Entiba Rural Improvement Project
Mwanye Chiefdom, Eastern Province (Zambia)
Entiba Energy is a developer, engineering and consulting firm devoted to renewable energy. Since its constitution the company look for the best solution in terms of sustainability, costs and benefits, and social impact for each energy challenge of our customers. In July 2017 Entiba Energy Zambia has been created to implement mini-grids in Rural Growth Centers (RGC) and SHS in its vicinity.
Entiba Energy is targeting rural areas in Zambia, where people are currently depending on the daylight, sharing that time for their domestic and agricultural tasks or learning activities at school. All tasks are manual and depend on the weather to grow one crop a year. In some places the only mechanised operation is the maize milling, and old diesel engines are used when fuel is available. They also use kerosene lamps and candles at night.
In Mwanye village, Entiba Energy Zambia will become the utility and perform O&M, after sales services including payment collection, solving technical issues at installations of customers and new business supervision. The main source of electricity will be a 100 kW off-grid PV system plus 230 kWh batteries for an area covering a radius of 1.5 km from the installation. Customers outside of that action radius will be supplied with a SHS. There will also be a small 25 kVAs diesel generator only intended for emergencies. Training and local capacity building will be provided by a local NGO working with the population to be familiarised with electricity, to teach them how to use the appliances and to provide them ideas and tools and supervision to raise their own business. Some locals will be trained to perform O&M tasks to ensure the longterm sustainability of the project, whereas others (mainly women) will learn about aftersales service and payment collection. Time frame will be at least 20 years, although it can be as prolonged as the owner desires. Changing solar modules after 20 years operation for more efficient ones will be less costly. The same can apply to batteries and electronic components of the installation. Wires, post, junction boxes and metres can have extended life service with the adequate maintenance.
To attract customers, Entiba Energy aims to mirror Zambia’s grid tariffs (Zesco) during daylight and charge a higher tariff only when the use of battery is necessary. For the financing structure, it proposes a 22% non-reimbursable grant and three years grace period before starting to repay debt until the local economy has been developed and higher tariffs can be charged. The rest of financing project structure is settled as 15% equity, and 63% over 10 years debt. Entiba Energy is flexible and can offer participation in form of equity in company, SPV/project or debt. PRESENTATION Equity remuneration can vary between 10 and 16% depending on final interest rate applied to debt. The case considers an annual interest rate of 8.65% (libor swap rate 15 year + 6% margin), and in that hypothesis equity remuneration will be 14,5% Internal Rate of Return (IRR) at 15 years. The project will be paid off within 13 years. Its market potential is enormous, since the project is easily scalable by adding new generation units in the RGC and easily replicable by building new ones in different RGC. Even if the company will only serve 10% of rural areas in Zambia, there is a potential market of one million people. The same scheme can be replicable elsewhere provided there is local regulatory support.
In Mwanye Chiefdom live around 5,000 people, thereof 950 attending primary school. They will have access to electricity for productive and domestic uses. They will save money on kerosene, candles, woods and diesel and they will be better served with reduced pollution. Their resilience will be increased since their crops will be less dependent on the weather, and they will be able to grow two crops a year generating more resources. They will have a better access to education and information, and electricity will provide ways for them to be more productive. As long-term impact is expected that new business related to services are created, such as shops, restaurants, hair dressers, telecom providers, etc. In the future, we plan to upscale the installation to supply more power to the local economy and use it as a training center for nearby chiefdoms where new plants are planned to be built. All lessons learned from this first installation will be applied in the coming ones.