In post-conflict Somaliland, electricity prices are some of the highest anywhere in the world, peaking at a dollar per kilowatt-hour. (In the US, by comparison, the average price is nearer 12 cents). For poor families and small businesses, where the average household salary is less than $2 a day,1 the impact can prove crippling. Mott MacDonald is managing a UK aid-funded programme that aims to unlock the potential of this young state’s renewable energy resources with a view to generating social outcomes.
Despite Somaliland having substantial energy resources – especially wind and solar – consumption per capita is among the lowest in Sub-Saharan Africa. This is due to the prohibitive cost. In common with other post-conflict contexts, the energy mix is dictated by a short-term and localised outlook. Private operators set up diesel-based mini grids that required limited infrastructure investment. The running overheads are much higher than renewables, but the returns are immediate and more attractive. Return on investment for a solar or wind plant is typically 10-12 years.
Although these local energy sector operators are well established on their ‘turf’, they tend to lack the capacity to implement large renewables installations with the power to appreciably lower electricity prices. How to engage with these local, well-connected operators and also find a way around their limitations is a central, practical consideration for the success of any programme.
The UK aid-funded Energy Security and Resource Efficiency in Somaliland (ESRES) programme aims to improve access to affordable electricity for communities by diversifying energy sources through the promotion of renewables and the development of an appropriate policy and regulatory framework. ESRES is now in its second phase.
Mott MacDonald is responsible for the day-to-day management of the programme, developing regulatory standards and providing technical assistance to the private sector and Government of Somaliland.
In Phase 1, we successfully ran a pilot with hybrid mini-grids, which combine solar energy with diesel generation for more reliable, cost effective, sustainable power. This allowed us to gather the experience to create the Somaliland Renewable Energy Fund (SREF), which was launched in April 2019 as part of Phase 2.
The fund makes investments in renewable energy and energy efficiency less risky and increased adoption rates of renewable energy technologies within the private sector. During ESRES Phase 1, we granted the initial investment for six private sector companies, incentivising them to build hybrid mini-grids that would fast-track the benefits of renewable (primarily solar) energy. To sign up, however, they had to commit to lowering their prices.
Learning the lessons of previous programmes, our approach was to work through the local operators and secure their buy-in. And then to link them up with international Engineering, Procurement and Construction (EPC) contractors, who could install the kit and train up the local people on the ground.
- Up to 42% price reductions in targeted areas
- Increased Somaliland’s generating capacity by 1.9 MW
- Reduced the reliance on diesel-powered generation
- Cut carbon emissions by 2,913 tonnes CO2e annually
ESRES Phase 1 supported the launch of six hybrid mini-grids which have made over 10,000 new connections while providing electricity at a reduced rate of 42% percent in those areas targeted for lower tariffs. Overall, Somaliland’s generating capacity has increased by 1.9 MW as a direct result of ESRES which reduced the reliance on diesel-powered generation and cut carbon emissions.
ESRES Phase 2 will increase investment into renewable energy in Somaliland with the aim of building on the success of Phase 1, while also exploring new business models. Phase 2 has the same goal of helping to alleviate poverty among Somaliland’s people and strengthening the country’s energy security.
1According to the the 2015 World Bank report Somaliland: Poverty Profile and Overview of Living Conditions