid
sizes/technologies/configurations and/or number of customers served. In addition,
consider allowing private operators to continue to charge cost-reflective tariffs that
the market will bear, on the principle that the cost of not having electricity is more
than the cost of expensive electricity.
Existing private mini-grids and developers are fairly small. A regulatory framework
should provide certainty to developers (e.g. through concessions like Uganda, clear
modalities for what happens if the national grid arrives, etc.) or be light-handed and
flexible to account for different private and community approaches and evolution
in service delivery over time. For example, providing permits for a company that
meets pre-determined conditions could be an option instead of requiring permits on
a site-by-site basis (i.e., one company could operate multiple sites, but need not go
through the red tape of obtaining permits for each individual site).
ERC-IFC Kenya mini-grids market assessment final report xviii

1 Introduction
Scope of report
The Kenya Market Assessment for Off-Grid Electrification was commissioned by the
International Finance Corporation (IFC) as part of a cooperation agreement with the
Kenya Energy Regulatory Commission (ERC), in order to better understand the options
and the opportunities for privately operated mini-grids in Kenya through an assessment
of the demand for, and costs of, commercially operated mini-grids.
This final report is the main output of the assignment that covers the following
components of the study:
a) Main findings of an end-user survey conducted at twenty-one sites, comprising
households, business and institutions;
b) Characterization of potential sites, five to a higher level of detail, with a view to
mini-grid development;
c) Characterization of the existing KPLC public utility mini-grids;
d) Cost assessment; and
e) Potential market size.
Rationale of the study

The Government of Kenya (GoK) has expressed interest in exploring private sector-driven
models for mini-grid development and operation. Private participation in the sector,
either via purely commercial or hybrid public-private models, could help increase the
impact of existing public funds, attract further international mini-grid expertise to Kenya,
and boost local entrepreneurs, thereby accelerating the pace of electrification and
reducing costs to GoK.
In order to better understand the options and the opportunities for privately-operated
mini-grids in Kenya, the ERC requested IFC support in order to help identify the demand
for, and costs of, commercially sustainable mini-grids, assess the level and structure of
any needed financial support and incentives, and identify key legal and regulatory
requirements for private participation in the sector. This report contributes towards these
efforts.
Potential uses of the data

Examples of potential uses of the findings and data from this study are provided below.
Policy-making
One of the outputs of the report is an assessment of the market size that can provide
MoEP, ERC, REA, the Privatization Commission, County Government officials and other
policy makers insights into the extent that, and at what level, the private sector can make
a greater contribution to rural electrification and connectivity, and identify areas where
synergies and opportunities for partnership may exist.
ERC-IFC Kenya mini-grids market assessment final report 19

Data on existing and potential electricity users especially regarding consumption patterns
and ability and willingness to pay can be useful inputs to national and county government
policy. For example, with regards to connection costs, understanding customer behavior
and barriers to electrification such as that some end-users may not want electricity due
to the availability of other options or safety concerns and identifying areas where
support, is most needed.
Investors and operators

The private sector and KPLC can benefit from looking into the available data on energy
use, demand and ability/willingness to pay to appropriately sized mini-grids,
understanding end-user segments and planning system expansion over time.
The identification of similarities and differences between and regional grouping of sites
may be useful for a portfolio approach to set tariff levels.
Information on frequency of income, energy purchase, and compensating measures when

funds run out, can help to align mini-grid business models with customer characteristics.
Planning uses
The site selection database contains information on 178 sites. Sixteen of the greenfield
sites, including nine on the REA list, are characterized, which can help determine where
grid extension or mini-grids will be most suitable based on expected demand and mini-
grid costs. Some of the data that was collected and processed is available in GIS format to
inform spatial planning. This can be of use to county governments, REA, KPLC and private
investors and mini-grid operators.
The Kenya Investment Authority (KIA) may find it useful to share some of the study
outputs with potential investors in order to help identify opportunities.
Regulatory process
The relevant findings discussed at the end of each section are intended to feed into the
regulatory and policy process and to be considered for consultations with stakeholders.
This includes cost, business model, market penetration and other information that may
impact tariff and subsidy levels for private off-grid electrification efforts.
The licensing and permitting approach can take system sizing, mini-grid technology types
and service delivery models in account.

2 End-user survey
This section first provides a brief overview of the process and results of the site selection
exercise that took place in March and April 2015 to identify sites at which to implement
end-users of existing and potential mini-grid customers in Kenya., A summary of the
questionnaire design, survey implementation, and data cleaning activities undertaken as
part of the study, is then presented. Finally, key findings from the end-user surveys are
discussed.
2.1 Site selection overview

Site selection process
Twenty-one potential mini-grid sites in Kenya were identified and selected for
assessment. The selection was guided by two principles: (i) maximizing
representativeness of the Kenyan mini-grid potential market and (ii) addressing sites with
good potential for commercially viable mini-grids. The focus was on greenfield sites but
some existing mini-grids were included for comparison.
Earlier site selection efforts, databases and site lists were reviewed, and interviews were
held with key stakeholders. New sites were also identified and a database was prepared.
In total, 178 sites were identified for assessment. A map with the location of the sites is
found in Figure 41 in Annex II.
A set of four general filter categories was used to exclude sites on the basis of:
Data availability
If there was inadequate data on the site (no GPS points, no information on population
or number of buildings, poor visibility on Google Earth), the site was excluded.
Minimum number of potential customers

If the number of buildings counted from satellite data within the outer site limits was
less than 50, the site was excluded.
Setting the filter level at 50 potential customers helped to exclude sites that likely
have few public services and little business activity. A 2015 REA/JICA study6 assumes
that a site only has a primary school and dispensary if it exceeds 50 households.
Security
If there were security issues related to a site, it was excluded.
6Rural Electrification Authority and Japan International Cooperation Agency (2015) Guideline for MHP Development
(draft), Establishment of Rural Electrification Model using Renewable Energy in Kenya, p. 22.

This filter was used predominantly for potential sites in the border areas near South
Sudan, Ethiopia and Somalia, which were removed from consideration. Sites filtered
out due to security concerns related more to practical and logistical considerations
vis--vis the end-user survey implementation than any issue that would necessarily
prevent development of a mini-grid.
Electricity service status

If the site already has electricity service, or electrification is likely due to ongoing
construction, grid extension, approved and planned projects, the site was excluded.
However, a site was still considered in one of three instances:

a) Where an electrified site could be used for benchmarking and comparison of
potential with non-electrified sites;
b) Where it would be useful to collect more data at a site (e.g. to inform expansion);
or,
c) Where the site had a specific feature of interest (e.g. presence of an existing
private micro-grid).
One area of uncertainty in the filtering process for electricity service status was for
sites that are planned for public or donor electrification but where (a) existing private
micro-grid operators are already present or have expressed an interest and (b) the
status and scope of the public or donor planning is currently unknown.
The filtering step reduced the number of sites under consideration from 178 to 94.
Relevant criteria were then used to rank and score the 94 short-listed sites. The criteria
are presented in Table 7 below.
Table 7: Site selection criteria
Criteria
No (planned) electricity Economics Renewable energy

service resource potential
Sufficient demand for Specific interest Security
electricity
Customer density Existing service benchmark Existence of implementing
entities
County support Accessibility, potential Environmental, social &
delivery model land-use barriers
Note: details on each selection criterion are found in the separate site selection report
Using the selected criteria above that were given a score, a weighted multi-criteria
analysis was applied to identify those sites with the highest potential. The four primary
scoring indicators applied were: (a) geography, (b) user profile, (c) economics and (d)
special interest. The scoring approach is presented in Table 8.

Table 8: Site selection scoring calculation
Score Factors Algorithm Range
The closer of the square root of
Distance from distances to on-grid or off-grid
grid/off-grid station, with off-grid stations 0 is worst
Geography
substations; is weighted half as much as on-grid, 1 is best
island Y/N plus a 10-point bonus if an island.
Normalized to the maximum value.
Customers (# of If less than 50, 0; otherwise, sum
buildings); of total buildings and building
0 is worst
Users profile customer density (upper estimate), equally
weighted. 1 is best
density
(buildings/km2) Normalized to the maximum value.
% of roofs
which are % of roofs expressed as a decimal +
iron/tin, tile or 1 point bonus if potential anchor 0 is worst
Economics
well-thatched; load. 1 is best
anchor load Normalized to the maximum value.
potential (Y/N)
Specific interest Site specific 1 point 0 or 1 point
0 is worst
OVERALL SCORE Sub-scores Sum of all sub-scores
4 is best
Site selection results
Table 9 below shows the sixteen sites that ranked the highest, including the two changes.
Table 9: Ranking of top (weighted scoring) sites

IDENTIFICATION
Site Name County Site Status

Wasini Island Kwale Greenfield
Takawiri Homa Bay Existing micro-grid
Napeitom Turkana Greenfield
Mageta Siaya Existing micro-grid
Ngodhe Homa Bay Greenfield
Dujis Garissa Greenfield
Kaivirya Kitui Greenfield

Bahadale Garissa Greenfield
Korr Marsabit Greenfield
Ijara Garissa Greenfield
Tamkal West Pokot Greenfield
Lorugum Turkana Greenfield
Rukanga Taita Taveta Grid connected
Zombe Kitui Grid connected
Alale West Pokot Greenfield
Kargi Marsabit Greenfield
In addition, based on the specific interest criteria, two existing mini-grids operated by
KPLC were selected. These are shown in Table 10.
Table 10: Selected sites with existing KPLC mini-grids

IDENTIFICATION
Hola Tana River Existing station
Mfangano Homa Bay Existing station
Lastly, three further sites were selected as presented in Table 11 bringing the total to
twenty-one. These sites were also included based on the, specific interest scoring.
Table 11: Selected sites with specific interest

IDENTIFICATION
Kadaina Island Kilifi Greenfield
Chardende Tana River Greenfield
Near Ogembo Kisii Existing micro-grid
Site synopsis
The twenty-one selected sites are fairly evenly dispersed between the northwest,
southwest, east, and southeast of the country. The majority are in areas that are far from
the national grid or have a number of island sites (see map in Figure 4 below). Twelve
different counties are covered, namely Garissa, Homa Bay, Kilifi, Kisii, Kitui, Kwale,
Marsabit, Siaya, Taita Taveta, Tana River, Turkana and West Pokot. Six of the twenty-one
sites are islands, in part because island locations received a, bonus point for isolation in
the criteria scoring. In the initial ranking, other available island sites (e.g. Ndau in Lamu
County, Kiwa in Homa Bay County) were manually given a lower score so as to provide
greater diversity of the types of sites used in the end-user surveys. Potential sites
identified near the South Sudan, Ethiopia and Somalia borders were excluded from
consideration due to both security concerns and logistical practicalities given the available
timeline for the end-user surveys.
Sixteen of the twenty-one sites are remote areas far from the grid or are islands on the
coast and in Lake Victoria. Three grid-proximate sites with energy access but few

electrified end-users were included Rukanga and Zombe in Taita Taveta and Kitui
counties, respectively, and a site near Ogembo in Kisii county. The Kisii site was chosen as
an example of an area close to the KPLC grid where customers are serviced by a private
micro-grid operator. Nine of the sixteen greenfield sites are those targeted by REA for off-
grid electrification.7
At some sites, the buildings are clustered in a circular pattern while at others the majority
of the buildings are found in a line along a main road. In addition, some sites (e.g. Wasini
Island) have two main population and trading centers with a short distance (1 km-2.5 km)
in between. This had implications for the distribution of end-user survey samples as well
as for the preliminary line design of a potential mini-grid.
The twenty-one sites represent a range of types and sizes: fishing communities, tourist
areas, agricultural zones and pastoralist communities. Load centers with different average
levels of income, kerosene consumption, and mobile phone and radio usage are included.
Figure 4: Map of sites where end-user surveys were implemented
7REA has a list of 44 greenfield sites of mini-grids that are under consideration or planning (as of November 2014) and
organized into groups by lot number from Lot 1 to Lot 9. Where relevant, the REA lot number of a site is indicated in
this report as REA Lot [x].

2.2 End-user survey implementation overview
The purpose of the end-user survey was to gather primary data on the characteristics of
existing and potential electricity customers in off-grid and rural areas of Kenya to enable
the profiling of selected sites for potential mini-grids and to feed into the overall off-grid
market assessment.
The end-user data collection instrument was developed in the form of a questionnaire
suitable for face-to-face interviews. The questionnaire design was based on a review of
the tools used in other similar studies and was tailored to meet the survey goals. The
questions were prepared with both electrified and off-grid end-users in mind.
The body of the questionnaire was organized in modules as follows:

1. Respondent information (gender, name, age, etc.);
2. Household or building characteristics (number of people living/working at the
premises, type of structure, etc.);
3. Economic information (income sources, levels and timing, expenditure, etc.);
4. Energy data (sources of energy, consumption patterns, expenditure, etc.);
5. Willingness to pay for electricity and hypothetical energy use; and,
6. Willingness to pay for connection costs and monthly charges.
A total of 2,153 end-user surveys were conducted across 1,540 households, 477
businesses and 136 institutions.
Close to 100% of potential electricity customers at Kadaina Island, Ngodhe Island,

Napeitom and Alale were surveyed. In contrast, only around 1%-2% of all end-users were
surveyed at Mfangano (26,000 45,000 inhabitants) and Hola (37,000 inhabitants), the
largest sites by population in the survey sample. 50% or greater coverage was achieved
at seven of the sites based on the building count. An overview of survey coverage is found
in Table 52 in Annex I.
Figure 5: View of Napeitom village in Turkana County

2.3 End-user survey summary of results
A summary of the main findings from the end-user surveys are presented in this section.
The summary provides information on respondent socio-economic characteristics, energy
usage and expenditure and willingness to pay across the twenty-one sites surveyed.
Mean values are presented except where otherwise noted. Median results are reported
alongside the mean for comparison where the range or influence of outliers was
considered to be significant. Weighted averages are produced for key variables (e.g.
income) to account for the difference in average household size (number of inhabitants)
per site. For institutions, the 3-sigma approach to exclude outliers greater than three
standard deviations from the mean was not applied due to the already small sample size.
The findings were compared with those from other relevant studies and found to be
either generally in line with those results, or else the difference had a likely explanation.
The source of data presented in all tables and graphs is the 2015 end-user survey unless
otherwise stated. An overview of the main economic findings is presented in Table 12
below.
Table 12: Overview of main economic findings

Households Business Institutions
Monthly income (mean) KES 16,238 KES 23,387 *KES 100,325
Monthly income (median) KES 10,000 KES 15,000 KES 18,417
Monthly expenditure on energy (mean)** KES 1,402 KES 2,279 KES 4,771
Mean energy expenditure as % of income 8.6% 9.7% 8.9%
Monthly ATP @ 10% of mean income KES 1,624 KES 2,339 KES 10,033
Existing user monthly electricity cost (mean) KES 909 KES 2,074 KES 5,413
Monthly electricity expense as % of income 5.6% 8.9% 5.4%
Main source of lighting Kerosene Solar Solar
Main source of cooking Firewood Firewood Firewood
Would like to be connected to electricity 70% 73% 69%
WTP upfront for electricity 72% 76% 84%
Maximum WTP connection (mean) KES 9,906 KES 11,640 KES 19,271
Maximum monthly WTP initially (mean) KES 521 KES 758 KES 2,299
Maximum monthly WTP higher service (mean) KES 725 KES 1,029 KES 3,539
Note: ATP = Ability to Pay, WTP = Willingness to Pay; *Known outliers not removed due to small sample
size; **Average across all sites and all sources of energy
End-user characteristics
The end-user survey found an average household size of 6.1. This ranged from 4.5 people
in Mfangano to 8 people in Dujis and Kargi.
The end user survey found that at 35%, self-employment was the most common
occupation of the respondents. 15% of people were working as farmers and another 15%

were employed, at the time. 31% of respondents were found to be unemployed. The
largest source of household income was generated from the sale of agricultural produce,
livestock and its produce, and fish (50%). Income from own business (19%) and salary
from employment (10%) also featured as prominent categories.
Overall, the mean monthly household income was KES 16,238. A large spread in average
income levels between the different sites was observed (Figure 6). In comparison, the
median reported income across the twenty-one sites was KES 10,000. 60% of income was
collected weekly and 27% monthly. The mean was found to be generally in the range of
other studies although a bit on the lower side. For example, the 2009 REMP study8 found
an average household income of KES 18,100 (or KES 28,200 indexed to 2015) and the 2008
Lighting Africa study9 found KES 10,138 (or KES 17,450 adjusted to 2015).
30,000
25,000
20,000
(KES)
15,000
10,000
5,000
0
Figure 6: Mean monthly household income (KES) by site
For businesses, 530 commercial activities were reported, with some operators having
more than one activity. There are businesses based at all sites except Napeitom. Most of
the activity involves small shops (27%) and commercial retail shops (16%). Generally, each
site has at least one or two larger consumers who could act as an anchor load for a mini-
grid and a number of small businesses that have electrical demand and can provide some
consistent revenue stream, such as phone charging (7%), tailoring (6%), hairdressing (5%)
and grain milling (3%) activities. The average business employs 1-4 people with 2 people
being the norm.
The mean monthly income for businesses across all sites is KES 23,387 and the median is
KES 15,000. Napeitom is not shown as there were no businesses at the site (Figure 7). 88%
of business revenue was collected daily and 7% weekly, or more frequently.
8 MoE&P, Kenya and MFA, Finland (2009) Updating of the Rural Electrification Master Plan, Final Report under the
MFA Contract Provisional Master Plan Volume 3: Background and Technical Studies, Annex 3.1.2: Report on Socio-
Economic Studies (Socio-economic Survey and Rural Electricity Demand Analysis), report by DECON (Germany) and
REAC (Kenya), p. 2
9 World Bank IFC (2008) Lighting Africa Market Assessment Results: Quantitative Assessment Kenya, presentation,
slide 22.

45,000
40,000
35,000
30,000
(KES)
25,000
20,000
15,000
10,000
5,000
0
Figure 7: Mean monthly business revenue (KES) by site
The 2008 Lighting Africa study10 found that business income was roughly KES
9,603/month for household businesses (of which a household may have more than one)
and KES 21,582/month for traders. Inflation-adjusted to 2015, monthly average
household business income was calculated to be KES 16,530 and small trader income was
expected to be KES 37,154- which is both lower and higher than what was found in this
study, although if household business income is taken to be total household income it is
close to the mean that was found in this study (KES 16,238).
Institutional activity varied significantly across the sites due to the small sample size as
seen in Figure 8. Religious organizations, schools and health facilities made up the
majority of the respondents. Mean monthly income for institutions was KES 100,325 and
the median income was KES 18,417.
700,000
600,000
500,000
(KES)
400,000
300,000
200,000
100,000
0
Figure 8: Mean monthly institution income by site (KES)
Energy use
The main household use of kerosene, vehicle batteries, solar home systems and grid-
powered electricity was for lighting, with 2% of respondents indicating primary use of
electricity for phone charging. 100% of candle use is for lighting whereas the main use of
dry cell batteries includes both lighting (85%) and radio (15%). The findings for kerosene
10 World Bank IFC (2008) Lighting Africa Market Assessment Results: Quantitative Assessment Kenya, presentation,
slides 28 and 30.

were reasonably in line with the 2005/2006 KIHBS results that showed that 81% of
household primary use of kerosene was for lighting, with 16% being used for cooking
(among others). Firewood and charcoal were used primarily for cooking as well as lighting,
boiling water and warmth. 37% used kerosene as their primary source of lighting while
flashlights/batteries are predominant in one in five households. At 13% each, solar home
systems (206) and solar lanterns (197) each shared third place as a primary source of
energy for lighting (Figure 9).
40% 37%
30% 19%
20% 13% 13% 10%
5% 3%
10%
0%
Figure 9: Primary household energy source for lighting
Firewood and charcoal collected or purchased by the household was the main source of
energy for cooking (9%). Kerosene, LPG, electricity and other (unspecified) comprised the
remaining 3%. Energy use for cooking is not considered in detail in this report as it is
assumed to be less relevant for off-grid electricity supply from a mini-grid.
Households used kerosene for 3.5 - 4 hours per day. This finding was very similar to the
results from the 2008 Lighting Africa Study (4 hours) and was also similar to dry cell
batteries use (4.5 hours). In contrast, connected households had a daily mean of 9.5 hours
for electricity usage. The 1,540 surveyed households used a total number of 1,885
electrical appliances. Cell phones (1,025) made up the bulk of these followed by
radios/music players (479) and television (193) units.
Businesses use all sources of energy for various purposes. Two main differences between
household and business energy consumption are noticeable: for some households, the
main use of energy is for heat and for irrigation, whereas for businesses these are not
primary uses and instead boiling water makes it to the list.
The main source of lighting for businesses was solar power (solar home systems and solar
lanterns) at 38% (25% and 13%). This was followed by electricity (16.5% of businesses),
kerosene (15%) and dry cell batteries (10%). Other sources made up the balance (Figure
10).
Businesses usage of kerosene averaged 3.4 hours or slightly less than that of households
(3.5-4). Grid electricity at the sites, if available, was used for an average of 11.3 hours per
day and dry cell batteries for 4.75 hours. Although cell phones were still the predominant
appliance (312) with radios/music players coming in second (147), it is interesting to note
that there were larger numbers of outdoor lighting, fridges, DVD players and fans.

30% 25%
25%
20% 17% 15% 15%
15% 13%
10%
10% 5%
5%
0%
Solar Home Grid/mini-grid Kerosene lamp Other 1 Solar lantern Dry cell Other 2
System batteries
Figure 10: Main business source of lighting (%)
All sources of energy were used by institutions. Apart from firewood, charcoal and LPG,
all sources were used for lighting. Institutions also used LPG for refrigeration, unlike the
other end-user types. The primary source of energy for institutional lighting was stand-
alone solar systems, followed by electricity, kerosene and various others. The
predominance of solar systems (presented in Figure 11 below) may reflect the Rural
Electrification Authority (REA)s current approach to electrifying public institutions in
remote off-grid areas.
Institutional kerosene daily use was in line with that of households and businesses at 3.5
hours and dry cell batteries at 5 hours. A total of 335 appliances were owned by the
institutions. As with businesses, institutional appliance use showed more variety of type
and function than that of the household category. As with households, cell phones were
most prevalent (69) with outdoor lighting appliances coming in second. Computers wee
also high on the list at 30, radio/CD at 28 and printer/copier, TV, and DVD coming in at 20
or more units.
50%
39%
40%
30% 22%
18%
20% 11%
10% 4% 3% 2%
0%
Solar home Other 1 Grid/mini-grid Kerosene Own diesel Dry cell Other 2
system generator batteries
Figure 11: Institution main source of energy for lighting (%)
Energy expenditure and quantities

Mean monthly household expenditure on energy from all sources over the end-user
survey sample at the twenty-one sites was KES 1,402. This ranged from a high of KES 2,670
at Mageta, KES 2,511 at Korr and KES 2,072 at Takawiri to a low of KES 341 at Kaivirya,
KES 486 at Dujis and KES 582 at Napeitom (see Figure 12 below). The difference is likely
explained by a combination of income, energy sources and the cost of energy. Median
energy expenditure was KES 990.

Monthly firewood and charcoal expenditure was found to be around KES 1,050 for each
per household that used this particular source. The mean monthly household expenditure
on grid/mini-grid electricity was KES 909 and KES 526 for kerosene, KES 286 for dry cell
batteries and KES 156 for candles. 173 of the 229 households that used solar home
systems were able to provide the wattage: mean rated capacity of 95 watts per system.
There were 267 solar lanterns in use (average of one per household who reported such
use). 19% of the sampled household population paid for mobile phone charging. At seven
sites, none of the end-user survey respondents paid to charge. For the 51 users who paid
to charge the household(s) phone(s), the mean cost for charging was KES 17. Phones
were charged on average 3.4 times a week and the mean monthly cost per user was KES
175.
3,000
2,500
2,000
(KES)
1,500
1,000
500
0
Figure 12: Household mean monthly expenditure on energy by site (KES)
Mean business monthly expenditure on energy from all sources across all sites was KES
2,279. Median energy expenditure was KES 1,000 at the twenty-one sites. Figure 13
presents the results. Businesses users with grid/mini-grid electricity reported a mean cost
of KES 2,074 per month (68 samples). As for business energy sources that may be likely to
be replaced with electricity, mean monthly expenditure on kerosene was KES 672 (100
samples) and KES 276 on portable dry cell batteries.
9,000
8,000
7,000
6,000
(KES)
5,000
4,000
3,000
2,000
1,000
0
Figure 13: Business mean monthly expenditure by site (KES)

Average energy expenditure by institutions across the twenty-one sites was KES
4,771/month, though this varied significantly. The median value was KES 2,100. Much of
the variation (see Figure 14 below) was caused by the small sample size at most sites and
the different types of institutions found from one site to the next. 23 institutions used
grid or mini-grid electricity, with a mean expenditure of KES 5,413. Average monthly
institutional expenditure on kerosene (KES 522) and dry cell batteries (KES 454) was
similar to that of households and businesses even though the average household had 6.1
members and the average institution, 10 staff. Since kerosene and batteries were mostly
used for lighting this indicated that the institutions interviewed (predominantly churches,
mosques, schools and health facilities) did not have much activity in the evenings.
30,000
25,000
20,000
(KES)
15,000
10,000
5,000
0
Chardende
Ngodhe
Tamkal
Ijara
Mageta
Bahadale
Rukanga
Takawiri
Kaivirya
Kadaina Island
Hola
Lorugum
Alale
Dujis
Korr
Mfangano
Kargi
Zombe
Wasini Island
Napeitom
Near Ogembo
Figure 14: Institution mean monthly energy expenditure by site
Spending on energy by each category of end-user consumed approximately 8.6% of

household, 9.7% of business and 4.5% of institutional gross income. For households this
was generally in line with other studies, such as the 5% affordability threshold assumed
in some of the GIZ feasibility studies for solar PV mini-grids and the 10% level used in the
MoEP/AFD assessment of connection costs in Kenya. The 10% threshold was considered
by some (e.g. Fankhauser and Tepic, 200511) as a typical value indicative of ability to pay
(ATP).
Diesel/petrol generators
11Fankhauser, Samuel and Sladjana Tepic (2005) Can poor consumers pay for energy and water? An affordability
analysis for transition countries, European Bank for Reconstruction and Development (EBRD), p. 5.

Out of the total 2,153 end-user surveys conducted at the
twenty-one sites, the sample size of diesel/petrol generators
was small relative to other energy sources. The share of
diesel/petrol generators was found to be as follows: 1% for
households (1,540 samples), 5% for businesses (477 samples),
and 12% for institutions (136 samples). The mean monthly
expenditure for diesel/petrol generators by users, including
both fuel and maintenance costs, was KES 2,197 for
households, KES 4,158 for businesses and KES 10,664 for
institutions. Most respondents did not report data on kWh
produced/consumed from generators and it was not possible
to make estimates due to the different fuel types and prices
Figure 15: Old generator and types and efficiencies of the generators. Diesel generator
in use usage was thus not assessed further.
Household and business expenditure comparison with Lighting Africa study

In terms of using kerosene, candles and flashlight batteries for lighting, the findings of the
2008 Lighting Africa study for monthly expenditure can be contrasted with the results of
this study (Table 13).
Table 13: Lighting Africa 2008 & the present assessment - kerosene, candle & battery
expenditure (in KES)
2008 2015 2008 2015

Energy source Households Households Businesses Business
Kerosene for lighting 619 526 779 672
Candles 87 156 146 n/a
Flashlight batteries 157 285 236 276
Source: 2015 end-user survey data and 2008 Lighting Africa quantitative study results
* 2008 KES values inflation-adjusted at an average of 8.1% per annum to 2015
** Kerosene for lighting values from Lighting Africa are weighted average of paraffin lamps with and without
glass cover
*** Lighting use factor of 92% and 85% respectively applied to 2015 kerosene and battery monthly costs
It is evident that household spending on candles varies between the two studies. This
could be because the cost of candles has increased more than inflation, because of the
different average household size found in the two studies (2008 Lighting Africa = 4.4, this
study = 6.1) or most likely due to the sample in this study being representative of more
rural areas. The latter is also likely the reason for the differences in household and
business expenditure on flashlight batteries and kerosene, e.g. the more remote areas
covered in this study may not have as reliable kerosene supply and thus the use of battery-
powered flashlights, which do not need daily replacement, could be more desirable. In
the case of businesses, the lower spending on kerosene may also reflect the recent uptake
in use of stand-alone solar systems and solar lanterns.

Patterns of expenditure
Overall households purchased more energy sources on a weekly than monthly basis. This
was found to be especially true for candles (93% weekly), kerosene (85% weekly), and
diesel generator fuel (76% weekly, sample size of 17). LPG (46 household users), generator
maintenance costs (17 sample size), dry cell batteries and vehicle batteries were on the
other hand most often purchased monthly. On average for all energy sources, households
could afford to pay for purchases at least 30% of the time. For grid/mini-grid connected
households, 45% could afford to pay for electricity. For those who were not always able
to pay for electricity, the solution for 24% was to postpone payments until the money
became available, and for 16% to borrow money to pay for electricity.
In contrast to households, approximately 60% or more of the time businesses could afford
to purchase an energy source across all sites and sources, including electricity. Of those
who could not always pay, 17% borrowed funds and 8% postponed payment.
Unlike businesses and households, institutions mostly buy dry cell batteries on a monthly
rather than a weekly basis. However, for kerosene weekly procurement happened 55%-
60% of the time. 60% or more of the time, institutions on average had enough money to
pay for the energy sources they currently use. For electricity, this reaches 79% of the time.
When funds were insufficient, it was found that institutions preferred to postpone the
payment of electricity bills.
Table 53 in Annex II provides an overview of some of the usage and expenditure findings,
which are relevant to take into account when planning for mini-grid demand/load
forecasts and billing/cash flow projections for energy sources likely to be replaced by
electricity (e.g. kerosene, candles, dry cell batteries, vehicle batteries, generators).
Willingness-to-pay for electricity

70% of households wanted to be connected to electricity, if there was the possibility that
it would be supplied to their communities in the future. Reasons for not saying yes
included: already connected to electricity, maybe, not sure of the costs, or safety
concerns, among others. The 1,157 positive respondents were also asked are you willing
to have electricity at your house at an upfront cost? 72% said yes and 6% maybe,
while 18% said, no, and 4% did not know. The mean WTP for upfront connection was
KES 9,906 after excluding outliers. The median was KES 10,000. The mean ranged from a
low of KES 5,555 near Ogembo to a high of KES 17,955 at Rukanga. For household monthly
WTP, please see Figure 16.

1000
815
800 717 713 700 678
620 603
540 515 513 498
600
(KES)
461 441 433 428
409 386 386 367
400 338 302
200
0
Figure 16: Household mean monthly WTP for electricity (KES)
73% percent of the 466 businesses surveyed said that, if they would have access
(proximity) to a power grid, they would want to be supplied with electricity. Of these, 76%
indicated a willingness to pay upfront to be connected to electricity service. In response
to the question: what is the maximum you are willing/able to pay upfront to connect to
a source of electricity? the mean across the twenty-one sites was KES 11,640.
Business respondents were then asked how much would you be willing/able to pay per
month for electricity? The mean WTP across the 272 valid responses was KES 758, with
a median value of KES 500. Site-specific values are show in Figure 17.
1,600 1338 1286

1,400
1,200 1008 1000 971 933
927
(KES)
1,000 824 800

800 627 623 590 556
533 518
600 445 425 420 391
400 260
200 0
0
Figure 17: Business mean monthly WTP for electricity (KES)
Of the institutions surveyed, 69% said yes to wanting electricity supply. Of the
remaining positive and tentative respondents, 84% reported yes when asked whether
they were willing to pay upfront for electricity. Although the sample size of one to five
institutions at some sites means that the results should be interpreted with caution when
applying the average at that site, across all twenty-one sites (60 valid responses), the
mean WTP upfront for an electricity connection was found to be KES 19,400. The median
WTP upfront for a connection was KES 15,000.
The institutions that gave a positive response were then asked: how much would you be
willing/able to pay per month for electricity? There were 70 valid responses that resulted
in a mean WTP of KES 2,299/month over the twenty-one sites. The mean monthly WTP
was not evenly distributed, ranging from KES 5,700 at Lorugum to KES 300 at Ngodhe.

Median monthly WTP for electricity service was KES 1,000 (see Figure 18: Institution mean
monthly WTP for electricity (KES)Figure 18).
5700 5667
6,000
5000
5,000
4,000 3375 3300
(KES)
3,000
2050 1925 1833
1750
2,000 1500 1480
1200 973
733 700 667
1,000 500 400 300
0
0
Figure 18: Institution mean monthly WTP for electricity (KES)
In response to the question what is the maximum amount you can pay per month?
linked to the increased electricity service or demand, the mean monthly WTP for
institutions at the sites increased to KES 3,539, or an increase of KES 1,240 (54%) over the
initial WTP. The median monthly WTP across all sites increased from KES 1,000 to KES
2,000.
Conclusions
At the time of the study, energy expenditure of respondents was, on average, less than
10% of income, albeit close to this threshold in the case of businesses and households.
Expenditure on electricity by existing users was likewise less than 10% of income, and
closer to 5% in the case of households and institutions. Ability to pay at 10% of income
was more than (a) existing expenditure on energy and (b) on electricity and the spread
was largest for Institutions. This is shown in Table 14 below.
Table 14: Overview of end-user ability to pay for energy (monthly values)
End-user Income Energy % of Electricity % of Ability to

type (KES) expenses income expenses incom pay at 10%
(KES) existing users e of income
(KES) (KES)
Household 16,238 1,402 8.6% 909 5.6% 1,624
s
Businesses 23,387 2,279 9.7% 2,074 8.9% 2,339
Institutions 100,325 4,771 4.5% 5,413 5.4% 10,033
Surprisingly, there was no strong correlation between energy expenditure and household
size. For example, mean monthly expenditure for a 4-person household was found to be
KES 1,564 and KES 1,598 for a 10-person household. With businesses, however, there was

a trend of energy expenditure increasing with size (number of staff). In contrast,
institutions did not show a clear relationship between staff level and energy expenditure.
The mean expenditure of institutions with 11 employees was KES 472/month (five
samples) and KES 8,645 for those with six employees (four samples).
Overall, the majority (70%) of household respondents were willing to be connected to

electricity service. As for businesses, at only one site was the majority not willing to pay a
connection fees. The majority institutions at all sites were willing to pay, albeit in some
cases this was based on very small (1-5) sample sizes.
The mean willingness to pay (WTP) for upfront connection across the 21 sites was KES
9,906 for households and only somewhat more for businesses (at KES 11,640), which likely
reflects the fact that the majority of the businesses surveyed were small-scale traders
with an average of two employees. For institutions the maximum WTP for a connection
was closer to KES 20,000. For households, the maximum WTP was slightly lower than the
affordable amount that the 2014 MoEP connection cost study12 found, which was less
than KES 10,000 to reach a reasonable market penetration (70% affordability) without too
many subsidies and was also still lower than KPLCs recently announced reduced upfront
connection charge of KES 15,000 under the last-mile connectivity program. This was the
same for businesses. On the other hand, mean household and business WTP for a
connection exceeds what small private mini-grid operators currently charge.
With regards to the monthly electricity bill, for households the monthly WTP was KES 521.
For businesses a monthly WTP of KES 758 was found and for institutions, KES 2,299. The
mean WTP, at the time, in the base case was less than the average actual costs
experienced by the grid/mini-grid connected household customers in the sample at KES
909/month for households, KES 2,074/month for businesses and KES 5,413/month.
Household mean monthly WTP was interestingly less than the average monthly costs for
kerosene (KES 526), dry cell batteries (KES 286) and candles (KES 156) combined, for a
household that would use all sources (not all do). Reported minimum spending on these
same sources was KES 30 for kerosene, KES 43 for candles and KES 20 for dry cells per
month. Ability and willingness to pay varied significantly on a case-by-case basis.
When compared with the current standard KPLC connection fee, it is evident that the
stated WTP for households and businesses was only about 30% of the cost charged by
KPLC. The WTP ratio increased somewhat when viewed against the average monthly
electricity bill of customers who are already supplied electricity, reaching close to 40% in
the case of businesses and almost 60% in the case of households. This is shown in Table
15 below along with the results for institutions for comparison purposes, even though the
actual cost charged by KPLC can be higher than the standard charge in the case of
12Ministry of Energy and Petroleum (2014) Consultancy Services for Development of Electricity Connection Policy and
Draft Regulations, Final Report by Fichtner Management Consulting AG, p. 93.

households further than 600m from a transformer and businesses and institutions with
higher power requirements.
Table 15: Typical connection cost & electricity expenditure as % of income

End-user type KPLC WTP % of Electricity WTP % of
connection upfront actual expenses monthly actual
cost (KES) (KES) cost existing (KES)
users (KES)
Households 34,980 9,906 29% 909 521 57%
Businesses 34,980 11,640 33% 2,074 758 37%
Institutions 34,980 19,721 56% 5,413 2,299 43%
Note: Connection cost for is for single-phase connection up to 3 kVA for customer within 600m of existing
transformer. Not applicable in all cases, but is provided for illustrative purposes
In comparison, private sector micro-grid operator connection costs were in the range of
KES 1,500-KES 2,500 and monthly costs were KES 1,500-KES 4,500 (depending on
electricity consumption).
The spatial distribution of the findings can give insights to potential grouping of sites for
mini-grid development based on common characteristics for income, expenditure and
WTP parameters. However, there can be significant differences even among sites within
a similar geographic area. Figure 19 gives a visualization of the variation in mean monthly
energy expenditure (excluding grid and mini-grid electricity expenses) by households and
businesses at the twenty-one sites. It can be seen that at Takawiri, Ngodhe and Mageta
(all small islands on Lake Victoria) that energy expenditure of businesses was similar
(spread of KES 300) and was always more than that of households, but at the eastern
neighboring sites of Chardende, Ijara and Hola the spread was higher at KES 730 and
business expenditure was less or similar to that of households. This is likely due to a
combination of factors including income, energy uses, source availability and price,
among others.

Figure 19: Spatial distribution of monthly non-electricity expenditure (KES)
2.4 Relevance of the findings

The following are the main points that can be considered by policy makers, regulators,
planners and mini-grid developers:

Usage: kerosene, batteries, solar lanterns, generators were found to be used for 3
hours/day-8 hours/day. Mini-grid electricity will most likely displace these sources,
along with candle use at households and vehicle battery use by businesses and
institutions, especially for lighting, cell phone charging and radio usage. Load profiling
can take this into account.
Some regional differences and similarities were noticed. For example, sites in the
east of the country had lower candle (and kerosene) use, likely due to availability: dry
cell batteries were more predominant. At the same sites household expenditure on
energy was more than business expenditure. Larger household size and smaller
businesses could be the reason. Separately, island sites had on average higher
expenditure on energy. This was because kerosene and generator use was fairly high.
Developers/planners could target or have a portfolio of similar or grouped sites
made available to benefit from economies of scale.
Income and energy expenditure was most often weekly or more frequently. It was
only found to be monthly for institutions. This has implications for electricity bill
payment frequency. When households and businesses lack funds to pay for
electricity, the most common response was to postpone payment or borrow money,
which should be taken into account for mini-grid operator cash flow planning.
For most end-users electrification may not lead to direct cost savings on phone
charging. However, for those households where this would be the case, the savings
could be significant if the users switch to electricity (on a similar level to mean
monthly WTP (KES 521).
Not all potential end users want electricity service (average 75%-85%). This may
change as users see their neighbors connect and initial connection rates could be
higher than anticipated. However this may not always be the case.
Household and business WTP for an electricity connection was lower than KPLC
connection charges. However, monthly WTP for electricity was more in the range of
the current KPLC tariff. Existing energy expenditure (including average electricity cost)
was less than the 10% ability to pay affordability benchmark. More households should
be able to afford electricity monthly bills at a higher level than the stated WTP
indicates.
A connection cost of KES 5,000-KES 10,000 and a monthly charge of KES 1,000 or less
would likely make electricity service accessible to the majority of households and
businesses. However, for 20%-30% of households KES 200- KES 500 is the monthly
maximum that they may be able to pay.

3 Site characterization
The objective of the site characterization section was to complement the core demand
and cost assessment activities of this study by determining in some detail the technical
and economic characteristics of the possible mini-grids to be installed at the sites
surveyed.
This section describes the approach and the results of the characterization of the twenty-
one sites investigated in the end-user survey. The scope of the task covers the analysis of
five sites to pre-feasibility level and the remaining sixteen sites to identification level.
The specific demand assumptions, modeled daily load profile and a map showing the
location of the surveyed respondents is provided in a separate report along with details
of the results of base case and high business growth case scenarios in terms of system
configuration, generation and costing as modeled using HOMER software.
An assessment of the Levelized Cost of Electricity (LCOE) for each of the five sites analyzed
to pre-feasibility level is provided in the cost assessment section below.
3.1 Summary of site characterization analysis

The five sites selected for a pre-feasibility level of characterization and analysis were
Takawiri, Korr, Kadaina Island, Lorugum and Dujis. All five were found to be greenfield
sites (i.e. no existing major power generation or distribution infrastructure). There is an
existing private mini-grid at Takawiri but due to its small size and the fact that it was being
removed during the time of this market assessment the site is considered to be greenfield.
The locations of the five sites are shown in Figure 20.
The sites selected consisted of two island and three mainland locations spread around the
country to provide some geographical diversity. Lorugum is an example of an off-grid site
with two distinct load centers and is also the largest site in the group (500 buildings) with
a telecommunications mast as a potential anchor load customer. Takawiri and Kadaina
were selected due to the higher level of detailed information available: Takawiri because
energy experts from the consultant team visited it in April 2015 and Kadaina due to the
small number of buildings that made it possible to achieve a census of all potential
customers. In addition, both Takawiri and Kadaina are on the REA list of targeted sites and
there are plans for World Bank electrification funding support. Korr was included because
it was previously visited during the 2014 KfW study13, has known anchor load customers
and is also under consideration by KfW and GIZ as a pilot mini-grid site, although Korr may
also be electrified from a spur off the Lake Turkana Wind Power transmission line. Korr is
13KfW (2014) Project Design Study on the Renewable Energy Development for Off-Grid Power Supply in Rural Regions
of Kenya, Project no. 30979, Final Report by Economic Consulting Associates, Trama TecnoAmbiental and Access
Energy.

also a REA-targeted site. Dujis was selected as an example of a site in the northeast of the
country that is on the REA target list.
Figure 20: Location of 5 potential mini-grid sites for pre-feasibility analysis
The findings from the five sites dispersed around the country indicated technical viability
for a mini-grid using a solar PV-battery storage-diesel generator backup configuration to
meet projected demand. Commercial viability was not assessed as further input
assumptions are required for that.
The number of potential customers (of all types) at the five sites ranged from 64/63
(anchor/no anchor load scenarios) at Kadaina Island, Kilifi County, to almost 1,000 at
Lorugum, Turkana County. This provided a good variation of size for the case studies. The
largest system capacity is needed at Korr, Marsabit County, in both the base case (350
kWp) and high business growth case (400 kWp) scenarios. Cost per kW capacity installed
ranges from roughly USD 5,000 to USD 6,000 across the sites and scenarios except for at
Kadaina Island where cost per kW exceeds USD 7,500 in the base case scenario with an
anchor load customer. Similarly, installed cost per customer is highest at Kadaina Island.
Dujis, in Garissa County, and Lorugum have the lowest installed cost per customer in the
respective growth scenarios. Total mini-grid capital costs reach approximately USD 2

million in some cases (Korr, Lorugum) while a system at Kadaina should not exceed USD
500,000 even in the high business growth case.
A summary of the technical and cost findings from the five sites is shown in Table 16.
Table 16: Overview of 5 sites characterized to "pre-feasibility" level

Scenario A base case Scenario B high case
Site
growth growth
Site name Potential Installe Cost Cost Installe Cost Cost

Cost Cost
County customer d 1,00 USD/ d 1,00 USD/
USD/ USD/
s (no.) capacity 0 custome capacity 0 custome
kW kW
kW USD r kW USD r
1 Takawiri 5,33 1,05 5,28
329 180 960 2,919 200 3,213
Homa Bay 6 7 5
2 Korr 1,92 5,49 2,11 5,27
883 350 2,179 400 2,390
Marsabit 4 7 0 6
3 Kadaina 7,63 5,52
64 40 305 4,770 85 469 7,331
Kilifi 1 0
4 Dujis 1,27 5,78 1,47 6,28
652 220 1,953 240 2,313
Garissa 4 9 4 2
5 Lorugum 1,86 6,22 2,04 5,53
968 300 1,928 370 2,114
Turkana 6 1 7 2
Of the five sites, Korr was modeled with the highest projected number of both institution
(17) and business (60) customers by year 5 of operations. Kadaina Island had the lowest
number of business customers at 13, and the fewest institutional customers were found
at Takawiri (4). Both Kadaina and Dujis were modeled without any anchor load customers
in the base case demand growth scenario. In contrast, Korr was assumed to have up to 6
anchor load customers including a telecommunications base station, and Takawiri could
have two anchor loads (tourist lodge and cold storage centre). Average watt-hour
consumption per day per customer (Wh/d/user) ranged from 945 for household
customers at all sites up to 68,072 for the two anchor loads at Takawiri. Business
customers averaged 3,500 to 5,000 Wh/d/user and institutions 3,000 to 8,500 Wh/d/user.
Mini-grids at the five sites will need to be designed to supply between 50,000 and 450,000
kWh of electricity per year by the fifth year of operations. Table 54 in Annex I gives an
overview of the details.
In order to meet the anticipated demand, solar PV-battery storage-diesel backup

generator mini-grids were modeled in HOMER software using a number of input
assumptions. The resulting system configurations on the generation side were as follows
(Table 17):

Table 17: Mini-grid system configurations at the 5 pre-feasibility sites
Site Daily Peak PV size Diesel Battery Converte Solar
load power (kWp) genset size size r size fraction
(kWh) (kW) (kW) (kWh) (kW) (%)
Takawiri 546 109 180 110 965 110 89%
Korr 1,223 245 350 250 2,680 250 92%
Kadaina 129 26 40 30 322 30 88%
Island
Dujis 784 157 220 160 1,340 160 90%
Lorugum 1,135 227 300 250 2,680 250 91%
The sensitivity towards different levels of hybridization was also assessed for the case of
Takawiri Island; two high diesel penetration scenarios were run on the base case, with
respective renewable energy fractions of 10% and 50%, holding system size and demand
side parameters constant. These are achieved with a larger diesel generator and less PV
infrastructure, including a smaller battery. The alternative scenarios revealed a significant
reduction in capital costs (given the lower investment cost of diesel generation compared
to solar generation); however, the lower investment costs are offset later on by higher
running costs in less than seven years of operations, as can be seen in Figure 21. Section
5.3 further below provides a comparison of the lifecycle costs of the different renewable
fractions for Takawiri. Because the overall lifecycle costs of diesel-dominant mini-grids are
likely to also be higher at the other sites characterized in this study the technology
configuration is not modeled for the other four sites assessed to pre-feasibility level.
4,000,000
Cumulative overall cost in
3,500,000
3,000,000
2,500,000
RF 10%
USD
2,000,000
RF 50%
1,500,000
RF 89%
1,000,000
500,000
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year of mini-grid operation
Note: RF = renewable fraction
Figure 21: Cumulative total costs of 3 mini-grid solar fractions at Takawiri
Of the remaining sixteen sites that were not assessed to pre-feasibility level, two are
existing KPLC mini-grids (Hola and Mfangano) and three have access to the national grid
(Rukanga, Mbara Nne near Ogembo and Zombe). Both the existing KPLC mini-grids and
grid-connected sites were included to provide reference cases of electrified sites where
many customers are not connected to KPLC service and grid-proximate mini-grid
operators could play a role in enhancing connectivity. Table 56 and Table 57 in Annex I
provide an overview of the mini-grid characteristics and potential at the twenty-one sites.

3.2 Pre-feasibility analysis of five sites
As only one of the sites (Takawiri) was visited as part of this assessment, the analysis relies
heavily on the end-user survey results, information from the area chief and county
officials, and previous studies and datasets. This means that certain information gaps or
uncertainties could not always be confirmed directly using direct site-level knowledge.
Demand projection
Based on the end-user survey results, a demand projection model was developed by the
consultant. This was based first on the WTP results (would you want to be supplied with
electricity?) with negative or uncertain answers (15%-25% of the sample) being adjusted
based on previous consultant experience with mini-grids. For example, if a respondent
indicated they did not want electricity because they were worried about safety or they
were considering an alternative approach (e.g. solar home system), it was assumed that
once mini-grid electricity service was delivered to a site these potential customers would
have their concerns addressed and/or see the benefits of 24/7 AC power. The percentage
wanting and likely to accept electricity formed the basis of the initial up-take estimate.
Across the five sites, an 85% initial uptake was found to be the average for households.
Then, using the end-user survey and chiefs questionnaire, indicative findings for numbers
and types of households, businesses and institutions at a site and checking this with
references from other mini-grid project analyses in Kenya14, a demand segmentation
analysis was prepared under the four categories considered in the end-user surveys:
Households (HH) including low, medium and high HH consumption categories;
Institutions;
Businesses; and,
Anchor or industrial load customers (very large consumers).
Based on the stated number and type of appliances a household would use if connected
and level of lighting based on number of light bulbs (module 8 of the end-user survey), a
household sub-segmentation was determined at the five sites studied at pre-feasibility
level. The following pattern was identified (Table 18):
Table 18: Household end-user consumption sub-segmentation
Household sub-segment Consumption per month % of total household users

Low Up to 20 kWh 75-80%
14E.g. Micro hydro study by JICA/REA (2015), paper by Kirubi et al. on Mpeketoni mini-grid (2008), GIZ/ASD feasibility
studies for mini-grids in Turkana (2014) and consultant own data on African mini-grids. For example:
2015 JICA/REA profiles households by appliance type & number (4 classes, A, B, C, D)
2014 KfW has two classes of household size (big and small)
2014 GIZ considers maximum demand with no distinction of user type (3 classes, 0-1 kW, 1-3 kW, 3+ kW)
2008 WB/IFC Lighitng Africa and KNBS use income quartiles or living standard measures (4-10 classes)

Medium 20-70 kWh 15-20%
High 70+ kWh 5%
Electricity uses in the low consumption segment included lighting, mobile phone charging
and radio. The medium consumption segment included TV and a fan (or computer), in
addition to the appliances listed under low consumption uses. The high consumption
segment included the use of a fridge, a satellite TV antenna and a DVD, in addition to
appliances listed under medium consumption usage.
The above sub-segmentation is in line with references from other projects. This pattern
is a key input to the demand curves that are presented in Section 6.2 below. For the site
characterization, the segmentation and sub-segmentation was used to help determine
typical customer daily consumption for each category.
Demand under the institutional category, as reported in the surveys and assessed during
the sites visits, included the following public premises:
Schools (primary, secondary);
Health centers;
Churches and mosques; and,
Street lighting (non-existent at the moment, but desired by area leaders and
residents).
Additionally, some sites have reported to have or are planning to have:

Public water pumps; and,
Police stations or other government/administrative offices
Potential businesses and anchor load customers depend on the specific socio-economics
of each site, and have been assessed case-by-case, taking into account the corresponding
appliances or even small machinery to be used. In terms of businesses, retail shops, repair
shops (garage) and lodges have been reported in all cases. Posho mills, barbers and
cinemas have also been found at the majority of the sites. Regarding anchor loads, island
communities with fishing activities have expressed an interest in the running of cold
storage facilities (including two fridges and one freezer), which were assumed for the case
of Takawiri as an example. The other island sites surveyed namely Mageta, Ngodhe,
Takawiri, Mfangano, Kadaina and Wasini, all stated a need for central cold storage
facilities. In addition, individual businesses also expressed an interest in fridges and
freezers if they received electricity service.
Other anchor loads identified in some sites are telecommunication stations (one in each
of Alale, Kargi, Korr, Lorugum, Mbara Nne (near Ogembo) and tourist lodges or hotels
(with significant loads due to air-conditioning and computer/internet access) for
instance one at each of Mageta, Takawiri, Tamkal, Wasini Island and one at Kadaina if a
tourist bridge is built.

Apart from the anchor load customers and some specific businesses and institutions
(since the other potential end-users identified are generally present at all or the majority
of the surveyed sites), the customer demand profiles are at least somewhat
representative of similar customer types at other sites. Nevertheless, each potential mini-
grid site should be surveyed and assessed on a case-by-case basis.
In terms of future demand projections, a base case and a higher business growth
demand scenario is presented for each of the five sites assessed to pre-feasibility level.
The 85% connection rate assumption in year 1 is applied, which is considered to be
applicable to smaller-scale (<300 kW), appropriately sized systems. Small-sized systems
are likely to achieve this because it is easier to assess and meet the demand of a fewer
number of known customers, and modular equipment allows for meeting demand growth
over time. The 85% may not, however, be possible to achieve for larger-scale systems
(e.g. 500 kW+) since due to the likely different financial structuring of the project, the
need for more infrastructure upfront and the economies of scale associated often lead to
the project being oversized for the number of customers who pay for connections in the
first year.
It is believed that 85% is a reasonable assumption if the initial connection cost is kept to
a reasonable level based on the experience of a few smaller private mini-grid operators
in East Africa, where in some cases a 100% connection rate was realized in the first year,
and then more modest growth or even stagnant growth after that.
The base case scenario (scenario 1) assumes an overall (across all customer types)
demand growth of 15% by the fifth year of mini-grid operation (which corresponds to an
average annual growth of 3.55% for years 2-5). Demand is then assumed to level off to an
annual growth rate of 2.5% for years 6-20 of the system lifetime.
The higher business growth case scenario (scenario 2) considers that businesses in
particular may be more willing and able to pay for electricity and derive immediate
economic benefits from electrification that are re-invested in further commercial
activities as well as in the local community. In addition, an electrified village may create
more demand for goods and services. In the business growth case scenario, while the
initial household connection rate stays at 85% it is increased to 100% for businesses.
Demand/consumption in years 2-5 is also given a boost to a 5% annual rate for households
and 20% for businesses. From year 6 onwards the demand growth assumption reverts
back to the 2.5% per annum. The two cases (see Table 19 and Table 20) were kept
constant across the sites assessed.
Table 19: Site base case growth scenario (scenario 1)

Overall growth
Connection
85% Increase Increase Increase
rate year 1 3.55% 2.50% 2.50%
year 2-5 year 6-10 year 10-20

Table 20: Site higher growth case scenario (scenario 2)
Household demand growth
Connection
rate year 1 5.00% 2.50% 2.50%
Business demand growth
Connection
rate year 1 20.00% 2.50% 2.50%
Annual growth assumptions should be considered as preliminary estimates for a pre-

feasibility level exercise and are highly dependent on a number of variables. A generic
approach is taken where the demand increase is not broken down in terms of the number
of new connections/customers versus increased consumption of existing ones, or a
combination of the two. For this reason growth in the customer base is not assessed
against the total population in a project area. For simplification, the same growth patterns
were applied to all five sites: Takawiri, Korr, Kadaina Island, Dujis and Lorugum. However,
in the overview profile of each site, information on the population growth rate (sub-
location level) and some data on customer stated electrical appliance use are provided to
give an indication of how these factors may influence the growth assumptions.
Number of customers
Mini-grid system sizing, generation requirements, costing and other parameters need to
also take into account the number of customers. The end-user surveys in some cases
achieved a, census (e.g. at Kadaina Island) of all potential electricity customers, but in
most cases did not. In these cases to extrapolate the end-user survey findings to the size
of the site that could be served by a mini-grid, sub-location household numbers from
KNBS (2009 Census)15 or SREP (using 2009 Census data)16 were applied, and adjusted
slightly downwards in some cases. This same approach (without the adjustment) is found
in some REA planning documents. However, the numbers can differ from sources, such
as information from community leaders on households and population and from
assumptions that can be made from a visual count of buildings at the site using Google
Earth. It could be that the assumed number of household customers is higher or lower
than the actual case might be. However, for business and institution customers the figures
are considered more reliable as they are based on the interview with the community
leader who with regard to institutions, could usually name each one individually. For
schools and health centers this could also be checked against KNBS micro-data.
The number of customers by type is presented as number of users in the demand

segmentation table for each site. Since the five assessed sites are essentially greenfield
this number corresponds to all customers that connect in the first year and definitely by
15 Kenya National Bureau of Statistics (2009) Kenya Population and Housing Census (10 Per Cent sample, every 10th
household), Population and Housing Census, Vol. 2A Table 2 Revised Sub-locations Population Distribution by Sex,
Number of Households, Area, Density and Administrative Units.
16 Government of Kenya (2013) Scaling-up Renewable Energy Program Project Document for Mini-Grids
Development in Kenya

year five of mini-grid operations. All are therefore new customers. This includes
potential customers who already have electricity supplied from diesel generators, vehicle
batteries, solar home systems and other sources as these were already incorporated in
the 85% average initial connection rate expectation above.
Some mini-grid assessment and planning studies apply an adjustment factor to load
forecasts based on the number of existing solar home system at a site, because it is
assumed that such systems will remain operational and thus reduce demand. This is not
applied in the demand analysis for this study as the lifetime of such systems is likely much
shorter than the 20+ year mini-grid operational timeline and there is a high likelihood that
consumption will increase when connected to electricity supply, thus adding to the load
that is met by any existing stand alone solar systems.
Technical configuration and simulation

Solar radiation, wind and hydro resources have been assessed to a basic level at each site
based on data from the HelioClim17 (solar) & SWERA18 (solar & wind) databases and local
measurements where available (SREP for wind, WRMA river gauging stations for hydro).
Solar radiation has been found to be relevant at all sites, which is likely also the case for
other potential sites in Kenya, so solar PV is therefore used as a reference for this study.
This is also because the wind and hydro resources at most of the surveyed sites were low
to moderate, non-existent or unknown. A wind hybrid option was investigated, but no
data on existing solar-wind mini-grids at the anticipated reference sizes (i.e. 10 kW-350
kW) was available. Since one of the premises of the study was to focus on readily available
technologies and commercially viable options to be able to carry out a realistic cost
assessment, a solar-wind-diesel hybrid configuration is not assessed. However, as an
indication for potential sites with relevant wind or hydro resources, the capital costs of
these alternatives to PV generation is provided for comparison purposes in a separate
report.
The mini-grid architecture is based on a centralized Photovoltaic (PV) plant connected to

a 3-phase alternating current (AC) bus, where the battery multi-mode inverter and a
diesel generating set (genset) are also connected. The system configuration follows an
AC-coupling model, where the battery multi-mode inverter acts as voltage source and the
PV grid-dependent inverter acts as current source, following the 50 Hz frequency of the
battery inverter. A diesel generator is included for backup and to provide some flexibility
to temporarily meet increasing demand as the load grows without expanding the solar PV
generation and battery storage capacity. A 100% solar system (no diesel generator) is
possible and is the approach taken by some micro-grid developers but for larger systems
this requires a large battery bank, which increases the upfront investment cost. Whenever
the diesel genset is on the battery inverter changes its modality to act as a current source,
17 HelioClim solar radiation database (2015). Available at: http://www.soda-is.com/eng/helioclim/ [accessed 20 June
2015]
18 OpenEI (2015) Solar and Wind Energy Resource Assessment (SWERA). Available at:
http://en.openei.org/wiki/SWERA/Data [accessed 20 June 2015]

following the 50 Hz frequency from the genset. The system is designed and components
specified to enable integration with the national grid if the area is reached by grid
extension. A visualization of the configuration on the generation side is presented in
Figure 22.
Charge
controllers
Inverters
Figure 22: PV hybrid configuration used as a reference in this study
HOMER software has been used to model the generation configurations of reference
mini-grids, and optimize them to maximize penetration of solar energy while keeping cost
of energy as low as possible. The main variables for optimization are the capacity of the
PV generator and the size of the battery bank. The primary factor for sizing is projected
demand and its possible evolution (e.g. changes in anchor load demand). Other site-
specific factors that could influence system size and configuration such as land availability,
terrain and social or environmental constraints were not considered in the modeling as
no significant factors were identified in the pre-feasibility analysis.
Renewable energy (RE) fraction was optimized with battery and diesel integration to
minimize the environmental impact and reduce logistical/diesel costs, making the system
easier to run/maintain and was also based on some expectation that battery/PV costs will
continue to reduce over time but diesel costs will not, so more mini-grids in the future
may have a higher RE share. Furthermore, most if not all private sector and planned
GIZ mini-grids in Kenya maximize the RE fraction and in some cases are 100% renewable
(no diesel backup), so the modeled systems reflect the Kenyan private sector case. The
site characterization, cost assessment and results reflect this approach.
The electricity distribution to customers in the pre-feasibility level assessment is by means

of a low voltage (LV) 3-phase line at 415 V, which is fairly standard in Kenya. The LV
network starts at the centralized PV station and at specific points the line has branches to
feed customers by means of a single-phase connection. Generation is sized to take
distribution losses into account.

The distribution equipment and materials considered are in accordance with IEC
(International Electrotechnical Commission) and ISO (International Standards
Organisation) standards and recommendations. For some specific items (e.g. type of
wood to use in aerial distribution poles), where IEC or ISO standards and
recommendations may not be available, then typically (BSI) British Standards or (ANSI)
American National Standards Institute is applied. Lower specification equipment and
material is not considered.
The PV plant and the battery capacity are sized accordingly to the daily demand and the
solar resources, and taking into account a performance ratio of 0.8 for the worst month
of radiation. Batteries are sized to provide one day of autonomy, a depth of discharge of
60% and 5% losses. The system is designed around the capacity needs in year five of the
mini-grid lifetime, when the demand growth is expected to stabilize. Some expansion in
years 8-10 to meet year 20 demand is considered later as part of the Levelized Cost of
Electricity (LCOE) in section 5.3 below on costs.
The renewable energy generation plant will also have a diesel genset, which will be used
normally for backup (contributing less than 11%-12% to the annual electricity generation).
The genset is sized in order to have the sufficient power capacity at year five after the
installation of the mini-grid. The genset should only be switched on whenever the battery
state of charge is under a certain limit, which would be defined at commissioning stage.
The diesel genset is sized to load the battery at C10 rates19 (battery should not be
discharged to 10 Ampere-hours or less, otherwise battery life decreases), so that the
genset is operating at its optimum power rate.
As noted above, for Takawiri only, two alternative examples with a renewable fraction of
10% and 50% are run in the base case scenario to show the impact on mini-grid
investment costs. In these alternatives, relevant parameters (demand, consumption per
customer, system size, losses, etc.) remain constant but the technical configuration is
changed to include a larger diesel genset, fewer PV and related components and a smaller
battery. Operating costs also change but as with the high renewable energy fraction cases
these are not presented here but are instead taken into account in the cost assessment.
Mini-grid capital expenditure (CAPEX) costs provided for the five sites, characterized to
pre-feasibility level are based on the typical cost reference cases (10 kW, 50 kW, 180 kW,
and 350 kW) identified in the cost assessment chapter of this study (see section 5 below),
adjusted to the size needed to meet the demand/consumption at the site. The cost
breakdown per major component is shown in the costing table for each site.
19C10 is the rating of the capacity that a battery bank can supply in kWh when discharged continuously in 10 hours,
and is chosen as the reference for a daily cycle. The C rating is not constant and depends on the speed at which a
battery bank is discharged.

A mini-grid system Levelized Cost of Electricity (LCOE) for each of the five sites is
presented separately in the cost assessment section of the report in section 5.3 below.
Annex I contains an overview of the five sites characterized to pre-feasibility level. The
names of existing community structures and organizations (e.g. cooperative associations,
self-help groups, CBOs) as provided by the area chiefs during the end-user survey
implementation are listed in the organizational possibilities section. Where there is an
indication that these could potentially serve as partners or service provides to a mini-grid
operator it is noted. However, in most cases not enough information was available to
adequately assess the potential for partnerships.
Identification of reference mini-grid cases

The analysis of the five sites found that an appropriately sized solar PV/battery/diesel
mini-grid system ranged from 40 kWp (Kadaina Island base case) to 400 kWp (Korr, high
growth case). The five sites are considered to be generally representative of the other
sixteen sites where data was collected in the end-user surveys as well as other potential
off-grid sites in Kenya. This is separate from Hola and Mfangano, that are larger, already
established mini-grids serving larger populations and were surveyed instead with the
purpose of comparison with greenfield and grid-connected sites.
The characteristics of the five sites assessed to pre-feasibility level especially, as well as
those of the other sixteen sites feed into the market size potential for mini-grids.

The following are the key messages that can be taken from site characterization exercise:
The five sites assessed in detail are found to be technically viable with solar PV as
the most relevant technology since it can be deployed almost anywhere in Kenya.
Appropriately sized mini-grid systems at the sites assessed range from 40 kWp
(Kadaina Island, base case) or smaller, to 400 kWp (Korr, high growth case). This is in
line with the typical size of newly planned KPLC/REA mini-grids and can serve
between 30-1000 customers.
Potential sites should be subjected to a detailed assessment prior to an investment

decision being made due. For example, Napeitom in Turkana County is on the REA list
of potential mini-grid sites but the population has shrunk in recent years and there
are very few if any businesses at the site.
The number of customers and demand at a potential mini-grid is site specific. This is
likewise the case for the relative distribution between residential, businesses,
institutional and anchor loads. Typical customer profiles can be used for high-level,
early stage planning, e.g. three demand segments for households (low, middle,
high). The majority of households are expected to consume 70 kWh or less per month
(which is in line with the KPLC mini-grid average of about 60 kWh/month, range: 50-

100 kWh). High initial connection rates are likely if cost is kept low. If connection
costs are too high the projected 85% uptake in years 1-5 may be overly optimistic.
Systems can be planned to meet anticipated demand in a given year with expansion
factored over time depending on how much uptake and growth actually materialize.
Anchor load customers, where present, can make a significant difference to

demand, consumption (and revenue). Generally, larger consumers such as cold
storage facilities, telecom base stations, tourist lodges, etc., act as anchor loads
lowering the LCOE and thus making such a site more attractive for mini-grid
construction. In the case of Takawiri, two expected anchor customers (cold storage
facility and tourist lodge) would uses approx. 25% of electricity produced by a mini-
grid. This influences system design and can provide certainty but also comes with
risks of dependency on a smaller number of larger consumers.
Although most sites have few if any anchor load customers, smaller businesses such
as kiosks, retail shops, hair dressers/barbers, phone charging shops, video halls and
posho mills are present at most of the sites. Therefore mini-grid developers may need
to plan for a greater number of smaller higher consumption customers. In this case
clusters of customers help reduce distribution costs.
On the demand side, overall eight of the twenty-one sites have good potential for
mini-grids based on an analysis of electrification status, ability and willingness to pay
(see Table 56 and Table 57 in Annex II). Four have moderate potential and nine sites
have little or no potential for mini-grids because they are already grid- or mini-grid
connected, there are electrification plans underway or demand, income and WTP is
on the low side. The higher and moderate potential sites are listed in Table 21. Island
sites are generally found to have higher potential due to (a) the isolation factor, (b)
higher current expenditure on kerosene and diesel generators and (c) higher WTP in
some cases.
Table 21: Sites with higher & moderate potential based on demand
Higher potential Moderate potential

Garissa County Bahadale, Ijara Garissa County Dujis
Homa Bay County Mageta, Ngodhe, Marsabit County Korr
Takawiri Tana River County
Kilifi County Kadaina Island Chardende
Kwale County Wasini Island Turkana County Lorugum
Marsabit County Kargi
The commercial potential of a mini-grid at each site will depend on developer-specific

costs, business delivery model, grid extension plans (which are not always known) and
the tariff that can be charged versus willingness/ability to pay, among others. The case of
Kadaina Island, for example, shows the high cost per kW and per customer of a very small
RE-based mini-grid. Given that the national grid is between 2 km - 4 km distant and the

island is not very far from the mainland it could indicate that grid extension may be the
most cost effective approach.
The Kenya Electricity Grid Code (currently under revision) covers the technical
requirements for small-scale generation, distribution and electricity supply and metering.
These requirements should be reviewed against international technical standards for
mini-grids (e.g. International Electrotechnical Commission) to see if it makes sense to
have a separate Kenyan technical standard for mini-grids. Key aspects could include
ensuring that the design of mini-grids allows for integration with the main grid and parallel
and island operation. Such a review and possible development of standards could
consider a simplified approach to distribution requirements, such as starting with a
single-phase network that is upgraded to three-phase as the load grows, use of simplified
wiring techniques and use of standard equipment.20
20See for example the 2014 MoEP/AFD study in Kenya entitled Consultancy Services for Development of Electricity
Connection Policy and Draft Regulations and the 2013 EUEI-PDF RECP Supportive Framework Conditions for Mini-
Grids Employing Renewable and Hybrid Generation in the SADC Region: guidelines on technology choice and technical
regulation

4 Characterization of existing mini-grids
This section characterizes fifteen existing diesel and hybrid mini-grids operated by KPLC
based on various aspects such as generation, demand, grid network, customers and
renewable energy resources potential.
The objective of this activity was to compile as much data as possible on the fifteen
existing KPLC mini-grids and assess the different technological, operational and
performance parameters, as well as the interrelation among them. To achieve the
objective, the work was carried out in two phases: (i) the collection of data from relevant
KPLC departments and reports and (ii) the sorting and analysis of data. The results of the
characterization of existing mini-grids will help inform the mini-grid market demand and
cost assessment. Findings are based on the latest available data, which is in most cases
2014 or early 2015. Where 2013 or earlier data is used this is noted in the report. In all
cases, except where otherwise stated, information provided in the tables and graphs is
based on (a) datasets made available by KPLC, (b) 2013 SREP mini-grid project document,
(c) previous studies and reports and (d) the consultants analysis.
A brief overview of private mini-grid developers in Kenya and in East Africa is also included
to describe the current status with the different players and to highlight the different
business models in the region.
Existing public utility mini-grid overview

The initial list consisted of twenty-two public mini-grids run by KPLC or KenGen. Of these,
Garissa and Lamu were excluded from the analysis as KenGen operates them. Thereafter,
Moyale in Marsabit County was omitted as it was recently connected to the Ethiopian
electricity grid. Finally, Lokori (Turkana), Faza (Lamu), Laisamis (Marsabit), North Horr
(Marsabit) and Lokitaung (Turkana) were excluded as they have been recently
commissioned and not enough data was available for the analysis. Therefore, the
remaining fifteen mini-grids operated by KPLC that were included in the analysis are
shown in Figure 23. Table 58 in Annex II has an overview of the characteristics of the
fifteen mini-grids.

Figure 23: Location of KPLC mini-grids assessed in this study
4.1 Analysis of existing mini-grids

The fifteen analyzed mini-grids are located in ten different counties: Homa Bay (1), Isiolo
(1), Lamu (1), Mandera (4), Marsabit (1), Samburu (1), Tana River (1), Garissa (1), Turkana
(2) and Wajir (3). Note that even though Hola power station is located in Tana River
County its distribution networks reaches the town of Masalani in Garissa County.
Technology wise, six of the KPLC off-grid stations run only on diesel, while seven are solar-
diesel hybrids, one is a wind-diesel hybrid, and one is a solar-wind-diesel hybrid. Total
installed capacity ranges from 184 kW (Rhamu and Eldas) to 3,400 kW (Wajir). Figure 24
ranks the stations from the largest to smallest effective capacity, visualizes the hybridized
stations with an asterisk (*), and indicates the number of customers connected, which
range from 80 (Eldas) to 4,100 customers (Wajir) based on the latest available figures.

Wajir
Marsabit*
Mandera*
Lodwar*
Mpeketoni
Hola*
Elwak*
Habaswein*
Lokichoggio
Mfangano*
Takaba*
Rhamu
Eldas
Merti*
Baragoi
0 500 1000 1500 2000 2500 3000 3500 4000 4500
Customers Effective Capacity (kW) Nominal Capacity (kW)
Figure 24: KPLC mini-grid customers & nominal and effective capacities21
Generation and load demand

The stations with the largest electricity generation in 2014 were Mandera (7,149 MWh),
Wajir (5,577 MWh) and Lodwar (5,513 MWh), followed by Marsabit (4,220 MWh), Hola
(3,005 MWh) and Mpeketoni (2,450 MWh). Wajir (3.40 MW), having the largest installed
capacity and running only on diesel was only second in electricity generation, behind
Mandera (2.35 MW), which is a hybrid solar-diesel station. This may be due to the
generally lower capacity factor of solar and wind technologies vis--vis diesel gensets (see
Table 59 in Annex II).
Except for Wajir, commissioned in 1988, and Mpeketoni (commissioned in 1997, but only
handed over to KPLC in 2007), all stations have been commissioned in the 2000s. It is
worth noting that five stations are in their initial years of operation, namely Takaba,
Rhamu, Lokichoggio and Eldas, all of which were commissioned in 2012, and Mfangano
that was commissioned in 2011. This is important since mini-grids tend to operate
differently during their first years of operation. For instance, demand and electricity
21Sourced from either Kenya Power and Lighting Company, KPLC (2015), Off-Grid Power Stations Generation (Diesel
and Renewable Energy), Fuel Consumed, Fuel Cost, Maximum Load Demand, Availability and Number of Customers
monthly reports 2012 -2015; the 2015 AFD/ASD study for mini-grid retrofitting; SREP 2013.

generation growth rates are higher during the first years while fuel consumption is less
efficient.22
The average annual growth in electricity generation over the four years analyzed ranges
from 10% to 25%, with the exception of Lokichoggio (65%), Mfangano (45%), Takaba
(32%) and Rhamu (-36%). The first three are recently commissioned stations, which would
support the statement on higher growth rates in the initial years of operation. Rates
normally decrease as the station ages as most customers who are willing and able to pay
have already been electrified. This argument is strengthened by looking at Wajir that was
the first commissioned of the group (1988) and shows the lowest growth (see Table 60 in
Annex II. Rhamu, which has also been recently commissioned, is a specific case since its
negative average results from a very high electricity generation during its first year of
operation that sharply decreased during its second year of operation.
Investment costs
Very little information was available to the consultants on the actual capital or operational
costs of the existing KPLC off-grid stations apart from some data on RE generation
investments and monthly diesel fuel expenditure. Estimated diesel capital costs for
planned new public-funded mini-grids to be built by REA and KPLC are available in the
2013 Scaling-Up Renewable Energy (SREP) mini-grid project document.23
SREP 2013 proposes that all new KPLC/REA mini-grid station have, at least two diesel
generators incorporate[d] with either solar and/or wind generation. The diesel generators
are to supply load when the RE generation is low or unavailable. It is expected that the RE
will service the base load when available. (See page 41 in the SREP 2013 report). It is
noteworthy that this approach is somewhat different to the situation with the existing
KPLC mini-grids where RE penetration is quite low (10% maximum based on available
data). Table 22 gives the estimated capital cost of the proposed investments in diesel.
Table 22: Estimated public mini-grid diesel generation capital costs (USD)
Generators (kVA) Size of Estimated cost Estimated Estimated Cost Total
station of gensets cost of total cost per cost
(kVA and associated civil & (USD) kVA per
equipment mechanical gensets kVA
(USD) works (USD) only (USD)
(USD)
80 & 150 270 470,588 1,764,706 2,235,294 1,743 8,279
150 & 300 450 647,059 1,764,706 2,411,765 1,438 5,359
300 & 500 800 823,529 1,764,706 2,588,235 1,029 3,235
22 The commissioning date is based on available information from KPLC. In some case a mini-grid was operational for
some time before official commissioning. For example, Mpeketoni mini-grid started in 1994 as a community
partnership supported by the then GTZ. In 2005 the project became fully independent. In 2006 the Government of
Kenya took over and requested KPLC to run the project. KPLC generation data starts from late 2007.
23 Government of Kenya (2013) Scaling-up Renewable Energy Program Project Document for Mini-Grids
Development in Kenya, p. 29.

Source: SREP 2013, and consultant calculations
Although it is not clear from the SREP 2013 report, the above costs are assumed to be
inclusive of a sub-station with step up transformers at 33 kV. In addition, 2013 SREP
assumes a lump sum amount for distribution network costs at USD 250,000 per site based
on experience with existing REA/KPLC mini-grids. This amount appears to include all
distribution system components but not customer connections and metering. The line
length and average number of customers served with the USD 250,000 budget are not
indicated.
In terms of renewable energy investment costs, the following table (Table 23) provides an
overview for the KPLC mini-grids where retrofitting/hybridization took place. The costs
include the generation, integration and associated equipment components. The impact
of economies of scale is evident (solar PV ranges from USD 5,100 to USD 13,575 per kWp
installed). Other factors such as the supplier, integration equipment, logistics and year of
procurement likely also have an influence.
Table 23: KPLC mini-grid RE generation capital costs as at 2013

Plant Capacity Year Capital cost Design Cost/kW
(kW) (USD) (USD)
Lodwar Solar 60 2011 306,159 Grid-tie PV with no batteries 5,103
Mandera Solar 350 2013 2,134,223 Grid-tie PV with no batteries 6,098
connected to 11kV power line
Marsabit Wind 500 2010 2,526,895 2x250kW wind turbines 5,054
directly connected to 11kV
power line
Hola Solar 60 2011 404,995 Grid-tie PV with no batteries 6,750
Merti Solar 10 2011 135,753 Grid-tie PV with no batteries 13,575
Habaswein Solar 30 2011 247,893 Grid-tie PV with no batteries 8,263
Habaswein Wind 50 2012 492,809 3x20kW wind turbines 9,856
connected through batteries
and inverter to the busbar
through a generator panel
Elwak Solar 60 2011 367,132 Grid-tie PV with no batteries 6,119
Source: SREP 2013, 2015 KPLC datasets and consultant calculations
Fuel consumption and costs

Specific fuel consumption (SFC) is the ratio between the amount of fuel consumed and
the electricity generation, or simply the amount of fuel used to generate one kWh. Based
on the data, the stations can be divided into four groups (see Figure 25):
A. Stations with the lowest SFC due to more efficient or larger generators that are also
likely operating at a higher rate with greater efficiency. Those are Mandera, Lodwar,
Marsabit, Hola, Habaswein and Mpeketoni. (0.29-0.34 ltr/kWh). Of these, Habaswein
could also be placed in the range of group B.

B. Stations that even though the total energy generated is still similar to group C, their
SFC is significantly lower (0.36-0.40 ltr/kWh). Those are Lokichoggio, Elwak, Baragoi
and Mfangano.
C. Stations with high SFC, between 0.48-0.51 ltr/kWh. Those are Merti, Rhamu, Takaba
and Eldas.
D. Wajir, even though the significant amount of energy generated implies an efficient
use of fuel, SFC is still at 0.41 ltr/kWh similar to those in group B. The reason for this
was not determined by the consultant.
7,000
Mandera
6,000 A D
Lodwar Wajir
5,000
kWh/year
4,000 Marsabit
3,000 Hola
2,000
Mpeketoni
B
1,000
Habaswein
Lokichoggio C
Elwak Rhamu Takaba
Baragoi
Mfangano Eldas Merti
0
0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70
SFC (litres/kWh)
Figure 25: KPLC stations grouped by specific fuel consumption 24
Note that three of the four recently commissioned mini-grids (Eldas, Rhamu and Takaba)
ranked within the group that shows the highest SFC. In fact, a closer look to their
individual annual SFC over the years shows that for all four of them, the first two years of
operation had higher values, at around 0.80 ltr/kWh. Therefore, it is expected that as the
stations continue to operate, SFC will decrease.
Diesel generation fuel costs for the most recent six months available (Nov 2014 - Apr
2015) are presented in Table 61 in Annex II for the five KPLC mini-grids that are closest
geographically to the five sites characterized to pre-feasibility level. Average cost in
USD/kWh25 over the period is 0.57 (Mfangano), 0.30 (Mpeketoni), 0.29 (Marsabit), 0.37
(Habaswein) and 0.29 (Lodwar). Apart from Mfangano the average USD/kWh cost is fairly
similar even though the sites are dispersed throughout the country, which likely reflects
the SFC grouping discussed above. It is notable that specific fuel consumption seems to
24 Consultants analysis based on KPLC data sets

25 Exchange rate of KES-USD 100.

have more influence on cost rather than regional location, albeit over the short time
frame considered here.
Findings on diesel fuel costs for generation are taken into consideration in the Levelized
Cost of Energy (LCOE) determination in the cost assessment section of this report.
Renewable energy generation

Nine of the fifteen KPLC off-grid stations
have been hybridized with solar and /or
wind. In 2014, Elwak had highest
proportion of renewable energy
generation at 11%. This was followed by
Merti at 8% and Mandera at 7%.
Lodwar, Hola and Takaba had the lowest
percentage of RE production. In terms of
absolute values, however, Elwak and
Merti generate a relatively small
amount of electricity while Lodwar and
Hola, with a low renewable energy
Figure 26: KPLC mini-grid at Habaswein fraction, are among the ones that
diesel, solar PV & wind generation generated the most at 94 MWh and 83
MWh, respectively. Mandera generates significantly more renewable electricity (505
MWh) than any others with its 350 kWp solar PV system. Marsabit, with two wind
turbines totaling 500 kW, also generates a significant amount at 180 MWh. Figure 44 in
Annex II has more details.
Transmission and distribution

From the analysis of the transmission and distribution network, several conclusions have
been drawn: First that the number of transformers and customers per transformer does
not follow any specific pattern and it greatly varies, from six customers per transformer
in Mfangano to 114 customers per transformer in Mandera. These results, however, have
to be interpreted with care since they are highly dependent on the available information
on the number of customers, which may be out of date or based on planning assumptions.
The size of the transmission and distribution networks also varies among mini-grids, and
does not correlate with the capacity of the power plant. For instance, Hola, with 1.22 MW
installed capacity, has one of the largest networks up to 50 km away from the power
plant, and 80 km from its two furthest extremities as-the-crow-flies. Wajir, in comparison,
has a much larger capacity of 3.4 MW and with a distribution network up to 50 km in
length. Lodwar, on the other hand, with a large capacity of 2.74 MW has a network that
extends to a radius of only 5 km from the power station.
These results, especially in the cases of Hola and Wajir, but also with Merti, Mandera and
Habaswein, show that mini-grid networks can cover a large geographical area. In some
cases they can extend further than the 50 km benchmark used by some planners in
identifying new mini-grid sites that are not likely to be connected in the near future. This

has implications for planning of new mini-grids, either by public or private developers.
Table 24 presents the results.
Table 24: KPLC mini-grid transmission and distribution details26
Mini-grid Length of Length of Low Number of Average

Medium Voltage Lines Transformers number of
Voltage (km) customers per
lines (km) transformer
Baragoi (248 kW) 7 (11 kV) 4.25 7 33
Eldas (184 kW) 66 (33 kV) 13.6 NA NA
Elwak (740 kW) 25 (11 kV) 52 12 67
Habaswein (760 kW) 82 (33 kV) 150 22 46
23 (11 kV)
Hola (1.22 MW) 130 (33 kV) 42 54 36
45 (11 kV)
Lodwar (2.74 MW) 35 (11 kV) 45 42 57
Lokichoggio (680 kW) 19.5 (33 kV) 16 NA NA
Mandera (2.35 MW) 86. (11 kV) 25 35 114
Marsabit (2.9 MW) 123 (11 kV) 65 49 67
Merti (250 kW) 6.85 (11 kV) 18.2 19 23
Mfangano (520 kW) 42 (33 kV) 7.3 21 6
Mpeketoni (1.3 MW) NA NA 40 38
Rhamu (184 kW) 58 (33 kV) 2.5 NA NA
Takaba (244 kW) 66 (33 kV) 16 NA NA
Wajir (3.4 MW) 56 (33 kV) 800 67 61
130 (11 kV)
NA = Not available
Customers
Kenyan electricity customers are categorized into different sub-categories of Domestic
(DC), Small Commercial (SC), Commercial and Industrial (CI), Off-peak (IT) and Street
Lighting (SL) customers. For tariff purposes, these categories are combined in the case of
off-peak, for Domestic and Small Commercial customers. KPLC provides an overview of
the number of customers in each category in their annual reports, distinguishing between
KPLC and Rural Electrification Programme (REP) users.
In the absence of more recent data on the number of customers in each category at the
KPLC mini-grids, the consultant has taken the figures in the 2014 AFD/ASD retrofitting
26 SREP 2013, 2015 KPLC datasets

study,27 which themselves are derived from the 2013 SREP report.28 To further refine the
estimate, the proportion of REP users as provided in the latest (2013/2014) KPLC annual
report is applied, since that is expected to reflect the distribution across customer
categories than when all national grid customers are considered. For instance,
Commercial and Industrial (CI) customers are not included in REP numbers, which is
considered to be more representative of the situation at the existing mini-grids where
there are few cases of very large consumers. For the customer type breakdown, the
portion of Domestic and Small Commercial Off-peak users was incorporated into the
Domestic and Small Commercial group percentages and street lighting was omitted, in all
cases due to its low significance. Finally, domestic customers have been broken down into
three tiers based on their consumption as per calculations taken from the 2013 Cost of
Service Study.29 This results in 82% DC and 17.4% SC customers, with 45.1% of the DC
category customers consuming 0-50 kWh/month, 37.4% consuming 50 kWh/month -
1,500 kWh/month and 0.2% consuming more than 1,500 kWh/month.
Based on the latest figure available for the total number of customers served by each
KPCL off-grid station, and following the approach explained above, the customer
categorization for each mini-grid is estimated in Table 25.
Table 25: KPLC mini-grid customer categorization30
Small commercial
per customer per

Electricity sold
50-1,500 units
and industrial
customer (W)
month (kWh)
Demand per
>1,500 units
Number of
customers
0-50 units
Domestic
Baragoi 230 190 104 86 0 40 343 62

Eldas 80 66 36 30 0 14 988 151
Elwak 802 663 361 300 2 139 207 61
Habaswein 1,015 839 457 379 2 176 206 78
Hola 1,956 1,616 881 731 4 340 351 105
Lodwar 2,380 1,966 1,073 889 5 414 447 158
Lokichoggio 166 137 75 62 0 29 1,738 400
Mandera 4,000 3,305 1,803 1,495 8 695 348 122
Marsabit 3,300 2,726 1,487 1,233 6 574 297 87
Merti 436 360 196 163 1 76 156 42
Mfangano 120 99 54 45 0 21 600 160
Mpeketoni 1,503 1,242 677 562 3 261 392 111
Rhamu 210 173 95 78 0 37 624 74
27 Africa Solar Design (ASD) and Marge (2014) AFD Feasibility Studyfor an Off-Grid Programme in Kenya Report on
Activity 2: Review of the Feasibility Study and Proposed Packaging, final version, pp. 15-16.
28 GoK (2013) Scaling-up Renewable Energy Program Project Document for Mini-Grids Development in Kenya, pp.
15, 22-23.
29 MoEP and ERC (2013) Kenya Cost of Service Study, final report by SNC-Lavalin International Inc.
30 Consultants calculations and KPLC data sets

Takaba 300 248 135 112 1 52 317 66
Wajir 4,100 3,387 1,848 1,532 8 713 344 93
Notes: (a) total number of customers based on latest available figures, (b) customer breakdown is estimated
The table above also demonstrates the demand per customer and the electricity sold per
customer per month. These findings should be interpreted with care, taking into
consideration the fact that they are highly dependent on the total number of customers
for each station. For instance, Lokichoggio, Eldas and Merti have values that are higher
than the other stations. This might be due to the number of estimated customers being
lower than in reality. Nevertheless, the results provide an indicative range of demand per
customer between 200 W to 400 W and of consumption between 50 kWh/month to 100
kWh/month for most stations.
Renewable energy resources

The potential of renewable energy resources has been assessed with two different
models based on site measurements, but generated by computer software. Therefore,
the values provided should only be used for information purposes. Especially for wind
resources, local terrain highly influences the results and one-year measurement
campaigns are recommended. Nevertheless, this basic overview should provide some
evidence on the availability of such resources and the potential for the technology. The
findings are shown in Error! Reference source not found. and Error! Reference source
not found. and Table 62 in Annex II.
Wind speeds at the existing stations are generally low on average with the exception of
Marsabit and Baragoi. These two sites also have good solar irradiation, together with
Lodwar and Mpeketoni. When compared with the existing power generation systems,
Marsabit has already installed two wind turbines. Baragoi, on the other hand, is still
running purely on diesel even though it could have a significant wind and solar potential.
4.2 Private mini-grid operators

Private sector mini-grid business models
The business models being considered, targeted or deployed by private mini-grid
developers in Kenya and East Africa can be categorized into three main types. It is because
of these different approaches that both off-grid and grid-proximate areas with low
connectivity were included in the end-user survey for this study.
PPA model
This involves a private developer focused on power generation and sale to a utility
company, large power consumer offtaker, or a single buyer that also supplies a mini-grid.
The business is essentially a small Independent Power Producer (IPP) that supplies or
helps to supply a mini-grid and receives payment under a Power Purchase Agreement
(PPA). In this case, the private operator is not involved in grid operations, distribution,
customer connections and revenue collection. Risks of national grid extension and tariff
adjustment are addressed in the PPA, but usually sites targeted in the PPA model are
located far from the grid. An example of the PPA model is the planned Wind for

Prosperity portfolio integrating a new wind-based IPP into a number of existing KPLC
mini-grids in Kenya.
Distribution concession model

This approach includes both distribution/supply companies that buy electricity from the
national grid and those that in addition or in parallel generate and sell their own power.
Two of the main principles of concessioning are i) exclusivity and ii) clear and pre-
established time duration. This is to provide certainty that the company can achieve a
return on investment once immovable assets and fixed infrastructure are in place. Mini-
grid sites are usually also larger in size to justify the transaction costs. With concessions,
the operator is responsible for grid operations, distribution, supply and revenue
collection. Generally, public authorities in East Africa only use the distribution concession
model for sites in very remote areas. Both Uganda and Tanzania have or have had
operational cases of this model, such as the hydropower-based West Nile Rural
Electrification Company mini-grid in northwestern Uganda run by Industrial Promotion
Services (IPS) Kenya Limited and the natural gas-to-power Mtwara Energy Project
formerly operated by Artumas in southeast Tanzania.
Electricity supply cluster model

In Kenya, largely unregulated private operators supplying customers in off-grid areas from
small diesel generators have existed for some time. However, a new breed of micro-grid
operator has been making inroads in the past few years. The delivery model is to target
small, clustered load centers, significantly reduce connection costs to facilitate immediate
electrification and charge higher tariffs to compensate. Developers make good use of
technology for control, monitoring, metering and payment collection. The micro-grid
systems are usually very small (<50 kW), solar PV-based, modular and mobile. This, and
the fact that the business focus is on electricity supply means that the developer is not
confined to off-grid areas. Instead, areas with energy access but low electrification rates
are also relevant. The delivery model is based on low capital costs, quick deployment, high
customer demand, and in some cases a shorter payback period. The portable systems can
be relocated if needed and in other cases when the KPLC network is in the area there may
be opportunities for cooperation to enhance connectivity. Examples in Kenya include
micro-grid operators SteamaCo and PowerGen.
Some private and community/non-profit mini-grid operators also target diversified

revenue streams from other electricity-related business activities. For example, while the
core business may be power supply to end-users, a mini-grid operator may also provide a
solar lantern distribution and charging service, run a kiosk for phone charging and/or
invest facilities for productive uses of electricity that provide other services such an ICT
centre (internet, printing, photocopying, etc.), water pumping or even agricultural
product processing.
Overview of existing private mini-grid developers in Kenya & East Africa

The mini-grid companies active in Kenya that have made the most progress are
Powerhive, SteamaCo and PowerGen. Other players active in Kenya or in East Africa that
are looking at Kenya include Green Power Engineering, Wind for Prosperity (Maara

Energy, Vestas, Frontier Investment Management consortium), RVE.SOL, KMR
Infrastructure and IPS Kenya that run the WENRECO mini-grid concession in Western
Uganda. Pamoja Energy in Uganda and Jumeme (Inensus, TerraProjects and St Augustine
University Mwanza consortium) and Juwi in Tanzania are other noticeable developers.
Uganda has other licensed and operational distribution concessionaires and Tanzania has
had experience with these as well as with IPPs feeding mini-grids, but it is not known
whether these developers are considering the development of project in Kenya.
Table 26 provides a non-exhaustive overview of the most relevant or advanced private

mini-grid operators in the region. The list does not consider community or cooperative-
type organizations in which case more developers such as the Energy 4 Development
partnership (four operational solar PV mini-grids in Kenya), EU-funded, GoK-supported
(e.g. Imenti Ndurumo 320 kW small hydro mini-grid on River Kathitha in Meru County)
and community initiated projects should be included. The list likewise does not cover
companies such as Finlays, Kilifi Plantations and Teita Estates that operate or are planning
internal mini-grids at location-specific agricultural estates that may also supply other
users.
Figure 27: Powerhive solar PV-battery mini-grid plant in Kisii County
Community-based, cooperative and other electricity service delivery models have

important relevance but were not considered in this study as the focus was on private,
for-profit developers. Nevertheless, the case of Mpeketoni when it was a community-run
mini-grid is discussed further below and community or non-profit mini-grid developers
and operators should be taken into account in the preparation of policies and regulations.
Table 26: Overview of some private mini-grid developers in East Africa
Country Name & description Type & tech
Kenya PowerGen Private investor,

operator,

http://powergen-renewable-energy.com/about- supplier, Wind
pre/ turbine
Kenya-based company with projects in Kenya, manufacturer
Tanzania and Zambia. 15+ operational micro-grid Early-stage
systems in Kenya (10+ for SteamaCo, below), 35+ company
kW, 500+ customers include client projects. Also Micro-grid
provide stand-alone systems. With Clean Star Wind, solar,
Ventures, PowerGen has set up the GridX project batteries
at James Finlay tea estate in Kericho
(http://www.gridx-kenya.com)
SteamaCo (formerly access:energy) Systems provider
http://steama.co Early-stage
Kenya-based company providing industrial company
automation services to micro-grids and other Micro-grid
technology types, including remote monitoring and
pay-as-you-go systems. Primary business is
information platforms and payment systems. First
micro-grid in Kenya was at Remba Island on Lake
Victoria (for PowerGen). Active in Kenya, Tanzania
and Nepal
Powerhive Private investor,
http://www.powerhive.com operator,
California-based company with a Kenyan subsidiary instrument
developing village-scale renewable energy micro- provider
grids, using solar with battery storage. Primary Early-stage
business is information, monitoring and payment company
systems. Currently have 4 sites in Kenya with a Micro-grid
total capacity of 80 kW (solar) and 300 customers. Solar, batteries
First company after KPLC to be formally licensed in
Kenya
Wind for Prosperity Kenya (Maara Energy, Vestas Private
& Frontier Investment Management) developer,
http://www.frontier.dk investor
Danish-Kenyan consortium established to develop, Established fund
invest, build, own and operate wind power Main-grid and
systems in the first instance as an IPP integrated mini-grid
into KPLCs existing and planned diesel off-grid All technologies.
stations. Discussions are at an advanced stage Wind for mini-
grids
Green Power Engineering Private
http://gpower-africa.org developer, NGO
Mini-grid

A Kenyan private company/NGO mix that designs, Small hydro
plans, develops and operates community-owned
small hydro plants and distribution networks on
the southern slopes of Mt Kenya. To date GPower
has identified 10 sites ranging from 60 500 kW to
supply up to 10,000 households. With government,
donor and local community support one site has
been built although the distribution network is not
operational.
Uganda Industrial Promotion Services (IPS) Kenya Private investor,
http://ipskenya.com/infrastructure/ operator
Own and operate the West Nile Rural Large
Electrification Company (WENRECO) 3.5 MW conglomerate
hydro-diesel hybrid generator & distribution Main grid and
system in Arua, northwestern Uganda, with around mini-grid
9,000 customers. IPS also owns other large power Hydro-diesel
plants in East Africa. Looking to invest in mini-grids hybrid
in Kenya
Pamoja Energy Ltd Private investor,
http://www.pamojacleantech.com operator
Pamoja CleanTech is a micro-grid operator focused Early-stage
on electricity from biomass feedstock gasification company
and other energy services such as equipment for Micro-grid
agro-processing, briquetting, charging lanterns & Biomass, solar PV
phones, electricity supply to telecom towers, etc. battery
With offices in Sweden and Uganda, Pamoja
CleanTech is also considering to enter the Kenyan
market. The biomass gasification systems use
technology from India and Sweden and can range
from 10 100 kW. They can be combined with
solar PV battery systems. Pamojas first project in
Uganda is a 32 kW bio-gasification system in Mpigi
District with a micro-grid that supplies 45 out of
105 households in Tiribogo Village. Two addition
sites (10 & 11 kW) have since been established.
Tanzania Juwi Private
http://www.juwi.com/off_grid_power_supply.html developer,
German-based international project development, investor,
EPC, operations and investment company focused operator
on solar and wind energy projects. Activities in Well-established
Kenya, Tanzania and elsewhere in Africa. First company
micro-grid project in East Africa is a 11 kWp solar

PV-battery system in Tanzania supplying 150 Main-grid, mini-
households grid, micro-grid
and off-grid
Wind and solar,
hybrids
Jumeme Rural Power Supply Micro-grid
Jumeme is a Tanzanian based company that is a developer
joint venture between Inensus GmbH of Austria, Solar PV
TerraProjects and St Augustine University in
Mwanza that specializes in solar-hybrid mini-grid
systems. Jumeme is implementing an initiative in
which 16 villages will be provided with electricity
serving up to 82,000 people (11,000 households),
2,600 shops and small businesses, 42 public
offices, 32 schools, 12 health centers and 77
religious buildings in the northwest region of
Mwanza
Devergy Mini-grid
http://www.devergy.com developer
Devergy is a Tanzania-based company that focuses Solar PV
on solar PV grids remote with monitoring and pay-
as-you-go systems. Devergy grids have been
deployed in 6 villages in the Bagamoyo and
Morogoro districts in Tanzania serving over 800
customers. Devergy grids are also licensed to third
parties in Ghana, where they power 3 villages
Box 1. Mpeketoni Electricity Project case study
The Mpeketoni Electricity Project (MEP) is a diesel-powered micro-grid project in Lamu County.
It is unique because it was community-based, established independent of government
subsidies and was relatively successful for over a decade, from 1994 to 2006. The mini-grid
started as a partnership between the Mpeketoni Jua Kali (craftsperson) Association and a GTZ
(German Technical Cooperation Agency) project. Approximately a third of the initial costs were
covered by selling shares to individual community members. The project started with a 60 kVA
generator and a 4km distribution system serving 90 connections, which by 2005 had expanded
to 271 kVA of capacity, 6 km of distribution lines and 240 connections. This translated to
electricity access for about 4% of the population in the area.
Despite relatively high tariffs - KES 22.50 /kWh or nearly three times the national grid tariff -
MEP demonstrated that there exists substantial unmet rural demand for electricity. MEP
customers were willing to pay a monthly fixed charge of KES 500 and KES 250 for small and
medium enterprises and households, respectively. This is higher than the current ERC/KPLC
fixed charges of KES 150 for both domestic and small commercial customers.

The impact of the project on economic
development, including micro-enterprises,
agriculture and education has been
documented (Kirubi et al, 2006).31 For
example, productivity per worker in
carpentry and tailoring micro-enterprises
increased in the order of 50%-200%. There
were other marked improvements such as
access to financial and communication
services that are crucial for development.
In 2006, the Government of Kenya (GoK) took over the running of the MEP (operated by KPLC
since 2007) due to increasing cost of power (rise in diesel price) and lack of service,
maintenance and power quality and reliability issues. In 2006, total consumption was 20,020
kWh/month and average consumption per
Figure 28: Mpeketoni town customer was approximately 90 kWh/month.
By 2015, after KPLC took over management of
the mini-grid and the national uniform tariff was introduced the number of customers had risen
to 1,503. At the same time, the average consumption had also increased approximately 136
kWh/month. A table with the breakdown of customer numbers and consumption is available
in Annex II.
4.3 Comparison of KPLC mini-grids and characterized sites

Installed capacity and number of customers
Data from the more detailed analysis of the five analyzed sites found that an appropriately
sized solar PV/battery/diesel mini-grid system ranges from 70 kW, of which 40 kWp is
solar, (Kadaina Island, base case) to 600 kW, of which 400 kWp is solar, (Korr, high-growth
case). This shows that the sites selected for the detailed analysis have a lower capacity
range compared to the existing KPLC mini-grids, but at this lower range are nevertheless
comparable. It is a similar case with the number of customers that ranges from 64 in
Kadaina to 968 in Lorugum, showing that the five sites are all within the lower the range
of the existing mini-grids. Table 64 in Annex II presents the capacity and customers of the
existing KPLC mini-grids and those of the five characterized sites.
Electricity generation and load demand growth

In terms of electricity generated per customer, the existing KPLC mini-grids range from
1,800 kWh/year (with the exception of Lokichoggio which probably has a data gap) to 500
kWh/year. Based on the demand projections, the five analyzed sites will be on the lower
range, from 428 kWh/year to 476 kWh/year. This is, however, influenced by the
proportion of business, institutions and anchor load customers estimated in the five sites
and those at KPLC mini-grids since these categories are expected to have much higher
31Kirubi, C.; Jacobson, A,; Kammen, D. M. and Andrew Mills (2009) Community-Based Electric Micro-Grids Can
Contribute to Rural Development: Evidence from Kenya. World Development, Vol. 37, No. 7, pp. 1212-1216.

consumption than households. The specific breakdown at each KPLC mini-grid is not
available, but for small businesses has been estimated in Table 25 above.
The percentage of the electricity generated in 2014 that can be attributed to renewable
energy in KPLC mini-grids was 11% at Elwak, while Lodwar, Hola and Takaba had the
lowest RE fraction of the hybridized systems at 2%, 3% and 4% respectively. For the five
analyzed sites, the share is significantly higher, between 90% and 98%. This is because
these sites were designed to run optimally on solar or other renewable and the share of
diesel is very small or insignificant. The KPLC off-grid stations, on the other hand, were
initially designed as diesel mini-grids and therefore most of the electricity generated still
comes from diesel generators even after retrofitting to include solar and wind capacity.
As for the load demand growth, the comparison would need to take into account the year
of operation of the KPLC mini-grid. For instance, older mini-grids experienced an average
growth of the maximum load demand in between 10% to 15% in comparison with only
1% for the long term used in the demand model of the five analyzed sites. For more recent
mini-grids, the growth varies much more, from 16% to 177% per year in the first years of
operation. However, a closer look at the growth year on year shows that a 30% 10% is
more likely. This also differs significantly from the 3.55% to 5% for households, although
not that farm from the 20% year 1-5 growth for businesses in the high case scenario. The
rationale behind the lower growth assumptions at the characterized sites is discussed
above (section 3.2).
Distribution network
When comparing the distribution network of the existing KPLC mini-grids against the five
sites characterized to pre-feasibility level there are some obvious differences due to the
size and service area of some of the larger KPLC mini-grids. For example, larger sites such
as Wajir (3.4 MW), Marsabit (2.9 MW), Mandera (2.4 MW), Hola (1.2 MW) and Habaswein
(760 kW) all have close to 100 km or more of Medium Voltage (MV) lines of 11 or 33 kV.
In some cases (Wajir, Hola, Habaswein) this is mainly because the mini-grids also supply
other towns up to 50 km away and in others (Marsabit, Mandera) it is due the number of
dispersed load centres in the service area. All existing KPLC mini-grids have some 11 or 33
kV network and 33 kV lines are planned for all future KPLC off-grid stations according to
the 2013 SREP project document. This is even the case for smaller sites such as Eldas (184
kW), Rhamu (184 kW) and Takaba (244 kW), and is likely done to ensure that the
infrastructure can handle longer-term demand growth, grid extension for rural
electrification (e.g. targeting isolated public institutions) and potentially accommodate
future larger customers with high demand.
This is in contrast to the five sites characterized to pre-feasibility level in this assessment,
where no 33 or 11 kV network is considered necessary due to the estimated maximum
distance of 2 km or less from the powerhouse to the end-line customer. If the few
dispersed, outlying customers were to be serviced then MV lines would be needed.

At the Low Voltage (LV) distribution and end-user connection level (0.240/0.415 kV) there
is more similarity between the KPLC mini-grids and potential mini-grids at the five
selected sites.
An overview of the distribution network at the KPLC mini-grids and five of the
characterized sites is found in Table 65 in Annex II
Investment costs
Although as noted above little information on actual capital and operational costs is
available to the consultant, estimated capital costs for planned new public-funded mini-
grids to be built by REA and KPLC are available in the 2013 Scaling-Up Renewable Energy
(SREP) mini-grid project document.32 While this does not relate to existing mini-grids or
realized costs and contrasts public and private approaches, the values provided can be
compared with the estimated investment costs of potential mini-grids with a high solar
fraction at the five sites (Takawiri, Korr, Kadaina Island, Dujis and Lorugum) characterized
to pre-feasibility level. Four sites can be directly contrasted, with key parameters provided
in Table 27.
Table 27: Comparison of mini-grid projections at 4 sites

2013 SREP Takawiri Korr Kadaina Dujis Lorugum
Household customers (#) 346 837 n/a 539 N/A
Expected peak load in year 5 (kW) 9.3 22.5 n/a 14.5 N/A
Diesel capacity (kW) 184 184 184 184 N/A
Solar capacity (kW) 100 150 100 150 N/A
Wind capacity (kW) 0 100 0 100 N/A
Diesel, conversion, PH cost (USD) 2,411,765 2,411,765 2,411,765 2,411,765 N/A
Solar capital cost (USD) 815,958 1,223,937 815,958 1,223,937 N/A
Wind capital cost (USD) 0 705,964 0 705,964 N/A
Distribution network (USD) 250,000 250,000 250,000 250,000 N/A
Total capital cost (USD) 3,477,723 4,591,396 3,477,723 4,591,396 N/A
Total capital cost/kW (USD)* 12,246 10,579 12,246 10,579 N/A
Total capital cost/HH customer (USD) 10,051 5,485 n/a 8,518 N/A
2015 Study (base case growth) Takawiri Korr Kadaina Dujis Lorugum
Household customers (#) 300 800 42 600 914
Expected peak load in year 5 (kW) 51 118 10 81 118
Diesel capacity (kW) 110 250 30 160 250
Solar capacity (kW) 180 350 40 220 300
Diesel, conversion, logistic cost (USD) 427,714 753,459 162,449 509,814 736,352
Solar, battery, PH cost (USD) 398,860 814,339 116,758 498,465 739,674
Distribution network (USD) 133,903 356,114 26,048 265,364 390,394
32GoK (2013) Scaling-up Renewable Energy Program Project Document for Mini-Grids Development in Kenya, pp.
38-41.

Total capital cost (USD) 960,477 1,923,911 305,255 1,273,643 1,866,421
Total capital cost/kW (USD)* 3,312 3,207 4,361 3,352 3,393
Total capital cost/HH customer (USD) 3,202 2,405 7,268 2,123 2,042
Source: SREP 2013, consultant calculations and analysis
Note: *Capital cost/kW is based on aggregate total kW installed of all generation technologies
Note: HH = household, PH = powerhouse
Apart from the share of renewable energy in the mix, two main differences are apparent
when comparing the potential mini-grid sites and technical configurations as estimated
and proposed in the SREP 2013 report to the findings of this study. The main similarity is
that the expected number of household customers is roughly the same. As for the
differences:
In the SREP report, the installed capacities are significantly higher than expected peak
load in year five of mini-grid operations. Even when extrapolating using the assumed
9.8% annual demand growth by year 20 with peak load of 38 kW at Takawiri, 59 kW
at Dujis and 92 kW at Korr, the diesel component of the systems still seem oversized
at the two former sites. Peak load is also low compared to the estimates used in this
study, as is the case with consumption (figures not shown or discussed). Part of this
may be due to the fact that the SREP report only includes household demand
businesses, institutions and anchor load customers are not presented. The SREP mini-
grid project document available to the consultant does not include a discussion on the
approach used to the size the systems or project demand so it is not possible to
analyze this further.
Capital costs, whether total, per kW installed or per household customer are much
higher than assessed in this report. This is especially true for the diesel generation and
conversion component. There can be a number of reasons for the differences, such as
equipment and system design (e.g. powerhouse size, implementation of separate sub-
station) and manufacturer, changes in costs of key components between 2013 and
2015 (e.g. reduction in solar PV prices), oversized systems for future expansion to
avoid lengthy procurement processes, simplification of the SREP estimations due to
the larger number of sites covered (40+), among others.
It can also be noted that in all cases at the current FIT of USD 0.20/kWh for off-grid solar
and USD 0.12/kWh for main grid wind, the Net Present Value (NPV) is negative and the
financial Internal Rate of Return (IRR) is negative to low (-8%-7%) for the SREP solar and
wind investments (generation side only). However, the NPV is positive and economic IRR
much higher (30%+) when the diesel fuel cost savings at the existing KPLC mini-grids are
taken into account.
Uses of the findings

From the characterization of existing mini-grids the following findings are taken into
account for the market assessment:
Demand growth

Data from the KPLC off-grid stations shows that both electricity generation/sales and load
has grown at different rates that have sometimes varied significantly from one site to the
next as well as year-on-year. Nevertheless, in comparing the sites some patterns and
assumptions can be made. Since the KPLC mini-grids represent on average larger load
centers, it is useful to review the demand growth experienced with what evidence is
available from private mini-grid operators. Although data from these operators is scarce,
generally in Kenya they have smaller systems and fewer customers per site than KPLC (e.g.
5 kW-50 kW systems, 15-75 customers). Demand projections depend heavily on a number
of situational parameters at a given site but both KPLC and private developer experience
helped to make informed assumptions for the market sizing.
Consumption by customer category

Only a few examples of customer meter and prepaid records from the KPLC off-grid
stations were made available to the consultants, precluding a detailed analysis of demand
and consumption patterns by customer segment. Nevertheless, some extrapolation was
made based on the national breakdown of customers adjusted for the situation at the
KPLC mini-grids (e.g. fewer industrial customers, higher proportion of small business
customers to households than the national grid). This was compared with the results of
the end-user surveys (existing and potential demand) to help better estimate the
segmentation of the off-grid market.
Cost inputs
Some data on KPLC capital costs on the generation side, fuel costs and typical distribution
costs are available. CAPEX breakdown, detailed distribution costs and other operational
costs (e.g. staffing) were not provided. This means that a breakdown of generation and
distribution investment costs and operational expenditure per customer is not possible
and so indicators for the market sizing are not available unless a number of assumptions
are made. From private developers some information on costs for certain components
and technologies has been shared. Available cost data was used for the cost assessment.

The following highlights the main points of relevance from the findings:
There are more than 10 private and community mini-grid developers active in
Kenya, with an aggregate capacity of approximately 500 kW serving more than
1,000 customers (excluding internal mini-grids on agricultural estates). Private
operators have a variety of business models, e.g. PPA with KPLC, concession and
grid proximate that need to be considered when setting policy and regulations,
in addition to the specific needs of community-based and non-profit approaches.
The Mpeketoni Electricity Project had customers paying KES 37/kWh (USD
0.53/kWh plus a fixed monthly charge of USD 6.70 (KES 700) for businesses and
USD 3.30 (KES 350) for households. This provides some indication of customer
willingness and ability to pay, although site-specific factors may have also played

a role. It is notable that when the lower standard uniform tariff was applied after
KPLC took over, both the number of customers and average consumption
increased. There are also other important lessons to be learned from Mpeketoni,
such as the impact of changes in diesel fuel costs in diesel-dominant systems.
KPLC mini-grids range from large to small. At the smaller end the sizing and
number of customers served by the KPLC mini-grids is similar to the five
characterized sites. The contribution of renewable technologies to mini-grid
generation is low, but this is increasing slowly over time. KPLC mini-grid demand
and consumption per customer per month is also similar to the five sites
assessed, although household consumption is slightly higher. Demand growth
experienced at KPLC off-grid stations averages 10%-25% per year, which is much
higher than the 2.5%-5.0% (20% for businesses in a high growth case scenario)
assumed at the five characterized sites.
The KPLC mini-grid distribution network is of a much higher voltage and is more
spread out than that of the private sector mini-grid infrastructure. This is due in
part to KPLC and REA reaching key customers quite far from the powerhouse and
also because of system planning that takes future demand and extension to
nearby sites into account. This is likely one reason that KPLC/REA mini-grid system
costs are higher than the estimated costs assessed at the five characterized sites.
The Government of Kenya, may consider the wider economic benefits of

electrification whereas private developers understandably need to focus
primarily financial rate of return in order to justify the project. This has
implications for policy with regards to the contribution of private sector to rural
electrification. For example, because private developers may charge a lower
upfront connection cost than KPLC they can immediately achieve high uptake at
a site. However, the flip side is that private developers often target only a smaller
number of high potential customers rather than focusing on wider energy access.
Due to higher private sector monthly charges that enable cost-recovery,
customers could be enticed to switch if the KPLC grid (lower national uniform
tariff) reaches a site. This points to a wider policy issue being that KPLC mini-grids
are subsidized and the national uniform tariff has a cross-subsidy for poorer
customers, which contrasts with the cost-reflective tariffs that the private sector
needs to achieve a financial return. All of this translates into important factor that
warrant consideration in policies if three is interest in attracting private
developers and finance for mini-grids in the country.
REA and KPLC progress towards extension of the national grid and from existing
mini-grids (80+ km in one case) means that the spatial area of off-grid customers
who may be served by commercially viable mini-grids under some business
models is shrinking considerably. On the other hand, even where there is power
network there may be opportunities for private delivery models (e.g. grid-

proximate mini-grids) that address some of the reasons for low electrification
rates.
Overall, the findings reinforce the notion that site characteristics, mini-grid
design, sizing and system costs are both very site specific and depend on the
approach of mini-grid developer/operator. At the planning stage, the
assumptions used for customer demand, consumption growth, sizing and other
parameters are used as inputs to the estimated mini-grid costs and for these to be
as accurate as possible each potential site should be evaluated on a case-by-case
basis.

5 Cost assessment
The cost assessment component of the report has been prepared to help estimate the
cost of providing electricity supply in the five sites characterized to pre-feasibility level of
detail via an appropriately sized, renewable energy-based mini-grid sufficient to provide
power for productive use. This is based on information collected during the site
characterization study, as well as other available data from existing mini-grids in Kenya
and in other countries with similar electricity demand patterns for rural areas. In
particular, the cost assessment identifies capital and operational costs components for
existing private mini-grids (including hybrid mini-grids).
Since the primary focus of this study is the potential market for renewable energy (RE)
based mini-grids, the cost assessment has been targeted to address greenfield sites,
based on the end-user surveys conducted.
5.1 Cost assessment methodology

The first step in this activity was the definition of the cost categories to characterize mini-
grids. For capital expenditure (CAPEX) and operating expenditures (OPEX) the key
components have been considered based on the typical value chain of electricity supply
from mini-grids.
The next step was the elaboration of four reference mini-grid cases based on their
generation capacities of 10 kW, 50 kW, 180 kW and 350 kW, and the characterization of
each under the cost categories defined in the previous step. Moreover, each of the
reference mini-grid cases includes three alternative generation technologies (solar PV,
wind and small hydro) that include battery storage in the configurations for 24/7
electricity supply. A diesel genset as a backup is also included as an option.
The third step is the consideration of life cycle costs over a 20-year operational period, in
order to assess the mid and long term costs to be faced by mini-grids. Two key indicators
have been selected to analyze life cycle costing:
i. Levelized cost of electricity (LCOE) global and breakdown into CAPEX, Fixed OPEX
and Variable OPEX)
ii. Monthly cost per average customer - global and breakdown into CAPEX, Fixed OPEX
and Variable OPEX)
Characterization of mini-grid functions

The cost assessment of any infrastructure needs to adapt to the nature of such
infrastructure, most especially if one of the aims of the assessment is to understand
where costs are incurred, where they can realistically be managed or reduced and where
subsidies could be considered if needed or desired due to the electrification benefits that
may accrue.

In the case of mini-grids for electricity supply, there are several functions (or subsystems)
to consider:
Figure 29: Typical functions in a decentralized electricity delivery scheme
Figure 29 above separates those functions related to generation from those associated
with distribution. As was the case with the site characterization, the micro-grid (or mini-
grid) business model assumed in the reference cases is a decentralized (or stand-alone or
off-grid) system that combines a generation micro-plant feeding a distribution micro-grid
that supplies end-users. This covers both the conventional concession model and the
small energy cluster models seen in East Africa. The small or micro-IPP case and
variations of the concession model (for example where the mini-grid operator takes over
existing distribution grid infrastructure or where a distribution utility purchases power
from one or more generators) are not assessed.
A first technical standardization of micro-grids has been developed by Task 11 of the

International Energy Agency PVPS, based on the recommendations of the International
Electrotechnical Commission IEC 62257 TS series.33 Each function has a rated unit by
which it is technically specified. These standards were taken into account in establishing
the system costs.
Cost category components and operational life cycle

In the context of electricity supply, it is well established that the appraisal of financial
sustainability requires a long term, holistic approach, and the typical analytical framework
widely used in academia and project development is life cycle planning (and accounting).
For the aims and scope of this study, the consultant team has used a life cycle approach
to analyze the costs incurred during the design, supply, construction, start-up and
management/operation/maintenance (M&O&M), during 20 years of operational life.
CAPEX categories
33P Jacquin 2011 - Social, Economic and Organizational Framework for Sustainable Operation of PV Hybrid Systems
within Mini-Grids IEA PVPS Task 11

Based on the typical functions of a mini-grid as presented in the previous section, and
after the review of available documentation on mini-grids gathered by the consultant
team, the following set of CAPEX categories have been considered:
1. Generation;
2. Storage & powerhouse;
3. Conversion;
4. Distribution;
5. Services; and,
6. Logistics
Each category includes several cost items, listed in Table 66 in Annex II. The selected
benchmarks for the overall CAPEX are: USD/kW and USD/customer.
The main criteria that guided the selection of the above items have been (i) enabling
analysis at pre-feasibility level, and (ii) coherence with GIZ, other donor and available
private sector cost breakdown in the feasibility studies, financial models and other cost
input data made available to the consultant team.
OPEX categories
Based on mini-grid literature,34 OPEX are split between fixed and variable. RE-based
solutions are more intensive on fixed OPEX than a diesel genset. The cost items
considered are shown in Table 67 in Annex II. The selected benchmarks for the overall
OPEX are: USD/yearkW and USD/year customer.
Reference mini-grid cases

As noted above in section 3.3, one outcome of the site characterization chapter was the
definition of reference mini-grid cases based on the size and system requirements needed
to supply electricity with a high renewable energy share to meet projected customer
demand at the five characterized sites, which are seen as typical and representative of
solar PV focused mini-grids in Kenya.
The mini-grid sizing range of 40 kWp 400 kWp, identified in the site characterization
exercise, was used to inform the reference case mini-grid sizes that are the basis for the
supply curves in section 6 of this report. In turn, the cost input assumptions (presented
below) taken from experience with other mini-grids, available private sector and donor
project information and interviews and review of other studies fed into the site
characterization system sizes and costs.
Based on interviews with, and information from, private mini-grid operators active in
Kenya, for the reference sizes the lower end of the scale was reduced to 10 kWp. Some
34Tenenbaum, Bernard, Chris Greacen, Tilak Siyambalapitiya, and James Knuckles. 2014. From the Bottom Up: How
Small Power Producers and Mini-Grids Can Deliver Electrification and Renewable Energy in Africa. Directions in
Development. Washington, DC: World Bank. doi: 10.1596/978-1-4648-0093-1. License: Creative Commons Attribution
CC BY 3.0

existing micro-grids are smaller than this but the 10 kWp reference should adequately
capture a range of 1 Kwp-20 kWp. At the upper end of the scale, the characteristics of a
400 kWp system could also roughly apply to a range from 300 kWp-500 kWp. However,
for solar PV specifically the 400 kWp mini-grid size is generally the maximum that can be
configured for battery-based systems using current technology that aim to maximize the
renewable energy fraction of system generation at a reasonable cost. As 400 kWp may
even be on the high side, this was reduced slightly to 350 kWp. The reference cases are
shown in Table 28.
Table 28: Mini-grid costing reference cases
Size (kW) Customers range35 Renewable fraction

10 30-50 100%
50 80-150 98%
180 200-350 90%
350 500-800 90%
The references cases were then also adopted for other technologies assessed in the cost
section of the study, those being wind and hydro. However, the case of wind or hydro
complementing solar to overcome the battery size limitation on reference case project
size was not considered in this study. Reference cases for wind and hydro-based mini-
grids could be expected to include larger systems (e.g. 500 kW+) but not enough data on
different cases was available to make a representative assessment. Instead, wind and
hydro cost examples are incorporated but follow the solar PV-led reference cases in terms
of sizing.
All cases consider an electricity service availability of 24/7. It should be noted that the
costing reference cases are not restricted to a particular site radius but rather an
estimated range of number of customers. In the costing spreadsheet used (see examples
above in the site characterization section 3) the layout of customers is taken into account
by considering:
The average distance between customers;
The Low Voltage (LV) line and its length; and,
The Medium Voltage (MV) line and its length, as well as the number of transformers.
As a rule of thumb, low voltage lines can be used to service customers located up to 1.5
km to 2.0 km from the powerhouse, but this depends on the voltage drops, i.e. the
sequence of loads between the power generator and the customer at the end of the
power line. In the case of all five sites characterized in more detail in this study no MV
lines or transformers were required because the distance from the powerhouse to the
furthest customer was 2 km or less. If there are a significant number of individual outlying
customers who would be connected it can affect the costs and sizing (also due to losses)
35The number of customers is very site specific. Also, the relative distribution between residential, businesses,
institutional and anchor loads is site (or region) specific.

but the customer ranges in Table 27 incorporate some flexibility in terms of distance,
number of connections, customer demand and/or consumption. In the case of a separate
significant load center it would need to be considered based on costs and other factors,
such as whether to increase the existing/planned system capacity and distribution
network or establish another mini-grid with its own powerhouse close to the load.
There is little data from long-term operational experience with RE based mini-grids above
400 kW to be able to consider a reference model above this capacity. Although similar or
larger hydro- and biomass-based mini-grids with multiple customers (e.g. West Nile Rural
Electrification project with 3.5 MW small hydro and 9,000 customers) are running in
Uganda and Tanzania, there are very few cases in Kenya (captive mini-grids or grid-tied
mini-grids developed primarily to supply a larger industrial consumer) and information
from the regional projects of this type could not be obtained to a sufficient level of detail.
Life cycle costing indicators

Previous studies36 have shown the relevance of considering costs per customer as well as
LCOE when assessing the affordability of electricity services from mini-grids. This is
because average kWh costs are useful to compare solutions for one application but for
different systems in different locations and small demands, transaction costs, local
management, etc., represent a higher fraction of service costs.
The selected life cycle indicators used in the cost assessment are provided in Table 29:
Table 29: Life cycle cost indicators
Cost per unit Unit Cost per customer Unit

LCOE Total cost
LCOE CAPEX CAPEX
KES/kWh KES/customer/month
LCOE Fixed OPEX Fixed OPEX
LCOE Variable OPEX Variable OPEX
Stakeholder interviews and inputs to costs

Inputs, comments and in some cases data of relevance to the mini-grid cost assessment
were received from the following mini-grid sources37:
Kenya Power Off-Grid Stations Department, diesel, diesel-wind, diesel-solar, diesel-
solar-wind generation and distribution system, Kenya;
Wind for Prosperity Kenya (consortium of Maara Energy, Vestas and Frontier), wind
generation, Kenya;
West Nile Rural Electrification Company (IPS Kenya), diesel and hydro mini-grid and
distribution system, Uganda;
SteamaCo, solar PV battery mini-grids, Kenya;
36 Arranz-Piera P., Vallv X., Gonzlez S., Cost effectiveness of PV hybrid village power systems vs. conventional
solutions. 3rd European Conference PV-hybrid and mini-grid, 11-12 May 2006 Aix en Provence, France.
37 A more detailed list is available.

PowerGen, solar PV battery mini-grids, Kenya;
Powerhive, solar PV battery mini-grids, Kenya;
GIZ, solar PV battery and diesel feasibility studies at selected sites in Kenya;
AFD, KPLC hybridization/retrofitting feasibility studies in Kenya; and,
Strathmore Energy Research Centre, solar-based energy centre, Kenya.
Detailed and disaggregated cost data across major components was available from some
of the above sources. In other cases, information was provided for some but not all cost
parameters. Where possible, the consultant tried to derive or estimate costs if the
information was not clear or complete, or relied on secondary sources. As mentioned
above, data was more readily available in Kenya on solar PV-based mini-grids than wind
or hydro-based systems.
Kenyan and East African data was supplemented by the experience of the consultant team
on other projects in Africa, e.g. the assessment and construction of solar PV mini-grids in
Chad and Ghana among other international cases and reference cases from the HOMER
software model.
The cost inputs were compiled in a cost reference dataset. Specific cost assessment
worksheets were then prepared for each of the five characterized sites.
5.2 Cost assessment results

The tables and graphs on the following pages highlight the results of the CAPEX modeling
of the four reference mini-grid size cases discussed above in section 5.1 (10, 50, 180 and
350 kW systems) for solar PV. All costs except where otherwise indicated (e.g. where
there is a component cost breakdown) incorporate both mini-grid generation and
distribution costs.
Some of the findings on upfront investment costs include:

Mini-grid cost per kW installed reduces as system size increases;
For mini-grids in the range of 10 kW-200 kW solar PV systems may be cheaper per kW
installed than wind or hydro-based systems. However, above 200 kW installed wind-
based systems may have a smaller upfront investment per kW;
As the size of solar PV-based systems increase, the generation components take up a
greater and the conversion equipment a smaller portion of the overall costs;
Estimated total upfront costs for the reference case solar PV mini-grids are roughly:
USD 119,000 for a 10 kW system, USD 398,300 for a 50 kW system, USD 1.06 million
for a 180 kW system and USD 1.72 million for a 350 system;
Per unit installed this is a cost of approximately USD 11,900/kW for 10 kW, USD
8,000/kW for 50 kW, 5,900/kW for 180 kW and USD 4,900/kW for 350 kW; and,
For the potential mini-grids at the five sites characterized in detail the cost per kW
ranges from about USD 7,600 for a 40 kW system at Kadaina Island (base case business
growth) to roughly USD 5,300 for a 400 kW system at Korr (high case business growth).

Figure 30 shows the CAPEX cost curve highlighting the sensitivity to mini-grid size and
technology. The decreasing cost per kW installed, with increasing system size, and the
difference between the different technology types, is noticeable.
15,000 Solar
PV
Mini-grid installed cost
13,000
Wind
11,000
(USD/kW)
9,000 Hydro
7,000
5,000
3,000
0 50 100 150 200 250 300 350 400
Mini-grid generation size (kW)
Figure 30: Mini-grid CAPEX per kW (USD) by technology (PV, wind, hydro)
The details of the CAPEX cost breakdown (USD) and total costs are provided in Table 30
for the four reference cases for a solar PV mini-grid. The impact of system size on the cost
components is evident. Figure 31 visualizes the results as a percentage.
Table 30: CAPEX per cost category for solar PV

powerhouse
2. Storage &
Distribution
Generation
Conversion
6. Logistics
5. Services
Mini-grid Total
size case CAPEX
1.
3.
4.
Customers
(kW (USD)
solar PV)
10 kW 50 18.480 22.478 14.850 21.725 18.056 23.639 119.227

50 kW 150 84.150 54.290 72.050 61.050 39.512 87.248 398.301
180 kW 350 281.710 154.096 198.550 142.450 56.976 225.902 1.059.683
350 kW 800 523.200 283.490 186.390 322.640 75.551 330.354 1.721.626
6. Logistics
CAPEX breakdown - Solar PV
100% 5. Services
80%
4. Distribution
60%
40% 3. Conversion
20%
0% 2. Storage &
10 kW 50 kW 180 kW 350 kW powerhouse
Mini grid reference cases 1. Generation
Figure 31: CAPEX per cost category (%)

Estimated solar PV mini-grid costs per kW installed for the four typical system sizes
assessed in this report are found in Table 31, with a graphical representation in Figure 32.
Table 31: CAPEX breakdown per kW (USD/kW)
powerhouse
2. Storage &
Distribution
Generation
Conversion
Mini-grid
6. Logistics
5. Services
size case
Customers
1.
3.
4.
(kW solar USD/kW
PV)
10 kW 50 1.848 2.248 1.485 2.173 1.806 2.364 11.923

50 kW 150 1.683 1.086 1.441 1.221 790 1.745 7.966
180 kW 350 1.565 856 1.103 791 317 1.255 5.887
350 kW 800 1.495 810 533 922 216 944 4.919
CAPEX per kW breakdown - Solar PV

14,000.00 $ 6. Logistics
12,000.00 $
5. Services
10,000.00 $
8,000.00 $ 4. Distribution
6,000.00 $
4,000.00 $ 3. Conversion
2,000.00 $
2. Storage &
0.00 $ powerhouse
10 kW 50 kW 180 kW 350 kW 1. Generation
Mini grid reference cases
Figure 32: Cost per kW installed (USD)
Lastly, variations in CAPEX per kW installed and customer served are shown in Table 32
for the three cases of mini-grid system sizes included in this study: (a) the typical or
reference cases and the results for the five sites characterized in detail (b) base case
business growth and (c) higher case business growth scenarios.
Table 32: Mini-gird reference cases and characterized sites CAPEX comparison
Case Number of CAPEX
Description Size (kW) customers cost(USD/kW)
Solar PV reference 10 50 11,923
cases (costs from the 50 150 7,966
consultants 180 350 5,887
database) 350 800 4,919
40 64 7,631
5 sites characterized 180 329 5,336
scenario 1 (base case 220 652 5,789
business growth) 300 968 6,221
350 883 5,497

85 65 5,520
5 sites characterized 200 329 5,285
scenario 2 (high case 240 652 6,282
business growth) 370 968 5,532
400 883 5,276
5.3 Life cycle costs: LCOE and cost per customer

The Levelized Cost of Electricity (LCOE) and monthly costs per customer were assessed
for the five sites characterized to pre-feasibility level (Takawiri, Korr, Kadaina Island,
Dujis and Lorugum), using a model prepared by the consultant and a National Renewable
Energy Laboratory (NREL) LCOE spreadsheet for solar PV38 with inputs from the demand
and cost findings from the site characterization exercise.
In the site characterization only capital expenditure was taken into account. Operational
and system life cycle costs were also considered to come up with a cost per kWh
generated (LCOE) over a fixed accounting or project operational period. In this instance a
20-year scenario is presented, which reflects the typical timeframe used for project
financing in the power sector and the standard term of most power purchase agreements
in Kenya. This allows for some comparison with other projects in the sector Although a
20-year project operational and accounting period is applied for financial modeling, the
equity payback period is between 4-12 years, as discussed further below. A 10-year
project/accounting lifetime was also considered relevant based on the fact that many
mini- and micro-grid projects may not always be subject to the same regulatory
considerations as large projects. In addition, a shorter investment planning timeframe is
often used given changes to technology, markets, lack of certainty with regards to
revenue streams and other factors that make it difficult to plan further ahead. The results
of the 10-year timeframe are, however, not presented in the report.
The purpose of the LCOE and cost per customer is to provide an indication of the tariff
levels that could be expected at the five sites characterized in detail if the projects were
implemented as described in section 3 above. This relates to what customers may be
billed on a kWh or monthly basis. The monthly cost per customer can also be directly
compared with what un-electrified end-users currently spend on energy per month and
willingness and ability to pay. The LCOE feeds into the supply cost curves used for the
market sizing in section 6 below.
Assumptions
The input assumptions for capital costs, customer demand and mini-grid system
configuration are those that were established for the five sites where the more detailed
characterization was performed. They are repeated here for convenience (Table 33 and
38National Renewable Energy Laboratory (2015) Cost of Renewable Energy Spreadsheet Tool (CREST), Solar, version
1.3. Available at: https://financere.nrel.gov/finance/content/crest-cost-energy-models [accessed 29 June 2015]

Table 34). To account for the likelihood that a mini-grid developer would develop a suite
of sites and achieve economies of scale on costs (e.g. for equipment and logistics), the
base case business growth scenario (scenario 1) values were used for mini-grid sizing and
customer consumption but the high case business growth scenario (scenario 2) capital
costs were instead applied, resulting in a lower upfront investment costs per kW than the
base case amounts. As with the site characterization approach, solar PV technology is
used as the default choice.
The capital costs applied to a system sized to reach 100% of the projected customers in
year 1 are thus:
USD 5,285/kW for 180 kWp at Takawiri (Homa Bay County);
USD 5,276/kW for 350 kWp at Korr (Marsabit County);
USD 5,520/kW for 40 kWp at Kadaina Island (Kilifi County);
USD 6,282/kW for 160 kWp at Dujis (Garissa County); and,
USD 5,532/kW for 300 kWp at Lorugum (Turkana County).
Table 33: Projected customers per site by type and electricity consumption
No. Wh/d/ No. Wh/d/ No. Wh/d/ No. Wh/d/ No. kWh/
user user user user year
Takawiri 300 945 23 4,319 4 6,812 2 68,072 329 199,395
Korr 800 945 60 3,626 17 7,948 6 19,093 883 446,536
Kadaina 42 945 13 5,033 8 2,965 0 0 63 47,029
Dujis 600 945 44 3,541 8 7,689 0 0 652 286,324
Lorugum 914 945 42 3,505 11 8,630 1 28,800 968 414,221
Table 34: Mini-grid system configurations at the five pre-feasibility sites

Site Daily Peak PV size Diesel Battery Converte Solar
load power (kW) genset size size r size fraction
(kWh) (kW) (kW) (kWh) (kW) (%)
Takawiri 546 109 180 110 965 110 89%
Korr 1,223 245 350 250 2,680 250 92%
Kadaina 129 26 40 30 322 30 98%
Island
Dujis 784 157 220 160 1,340 160 90%
Lorugum 1,135 227 300 250 2,680 250 91%
Operational expenditure costs are then included in the model based on the OPEX cost
categories indicated in the cost section above. These are (a) variable operations and
maintenance costs- being the fuel consumption of the backup gensets in USD/kWh, which
depends on the price of diesel and the annual generation, and (b) fixed costs, such as
costs of staffing and recurrent fees, such as licensing. The variable costs are highly site

and system specific and depend on size, but for staff costs an estimate is made that is
applied equally to all five sites. This is show in Table 35 below.
Table 35: Mini-grid fixed O&M assumptions

Dedication Gross salary TOTAL
Fixed O&M costs N
(per year) (USD/month) (USD/year)
Local manager 1 20% 500 1,200
Local caretaker and guard 2 100% 200 4,800
Professional preventive O&M 1 15% 500 900
Professional administrator 1 10% 1500 1,800
Total annual fixed O&M costs 8,700
These costs are based on a presumed portfolio approach where a mini-grid developer
would be operating five or more sites in Kenya. The assumptions were:
One local manager can manage up to five sites;
Each caretaker does a 12-hour shift; and,
One head office person can oversee up to ten sites.
To calculate the LCOE and cost per customer indicators, a further set of specific
assumptions common to the five analyzed mini-grid sites is used. In the formulation of
the assumptions, the consultant team has kept them as generic as possible to
accommodate a range of mini-grid ownership models, and has reduced the number of
variables as much as possible so as to reduce the complexity of the impact in the results
of each assumption.
The assumptions used are as follows:
Lifetime of the mini-grid operational period for financial modeling set at 20 years;
Project financing approach with 30% from equity and 70% from debt;
A 6% (real) interest rate, which is considered achievable on USD terms, with
concessional facilities (i.e., not commercial) that are available or are likely to be
available for private mini-grids in Kenya given the early stage of the market.
Commercial rates were not applied because based on the consultants research no
financial institution would likely lend to private mini-grids in Kenya, so concessional
funds would be needed. Higher (commercial) interest rates would increase the cost of
service and/or reduce investor returns;
Loan period of 10 years. The loan period is likewise concessional and as with the
interest rate is assumed as being appropriate due to the early stage of the market; A
fully commercial loan would have a duration not exceeding 5-7 years;
Project developer / sponsor assumes the currency risk;
Lender financing fee of 3% of the borrowing costs;
Corporate tax at a flat rate of 30%, being the rate in Kenya;
Internal rate of return (IRR) on equity of 10% or 20%. A 10% IRR is considered too low
for private investors but is modeled to show the impact on the LCOE;

Inflation of 4%. This rate is an approximation of a mix of USD (2%) and KES (5%)
inflation targets since the project is expected to use both currencies;
Diesel. Constant price at USD 0.30/kWh with an annual price increase of 5%. The USD
0.30/kWh is taken from the approximate average of the cost of diesel in the
November 2014-April 2015 (6 month) period as seen at the five KPLC mini-grids that
are closest geographically to the five characterized sites as noted in the section above
characterizing the existing KPLC mini-grids;
Demand. 85% initial customer uptake. Average annual growth of 2.5%. This is kept
constant over the period;
Sizing of many of the system components in year 0 to absorb the demand in year five
with some surplus, and with generation and component expansion and upgrade in
years 8-10 to meet demand in year 20; and,
Lifetime of components and replacement schedule as shown in Table 36 below.
Table 36: Components lifetime and replacement schedule
Component Lifetime (years) Replacement in year

Generation (PV) 25 Not Applicable
Storage: Battery & monitoring 7 7, 14
Storage: Technical room and others 15 15
Conversion (including genset) 15 15
Distribution 21 Not Applicable
Services 21 Not Applicable
Logistics (transport, installation) 15 15
The lifecycle costs are only assessed for solar PV-based mini-grids. As noted previously,
modeling for wind-hybrid and small hydro mini-grid systems was not undertaken as solar
technology was considered to be an option at most or all potential sites. Wind and hydro
resources are very site specific. In the case of hydro there are few sites where the resource
is available and in the case of wind the resource is often not as good as may be assumed.
This was revealed in both the pre-feasibility level assessment of the five potential sites
and the characterization of existing mini-grids For example, in the site characterization
only one of twenty-one sites was found to have good wind resources (275+ W/m2 at 50m)
and only two had small hydro potential (permanent river with a drop of 50m-100m within
a distance of a few km and powerhouse siting close to the site load center)- although two
other sites had moderate wind potential (165 W/m2-275 W/m2 at 50m). Among the
fifteen existing KPLC mini-grids characterized in this study, the wind resource is only very
good or excellent at two sites and moderate at one at the other twelve sites it is assessed
as being marginal or poor based on available data.
In addition, smaller wind turbines, as may be most appropriate for sites of 10 kW-350 kW
in size, would in many cases not reach a height of 50m. For instance, KPLC Marsabit has
two 250 kW turbines at 39m and KPLC Habaswein has two 25 kW turbines at 10m-15m,
and at these heights the wind resource would be lower than the data used in this study.
Furthermore, the wind data available at the specific sites assessed is much less reliable

than that of solar resources. Lastly, there is very little expertise on wind-hybrid mini-grids:
there are many prospects on the table including at least one developer in Kenya and KPLC
also has some experience but there are few operational sites to learn from. This is not to
say that wind-hybrid systems have low potential or that the LCOE is not competitive, in
fact the opposite is the case.
Instead of alternative RE technologies, lifecycle costs are also assessed for a diesel-based
hybrid mini-grid system with lower solar fractions as one possible alternative to solar PV-
dominant systems. The LCOE and monthly costs per customer for two scenarios 10%
and 50% solar fractions are considered for Takawiri as an example. This is done to
provide a lifecycle comparison of costs with the solar/RE dominant systems applied as the
default in this study.
Results
The results of the lifecycle cost modeling for solar PV-battery-diesel backup systems are
presented here for each of the five sites: Takawiri, Korr, Kadaina Island, Dujis and Lorugum
(Table 37, Table 38) against the 10% and 20% equity internal rate of return (E-IRR) cases.
The results are then discussed below.
Table 37: LCOE & monthly cost per customer 10% equity IRR
Takawir Kadain Lorugu
Korr Dujis
i a m
LCOE - 10% E-IRR 60 51 58 59 52 KES/kWh
LCOE CAPEX 51 46 45 51 47 KES/kWh

LCOE Fixed OPEX 5 2 12 3 2 KES/kWh
LCOE Variable OPEX 4 3 1 4 3 KES/kWh
Cost/costumer - 10% E-
IRR
1,07 1,09 KES/user/mont
Total costs 1,535 1,827 932
4 2 h
KES/user/mont
CAPEX 1,307 969 1,422 950 840
h
KES/user/mont
Fixed OPEX 116 42 390 64 37
h
KES/user/mont
Variable OPEX 112 64 16 78 55
h
Table 38: LCOE & monthly cost per customer 20% equity IRR
Korr Dujis
i a m
LCOE - 20% E-IRR 79 66 77 78 68 KES/kWh
LCOE CAPEX 68 60 60 68 62 KES/kWh

LCOE Fixed OPEX 6 3 16 5 3 KES/kWh
LCOE Variable OPEX 6 4 1 6 4 KES/kWh
Cost/costumer - 20% E-
IRR
Total costs 2,018 2,408 1,229
2 6 h

CAPEX 1,720 1,873 1,107
3 9 h
KES/user/mont
Fixed OPEX 152 55 513 84 49
h
KES/user/mont
Variable OPEX 147 84 21 103 73
h
The Levelized Cost of Electricity, which has been calculated for a 10% and 20% return on
equity, generally decreases as the installed capacity of the mini-grid increases. This is as
would be expected due to the economies of scale and also slightly lower operating costs
with a greater contribution of renewable energy (lower variable costs) thanks to a higher
solar fraction. However, the impact of economies of scale is not always consistent as
demonstrated by Kadaina (the smallest site at 40 kWp + 30 kW genset), which has a lower
LCOE than Takawiri and Dujis. This is mostly due to the fact that Kadaina Island has very
low variable operating costs (with a solar fraction of 98% it hardly uses any diesel fuel).
While Kadaina Island, Dujis and Takawiri have a cost ranging from KES 58/kWh KES
60/kWh at a 10% return on equity, Korr and Lorugum are KES 6-KES 9 lower at KES 51/kWh
KES 52/kWh. When a 20% return on equity is considered, the results show a similar
pattern but give a cost that is approximately KES 15-KES 19 higher. In all cases the LCOE
remains below KES 80/kWh (USD 0.80/kWh). Depending on the site, the level of market
penetration (number of customers/load) and other assumptions (e.g. equity return, etc.),
the simple payback period for an initial investor ranges from 4-12 years, i.e. the time when
positive cumulative cash flows are realized.
The analysis of the cost per customer connected to the mini-grid shows a different trend.
In this comparison the cost per customer is greatest at Kadaina Island (KES 2,408/month
@ 20% equity return) followed by Takawiri (KES 2,018/month). Dujis cost per customer
(KES 1,446/month) is more in line with those of Korr (KES 1,412/month) and Lorugum (KES
1,229). An additional reason for such an outcome, apart from the economies of scale, is
the number of customers and the demand segmentation per type of customer. Korr,
which has the lowest LCOE, has six potential larger customers acting as anchor loads and
representing 60% of the demand. These anchor loads, while positive for the LCOE, reduce
the total number of customers per total installed capacity, hence increasing the cost per
customer. In comparison, Dujis and Lorugum have zero and one larger customer,
respectively. The cost per customer at Dujis, however, is still higher than at Korr because
the total number of customers is much lower (652 versus 883). Takawiri, although much
smaller than the other three, also has two industrial customers acting as anchor loads that
represent 85% of the demand, increasing the cost per customer. Kadaina Island has the

fewest number of customers. This shows that while mini-grids with anchor load
consumers can increase the cost per consumer, the final LCOE per kWh is positively
affected (reduced) and less risky.
The cost per customer per month at the five sites is more than the mean expenditure on
electricity by existing household users across the twenty-one sites surveyed (KES
909/month) but in line with or lower than the existing mean for electrified businesses
(KES 2,074/month) and significantly less than what the average connected institution
currently pays (KES 5,413/month). However, it should be noted that the LCOE is based on
a high level of uptake by potential customers equating to a high level of load and if fewer
customers are connected or the load is lower then the LCOE and cost per customer
increases for a given system size.
The monthly costs per customer can be compared with the mean ATP and WTP at the five
sites for the 20% equity internal rate of return (IRR) case. ATP at 5.6% of income for
households and 8.9% for businesses is the average of what existing electricity customers
pay across the twenty-one sites. The results are shown below (Table 39):
Table 39: Comparison of monthly cost/customer at 5 sites with ATP & WTP
Korr Dujis
i a m
Cost at 20% equity IRR 2,018 2,408 1,229
2 6 h
1,62 1,21
HH ATP @ 10% of income 1,663 2,323 587
4 5
HH ATP @ 5.6% of income 931 909 1,301 681 329
3,95 2,21
BS ATP @ 10% of income 1,733 4,100 1,737
0 7
3,51 1,97
BS ATP @ 8.9% of income 1,543 3,649 1,546
6 7 KES
HH WTP open-ended mean/month
409 515 678 302 386
initial
HH WTP open-ended max 619 841 792 383 644
BS WTP open-ended
556 933 1,000 518 627
initial
1,28
BS WTP open-ended max 989 1,150 722 840
3
Note: HH = household, BS = business, ATP = ability to pay, WTP = willingness to pay
It can be seen at that mean WTP of household and business end-users is in all cases less
than the monthly cost needed for a 20% return on equity. Only in the case of businesses
at Korr does the maximum WTP come close (KES 1,283 vs. KES 1,412). When it comes to
household ATP at 5.6% the mean is higher at four of the five sites, but still insufficient to
meet the monthly costs. ATP at 10% of income comes much closer to the actual cost- but
for Lorugum and Korr (where it exceeds the cost). For businesses the case is quite
different except for Takawiri, ATP at both 8.9% and 10% of income is higher than actual

monthly costs at all sites. However, since LCOE and monthly cost depend on the level of
market penetration and number of customers, and seeing that ATP and WTP per month
are also linked to the number of kWh consumed, the results shown here only give an
indication of the difference between customer types and sites. The actual market
potential based on these factors is assessed below in section 6 on market potential.
As for the distribution of the cost structure, CAPEX is the largest expenditure over the
lifetime of the project. Figure 33 below show the cost distribution for a 20-year accounting
period. With the exception of Kadaina Island, CAPEX is responsible for 85% to 90% of the
total costs, while the OPEX is evenly divided between fixed and variable costs. Takawiri is
the only one of these four sites where the variable OPEX is slightly higher than the fixed
OPEX. This is due to a higher share in the generation from the diesel genset that increases
the fuel costs. Kadaina Island, however, has the highest share of renewable energy in the
generation mix at 98%. This significantly reduces the variable OPEX since diesel fuel is
essentially not used. Another interesting difference of Kadaina Island is that the
percentage of OPEX (mostly fixed as already explained) in comparison with the CAPEX is
the largest. This is most likely due to higher OPEX cost per kW and kWh for smaller mini-
grids since there is a reverse economy of scale effect.
100%
80%
60%
40%
20%
0%
Takawiri Korr Kadaina Dujis Lorugum
CAPEX Fixed OPEX Variable OPEX
Figure 33: Distribution of CAPEX & OPEX over 20-year period (%)
Finally, the sensitivity to different hybridization levels has been assessed. The costs under
three solar fractions for the case of Takawiri Island have been investigated, and are shown
in Table 40 below for 89%, 50% and 10% renewable fraction (RF) scenarios:
Table 40: Influence of the solar fraction on costs at Takawiri 20% equity IRR
RF 89% RF 50% RF 10%
LCOE - 20% E-IRR 79 93 97 KES/kWh
LCOE CAPEX 68 58 39 KES/kWh

LCOE Fixed OPEX 6 6 6 KES/kWh
LCOE Variable OPEX 6 29 52 KES/kWh
Cost/costumer - 20% E-IRR

Total costs 2,018 2,357 2,461 KES/user/month

CAPEX 1,720 1,468 983 KES/user/month
Fixed OPEX 152 152 152 KES/user/month
Variable OPEX 147 737 1,326 KES/user/month
At a return on equity of 20%, the LCOE and the average cost per customer over a 20 year
operational period are lower for those configurations with higher renewable fractions.
The 89% RF at Takawiri results in a LCOE of KES 79/kWh or KES 2,018/customer/month
versus KES 93/kWh (KES 2,357/customer/month) and 97/kWh (KES
2,461/customer/month) for the 50% and 10% RF scenarios.
As was shown above in section 3.1, the analysis of the cumulative costs over a 20-year
operational period reveals that by year 7 the cumulative costs of the 89% RF scenario are
lower than the other more diesel-intensive cases. By year 20, total savings with 89% RF
are between USD 1 million- USD 1.5 million. It is for this and other previously stated
reasons that diesel dominant-hybrid systems are not considered in the study.

The cost assessment findings in terms of unit and total capital costs form the basis of the
development of the supply curves used to determine market size (section 6 below).
System costs depend on a number of factors and are subject to input assumptions.
Generally at the pre-feasibility level of analysis there is still some uncertainty regarding
the cost of site specific supply. However, overall the costs at the characterized sites and
the reference cases give a good indication of the level of cost of supply. The main findings
are as follows:
Larger systems serving more customers are generally cheaper per kW installed
and per customer than smaller ones (but not always). Cost can range from almost
USD 12,000/kW (KES 1.2m/kW) to serve 50 customers, to USD 5,000/kW (KES
500,000/kW) to serve 800 customers, in the reference cases examined.
Diesel-based systems are generally more expensive than RE-based systems over
a 20-year lifetime, even though RE systems have higher upfront capital costs.
Planners may wish to take this into consideration especially as solar PV and battery
costs should continue to reduce while the price of diesel may fluctuate or increase
over the 20-year period.
The average cost of supply per customer per month is higher than stated WTP
(open ended question) except for institutions but in some cases lower than
the Price Sensitivity Meter WTP responses, and close to ATP at 10% of income.
The LCOE at the five sites assessed to pre-feasibility level are in the range of what
existing private mini-grid operators charge and customers pay, and likely in the

approximate range of estimated cost of supply at existing KPLC diesel-based mini-
grids. However, in all instances the LCOE are much higher than national uniform
(KPLC) tariff.
For private mini-grids a uniform tariff may not be appropriate given that costs
depend on site-specific factors, system technology, size and configuration,
demand, customer segments and WTP/ATP. However, a range of tariffs at
different system sizes and numbers of customers serviced could be investigated.

6 Market size potential
In this section the potential for mini-grids in Kenya is analyzed through an economic
assessment of the five sites presented in sections 3 and 5.3. The assessment provides
insight into how the market responds to different price levels of electricity, the costs of
meeting different levels of consumer demand, potential market sizes for mini-grids, and
a discussion of the role subsidies could play in stimulating market development.
The market size potential assessment does not explore commercial considerations, such
as risk (technical, political), business models, financing structures or regulatory
constraints, amongst others. These commercial considerations could increase the
potential (through innovative business and financing structures, for example), or decrease
the potential (e.g. by factoring in commercial risk) for private mini-grids. The study also
does not take into account other approaches to rural electrification that include extension
of the grid, solar homes systems and other solar products, which could also serve the
needs of the population.
The economic analysis is based on an analysis of demand and cost curves. The intersection
between such curves indicates the market penetration level at which the price level of
electricity from a mini-grid meets the price level acceptable for its users.
The cost curves were constructed using the Levelized Cost of Electricity (LCOE) approach
presented above based on the base-case scenario sizing and consumption and the high
growth case scenario cost per kW at the five characterized sites. A full description of the
cost curves can be found in section 6.1. Consumer demand curves were constructed
based on the end-user surveys, and more specifically the willingness to pay for
electricity, as well as the ability to pay. A full description of the demand curves can be
found in section 6.2. A price sensitivity meter analysis was undertaken as a
complementary approach and can be found in section 6.4.
An estimate of the potential market size was made based on comparing the cost curves
with the demand curves. The intersection of the curves provided information on the
market size at a commercially viable price level. A full description of the potential market
size assessment can be found in section 6.3.
Following this, a discussion of potential subsidization pathways to stimulate the market

is presented. The issues around subsidization, and the options for subsidization that could
be more realistically applied are described.
6.1 Costs of mini-grids

Scope of the analysis
The scope of the assessment was limited to the five cases analyzed in section 5, namely
Dujis, Kadaina Island, Korr, Lorugum and Takawiri. Only solar PV-battery-diesel back-up-
hybrid mini-grids were considered. Three generation technology types solar PV, wind

and hydro were included for comparison in the assessment of capital costs but the latter
two were not assessed further due to the reasons discussed above in sections 3.2, 5.1 and
5.3, and using one technology types makes the cost analysis for the market size
assessment comparable across different sites. A cost assessment for high and medium
diesel scenarios was undertaken for Takawiri (see previous section), however as the
levelized costs were higher than the solar PV case, it was not included in this analysis.
Approach
The Levelized Cost of Electricity (LCOE) of the mini-grids is determined from the estimated
number of kWh to be supplied, as well as the fixed (investment, operational expenditures)
and variable (some fuel costs, replacement of key equipment/ components) costs of the
mini-grid. The LCOE is not a fixed value, but differs depending on the kWh to be delivered
and associated capacity of the mini-grid. Once a mini-grid of a certain capacity becomes
more and more utilized, expansion of the mini-grid is required to maintain a reliable
supply of electricity. As the cost of expanding a mini-grid depends on its initial size,
different levels of market penetration i.e. electricity consumption from the mini-grid
show different cost levels for expanding the grid. This effect was accounted for by
constructing a LCOE curve based on expansion between the reference case mini-grids of
10 kW, 50 kW, 180 kW and 350 kW.
The financing of the mini-grids, which plays a very important role in determining the final
LCOE, was assumed (as presented in section 5.3 above) as 30% from equity and 70% from
debt, at a 6% (real) interest rate. The cases vary in the internal rate of return on the equity
part, which is either set at 10% or at 20%. Profits are taxed at a flat rate of 30%, being the
corporate rate in Kenya. The lifetime of the investment is set at 20 years.
Market penetration is expressed in terms of a percentage amount, with 100% equivalent

to the entire market as assessed in the earlier sections. The percentage amount allows
for the sample results to be scaled to the actual market size and facilitates comparison
between different sites. The estimated total amount of energy consumed and number of
connected consumers is reported alongside market penetration. Statistical uncertainty
from this scaling-up has not been analyzed.
An example of the LCOE obtained for Dujis is present here for four market penetration
levels (100%, 75%, 50% and 25%) at two rates of return on equity 10% & 20% (Table 41).
Table 41: Variation of LCOE for Dujis mini-grid (KES/KWh)

Market penetration level 100% 75% 50% 25%
Total consumption/month 23,860 kWh 17,895 kWh 11,930 kWh 5,965 kWh
Number of customers 140
connected 600 households 498 households 306 households households
44 businesses 20 businesses 20 businesses 14 businesses
8 institutions 0 institutions 0 institutions 0 institutions
LCOE 20% equity IRR 78.35 81.75 91.05 100.45
LCOE 10% equity IRR 59.15 61.45 68.15 74.85

As can be seen in the table, the LCOE increases with lower market penetration, as the
CAPEX per kW installed increases with smaller sized systems. The 20% equity IRR
scenarios are higher than the 10% equity IRR scenarios, as a greater return is expected
(due to a greater perceived risk on the investment). At 20% return at high market
penetration the simple payback period of a mini-grid investment is 4 years; the payback
increases to as high as 12 years at the 10% return scenario at low market penetration. The
LCOE results for each site are the same at 100% market penetration level as the LCOE
results described in the cost assessment section. As noted, using the cost difference
between the four reference cases, the mini-grid size was scaled back from 100% to the
lower penetration levels to come up with a LCOE, total consumption and number of
customers for the mini-grids at each penetration level. Number of customers presented
is cumulative.
Cost curves
Cost curves for Dujis, Kadaina, Korr, Lorugum and Takawiri were constructed. The cost
curves exhibited similar trends, and the cost curve for Dujis is shown in Figure 34 below
as an example. The curve shows the relationship between penetration (% of market
served and kWh consumed) and the cost of supply. The current KPLC national uniform
tariff (fixed and energy charges without adjustments, taxes or levies) is provided for
comparison. The dashed red line is the weighted average KPLC tariff (DC1, DC2 and SC)
based on the 100% market penetration level (in the case of Dujis 600 households, 44
businesses and 8 institutions), and the dashed blue line is the average domestic KPLC tariff
including in the upfront connection cost of KES 34,980 as a distributed cost across 5 years,
un-discounted. It should be noted that the KPLC tariff is provided for information
purposes and does not represent the actual cost of supply at the KPLC off-grid stations,
as discussed above in section 4.
The cost curves do not extend to the 0-10% market penetration level because it was
thought that most mini-grid operators would not invest in a site unless they could achieve
a greater market share.

Figure 34: Cost curve for Dujis
For all cases it was observed that mini-grid costs decrease with increasing market
penetration. This is partly due to the increase of the mini-grid capacity; expanding a 150
kW mini-grid with 10 kW is cheaper than expanding a 30 kW mini-grid by the same
amount. Still, even at 100% market penetration, the mini-grid costs are 4.5-7.8 times
higher than the KPLC tariff (approximately 2-3 times higher when the KPLC connection
cost is included). This implies that with the national grid nearby, mini-grids might be a less
favorable option compared to expanding the national grid when the impact of the upfront
connection cost on uptake is ignored.
Sensitivity analysis
A sensitivity analysis was performed on the impact of variations in capital cost
expenditures (CAPEX) on LCOE. A 50% increase in capital costs, leads to a 59% increase in
LCOE for a supply cost of KES 125/kWh at Dujis in the 20% equity IRR case. A 50% decrease
in CAPEX leads to a 50% decrease in LCOE or a cost KES 30/kWh at Dujis a 20% return on
equity. As costs for RE systems are predominantly CAPEX, this confirms that CAPEX is an
important determinant of LCOE of mini-grids.
6.2 Consumer demand profiles

Scope of the analysis
Demand curves were constructed for the same five sites mentioned in the previous
section. The curves were based on the survey data, more specifically stated income levels
(for the ability to pay measure) and willingness to pay. The demand curves presented here

reflect the price range for electricity that is still acceptable for users across three sites
high, medium and low-income case examples.
Approach
The end-user survey targeted three types of power consumers: households, businesses
and institutions. Two ability to pay (ATP) analyses were undertaken, as well as a
willingness to pay (WTP) assessment.
Ability to pay (ATP)

The questionnaire covered details on income. The income levels determined the ATP for
energy (including electricity) and electricity. To determine the price range for electricity
from mini-grids two cases for the ATP were assumed: i) each consumer type (households,
businesses, institutions) can spend 10% (AFD 2014,39 Fankhauser and Tepic 200540) of the
reported income in the survey on electricity41 and ii) for each of the three consumer types
a different share of income that can be spent on electricity alone. Households spend 5.6%,
businesses 8.9% and institutions 5.4%. These percentages were based on experience with
existing electricity customers as per the end-user survey findings.
Willingness to pay (WTP)

Price sensitivity questions were asked to understand perceptions of expensive, cheap and
value for money. As discussed in a separate report, the Price Sensitivity Meter (PSM)
approach to WTP as developed by Peter Van Westendorp42 was used in the end-user
survey questionnaire. Four questions fed the PSM:
1. At what price would you begin to think product is too expensive to consider?
2. At what price would you begin to think product is so inexpensive that you would
question the quality and not consider it?
3. At what price would you begin to think product is getting expensive, but you still might
consider it?
4. At what price would you think product is a bargain a great buy for the money?
39 Ministry of Energy and Petroleum (2014) Consultancy Services for Development of Electricity Connection Policy and
Draft Regulations, Final Report by Fichtner Management Consulting AG, p. 58.
40 Fankhauser, Samuel and Sladjana Tepic (2005) Can poor consumers pay for energy and water? An affordability
analysis for transition countries, European Bank for Reconstruction and Development (EBRD), p. 5. Table 1 in the
EBRD study indicates that the World Bank (2002) and World Health Organization (2004) have previously used the
same 10% benchmark.
41 It should be noted that the 2014 GIZ and African Solar Designs Feasibility Study Report on the Potential for Solar PV-
Hybrid Mini-grids in Turkana: Naduat assumed electricity affordability at 5% of income (p. 16), in contrast to the 10%
used in this study.
42 Van Westendorp, P.H. (1976) NSS Price Sensitivity Meter (PSM) a new approach to study consumer perception
of price, Proceedings of the ESOMAR Congress, Venice. Available at: https://rwconnect.esomar.org/a-new-approach-

to-study-consumer-perception-of-price/ [accessed 30 May 2015]. More information on the Van Westendorp Price
Sensitivity Meter is available from the following sources:
http://blog.verint.com/the-van-westendorp-price-sensitivity-meter
http://www.5circles.com/van-westendorp-pricing-the-price-sensitivity-meter/
http://www.mv-research.com/images/pdfs/pricesensitivity.pdf

The main result used to construct the demand curves for comparison with cost curves
was the, expensive but worth considering curve. This choice was made based on
observations at other mini-grids that once potential customers see their neighbors
connected and realize the benefits of electricity service they are more likely to also
connect. This assumption is supported by the fact that the end-user survey results
revealed that expenditure on electricity by existing customers is higher that stated WTP.
Nonetheless, the other Price Sensitivity Meter results were also analyzed to complement
the demand / cost curve analysis. An example of the results for one site is shown and
discussed in section 6.4. The broader findings are presented in section 2.3 of this report.
Estimating energy consumption

Based on information on actual energy use of consumer types, an estimation of the
respondents electricity consumption, based on their customer profile, was made. The
sub-segmentation of household customers and typical profiles for other consumers was
based on the approach taken in the demand projections for the characterization of the
five sites to pre-feasibility level, as discussed in section 3.2 above.
Constructing demand curves

The three price data points (WTP and two ATP) were plotted against the associated power
consumption of each of the respondents. A merit ordering of these results was then
made, in order to sort from highest to lowest WTP/ATP. From this, the demand curve(s)
were derived. To determine the market potential for each site, it was assumed that the
distribution of households, businesses and institutions over the survey respondents
reflected the distribution of these consumer types for the entire site. Concretely, the
lowest WTP/ATP was then assigned as 100% market penetration, as it was assumed that
at this price point, all of the village would be willing / able to pay for electricity. A statistical
analysis of the impacts of this assumption has not been undertaken, however as a
proportional representation of households, businesses and institutions was obtained in
the sample, for the sake of this high-level analysis the assumption is considered to be
acceptable.
Demand curves
The demand curve for Dujis is shown (in Figure 35) and typifies the demand curves
constructed from the results for the other sites.

Market
penetration 25% 50% 75% 100%
Cumulative
energy
Households
Businesses
Insitutions
Figure 35: Demand curve for Dujis
The demand curves in general showed a strong decrease in willingness to pay between 0
and 10% market penetration after which the curves show a smoother downward trend.
Institutions and businesses populate the higher market penetration levels, i.e. they have
a lower willingness / ability to pay. The reason for this is that the questionnaire asks how
much (or how capable) the business / institution is willing / able to pay for energy access
per month. Because they use more electricity, even though they are in most but not all
cases willing / able to spend more per month in absolute terms, this translates into a
lower WTP / ATP per kWh because of the higher electricity use. For this study the reasons
behind the willingness to pay by the different consumer types and the impact of the
connection cost on the order of customer uptake was not investigated.
The three cases on ability and willingness to pay provided a range for mini-grid electricity
at the five sites. The bandwidth provides an estimate for a pricing bandwidth within which
it can be expected with some confidence that a viable business case for mini-grids without
public support is feasible. As can be seen, at the 50% penetration level WTP/ATP ranges
from about KES 8- KES 17/kWh and at 100% penetration WTP/ATP is approximately KES
0.80 - 5/kWh.
Comparing the average income level at the sites (Table 42) with the demand curve,
showed that the acceptable level for pricing strongly depends on the income level at each
site. The difference is particularly clear between Kadaina and Lorugum with Dujis in-
between these extremes.

Table 42: Average household income at the five analyzed sites
Site Average household income (KES/month)
Lorugum 5,867
Dujis 12,155
Korr 16,240
Takawiri 16,633
Kadaina Island 23,235
A sensitivity analysis was performed on income, willingness to pay (WTP) and energy
demand, on price levels. Table 43 below shows the percentage variation if these figures
vary by 50%. It can be seen that these variables have a strong impact on the curves. Of
particular importance is the sensitivity of energy demanded for a particular WTP/ATP, as
there is the greatest uncertainty on this variable (how much electricity will a consumer
use?) and it can have the biggest impact on the results. As an example, for Dujis village it
was estimated that household energy usage was approximately 1 kWh per day. This was
compared with WTP / ATP per month, arriving at a KES / kWh value (e.g. KES 50/KWh). If
the estimated energy usage was too high, i.e. the actual electricity that a consumer would
be willing to pay for a cash amount was 50% less (0.5 kWh per day), then the WTP / ATP
would be double, i.e. KES 100/ kWh. This has a major impact on the results.
Table 43: Impact of variation in income, WTP & energy demand on price levels
+50% -50% decrease
increase
Income 50% -50% Impact only on ATP curves
WTP 50% -50% Impact only on WTP curve
Energy -33% 100% Impact on both ATP & WTP curves in the
demand same proportion
6.3 Estimate of market size

In this section, based on the interaction between the cost and demand curves, an
assessment of market size at the national level is made.
Given the strong correlation between demand and income, a representative analysis
across high, middle and low-income sites was made. The cases of Kadaina Island (highest
mean income of the five sites), Dujis (middle income) and Lorugum (lowest mean income
of the five sites) were selected as representative of these cases. Below for these three
sites the cost and demand curves are depicted on the same chart in order to determine
the likely market penetration at these sites, without government intervention such as

public investment, feed-in subsidies, or as concessions with certain parameters stipulated
as part of the bidding process.43
43As the costs decrease by increasing market penetration, and the mini-grid is a natural monopoly the supply curve
should follow a downward trend. This is contrary to a common neo-classical supply and demand curve that assumes
competition between bidders and a cost curve constructed from the merit order of bids by competing suppliers.

Market penetration 25% 50% 75% 100%
Cumulative energy
Households
Businesses
Insitutions
Estimated system
size 10 20 30 40 kW
Figure 36: Kadaina cost & demand curves and distribution of users

Market
penetration 25% 50% 75% 100%
Cumulative
energy
Households
Businesses
Insitutions
Estimated
system size 55 110 165 220 kW
Figure 37: Dujis cost & demand curves and distribution of users

Market penetration 25% 50% 75% 100%
Cumulative energy
Households
Businesses
Insitutions
Estimated system
size 75 150 225 300 kW
Figure 38: Lorugum cost & demand curves and distribution of users

Market viability based on demand cost curves
Inspection of the curves revealed that only for Kadaina Island (high-income) there is a
market potential for mini-grids, with approximately a 20% (with a range of 0 - 40%) market
penetration. This corresponds to a price of KES 76/kWh- KES 80/kWh in the 10% equity
IRR case, resulting in an average monthly expenditure for households of KES 2,184 KES
2,299 per month, for businesses KES 11,634 KES 12,246 per month, and for institutions
KES 6,854 KES 7,215 per month. The higher cost per month for business and institution
categories is due to the higher monthly kWh consumption assuming the same unit cost
across the customer categories. A segmentation of tariffs that could be applied to
different users was not assessed as this would require a more detailed analysis (e.g. site-
specific analysis of individual customers, sub-segmentation of business demand, goal
seeking to find the optimal tariff level) and need to take into account policy
considerations.44
The case of Dujis (middle-income) and Lorugum (low-income case) indicate that in the
absence of any subsidy, it is unlikely that commercially viable private mini-grids would be
feasible. For sites with income level above KES 12,000- KES 16,000 per month a viable
market potential exists without any market support, albeit with very limited market
penetration.
Estimated market potential for mini grids nationwide

Assuming that the sample of sites and respondents shows a representative sample of off-
grid, rural customers in Kenya (i.e. that the national level is sufficiently reflective of the
small sample) which the consultant believes is a reasonably valid assumption - it is
possible, to make a rough estimate of the nationwide market potential for mini-grids.
Table 44 shows that a third of the investigated sites (number 14 - Chardende, to number
21 - Kargi) have an income level above KES 16,000 per month, which is the threshold for
mini-grid uptake. Assuming a linear increase in market penetration with increasing
income, and based on the market penetration of 20% in Kadaina Island, the site market
penetration level for mini-grid use increases from 0% in Chardende to about 30% in Kargi.
The upper bound, again, based on Kadaina Island, is 60%. Averaged over all sites with
some market uptake of mini-grids, commercially viable market penetration reaches 15%-
30% at those sites. As a third of the sites have an average income level above KES 16,000
per month, a rough estimate, assuming similar sized villages, is that the market potential
for mini-grids is about 5%-10% of the off-grid, rural market in Kenya (i.e. one third of 15%-
30%). What this translates to, in terms of number of customers, is not assessed.
Table 44: Household income levels at surveyed sites

Low & middle income Higher income
44However, an indication the possible tariff segmentation comes from the 2014 GIZ feasibility study for a mini-grid at
Talek and Oloolaimutiak in Narok County where a few potential anchor load customers were willing to pay between
KES 50-80/kWh. In the Mpeketoni Electricity Project case study it was found that average WTP/ATP was KES 37/kWh
but that small and medium business would pay a higher fixed charge than households (KES 500 versus KES 250/month).

Mean HH income Mean HH income
Site Site
(KES/month) (KES/month)
1 Kaivirya 4,114 14 Chardende 18,852
2 Napeitom 5,200 15 Ngodhe 19,645
3 Lorugum 5,867 16 Wasini Island 20,135
4 Zombe 6,942 17 Alale 20,659
5 Bahadale 9,521 18 Kadaina Island 23,235
6 Ijara 11,241 19 Tamkal 25,048
7 Near Ogembo 11,511 20 Rukanga 26,856
8 Dujis 12,155 21 Kargi 27,748
9 Mfangano 15,096
10 Hola 15,724
11 Korr 16,240
12 Mageta 16,302
13 Takawiri 16,633
The nationwide market potential estimate of 5%-10% does not take into account
competition with national grid extension. In order to do so, data from KPLC/REA on a
percentage likely to be served by mini-grids is needed. Given the difference in costs
between mini-grids and the KPLC tariff, even with the connection cost integrated (see
section 6.1 above), it is anticipated that mini-grids will not be economically viable at sites
close to, or part of, the national grid.
It is important to recall that this estimate does not take into account possible commercial
considerations, which could increase the market potential in a number of ways, including
structuring service agreements with KPLC; reducing the cost to supply power and/or
covering the viability gap through incentives or subsidies applied either at the operator
level or at the end-user level.
A best case and worst case scenario sensitivity analysis was performed on the high,
medium and low income case study sites (Kadaina Island, Dujis and Lorugum) to explore
the impact of variations in income, willingness to pay (WTP) and CAPEX on market
penetration levels. Table 45 below shows two cases across the three sites using the 10%
equity IRR intersection with the Ability to Pay (ATP) curves. The best-case scenario is that
WTP and income (ATP) have been under-measured by 50%, and that CAPEX costs have
been overestimated by 50%. This increases the market penetration by approximately
30%. A worst-case scenario was also constructed using an over-estimation of WTP and
ATP by 50% and underestimation of CAPEX by 50% was assumed. This lowers the market
penetration by approximately 20% for the case of Kadaina Island.
Table 45: Impact on market penetration by variations in income/WTP and CAPEX

Best case Worst case
Income / WTP +50%, Income / WTP -50%,
CAPEX -50% CAPEX +50%
Kadaina (high income) Original 20-40% 20-40%

Final 58-60% <10%
Change 30% increase 20% decrease
Dujis (middle income) Original 0-10% 0-10%
Final 32-42% 0
Change 30% increase 10% decrease
Lorugum (low income) Original 0 0
Final 30% 0
Change 30% increase N/A
The sensitivity analysis also reinforces the finding that mini-grids operated on a cost-
recovery plus margin basis without any support/subsidy mechanisms may not be able to
reach all customers even in the best-case scenario at a higher income site (Kadaina
Island) the final market penetration does not exceed 60% of the market.
6.4 Stimulating mini-grid roll-out: subsidy analysis

To promote private mini-grids at more sites and reach higher levels of market penetration
based on the input assumptions and analysis presented above, it is clear that customers
may need to be asked to pay more cost-reflective tariffs (which is unlikely or impossible
for many), that different business models are needed or that some kind of public support
is required which is already the existing case with the REA/KPLC mini-grids. There are a
number of ways to implement such support, including tax breaks, subsidies, and
concessional finance. In this section the use of subsidies to increase penetration of mini-
grids, is discussed.
Subsidy analysis
There are many different kinds of subsidies that can be analysed:
Capital / investment subsidies targeting the initial investment. Most of lifecycle
system costs are upfront for RE mini-grids;
Operational subsidies cover operation of the system, and are delivered to the power
producer. This is meant to cover the gap between affordability and cost recovery. This
approach may require a strategy for phasing-out. However, without the subsidy the
incentive to extend connections may reduce since return on investment may not
cover costs;
Output-based or results based subsidies are given in exchange for a service to
encourage occurrence. Can be linked to a target number of connections or level of
production; and,
Lifeline rates subsidize energy use for poorer consumers and cross-subsidies can be
applied, where richer consumers subsidize poorer consumers.
In this analysis two main types of subsidies are analysed a simple blanket subsidy on
tariffs (which can be used to understand operational, output-based, and lifeline rates),
and a subsidy on investment costs. It should be noted that this is a simplified analysis that

does not take into account interactions with other technologies nor other policy
measures, and results should be interpreted with care.
Analysis of subsidies on tariffs

A tariff subsidy reflects a more performance-based subsidy. In practice, the subsidy would
correspond to the difference between the consumer tariff and the tariff agreed upon with
a private mini-grid owner, and is thus dependent on the amount of KWh delivered to the
consumers. Only electricity that is actually delivered is subsidised.
To investigate the impacts of a tariff subsidy, the price elasticity in the demand curve is
explored by introducing a variety of reduced electricity tariffs in the demand curve and
analysing the impact on market access of potential electricity consumers. The tariff
reduction over the actual costs provides an indication of required subsidy levels to meet
a given market penetration level. As a first proxy, subsidy levels are shown in Table 46.
This scenario assumes the most favourable conditions for the subsidy provider, as the
subsidy is determined from the difference between the LCOE at 10% expected return on
equity (lowest cost) and the highest of the three demand curves (highest ATP/WTP) at the
75% market penetration level. Subsidy levels are site specific, and are not only related to
mini-grid size, but also to consumer ATP/WTP.
Table 46: Subsidy levels at three sites at 10% EIRR (minimum subsidy scenario)
Site Acces Required Final LCOE Additional KWh / Subsidy
s subsidy consumer (KES/kWh month consumed volume
target level price ) with subsidies (KES/
(%) (KES/kWh) (KES/kWh) month)
Kadaina 75 49 17 66 From 1528 to 2939 69,139
Dujis 75 54 7* 61 From 2386 to 17895 837,486
Lorugu 75 47 8* 55 From 0 to 25231 1,185,857
m
*This is below the KPLC tariff and is thus a theoretical calculation
Analysis of subsidies on investment costs (capital subsidy)

Another option is an investment cost subsidy. Renewable energy-based systems have a
high up-front cost approximately 80% of the overall life cycle costs associated with solar
PV systems can be attributed to the initial investment. Purely for illustrative purposes, the
impact on the market size of an investment subsidy that reduces the capital costs by 80%
(an arbitrarily chosen value) is shown in Figure 39 below. Such a subsidy would increase
the market penetration from 0-10% without government support to 35% (30%-45%) by
decreasing the cost of supply from KES 75/kWh and KES 100/kWh (10% and 20% return
on equity cases) to KES 24/kWh and KES 29/kWh at 25% market penetration. In terms of
the impact of subsidies on the total market size, there will be an increase in total market
penetration of a similar order of magnitude. The costs of such subsidization would be
significant.
Subsidy design

A holistic perspective needs to be adopted in the design of subsidies. Supporting mini-
grids often relies on a combination of financial (subsidies, fiscal measures), policy (targets,
FiTs) and regulatory incentives (laws, contract protection). Efficiency is also an issue - for
example, a blanket subsidy may not be the most efficient means of achieving access with
a set amount of funds. Determination of the subsidy to be applied, or combination
thereof, involves calculating th Both investment and operational subsidies (or a combination
thereof) could be considered e subsidy volume (how much money to give), but also delivery
channels (to the consumer versus the operator), subsidy sources (cross subsidisation,
climate finance) and timing (upfront investment subsidy, continuous operational subsidy,
phased subsidies). Interaction with the tariff scheme is also a critical consideration for
subsidy determination. A dialogue with the business community, institutional
consultations, as well as techno-economic analysis, with some optimisation approaches
could be undertaken to design the subsidies.
Such analyses and consultations were not undertaken in this study. In box 2 below, a
description of some existing subsidy schemes in other countries is provided for reference.
Box 2. Financial incentives and subsidies: lessons from other countries
Deshmukh et al (2013)45 provides an overview of experience on incentivizing mini-grid systems

using financial incentives and subsidies. Example mechanisms from selected countries are
presented here.
Financial assistance provided by governments, utilities, and international aid agencies and
donors can prove critical, especially when committed over the long term beyond the pilot
project stage. Financial assistance covers different funding streams that cater to stakeholders,
usually project developers and consumers, in order to allow a combination of scalability, equity,
and economic sustainability.
There are several different forms of subsidies and support that various governments have
adopted. Capital subsidies are the most common form of support that reduces the upfront
capital costs of a RE mini-grid. These capital subsidies may be linked to ongoing performance
and disbursed in specific time intervals to ensure service delivery by project developers.
Under the Township Electrification Program, the Chinese central and local governments paid
for all the capital expenses and some of the operations and maintenance expenses of mini-
grids. In addition, in China small hydropower producers benefit from both a lower value-added
tax and income taxes that are either lowered or forfeited altogether. Most of the funding comes
from government sources, international donors, and district and county contributions, while
the local communities, considering their low income levels, are expected to pay only a small
remaining portion, if any.
In India, the Ministry of New and Renewable Energy, under the remote village electrification
program, offers capital subsidies for solar PV, micro-hydro and biomass gasifier mini-grid
45
Deshmukh, Ranjit; Carvallo, Juan Pablo and Ashwin Gambhir (2013) Sustainable Development of Renewable Energy
Mini-Grids for Energy Access: A Framework for Policy Design, Lawrence Berkeley National Laboratory

systems that are up to 90% of their respective benchmark prices. The provision of these
subsidies is tied to a 5-year annual maintenance contract with the developer. The Forum of
Regulators in India is also considering a model where the tariffs of mini-grids will be regulated
and made equitable with central grid counterparts while the project developer will be provided
an ongoing viability gap subsidy to ensure a profit margin. Meanwhile, the state government of
Chhattisgarh augments the capital subsidies offered by the central government of India by
providing ongoing subsidy and support per household connection for solar mini-grids, as well
as support for operations and maintenance through service providers.
In Cambodia, the renewable energy fund provides capital subsidies to Rural Electricity
Enterprises for the installation of mini hydro projects (USD 400/kW) and biomass projects (USD
300/kW) and USD 45 for each household connection. In addition, consumers receive USD 37
per connection as part of the last mile connection initiative. Other incentives include lower tax
rates and accelerated depreciation for project developers and reducing the cost of mini-grid
equipment through reduction in import duties or incentives for manufacturing.
In Nepal, financial assistance is being provided for approximately half the cost of the micro-
hydro installations, the predominant type of mini-grids in the country This financial assistance
is in the form of capital subsidy, provided through the Rural Energy Fund, set up by the
Government of Nepal to combine and channel subsidies from the government and
international donors. The other half comes from district or village development committee
equity investment (10%), financial community contributions in the form of cash and loans
(20%), and in kind community contributions in the form of labor and locally available
construction materials (20%).
In Sri Lanka, the Energy Service Delivery (ESD) and Renewable Energy for Rural Economic
Development (RERED) programs funded both grid-connected and mini-grid projects through
medium and long-term loans using existing institutional capacity. Additionally, they channeled
a USD 400 per kW subsidy for micro-hydro systems and enabled a micro-lending scheme to
provide funding for service drop connections. By 2011, 2.2 MW of mini-grid generation capacity
was operational supplying almost 8,000 households. In addition, more than 130,000 solar home
systems were installed.
In Brazil, the 2009 Special Project Manual allowed an 85% capital subsidy, disbursed in three
tiers according to monitored progress.
In Tanzania, in addition to a capital subsidy of USD 500 per connection, a generation IPP
supplying a mini-grid receives a tariff premium compared to national grid PPAs, based in part
on the avoided cost of diesel generation in remote areas. Tanzania also has regulations that
specify what happens when an isolated mini-grid becomes connected to the national grid,
providing some certainty for investors. Similarly to Kenya, Tanzanias state utility TANESCO
provides electricity to the rural population using a social tariff for consumption below 50
kWh/month. The cost of generation on isolated grids is considerably higher than the prices
charged to these customers and TANESCO compensates by charging higher prices to industrial
customers.
While the amount and form of subsidies is important, it is their combination and efficient
disbursal that can make mini-grids financially viable over the long term and make electricity
access affordable to consumers. Subsidy disbursals linked to prescriptive standards, and those

involve high transaction costs due to inefficient government agencies, can stifle innovation,
compromise financial viability and restrict the scale-up of mini-grids.

On the left, no subsidy has been applied. On the right, an 80% CAPEX subsidy has been applied.
BEFORE AFTER
Figure 39: Impact on market size of 80% investment subsidy at Dujis.

Price Sensitivity Meter
The Price Sensitivity Meter (PSM) results for households in Korr are presented in Figure
40 below as complementary analysis of the results for one site for monthly WTP. The
following can be inferred from the PSM:
The range of values illustrates the extremes of the market potential. The, too
expensive curve (in purple) shows the upper limit, where the price would stretch the
willingness to pay too much. The, too cheap curve (in red) illustrates a minimum
value with very high certainty that respondents will pay;
The optimal pricing range can be found between the intersection of too cheap /
expensive but worth considering (in green) and intersection of too expensive / good
value (in blue). The range is thus KES 500 KES 1,200 per month. This translates into
approximately KES 17.4/Kwh KES 41.7/kWh. If a price below this range is offered, it
could harm the image of the mini-grid operator (too cheap); If the price is above the
range, the number of those people who see the product as too expensive exceeds the
number of those who do not think it is expensive; and,
The optimal price point can be found looking at the intersection of too expensive and
too cheap curves. This corresponds to KES 1,200 per month (KES 41.7/kWh). This price
corresponds to the price level where the resistance to purchasing is at its lowest.
Figure 40 shows the acceptance of price level versus the share of the population in Korr.
Figure 40: Korr Price Sensitivity Measure results
The optimum pricing point is still below the price level required to reach full cost-
recovery, which is KES 66/kWh or KES 51/kWh (in Korr) at 100% market penetration based
on the 20% and 10% equity IRR cases, respectively.

This section provides an overview of the main points and conclusions that can be taken
from the assessment of the market potential at the five sites characterized in detail and
overall in Kenya:
Supply curve results

Mini-grid costs are site-specific. Mini-grid costs lower with increasing market
penetration and vice versa (i.e. smaller systems have higher CAPEX per kW installed).
This confirms the findings in the cost assessment section.
At 100% penetration, LCOE at the five sites assessed are 4.5-7.8 times higher than
the KPLC tariff or 2-3 times higher if the KPLC connection costs are included. A direct
comparison is, however, not entirely appropriate as the KPLC national uniform tariff
does not reflect the cost of supply at the KPLC/REA off-grid stations, which is higher
than the national tariff and likely closer to the solar PV supply costs at the five
characterized sites.
Where the national grid is nearby, mini-grids may be a less favorable option
compared to grid expansion. This conclusion does not taken into account the level at
which higher KPLC connection costs limit uptake by potential customers.
The cost inputs assumptions have a significant impact on the results. For example,
at Dujis the LCOE of KES 78/kWh at a 20% equity return could range from KES 30/kWh
to KES 125/kWh if the mini-grid system capital costs have been over or under-
estimated by 50%.
Demand curve results

Demand and merit order of customers is site specific. Nevertheless, the demand
curves all show a strong decrease in WTP between 0 and 10% market penetration.
After that the curves show a smoother downward trend. This reflects the fact that at
initial market penetration levels there are a small number customers willing to pay
a much higher amount than other end-users.
Institutions and businesses populate the higher market penetration levels. This is
somewhat counter-intuitive because households generally place relatively lower
value (WTP) on electricity from mini grids. However, because institution and business
ATP/WTP is generally higher, so is their overall consumption, which leads to a lower
cost per kWh.
As with the cost of supply, the input assumptions on WTP/ATP have an important
impact on projected market penetration. Of particular importance is the assessment
of energy demand for a particular WTP/ATP, the sensitivity of which could lead to an
over or underestimation of market demand.

Results from the five sites characterized to pre-feasibility level
Potential mini-grid sites can generally be categorized as high (KES >16,000), medium
(KES 12,000 KES 16,000) and low (KES <12,000) income, based on average monthly
household income. At the level of KES 12,000 KES 16,000 market potential becomes
apparent, but does not start exceeding 0-10% in most cases until mean household
income exceeds KES 16,000/month.
Of the five sites assessed, only the high income case (Kadaina Island) has good
market potential for a mini-grid at approximately 20% penetration (range of 0-40%).
This corresponds to a price of KES 76/kWh- KES 80/kWh at a 10% return on equity.
The case of Dujis (middle-income) and Lorugum (low-income case) indicate that in
the absence of any subsidy, it is unlikely that commercially viable private mini-grids
would be feasible. Alternatively, with cost-reflective tariffs in middle and low income
areas private mini-grids would have to be small and sized to target the highest
potential customers.
Estimate of market potential size

The estimate of market potential is based on the results from the 21 sites surveyed,
and an assumption that the sites are reflective in large part of the off-grid, rural
market in Kenya. The study likely offers some insight into the Kenyan market in
general and not only the specific areas surveyed, albeit only at an indicative level.
Averaged over the eight sites with the highest mean household income (more than
KES 16,000/month) where more uptake is likely, and assuming a linear increase in
market penetration with increasing income, market penetration at these sites
reaches 15%-30%. The eight sites represent about one-third of the twenty-one sites
surveyed.
Based on this, the market potential for mini-grids in off-grid, rural areas of Kenya is
very roughly estimated at 5%-10% (i.e. one third of 15%-30%). This estimate does
not take into account competition from grid extension or stand-alone solar systems.
Nor is the impact of higher KPLC and lower private sector connection costs considered.
It is anticipated that generally mini-grids will not be economically viable at sites

close to or part of the national grid. However, some private developers have a
business model that addresses this.
A sensitivity analysis on the impact of variations in income, WTP and CAPEX shows
that in the best scenario market penetration could increase by approximately 30%
and in the worst case scenario it could be 10%-20% lower. Even in the best-case
scenario, at a higher income level market penetration does not exceed 60%.
Subsidy analysis

Potential subsidy mechanisms largely fall into two types: (a) upfront/investment
subsidies and (b) tariff/operating subsidies, Subsidies and other support mechanisms (as
are already the case with the KPLC/REA mini-grids) could help increase market penetration.
Both investment and operational subsidies (or a combination thereof) could be considered,
among others of the two. A tariff subsidy reflects a more performance-based subsidy
while an investment subsidy helps address the issue of high upfront costs for
renewable technologies. Tariff subsidies can be delivered as operational, output-
based, or cross-subsidies. As an example, in Tanzania mini-grid generation tariffs are
higher than national grid tariffs but the cost to the end-user is subsidized through a
higher charge on industrial consumers.
Subsidy levels are site specific, and are not only related to the size and technology(ies)
of the mini-grid, but also consumer ability and willingness to pay, segmentation (if
any) of the tariffs by customer category and other variables. This means that a
uniform subsidy or support mechanism for mini-grids may not be the best approach,
as the level of subsidy required to stimulate the market is not the same in every
village.
There are key issues that should be taken into account before considering a subsidy.
These include (a) complementarity with rural electrification through grid extension
and stand-alone solar systems and (b) interaction with other policy measures. In
addition, it is important to keep in mind that the ability to pay of 10%-40% of
potential customers is lower than the current national tariff. These customers may
not connect or be able to afford electricity even with a subsidy, and other (albeit lower
service) options such as solar lanterns could be more appropriate.

7 Conclusions and recommendations
7.1 Conclusions
This Kenya Market Assessment for Off-Grid Electrification study report provides an
analysis of the potential for private mini-grids at twenty-one selected sites and the overall
market potential in off-grid, rural areas based on a demand and cost assessment. The
main conclusions and recommendations arising from the analysis are presented in this
section.
This is an assessment of market potential based on available information, time/resources

and input assumptions. It is not a rural electrification plan and does not include a
comparison of the different approaches to providing energy access and connectivity.
However, the report can inform the electrification planning process as well as provide
useful information for policy makers, regulators, local planners and mini-grid developers,
operators and investors.
Any usage of the results should bear in mind that the findings are from twenty-
one sites, some of which are already electrified, and that detailed mini-grid sizing
and cost data is only from the five sites, with a focus on solar PV as a technology.
Nevertheless, the results are considered to be broadly reflective of the off-grid,
rural market in Kenya. At the very least, the report can give general insights into
the Kenyan market.
The potential for private mini-grids and mini-grids depends on both cost and
demand, which are influenced by local and external factors. There is variation in
demand and growth projections at different sites. For example the existing KPLC
mini-grids have experienced average growth of 10%-15% per annum. This
contrasts with some private mini-grid sites where demand has not increased
substantially after a core cluster of customers is connected.
Actual monthly expenditure on electricity by existing customers generally

exceeds stated monthly willingness to pay. On the other hand, the current KPLC
connection cost is higher than both willingness and ability to pay. Overall, ability
to pay (based on income) is likely the most important parameter for uptake.
Anchor load customers may not be present at all sites. Therefore mini-grid
developers may need to plan for a delivery model and design systems around a
greater number of smaller customers, e.g. barbershops/hair saloons, retail shops,
phone charging centres, video halls and posho mills that are found at almost all
the sites surveyed. Primary schools, religious centres and health
clinics/dispensaries are also present at most sites. No anchor load customers
creates a significant risk for project developers, as they become entirely
dependent on household and small business payments.

Solar PV-based mini-grid systems are likely to be the most applicable
technology. There is good potential for wind, small hydro and biomass-based
generation but these are dependent on site-specific resources. Renewable
energy-based systems have high capital investment costs. However, even with
higher capital costs renewable energy systems may be cheaper overall than
diesel-based systems over a typical investment lifetime of 15-25 years and in
some cases are cheaper after less than seven years of operations.
Typical mini-grid systems are expected to in the range of 10 kW-400 kW installed

capacity, serve between 30-1,000 customers and cost between USD 12,000 (KES
1.2 million) and USD 5,000 (KES 500, 000) per kW installed.
At the five sites assessed in detail, for solar PV-battery-diesel back up mini-grids
levelized cost of electricity (LCOE) ranges from KES 50/kWh-80/kWh at high (75%-
100%) market penetration levels at 10% and 20% return on equity scenarios.
However, in the cases studied market penetration is limited to 15%-30% of
customers at higher income sites, and at lower penetration levels (15%-50%)
LCOE increases to KES 60/kWh-120/kWh depending on the site and equity return
expectation. The LCOE is likely similar to that of existing KPLC mini-grids, but more
expensive than national grid service.
Some customers, between 10%-40% of off-grid, rural market, may not be able to
afford the KPLC tariff, let alone connection costs or cost-reflective mini-grid tariffs
charged by private developers.
Overall in Kenya, the potential market for electrification via private mini-grids is
roughly assessed to be 5%-10% in off-grid, rural areas.
7.2 Recommendations
From the findings, analysis and conclusions of the report the consultants can make the
following recommendations to stakeholders.
Potential sites
Of the twenty-one sites covered in the study, on the demand side eight sites may have
good and four sites moderate potential for mini-grids. Based on an analysis of the demand
and supply curves and market penetration levels, eight higher income sites (KES >16,000)
were found to have the most potential. The sites where the two findings overlap are:
higher potential (a) Kargi, (b) Ngodhe, (c) Wasini Island, (d) Kadaina Island and (e)
Chardende and moderate potential (f) Mageta, (g) Takawiri, (h) Korr and (i) Dujis.
Therefore, nine of the twenty-one sites are considered to have medium to higher
potential for private or public-private mini-grids. Five of the nine sites are islands and
seven are on the REA list targeted for mini-grids development. There are still a number of
uncertainties and potential risks, but the nine sites could have priority for further
assessment.

Connection costs and monthly charges
If upfront connection costs can be kept to KES 5,000 10,000 and monthly charges at
KES 1,000 or less it would likely make electricity service accessible to the majority of
potential household and business customers (50-70%) in off-grid, rural areas. For public
actors this means finding ways to further reduce existing connection costs, such as
through a subsidy, or spreading payments out over a longer time period. For
private/community mini-grid developers the implication is that it may be possible charge
more upfront than is the case at the moment.
However, in terms of commercial viability, based on the five sites studied in detail,
revenue requirements to deliver a 20% return on equity for a private mini-grid operator
range from an average of KES 1,229 to KES 2,408 per customer per month. This implies
a gap that needs to be addressed through the identification of areas for cost reduction,
a portfolio approach for developers to reach economies of scale, subsidies and other
measures (e.g. differentiated end-user tariffs).
Changes in customer behavior

It is important to consider changes in customer behavior over time and competing or
complementary approaches to rural electrification. For example, customers may initially
appreciate lower connection costs in exchange for higher monthly charges but this
preference could change, and customers may switch to another provider if the
opportunity arises. This needs to be planned for and managed by developers and taken
into account for regulatory processes.
Public and private approaches

Private sector mini-grids are likely to target sites and size their systems with a commercial
return on investment in mind; meaning customers with higher potential will be
prioritized. This may be different from public sector mini-grids that bring energy access
to as many inhabitants as possible and invest more extensively in grid infrastructure and
reaching last mile customers especially public institutions. Community-based
organizations may fall somewhere between the two approaches.
Subsidies, support mechanisms and other policies

Subsidies would increase uptake by customers and mini-grid electricity supply. The
impact of the subsidy depends upon the level and type of support, competition from
other approaches to electrification, interaction with other policy measures and other
factors. The subsidy level needed to make mini-grids commercially viable will be specific
to the site, technology and business delivery model of the developer/operator. As
indicated in Table 46 section 6.4 for three example sites, an estimated minimum subsidy
(at 10% EIRR) to reach 75% of customers and relatively high load indicating commercial
viability ranges from KES 47/kWh to KES 54/kWh. This works out to between KES 69,000
and KES 1.2 million per month depending on the site, although in some cases the end-
user tariff becomes lower than the KPLC tariff, which is not considered to be a likely
scenario. Therefore, a uniform tariff or support mechanism may not be appropriate.
Instead, any subsidies and related policy measures could be based on typical

sizes/configuration and number of customer ranges. The reference cases provided could
be the starting point to consider the ranges.
In addition to subsidies, it is worthwhile for stakeholders to consider other possible

approaches. These could include for example the possibility to charge cost-reflective
tariffs even if this means only a small portion of the market would be reached initially,
front-loaded tariffs that decrease over time, sub-segmentation of customer tariffs based
on willingness and ability to pay, allocation of sites on a portfolio basis to help achieve
economies of scale and PPPs/build-operate-transfer structures to distribute risks and
provide incentives and new approaches for increasing connectivity and partnerships with
community-based initiatives, among others.
Flexibility, certainty and light-handed regulation

Since KPLC and GoK/REA grid and mini-grid extension efforts are reaching sites more
than 50 km from an existing grid, private mini-grid operators may need to target the
most isolated sites (which may have lower commercial potential), seek assurances
through a concession arrangement and/or ensure that their infrastructure and business
model takes into account the likelihood of an expanding public grid (e.g. through use of
portable, modular equipment, by designing their system to integrate to the public
network, with front-loading returns, etc.).
Policy makers and regulators should keep in mind that most existing private mini-grid
systems and developers in Kenya are fairly small, although this may change. Many
developers would benefit from the certainty that well-designed regulation can provide,
for example through concession arrangements (like in Uganda/Tanzania). An
alternative approach is to ensure that the regulatory process is light-handed and flexible
enough to accommodate different business models and the evolution of approaches to
service delivery. There may be opportunities for private delivery models (e.g. grid
proximate mini-grids) even where there is access to the national grid in terms of
providing grid stability support or helping with densification of connections and increasing
new connections. As one concrete example of what flexibility could mean, smaller mini-
grid developers could be licensed to operate on a regional or nationwide basis if they
meet certain pre-determined conditions instead of permitting on a site-by-site basis.
Policy specific recommendation highlights:

For energy access, try to keep household and small business customer connection
costs at KES 10,000 or less.
Mini-grid subsidies and complementary support mechanisms will be needed to

achieve high rollout and uptake. The type and structure of potential subsidies (e.g.
investment or operational or a combination) should be further investigated.
Provide certainty to mini-grid developers through concession arrangements and

flexibility for smaller operators with light-handed regulation. Consider what the
options are if the national grid reaches a private mini-grid site and the possibility
of grid-proximate mini-grids.

Provide certainty to mini-grid developers as to the appropriate and fair
compensation if the mini-grid is connected to the national grid.
Do not apply uniform tariffs or other support mechanisms. Instead, tariffs,

subsidies and other measures could be based on a range of typical mini-grid sizes
and numbers of customers served.
Outside of a PPP or concession framework, allow private operators to charge cost-

reflective tariffs that the market will bear, on the principle that the cost of not
having electricity is more than the cost of expensive electricity.
Consider allocating a portfolio of sites to developers based on common

characteristics or regional groupings to help reach economies of scale.

ANNEXES

Annex I details of five characterized sites
1. Takawiri
Takawiri (Homa Bay)
County: Homa Bay Constituency: Ward: Mfangano Location: Mfangano

Mbita Island
Sub-location: Latitude: 02851S Longitude: 340505E
Wakinga
General description: Takawiri Island is a small island of 2.7 km in length and 1 km width
located on Lake Victoria in Homa Bay County, near Mfangano Island. It has 3 villages
approximately 0.6 km apart. The main economic activities are fishing and tourism.
Site status: The village of Takawiri Central (Kamarach) has an existing solar micro-grid
approximately of 2 kW owned by private developer, which may have recently been
removed. It is not clear if the mini-grid will be re-installed. Due to their experience with
the mini-grid respondents were not initially receptive. Takawiri is a REA Lot 5 site. There
is a planned diesel-PV hybrid plant to be funded by World Bank under the Kenya
Electricity Modernization Project (KEMP).
Proximity to the grid: Takawiri Island is approximately 2.5 km from the KPLC Mfangano
mini-grid station.
Existing sources of electricity: Known sources of electricity from the end-user surveys of
households, businesses and institutions are: (a) 1 private solar PV battery micro-grid
serving at least 30 customers, both businesses and households (may no longer be the case),
(b) 1 shared diesel generator (number of users not known), 9 vehicle batteries and 14 solar
home systems. There is no electricity service from the national grid or a public mini-grid.
No users with own diesel generator or other electrical sources were among the end-user
sample.
Inner limit area: 0.013 km2 + 0.009 km2 Outer limit area: 1.47 km2 (island)
(each of the two settlements)

Building aggregation: 108.8 bldg./km2
Population: 5,729 (Wakinga sub- Households 2014 (sub- Buildings at site
location that includes part of Mfangano location): 346 (REA list) (approx.): 160
Island)
Growth rate: 2.3% Average household size: 5.3 (calculated from
2009 Census data), 4.6 (end-user survey)
Urban electrification rate: 13.9% Access to mobile phone service: 60.3%
(County)
Rural electrification rate: 1.4% (County) Access to radio service: 85.4%
Main fuel for lighting: Kerosene, 99.1% Main roof material: Corrugated iron sheets
88.9%
GINI index: 0.401 Main employer/main economic activity: Self-
employed informal, 21.6%
Activity in the last 7 Worked for pay: Family business: 13.7% Family agriculture
days 14.9% holding: 10.6%
Household customer demand: 86% of the 88 households surveyed at Takawiri are willing
to be supplied with electricity as new customers and 3% are willing to consider another
electricity source. Of these, 76% are willing to pay upfront and 10% are unsure (maybe
or dont know). Initial household uptake could exceed 85% depending on the upfront
cost and monthly charge. Currently, 51% of respondents use kerosene as their main
energy source for lighting and 26% use solar lanterns. 8% use solar home systems, 7%
candles. Purchased firewood or charcoal and battery-powered flashlights are used as a
main lighting source by 3% respectively. If supplied with electricity, over 90% would use it
for lighting and charging mobile phones, and almost 80% for radios, TVs and other
household appliances, while 15% would also like to use a refrigerator.
Business customer demand: 10 businesses were Institutional customer demand: 3
surveyed and all are willing to pay for electricity, institutions were surveyed. 100%
80% at an upfront cost. 80% of the businesses are willing to be supplied with
would consider having electricity for indoor electricity. All three institutions
lighting, 70% for cell phone charging and 60% for would consider having electricity
radio and TV use. 50% would plan to use electricity for TV, DVD player & decoder and
for refrigeration and 30% would install an electric computers
fan.
Existing public and private institutions: At least 4 Institutions including 1 dispensary and
3 schools. The main village Takawiri Central has several businesses including a posho mill,
retail shops, phone charging, hairdressers, tailors, bars, a watch/radio repair shop, a
market, a video hall, furniture makers and a restaurant and is the main collection point
for fish. There is a tourist lodge on the island (south west of Takawiri Central village).
According the area chief there is also a telecommunication mast on the island. The
enumeration team noted that there is a lot of business activity on the island and believe
that the potential for electricity uptake is high.
Organizational possibilities: Takawiri has at least 2 organizations: the Takawiri Fishing
Group and Ekialo Kyona for Subas CBO (Community Based Organization). In addition,
there is an existing privately run mini-grid, which the operator may be willing to expand.

Security: Conflicts flare up from time to time linked to the disputed international border
between Kenya and Uganda. Citizens of both countries cross borders informally. There
are also at times conflicts between mainland residents and fishermen.
RE Solar: 5.45 Wind: Poor (0 90 Hydro: n/a, no rivers Other:

resources kWh/m2/day (GHI) W/m2 at 50m) on the island n/a
Daily load: Peak load: PV size: Diesel genset size: RE highest

546 kWh 51 kW 180 kWp 110 kW potential:
Solar
Takawiri is a greenfield site on the REA list of targeted sites and may receive funding
support from the World Bank. Takawiri was assessed to have 329 potential (i.e. new)
electricity customers, of which the majority are households. This translates to
approximately 1,513 people served based on Takawiris average household size of 4.6
individuals. There are 23 potential business and 4 institutional end-users. A tourist hotel
and fish cold store were determined to be the two anchor loads making up to 25% (163
kWh) of the estimated daily electricity consumption. Table 46 shows the demand per
customer type.
Table 47: Demand segmentation at Takawiri

Number of Total for user group
Category Total (%)
users (Wh/d)
Households 300 283,560 52%
Business 23 99,339 18%
Institutions 4 27,246 5%
Industry (anchor loads)
2 136,144
Tourist hotel & fish cold store 25%
Total 329 546,289 100%
Note: Wh/d = watt-hour/day
A 180 kWp and a 200 kWp solar PV-battery-diesel system was modeled based on two
demand growth scenarios with a Low Voltage (LV) network of approximately 6.6 km.
In the base case scenario, by year five a daily load of 546 kWh with a peak of 51 kW is
expected. To meet this demand, the HOMER simulation results indicate that the optimum
configuration would be PV generation of 180 kWp with battery with storage of 946 kWh
and a 110 kW diesel genset backup, resulting in a RE (solar) fraction of 89%. In the higher
business growth case scenario, by year five a daily load of 651 kWh with a peak of 66 kW
is expected. To meet this demand, the HOMER simulation results indicate that the
optimum configuration would be PV generation of 200 kWp with battery storage of 1,286
kWh and a 130 kW diesel genset backup, resulting in a RE (solar) fraction of 89%.
The investment cost is estimated to be USD 960,500 or USD 2,920/customer in the base
case scenario and USD 1,056,900 or USD 3,210/customer in the high growth scenario.

In the high diesel penetration scenarios on the base case, at 10% and 50% renewable
fraction respective capital costs are USD 596,596 (USD 3,314/kW or 1,813/customer) and
USD 834,649 (USD 4,637/kW or 2,537/customer), a reduction of 38% or 13% against the
high RE fraction case. However, as discussed elsewhere in the report, lifecycle costs for
diesel-dominant systems would be higher over a 10-20 year period.
2. Korr
Korr (Marsabit County)
County: Marsabit Constituency: Laisamis Wards: Korr/Ngurunit Location: Korr

Sub-location: Korr Latitude: 200'33"N Longitude: 3730'29"E
General description: Korr is a site southwest of Marsabit town in Marsabit County. Korr
consists of 3 villages, which are AIC, Tirim and Don Bosco. Livestock rearing is the main
economic activity of the area however commodity trading both wholesale and retail takes
place in Korr.
Site status: Korr is a greenfield site southwest of Marsabit town and is listed in the REA
list of sites to be electrified (Lot 3). In 2014 a KfW study had shortlisted the site for mini-
grid development but it was not selected for further detailed investigation. There are
reported plans to connect Korr via a substation to the new 400 kV transmission line that
will be built for the Lake Turkana Wind Power project.
Proximity to the grid: Korr is 55 km northwest of the Laisamis off-grid station and
approximately 63 km southwest of Marsabit KPLC mini-grid.
households, businesses and institutions are: (a) solar home systems, with 50 users. There
is no electricity service from the national grid or a public or private mini-grid. No vehicle
batteries, users with their own or shared generator, or other electrical energy sources
were found among the end-user sample.
Inner limit area: 1.39 km2 Outer limit area: 2.59 km2

Population: 3,910 (may include nearby Households 2009 (sub- Buildings at site
sub-locations) location): 837 (approx.): 200
Growth rate: 6.9% Average household size: 4.7 (calculated from
2009 Census data), 7.6 (end-user survey)
Urban electrification rate: 33.7% Rural electrification rate: 0.6% (County)
(County)
Access to mobile phone service: 5.8% Access to radio service: 28.9%
Main fuel for lighting: Fuel wood, Main roof material: Grass and makuti, 86.9%
76.2%
GINI index: 0.212 Main employer/main economic activity: Self-
employed informal, 31.1%
Activity in the last Worked for pay: Family business: 7.8% Family agriculture
7 days 2.6% holding: 55.2%
Household customer demand: 86% of the 83 households surveyed at Korr are willing to
be supplied with electricity and of these 46% are willing to pay upfront. 5% are not sure
(maybe or dont know). Initial household uptake could reach 86% depending on the
upfront cost and monthly charge.
45% of respondents use solar home systems as their main energy source for lighting. 27%
use flashlights powered by batteries and 19% use kerosene. Other main sources of
lighting are solar lanterns (8%) and other (1%). If supplied with electricity, over 70%
would use it for lighting and charging phones, about 60% for radios, TVs and other
household appliances and about 30% would also like to use a refrigerator.
Business customer demand: 22 businesses Institutional customer demand: 4
were surveyed at Korr and 17 responded to institutions were surveyed. All are willing
the WTP questions. Uptake in year 1 is to pay for electricity service. 75% would
estimated at 76% based on WTP. 69% of the consider electricity for indoor lighting,
businesses would consider having electricity 50% for outdoor security lighting, TV,
for lighting, radio, and cell phone charging, projector, fridge, freezer, electric kettle,
62% for refrigeration, TV and DVD players computer, printer/copier, internet router
and 23% for an electric kettle and fan. 15% and a water pump while one would
would use electricity to power a computer consider electricity for a DVD player&
and internet router. decoder, radio/CD, fan, fuel pump and
public address system.
Existing public and private institutions: There are a total of 12 institutions including 5
schools, 6 churches and one mosque. A dispensary is proposed. At Korr the Don Bosco
missionaries are running a kindergarten, primary school and a church. Notable businesses
in Korr: slaughterhouse/butchery, posho mill, restaurants, wholesale and retail
commodity shops. There is a telecommunication Base Transceiver Station (BST) in the
area. Other private sector activities include phone charging, a chemist, tailors, a
guesthouse, video hall and a livestock market. Korr has two water boreholes.
Organizational possibilities: At least 3 organizations are in the area. These are: Kolima-
Korr Livestock Marketing Association, Ersin Self Help Group and Tirim (providing

education on church matters and bible translation). GIZ/KfW have also shown an interest
in supporting a mini-grid in Korr.
Security: Proliferation of small arms through the Marsabit/Ethiopia border by the Oromo
rebellion from Ethiopia exposes the area to conflict. Korr also experiences cattle rustling.
Water scarcity and drought and intercommunity disputes are also prevalent.
RE Solar: 6.11 Wind: Good (275 - Hydro: n/a, seasonal Other:

resources kWh/m2/day 425 W/m2 at 50m) stream in vicinity n/a
(GHI)
Daily load: Peak load: PV size: Diesel genset RE highest

1,223 kWh 118 kW 350 kWp size: potential:
250 kW Solar & wind
Korr is a village located southwest of Marsabit town in Marsabit County. There are
reported plans to connect the site to the Lake Turkana wind project transmission line but
Korr was nevertheless assessed as a higher-ranking site targeted by REA that GIZ has also
previously considered for a pilot mini-grid project. It is estimated that Korr has slightly less
than 900 potential electricity customers, made up of 800 households, 60 businesses, 17
institutions and 6 anchor load customers, two of which are a telecommunication base-
station and a butchery/slaughterhouse. If all 800 households are connected the potential
mini-grid could provide electricity to a population of about 6,080 based on Korrs average
household size of 7.6 people. The demand segmentation is in Table 48.
Table 48: Demand segmentation at Korr

Category Total (%)
users (Wh/d)
Households 800 756,160 62%
Business 60 217,554 18%
6 114,560
Telecom station & slaughterhouses 9%
Total 883 1,223,387 100%
Projections for customer consumption and demand growth in a base case scenario lead
to an estimated daily load of 1,223 kWh and a 118 kW peak by the fifth year after the
implementation of a mini-grid. A 350 kWp solar PV system with a 250 kW diesel generator
and a 2,860 kWh battery is modeled to meet the demand. The resultant solar fraction is
92%.
Such a system at USD 5,497/kW is expected to cost USD 1.9 million or USD 2,179 per
customer in the base case growth scenario. This includes 17.7 km of distribution network.
In the higher business growth case scenario, by year five a daily load of 1,458 kWh with a
peak of 151 kW is expected. To meet this demand, the HOMER simulation results indicate

that the optimum configuration would be PV generation of 400 kWp with battery storage
of 3015 kWh and a 300 kW diesel genset backup, resulting in a RE (solar) fraction of 90%.
Such a system at USD 5,276/kW is expected to cost USD 2.1 million or USD 2,390 per
customer in the base case scenario. The length of the distribution network remains the
same as in the base case scenario.
3. Kadaina Island
Kadaina Island (Kilifi County)
County: Kilifi Constituency: Kilifi North Ward: Location: Roka

Matsangoni
Sub-location: Uyombo Latitude: 322'00"S Longitude: 3957'25"E
General description: Kadaina Island is located on the Indian Ocean in Kilifi County, part of
Mida Creek in the Watamu Marine Park, a UNESCO Biosphere Reserve. Kadaina Island has
only one extended village with scattered buildings and is surrounded by mangrove
forests. Access is by boat or foot at low tide.
Site status: Kadaina Island is a greenfield REA Lot 6 site. There is a planned diesel-PV
hybrid plant to be funded by the World Bank under the Kenya Electricity Modernization
Project (KEMP).
Proximity to the grid: Kadaina is an island. However, Matsangoni approximately 4 km
south west of Kadaina Island is connected to the grid. A 33 kV line also passes along the
B8 road to Malindi approximately 2 km away.
households, businesses and institutions are: (a) own diesel generators, used by 2 end-
users and 2 users of solar home systems. There is no electricity service from the national
grid or a mini-grid. No vehicle batteries, users with a shared generator or other electrical
energy sources were found among the end-user sample.

Inner limit area: 0.79 km2 Outer limit area: 0.79 km2 (same as inner
limit area as it is an island with one village)
Population: 315 estimated for Kadaina Households 2009 (sub- Buildings at
Island based on the 42 households location): 864 site (approx.):
surveyed (census) and the average Households 2015 site- 50
household size of 7.5. 5,716 is the level (end-user survey): 42
population for Uyombo sub-location that
includes Kadaina island.
Growth rate: 3.6% Average household size: 6.6 (calculated
from 2009 Census data), 7.5 (end-user
survey)
Urban electrification rate: 39.4% Rural electrification rate: 3.9% (County)

(County)
Main fuel for lighting: Kerosene, 95.4% Main roof material: Grass and makuti, 85.1%
GINI index: 0.527 Main employer/main economic activity:
Self-employed informal, 16.5%
Activity in the last 7 Worked for pay: Family business: Family agriculture
days 8.9% 11.5% holding: 8.7%
Household customer demand: 67% of the 39 households surveyed at Kadaina Island are
willing to be supplied with electricity and 3% may consider an additional source of
electricity. Of these, 78% are willing to pay upfront.
85% of households currently use kerosene as their main energy source for lighting. 10%
solar home systems and 5% solar lanterns. If supplied with electricity, over 80% would
use it for lighting and charging mobile phones and about 60% for radios, TVs and other
household appliances. Almost a third would also like to use a refrigerator.
Business customer demand: 4 Institutional customer demand: 6 institutions
businesses were surveyed at Kadaina were surveyed. Four are willing to pay or
Island. All expressed an interest to pay power. All would like to have electricity for
for electricity service. All four would use lighting, 75% for TV use and 50% for a
electricity for lighting and refrigeration projector, cell phone charging, a fan, a
while three would consider electricity printer/copier and communication equipment.
for cell phone charging and DVD player Two institutions would consider electricity for
and TV use. a fridge, computers, air conditioning, an
electric press, electric heater and a public
address system.
Existing public and private institutions: There are a total of 6 to 8 institutions including 2
schools, 3 churches and 1 mosque. Business activities include a retail shop, a chemist, a
tailor, a radio/watch repair shop, small restaurants and food stalls, a market, a posho mill
and a furniture maker.
Organizational possibilities: The Kwetu Training Centre in Kilifi has previously
implemented activities on Kadaina Island supported by UNDP

Security: No security issues identified
RE Solar: 6.12 Wind: Moderate (165 Hydro: n/a, no Other:

resources kWh/m2/day (GHI) - 275 W/m2 at 50m) rivers or streams in n/a
vicinity
Daily load: Peak load: PV size: Diesel genset size: RE highest potential:
129 kWh 10 kW 40 kWp 30 kW Solar & wind
Kadaina Island is situated in Mida Creek, part of the Watamu Marine Park, a UNESCO
Biosphere Reserve on the Indian Ocean in Kilifi County. Kadaina Island has one small,
extended village with scattered buildings. Access is by boat or foot at low tide through a
mangrove forest. There is a KPLC power line approximately 2km to the west and 4 km to
the southwest of the island. Kadaina Island is on the list of sites under consideration by
REA for a mini-grid. At present there is no electricity service.
Due to its small size, the end-user survey resulted in a near-census of the island. On this
basis, it is estimated that Kadaina Island has 64 potential customers if a possible, but
currently hypothetical, anchor load tourist hotel is considered. The customer base is 42
households (39 surveyed), 13 businesses (four surveyed) and eight institutions (six
surveyed). With an average household size of 7.5, if all 42 households were connected
electricity service would reach 315 people. Table 49 shows the demand segmentation.
Table 49: Demand segmentation at Kadaina Island

Category Total (%)
users (Wh/d)
Households 42 39,698 16%
Business 13 65,431 26%
1 125,144
Tourist hotel, if bridge is built 49%
Total 64 253,989 100%
After the fifth year of the implementation of the mini-grid peak demand reaches 10 kW
and daily consumption 129 kWh. Electricity requirements can be met with a 40 kWp solar
system, 30 kW diesel generator and 322 kWh capacity battery, with solar delivering 98%
of the power. Peak load is closer to 18 kW and consumption 255 kWh in base case scenario
with a hypothetical anchor load tourist hotel and the diesel genset has been oversized to
accommodate this eventuality. The base case scenario the hotel will cost USD 305,255 or
7,361 USD/kW. This works out to USD 4,770 per customer, including 1.3 km of low voltage
lines.

The higher business growth scenario including the hypothetical tourist hotel sees the daily
load more than double to 279 kWh. A system of 85 kWp solar PV, 60 kW diesel genset
and 643 kWh battery with peak power output of 56 kW can meet this demand with a solar
fraction of 97%, without any change to the 1.3 km power line. The cost of this mini-grid
would be USD 7,331 per customer, USD 5,520/kW installed and a total cost of USD
469,198.

4. Dujis
Dujis (Garissa County)
County: Garissa Constituency: Ward: Goreale Location: Saka

Lagdera
Sub-location: Dujis Latitude: 014'53"N Longitude: 3923'36"E
General description: Dujis is located in Garissa County north of Garissa town. It is
composed of 5 villages i.e. Dujis, Reithat, Welmarrel, Iiskadekh and Istin. Livestock rearing
(pastoralism) is the main activity in the area.
Site status: Dujis is a greenfield site included in Lot 7 of REA sites planned for
electrification.
Proximity to the grid: Approximately 82 km from Garissa town and 58 km from
Modogashe, which is connected to the KPLC Habaswein off-grid station.
Existing sources of electricity: The end-user surveys of households, businesses and
institutions identified 10 users of solar home systems. No other electricity sources were
noted, e.g. no service from the national grid or a public of private mini-grid, no diesel
generators, no vehicle batteries or users with a shared generator or other electrical
energy sources were found among the end-user sample.
Population: 3,243 Households 2009 Buildings at site
(sub-location): 539 (approx.): 170
from 2009 Census data)
8.0 (end-user survey)
2
Building aggregation: 67.7 bldg./km
Urban electrification rate: 43.2% (County) Rural electrification rate: 0.5% (County)
Main fuel for lighting: Kerosene, 87.0% Main roof material: Grass and makuti,
77.8%

Self-employed informal, 30.7%
Activity in the last 7 Worked for pay: Family business: Family agriculture
days 3.1% 24.0% holding: 8.7%
Household customer demand: Only 49% of the 71 households surveyed at Dujis are
willing to be supplied with electricity. Of these, only 57% are willing to pay upfront.
Factoring in the reasons for not wanting electricity (15 respondents are considering a
solar system or similar and 12 are worried about the safety of electricity), however, the
initial household uptake once people see their neighbors being electrified could reach
80%.
None of the respondents at Dujis use kerosene as a main source of lighting, while 55%
use battery powered flashlights and 21% solar lanterns and solar home systems. 23% use
collected firewood as the main source of lighting. If supplied with electricity, over 70%
would use it for lighting and charging mobile phones and about half for radios, TVs and
other household appliances, while 20% would also like to use a refrigerator.
Business customer demand: 37 businesses were Institutional customer demand:
surveyed at Dujis. Estimated initial uptake of Only two institutions were
electricity is 73%. All of the interested businesses surveyed and one indicated
would consider having electricity for lighting while willingness to pay for electricity.
58% would use power for cell phone charging and
50% would plan for a radio/CD player. 42% of
business respondents would install a TV and 38%
would consider electricity for fans (cooling).
Existing public and private institutions: At least 4 institutions including: 1 school, 1

health center, 1 administration police camp and 1 mosque. Businesses include phone
charging, hairdressers, retail shops, chemists, tailors, small restaurants and food stalls, a
market and posho mills. Dujis has a government-run borehole.
Organizational possibilities: Not known
Security: Proliferation of small arms in the area. Terrorism attacks in Garissa/Tana River
resulted to a 6:30 pm to 6:00 am curfew that has been recently lifted (18 June 2015).
RE resources Solar: 5.82 Wind: Marginal (90 - 165 Hydro: Other: n/a
kWh/m2/day (GHI) W/m2 at 50m) n/a
784 kWh 81 kW 220 kWp 160 kW Solar
Dujis is a greenfield site located in Garissa County approximately 82 km north of Garissa

town. It is composed of 5 villages i.e. Dujis, Reithat, Welmarrel, Iiskadekh and Istin.
Pastoralism is the main economic activity of residents. The site is 58 km from Modogashe,
which is supplied by electricity from the Habaswein mini-grid run by KPLC. Dujis is in the
seventh lot of sites targeted by REA for electrification via a mini-grid.

It is estimated that Dujis may have up to 600 household, 44 business and 8 institutional
potential electricity customers, for a total of 652. No anchor loads were identified. Dujis
has an average of 8 people per household so if 600 household customers were connected
to electricity 4,800 people would be served. The breakdown of projected daily
consumption by each end-user category is presented in Table 50.
Table 50: Demand segmentation at Dujis

Category Total (%)
users (Wh/d)
Households 600 567,120 72%
Business 44 155,822 20%
Industry (anchor loads) - - 0%
Total 652 784,450 100%
A mini-grid of 220 kWp solar PV, 160 kW diesel generator and 1,340 kWh battery has been
modeled in HOMER to meet the year five peak demand of 81 kW and 784 kWh daily load
in the base case scenario, with an LV network of 13 km. The cost of this system is
estimated at USD 1.3 million, which is USD 5,789/kW or USD 1,953 per user.
In the high business growth scenario the daily consumption increases to 935 kWh. A
slightly larger PV-based system of 240 kWp solar, 200 kW diesel generator and 2,680 kWh
battery, with a solar fraction of 91%, can meet this demand at a cost of USD 1.5 million,
USD 6,282 per kW installed and USD 2,313 per customer.

5. Lorugum
Lorugum (Turkana County)
County: Turkana Constituency: Ward: Turkwel Location: Lorugum

Loima
Sub-location: Lorugum Latitude: 253'01"N Longitude: 3515'19"E
General description: Lorugum is located in Turkana County, southwest of Lodwar town
and consists of 5 villages. The main economic activity in the area is livestock rearing
(pastoralism).
Site status: Lorugum is an un-electrified site that was identified during the site selection
process as having good potential for a mini-grid.
Proximity to the grid: Approximately 47 km southwest of Lodwar off-grid station
Existing sources of electricity: From the Lorugum end-user surveys of households,
businesses and institutions (a) one user of a diesel generator and (b) 15 users of solar
home systems were identified. No other electricity sources were noted, e.g. no services
from the national grid or a public of private mini-grid, no vehicle batteries or users with a
shared generator or other electrical energy sources.
Population: 4,737 Households 2009 Buildings at site
(sub-location): 914 (approx.): 600
from 2009 Census data)
6.2 (end-user survey)
2
Building aggregation: 145.3 bldg./km
Urban electrification rate: 10.4% (County) Rural electrification rate: 0.6% (County)
Main fuel for lighting: Fuel wood, 98.5% Main roof material: Grass and makuti,
37.0%

Self-employed informal, 28.1% / Self-
pastoralist, 22.2%
Activity in the last 7 Worked for pay: Family Family agriculture
days 2.6% business: holding: 42.3%
17.3%
Household customer demand: 93% of the households the 84 households surveyed in

Lorugum are willing to be supplied with electricity. Of these, 83% are willing to pay
upfront. Factoring in the reasons for not wanting electricity, likely initial household
uptake could reach 87%.
50% of respondents use battery-powered flashlights as the main source of lighting. Only
8% of the respondents use kerosene as the main source, while 31% use firewood. 5% use
solar lanterns and 6% solar home systems. If supplied with electricity, about 90% would
use it for lighting and charging mobile phones and about half would use it for radios, TVs
and other household appliances. 14% would intend to use a refrigerator.
Business customer demand: 23 businesses Institutional customer demand: 7
were surveyed at Lorugum, of which 20 institutions were surveyed at Lorugum. All
indicated a willingness to pay for are interested to pay for electricity service.
electricity. 85% of the businesses would 100% of the institutions would consider
consider having electricity for lighting, 65% having electricity for indoor lighting, 71%
for radio, 55% for TV, 50% for cell phone for outdoor security lighting, a TV and a
charging and 40% for a DVD player and a projector while four would like to use a
refrigerator. One business would like computer and printer/copier.
electricity for a milling machine.
Existing public and private institutions: There are at least 8 institutions including 4
schools, 3 churches and 1 dispensary. Business activities include car, motorcycle and
bicycle repair shops, phone charging, retail shops, tailors, small restaurants and food
stalls, bars and posho mills. There is also a telecommunication base station at the site.
Organizational possibilities: There are 2 associations of business people and livestock
traders
Security: Inter-ethnic conflicts over natural resources and cycles of cattle rustling
between communities in Turkana, neighbouring counties and across the border. Water
resource scarcity.
RE Solar: 6.29 Wind: Poor (0 - 90 Hydro: n/a, likely Other:

resources kWh/m2/day (GHI) W/m2 at 50m) no potential n/a
1134 kWh 118 kW 300 kWp 250 kW Solar
Lorugum is located in Turkana County, approximately 47 km southwest of Lodwar town,

where there is a KPLC mini-grid. Lorugum does not currently have electricity service and
there are no known plans for such.

It is estimated that Lorugum has up to 968 potential electricity customers, made up of
914 households, 42 businesses, 11 institutions and one anchor load customer
(telecommunications base station). If all 914 households are connected, the potential
mini-grid could provide electricity to a population of about 5,670 based on Lorugums
average household size of 6.2 people. The estimated demand segmentation is show in
Table 51.
Table 51: Demand segmentation at Lorugum

Category Total (%)
users (Wh/d)
Households 914 863,913 76%
Business 42 147,211 13%
1 28,800 3%
Telecom base station
Total 968 1,134.852 100%
Projections for customer consumption and demand growth in a base case scenario lead
to an estimated daily load of 1,134 kWh and a 118 kW peak by the fifth year after the
implementation of a mini-grid. A 300 kWp solar PV system with a 250 kW diesel generator
and a 2,680 kWh battery is modeled to meet the demand. The resultant solar fraction is
91%. Such a system at USD 6,221/kW is expected to cost USD 1.9 million or USD 1,928 per
customer in the base case growth scenario. This includes 19.4 km of distribution network.
In the higher business growth case scenario, by year five the daily load increases to 1,352
kWh. To meet this demand, the HOMER simulation results indicate that the optimum
configuration would be PV generation of 370 kWp with battery storage of 2,680 kWh and
a 300 kW diesel genset backup delivering peak power of 270 kW, with a solar fraction of
91%. At USD 5,532/kW the mini-grid is expected to cost USD 2.05 million or USD 2,114
per customer. The length of the distribution network remains the same as in the base
case scenario.

Annex II additional tables and figures
Figure 41: Map of sites in selection database

Table 52: End-user survey sample versus estimated population at the 21 sites
Google SREP 2013 or
Site Type of user surveyed Data or estimates from local area leader
Earth count KNBS 2009
Population
Name Household Business Institution Sample size Business population Institution population Buildings Households
(2015)
Dujis 71 37 2 110 NA 55 5 170 539
Bahadale 62 41 2 105 NA 58 9 358 937
Ijara 62 36 6 104 NA 52 7 500 525
Mfangano 84 21 7 112 15,000 142 9 n/a 5,574
Ngodhe 81 6 2 89 500 22 5 100 418
Takawiri 88 10 3 101 2,000 41 4 160 346
Kadaina 50 864
39 4 6 49
Island NA 14 6
Near Ogembo 87 13 3 103 1,400 36 11 361 4,954
Kaivirya 76 26 4 106 NA 27 9 135 376
Zombe 84 20 4 108 NA 57 6 200 924
Wasini Island 130 15 13 158 NA 49 18 196 965
Korr 83 22 4 109 3,000 36 13 200 837
Kargi 84 15 6 105 1,000 32 10 260 876
Mageta 79 16 9 104 8,000 175 9 300 1,743
Rukanga 67 23 12 102 NA 85 15 460 942
Hola 76 45 22 143 NA 310 28 n/a 7,370
Chardende 40 35 4 79 6,000 81 6 50 861
Napeitom 40 0 2 42 240 41 14 120 717
Lorugum 84 23 7 114 18,785 40 8 600 914
Tamkal 70 38 11 119 NA 102 20 160 345
Alale 53 31 7 91 NA 59 8 297 540
Total 1,540 477 136 2,153

Percentage 71.5 22.2 6.3 100

Table 53: Overview of some usage & expenditure findings
Households Businesses Institutions

Primary energy uses Lighting & Lighting & Lighting &
cooking cooking cooking
Daily kerosene usage (hours) 3.54 3.4 3.5
Daily usage of dry cells (hours) 4.5 4.8 5.0
Daily generator usage (hours) 4.0 8.3 5.0
Daily firewood usage (hours) 4.3 6.5 5.9
Daily electricity usage (hours) 9.5 11.3 12.6
Mean monthly kerosene consumption 4.5 ltr 4.2 ltr 4 ltr
Mean monthly expenditure on kerosene KES 526 KES 672 KES 522
Mean monthly dry cell battery consumption 4.3 6.7 9.1
Mean monthly expenditure on dry cell batteries KES 286 KES 276 KES 454
Mean monthly firewood consumption 391 kg 732 kg 1,300 kg
Mean monthly expenditure on firewood KES 1,050 KES 1,701 KES 7,831
Mean monthly cost genset fuel & maintenance KES 2,197 KES 4,158 KES 10,664
Table 54: Projected customers at 5 sites by type and electricity consumption

No. Wh/d/ No. Wh/d/ No Wh/d/ No. Wh/d/ No. kWh/
user user . user user year
Takawiri 30 945 23 4,319 4 6,812 2 68,072 32 199,395
0 9
Korr 80 945 60 3,626 17 7,948 6 19,093 88 446,536
0 3
Kadaina 42 945 13 5,033 8 2,965 0 0 63 47,029
Dujis 60 945 44 3,541 8 7,689 0 0 65 286,324
0 2
Lorugu 91 945 42 3,505 11 8,630 1 28,800 96 414,221
m 4 8
Table 55: Takawiri at 89%, 10% and 50% solar fraction configurations
Takawiri PV Diesel Battery Converter Capital Capital Capital
scenarios size genset size size (kW) costs costs costs
(kW) size (kWh) (USD) (USD/kW) (USD/
(kW) customer)
Solar 89% RF 180 110 965 110 960,477 5,336 2,920
Solar 50% RF 90 130 965 110 834,649 4,637 2,537
Solar 10% RF 20 150 322 50 596,596 3,314 1,813

Table 56 provides an overview of the potential customers, daily load, peak load, estimated mini-grid system generator size (for PV with storage and
diesel backup) and best potential renewable energy resource (RE) at all 21 sites surveyed, including those assessed to identification level and those
that already have electricity service. The sites are grouped by region.
Table 56: Overview of estimated system size & RE potential at 21 surveyed sites
Location Number of Daily Peak Diesel
Number of Number of Buildings PV size RE
institution load load genset
Region Site households businesses counted (kWp) potential
s (kWh) (kW) size (kW)
1. Western Mageta 1,743 175 9 300 1,766 381 561 405 Solar
Mfangano 5,574 142 9 n/a 5,326 1,149 1,690 1,222 Solar
Near Ogembo 4,954 36 11 361 4,797 1,034 1,523 1,100 Solar & hydro
Ngodhe 418 22 5 100 447 96 143 103 Solar
Takawiri 346 41 4 160 410 109 180 110 Solar
2. North East Alale 540 59 8 297 678 146 216 156 Solar
Kargi 876 32 10 260 950 205 302 218 Solar
Korr 837 36 13 200 1,108 244 350 250 Solar & wind
Lorugum 914 40 8 600 1,106 226 300 250 Solar
Napeitom 120 0 14 120 130 28 42 31 Solar
Tamkal 345 102 20 160 603 130 192 139 Solar & hydro
3. Eastern Bahadale 937 58 9 358 532 114 169 122 Solar
Dujis 539 55 5 170 784 156 220 160 Solar
Chardende 861 81 6 50 985 212 313 227 Solar
Hola 7,370 310 28 n/a 7,301 1,574 2,317 1,674 Solar
Ijara 525 52 7 500 672 145 214 155 Solar
Kaivirya 376 27 9 135 480 103 153 111 Solar
Zombe 924 57 6 200 986 212 314 227 Solar
4. Coast Kadaina Island 42 14 6 50 128 25 40 30 Solar & wind
Rukanga 942 85 15 460 1,067 230 339 245 Solar
Wasini Island 965 49 18 196 1,005 216 320 231 Solar & wind
Sources: (1) households, 2009 census, 2013 SREP or 2015 chief interviews, (2) businesses & institutions, chief interviews, (3) RE resources, HelicoClim, SWERA, SREP & others

Table 57 below presents a preliminary indication of the potential of each of the 21 sites surveyed for a mini-grid based on eleven key demand-side
parameters investigated as part of the site characterization exercise: (a) distance from the existing national grid or existing or planned mini-grid,
(b) site electricity service status, (c) business and (d) household monthly ability to pay at 10% of income, percentage of (e) business and (f)
household respondents willing to pay upfront for electricity, the maximum amount that (g) businesses and (h) households are willing to pay for a
connection, the maximum monthly amount that (i) businesses and (j) households are willing to pay for electricity and (k) the estimated number of
potential anchor load customers.
A threshold is then applied to each parameter. Depending if the findings for a site are higher, lower or significantly lower than the threshold, the
parameter is colour coded to indicate high (green), medium (yellow) or low (red) potential. For example, if around 75% of more of potential end-
users are willing to pay upfront for an electricity connection, this is considered an indication of higher potential so the parameter in Table 57 is
coloured green. If less than 50% of end-users are willing to pay upfront, the site may have lower potential demand and is accordingly colour-coded
red. Yellow colouring indicates moderate potential (50%-74% of users willing to pay upfront for a connection).
It can be seen that eight of the 21 sites have higher potential (6 or more of 11 variables are coloured green) while nine sites have low potential as
they are already or will soon be grid-connected, supplied by a mini-grid (although a private IPP could be integrated on the generation side) or have
low ability and/or willingness to pay. At four sites the potential is moderate.
Potential is tentative the assessment is based on site characteristics and average Ability to Pay (ATP) and Willingness to Pay (WTP) only and not
cost of mini-grid supply. In addition, the latest status of REA and KPLC grid extension plans were not always known.

Table 57: Tentative potential at the 21 sites based on selected parameters
Location Distance & electricity ATP @ 10% WTP WTP upfront (KES) WTP monthly Anchor Comments
status income (KES) upfront (%) (KES) loads
Region Site From Electricity status BS HH BS HH BS HH BS HH Number
grid
(km)
Western Mageta Island Greenfield 1,765 1,630 93 76 6,857 8,453 800 461 2 8/11 green. Suitable for PO or PPP
Mfangano 0 Mini-grid 1,896 1,510 63 55 3,000 8,750 425 386 n/a KPLC mini-grid, suitable for grid-proximate PO or
PPP
Near Ogembo 2 National grid 2,018 1,151 67 80 8,250 5,555 590 433 2 National grid, suitable for grid-proximate PO only
Ngodhe Island Greenfield 3,412 1,965 83 88 12,667 7,675 420 428 1 7/11 green. Suitable for PO or PPP
Takawiri Island Greenfield 1,733 1,663 70 76 2,671 8,223 556 409 2 6/11 green. Suitable for innovative PO or PPP
Northeast Alale 115 Soon national 3,511 2,066 81 74 18,605 11,693 824 603 1 9/11 green. Grid extension, grid-proximate PO only
grid
Kargi 49 Greenfield 3,606 2,775 73 91 13,200 12,123 971 717 0 8/11 green. However, grid extension from LTWP?
Korr 55 Greenfield 3,950 1,624 38 46 15,000 9,788 933 515 6 6/11 green. However, grid extension from LTWP?
Lorugum 47 Greenfield 1,732 587 50 33 14,409 11,738 627 386 1 4/11 green. Potential, but challenging for PO
Napeitom 60 Greenfield n/a 520 n/a 46 n/a 6,895 n/a 367 0 Low PO potential, no businesses, depopulation
Tamkal 42 Soon national 3,719 2,505 79 83 11,444 12,291 391 513 1 6/11 green. Grid extension, but not for some time
grid
Eastern Bahadale 79 Greenfield 2,403 952 71 64 11,739 10,521 927 620 1 7/11 green. Suitable for PO or PPP
Dujis 58 Greenfield 2,222 1,216 77 57 7,810 8,579 518 302 0 3/11 green. Potential, but challenging for PO
Chardende 36 Greenfield 2,547 1,885 97 81 9,682 7,722 623 700 0 6/11 green. However, close to national grid
Hola 0 Mini-grid 2,340 1,572 78 77 14,875 10,810 1,286 441 n/a KPLC mini-grid, suitable for grid-proximate PO or
PPP
Ijara 55 Greenfield 1,202 1,124 85 76 12,286 11,103 1,008 540 1 6/11 green. Suitable for PO or PPP
Kaivirya 32 Greenfield 496 411 55 56 7,750 10,583 445 338 1 Lower potential, also close to national grid
Zombe 0 National grid 1,082 694 63 62 14,850 13,866 260 498 1 National grid, suitable for grid-proximate PO only
Coast Kadaina Island Island Greenfield 4,100 2,323 100 78 13,333 12,474 1,000 678 0 10/11 green. Grid extension may be cheaper
Rukanga 0 National grid 2,009 2,686 100 73 10,000 17,955 533 815 n/a National grid, suitable for grid-proximate PO only
Wasini Island Island Greenfield 2,620 2,013 100 96 12,200 8,271 1,338 713 2 10/11 green. Suitable for PO or PPP
Sources: (1) Distance from grid, 2015 Google Earth, (2) Electricity status, various, (3) ATP, end-user surveys, (4) WTP, end-user surveys, (5) Anchor loads, area chief interviews
Note: BS = Business, HH = Household, ATP = Ability to Pay, WTP = Willingness-to-Pay, PO = Private Operator, PPP = Public Private Partnership, LTWP = Lake Turkana Wind Power

Legend Higher potential Medium potential Lower or no potential
Note: potential is preliminary, tentative and based on site location, known status, and relative ATP and WTP only, not mini-grid costs and other factors

Table 58: Overview of KPLC mini-grids assessed in this study46
Mini-grid Type Nominal Effective Customers

Capacity Capacity
Baragoi Diesel 248 kW 138 kW 230
Eldas Diesel 184 kW 184 kW 80
Elwak Hybrid Solar 740 kW 610 kW 802
Habaswein Hybrid Solar and Wind 760 kW 542 kW 1,015
Hola Hybrid Solar 1,220 kW 660 kW 1,956
Lodwar Hybrid Solar 2,740 kW 1,480 kW 2,380
Lokichoggio Diesel 680 kW 500 kW 166
Mandera Hybrid Solar 2,350 kW 1,480 kW 4,000
Marsabit Hybrid Wind 2,900 kW 2,800 kW 3,300
Merti Hybrid Solar 250 kW 170 kW 436
Mfangano Hybrid Solar 520 kW 390 kW 120
Mpeketoni Diesel 1,285 kW 950 kW 1,503
Rhamu Diesel 184 kW 184 kW 2,132
Takaba Hybrid Solar 244 kW 244 kW 300
Wajir Diesel 3,400 kW 3,130 kW 4,100
TOTAL 17,705 KW 13,462 KW 20,598
Source: KPLC datasets, 2013 SREP, 2014 KfW & AFD studies
Table 59: Electricity generation and maximum load demand in 2014 47
Mini-grid Electricity Generated Maximum Load Demand

(MWh, 2014) (2014)
Baragoi (248 kW) 208* 79
Eldas (184 kW) 177 79
Elwak (740 kW) 714 166
Habaswein (760 kW) 1,159 209
Hola (1.22 MW) 3,005 686
Lodwar (2.74 MW) 5,513 1,064
Lokichoggio (680 kW) 972 296
Mandera (2.35 MW) 7,149 1,390
Marsabit (2.9 MW) 4,220 980
Merti (250 kW) 268 68
Mfangano (520 kW) 281 72
46Kenya Power and Lighting Company, KPLC (2015) Off-Grid Diesel Power Stations Ongoing Projects and 2013/2014
Projects
47Kenya Power and Lighting Company, KPLC (2015), Off-Grid Power Stations Generation (Diesel and Renewable
Energy), Fuel Consumed, Fuel Cost, Maximum Load Demand, Availability and Number of Customers monthly reports
2012 -2015

Mpeketoni (1.3 MW) 2,450 589
Rhamu (184 kW) 226 131
Takaba (244 kW) 291 95
Wajir (3.4 MW) 5,577 1,412
* Year 2013 instead due to data for 2014 not being available.
Table 60: Annual electricity generation and peak load demand growth rates48
Mini-grid Growth Growth Growth Growth Average
2010-2011 2011-2012 2012-2013 2013-2014
(year of
commissioning)
Generation
Generation
Generation
Generation
Generation
Max. Load
Max. Load
Max. Load
Max. Load
Max. Load
Electricity
Electricity
Electricity
Electricity
Electricity
demand
demand
demand
demand
demand
Wajir (1988) 3% 13% 3% 14% 16% 6% 6% 9% 7% 10%
Mandera (2000) 6% 9% 12% 13% 20% 9% 27% 31% 16% 15%
Marsabit (2000) -3% 12% 16% 4% 19% 22% 14% 15% 11% 13%
Lodwar (2001) 9% 2% 12% 10% 9% 13% 23% 16% 13% 10%
Mpeketoni (2008) 32% 6% 38% 4% 7% 38% 15% 10% 22% 14%
Merti (2008) 27% 12% 19% 20% -8% 9% 29% 13% 16% 13%
Habaswein (2008) 21% 1% 38% 43% 18% 24% 14% -1% 22% 15%
Hola (2008) 50% 22% 17% 11% 18% 30% 22% 23% 26% 21%
Baragoi (2009) 29% 47% 2% 60% 19% -11% NA 11% 16% 23%
Elwak (2009) 31% 9% 14% 10% 24% 30% 11% 8% 19% 14%
Mfangano (2011) - - 47% -18% 43% 25% 46% 13% 45% 5%
Eldas (2012) - - - - 2% 400% 19% -1% 10% 122%
Lokichoggio (2012) - - - - 92% 3% 41% 30% 65% 16%
Rhamu (2012) - - - - -75% 488% 65% 31% -36% 178%
Takaba (2012) - - - - 23% 44% 43% 20% 32% 31%
Figure 42 and Figure 43 represent the load profile for a typical day (not necessary the
same day) for eight of the stations. For representation purposes, mini-grids have been
grouped in three lots, with Wajir and Lodwar on the right axis of the second graph since
their load is much higher than the others. A general pattern is observed along the stations
were there are two load peaks along the day, first one at around noon and a second more
pronounced one at 20:00. The only exception would be Lodwar that seems not to have
such a second peak in the evenings. However, this needs to be further studied and
compared with other days along the year to draw conclusive results.
48 Consultants analysis of off-grid stations generation and maximum load demand data from KPLC

70
60
50
40
LOAD (KW)
30
20
10
0
1:00
2:00
3:00
4:00
5:00
6:00
7:00
8:00
9:00
0:00
14:00
10:00
11:00
12:00
13:00
15:00
16:00
17:00
18:00
19:00
20:00
21:00
22:00
23:00
TIME (HRS)
Eldas Baragoi Merti Mfangano
Figure 42: Typical daily load curves at 4 smaller KPLC off-grid stations49
250 1800
1600
200 1400
1200
150
LOAD (KW)
1000
800
100
600
50 400
200
0 0
1:00
2:00
3:00
4:00
5:00
6:00
7:00
8:00
9:00
0:00
10:00
11:00
12:00
13:00
14:00
15:00
16:00
17:00
18:00
19:00
20:00
21:00
22:00
23:00
TIME (HRS)
Elwak Lokichoggio Wajir Lodwar
Figure 43: Typical daily load curves at 4 larger KPLC off-grid stations50
Table 61: Recent diesel fuel generation costs at selected KPLC mini-grids51
Parameter Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15
Diesel Generation (kWh) 27,133 27,740 29,213 24,075 28,434 27,489
Mfanga
no
Fuel Cost (KES 000) 1,667 1,532 1,648 1,551 1,337 1,504
Fuel Cost (USD) 16,674 15,315 16,484 15,507 13,374 15,038
49 Consultants analysis on KPLC data sets

50 Ibid
51 Kenya Power and Lighting Company, KPLC (2015), Off-Grid Power Stations Generation (Diesel and Renewable
Energy), Fuel Consumed, Fuel Cost, Maximum Load Demand, Availability and Number of Customers monthly reports
2012 -2015

Fuel Cost (USD/kWh) 0.62 0.56 0.57 0.65 0.48 0.55
Mpeketoni
Fuel Cost (KES 000) 5,964 6,642 5,231 6,004 6,509 5,480
Fuel Cost (USD) 59,637 66,416 52,315 60,037 65,086 54,793
Fuel Cost (USD/kWh) 0.29 0.31 0.33 0.29 0.33 0.27
Marsabit
Fuel Cost (KES 000) 12,866 11,028 10,103 7,537 12,537 9,338
Fuel Cost (USD) 128,656 110,276 101,029 75,373 125,371 93,382
Fuel Cost USD/kWh 0.37 0.30 0.26 0.22 0.32 0.25
Habaswein
Fuel Cost (KES 000) 3,308 2,747 2,627 3,752 4,164 3,341
Fuel Cost (USD) 33,076 27,475 26,269 37,523 41,641 33,411
Fuel Cost (USD/kWh) 0.40 0.35 0.28 0.40 0.39 0.38
Lodwar
Fuel Cost (KES 000) 13,021 16,205 13,237 13,626 13,165 12,429
Fuel Cost (USD) 130,212 162,052 132,374 136,263 131,648 124,291
Fuel Cost (USD/kWh) 0.27 0.34 0.29 0.28 0.28 0.27
600 12%
MWh/year
500 10%
400 8%
300 6%
200 4%
100 2%
- 0%
Haba
Elwa Man Mfan Mars Taka Lodw
Merti swei Hola
k dera gano abit ba ar
n
Generation share from
11% 8% 7% 5% 4% 4% 4% 3% 2%
renewable energy (2014)
Renewable Energy Generation
76 21 505 59 13 180 16 83 94
(MWh/year)
Figure 44: Renewable generation (MWh/year) and share (%) 52
52 Consultants analysis on KPLC data sets

Table 62: Overview of renewable energy resource availability at KPLC sites 53
Mini-grid Wind (W/m2 at 50m) Solar (GHI) (kWh/m2/day)
Baragoi Very good (425 - 615) 6.56

Eldas Marginal (90 - 165) 5.00
Elwak Marginal (90 - 165) 5.03
Habaswein Marginal (90 - 165) 5.52
Hola Marginal (90 - 165) 5.46
Lodwar Marginal (90 - 165) 6.39
Lokichoggio Marginal (90 - 165) 6.14
Mandera Marginal (90 - 165) 5.48
Marsabit Excellent (815 - 1400) 6.20
Merti Marginal (90 - 165) 5.95
Mfangano Poor (0 - 90) 5.51
Mpeketoni Moderate (165 - 275) 6.09
Rhamu Poor (0 - 90) 5.40
Takaba Marginal (90 - 165) 5.07
Wajir Marginal (90 - 165) 5.05
Note: W/m2 = watt/m2, GHI = global horizontal irradiation
53 Consultants analysis of SWERA wind data and PVGIS GHI data

Table 63: Summary of electricity use at Mpeketoni54
54Kirubi et all (2008) Community-Based Electric Micro-Grids Can Contribute to Rural Development: Evidence from
Kenya

Table 64: Installed capacity and customers per site
KPLC mini-grid Diesel capacity (kW) RE capacity (kW) Customers (#)
Baragoi 248 0 230
Eldas 184 0 80
Elwak 680 60 802
Habaswein 680 80 1,015
Hola 1,160 60 1,956
Lodwar 1,480 60 2,380
Lokichoggio 680 0 166
Mandera 2,000 350 4,000
Marsabit 2,400 500 3,300
Merti 240 10 436
Mfangano 520 0 120
Mpeketoni 1,285 0 1,503
Rhamu 184 0 2,132
Takaba 184 60 300
Wajir 3,400 0 4,100
Potential mini-grids Diesel capacity (kW) PV capacity (kWp) Customers (#)

Takawiri 110 180 329
Korr 250 350 883
Kadaina Island 30 40 64
Dujis 160 220 652
Lorugum 250 300 968
Table 65: KPLC & potential off-grid site distribution lines & customers
KPLC mini-grid 33 kV (km) 11 kV (km) LV lines (km) Customers (#)
Baragoi (248 kW) 0 7 4.3 230
Eldas (184 kW) 66 0 13.6 80
Elwak (740 kW) 0 25 52 802
Habaswein (760 kW) 82 23 150 1,015
Hola (1.22 MW) 130 45 42 1,956
Lodwar (2.74 MW) 0 35 45 2,380
Lokichoggio (680 kW) 19.5 0 16 166
Mandera (2.35 MW) 0 86 25 4,000
Marsabit (2.9 MW) 0 123 65 3,300
Merti (250 kW) 0 6.9 18.2 436
Mfangano (520 kW) 42 0 7.3 120
Mpeketoni (1.3 MW) NA NA NA 1,503
Rhamu (184 kW) 58 0 2.5 2,132
Takaba (244 kW) 66 0 16 300
Wajir (3.4 MW) 56 130 800 4,100
Potential mini-grids 33 kV (km) 11 kV (km) LV lines (km) Customers (#)

Takawiri (180 kW) 0 0 6.6 329
Korr (350 kW) 0 0 17.7 883
Kadaina 40 kW) 0 0 1.3 64
Dujis (220 kW) 0 0 13.0 652
Lorugum (300 kW) 0 0 19.4 968

Table 66: Mini-grid CAPEX categories and items
Category (by component in the value chain) Unit
1. Generation
PV modules kWp
PV modules structure kWp
Cabling PV generator kWp
Wind turbine incl. tower kW
Hydro turbine incl. penstock and civil works kW
Regulators (PV, Wind or Hydro) kW
Protections of regulators unit
Labour CAPEX
2. Storage & powerhouse
Battery (incl. cells, cabling, protections) kWh
Monitoring and control system unit
Technical room (powerhouse with fence) m2
Labour CAPEX
3. Conversion
Battery inverter incl. cabling kVA
Genset (diesel) kVA
EMS (Energy Management System) unit
Labour CAPEX
4. Distribution
LV distribution grid (incl. poles, cabling and protections) 0.415 kV m
MV distribution grid 11 kV m
Transformers kVA
Public lighting m
Smart meters and service connections customer
Internal installations (incl. protections) customer
Labour CAPEX
5. Services
PM (Project Management) and engineering %CAPEX
Capacity building and training (of local operators) %CAPEX
6. Logistics
International shipping costs (maritime), incl. customs miles
Local transportation costs (road) km
Storage of equipment %CAPEX
Insurance cost %CAPEX
Table 67: Mini-grid OPEX categories and items

Category (by type of OPEX) Unit
1.Variable O&M costs
Fuel consumption (genset) kWh/year
2.Fixed O&M costs
Staff Annual Dedication (months)
Local administrator (field manager), local caretaker and guard,
professional preventative O&M, professional administrator (office-based USD
manager)
Other
Permitting licensing USD/year

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Kenya Market Assessment for Off-Grid

Carbon Africa Limited

African Solar Designs Kenya National Bureau of Statistics

lAgence Franaise de Dveloppement Kenya Power

Council of Governors Kreditanstalt fr Wiederaufbau

County Governments PowerGen Renewable Energy

Deutsche Gesellschaft fr Internationale Rural Electrification Authority

ERC-IFC Kenya mini-grids market assessment final report ii

ERC-IFC Kenya mini-grids market assessment final report iii

A report on the selection of 21 off-grid and grid-connected sites.

ERC-IFC Kenya mini-grids market assessment final report iv

End user survey

ERC-IFC Kenya mini-grids market assessment final report v

A summary of the results of the end-user survey is as follows:

ERC-IFC Kenya mini-grids market assessment final report vi

Table 1: Overview of end-user survey main findings

Households Business Institutions

ERC-IFC Kenya mini-grids market assessment final report vii

Key findings (non-exhaustive):

ERC-IFC Kenya mini-grids market assessment final report viii

Table 2: Projected customers at five sites by type and electricity consumption

Based on renewable energy resource availability, solar PV is the most applicable

ERC-IFC Kenya mini-grids market assessment final report ix

ERC-IFC Kenya mini-grids market assessment final report x

Characterization of existing mini-grids

5 Exchange rate of KES-USD 100.

ERC-IFC Kenya mini-grids market assessment final report xi

ERC-IFC Kenya mini-grids market assessment final report xii

Table 4: Overview of sites characterized to "pre-feasibility" level

Cost/Costumer - 10% E-IRR

ERC-IFC Kenya mini-grids market assessment final report xiii

Cost supply curves

ERC-IFC Kenya mini-grids market assessment final report xiv

Table 5: Variation of LCOE for Dujis mini-grid (KES/KWh)

Customer demand curve

Market size potential

Figure 3: Supply cost & demand curve at Dujis

ERC-IFC Kenya mini-grids market assessment final report xv

Capital / investment subsidies targeting the initial investment. Most of lifecycle

ERC-IFC Kenya mini-grids market assessment final report xvi

Determination of the subsidy to be applied, or combination thereof, involves calculating

ERC-IFC Kenya mini-grids market assessment final report xvii

ERC-IFC Kenya mini-grids market assessment final report xviii

Rationale of the study

Potential uses of the data

ERC-IFC Kenya mini-grids market assessment final report 19

Investors and operators

Information on frequency of income, energy purchase, and compensating measures when

ERC-IFC Kenya mini-grids market assessment final report 20

2.1 Site selection overview

Minimum number of potential customers

ERC-IFC Kenya mini-grids market assessment final report 21

Electricity service status

However, a site was still considered in one of three instances:

Table 7: Site selection criteria

No (planned) electricity Economics Renewable energy

ERC-IFC Kenya mini-grids market assessment final report 22

Specific interest Site specific 1 point 0 or 1 point

Site selection results

Table 9: Ranking of top (weighted scoring) sites

Site Name County Site Status

ERC-IFC Kenya mini-grids market assessment final report 23

Table 10: Selected sites with existing KPLC mini-grids