- Mini-Grid as a Path to Electrification in Africa
Mini grids have demonstrated their significance in enhancing energy access across Africa by reaching millions of individuals currently without electricity. This not only enables them to access essential modern services like healthcare, education, and business but also contributes significantly to overall socio-economic development. According to the Africa Energy Outlook 2022 by the International Energy Agency (IEA), mini grids are indeed the most cost-effective way to provide electricity access to 265 million people in 21 African countries by 2030, requiring a total investment of US$65 billion. Accordingly, governments must implement policies that stimulate the development of mini grids through an effective regulatory structure. Robust regulatory frameworks, similar to those employed to govern the operationalization of public utilities, are essential to ensure investors’ confidence and enhance prospects for mini-grid project profitability.
Despite the growing adoption of mini grids in Sub-Saharan African countries, existing frameworks are not consistently clear. In Cameroon, there has been no specific regulatory development since the enactment of primary legislation—the electricity code. The ambiguity surrounding sector policies has been a barrier to private investment, leading to uneven development within the industry. This has particularly affected the mini-grid sector, where the absence of a unified approach has led to subpar and varied development strategies by different promoters.
In Cameroon, where approximately 40% of the population lacks access to electricity, mini grids present a transformative opportunity to rapidly increase electrification rates, particularly in rural and underserved areas. By harnessing Cameroon’s abundant renewable energy resources, mini grids could not only bridge the energy access gap but also drive economic development, improve healthcare and education outcomes, and contribute to the country’s climate change mitigation efforts. Having established the importance of mini grids in Africa’s energy landscape, it’s crucial to examine how these systems are defined and regulated within Cameroon’s specific legal framework.
- Mini-Grids in the context of Cameroonian legislation
Mini grids are generally defined as localized, small-scale power generating and distribution systems that can be extremely useful in bringing electricity to isolated or neglected areas. Mini grids are relevant to the development and improvement of energy access rates in Africa because they offer a cost-effective and reliable solution for electrifying rural and remote communities that are not connected to the main grid or have poor grid service. In addition, they are a potential source of clean and sustainable energy that minimizes greenhouse gas emissions and promotes climate action.
In the Cameroonian context, the term “mini grid” lacks a specific definition within the relevant regulatory instruments. Nevertheless, despite the absence of a formal definition, the activity is acknowledged and subject to certain regulations. According to the interpretation and application of Article 68 of Law N ° 2011/022 of 14 December 2011 governing the electricity sector in Cameroon (The Electricity Code), a project can be identified as a mini-grid project if it entails the generation of electricity, along with the installation and operation of electricity distribution lines aimed at supplying power directly or indirectly to specific communities without grid connection. Regardless of the technology employed (solar, hydro, wind, etc.), power generation projects with a capacity of less than 5MW, and with distribution lines independent of the national grid, fall under the classification of mini-grid projects and are subject to the corresponding regulations.
- The Key Challenges for Mini-Grid Sector
- Challenges around Licensing Requirement for Mini Grids
In the context of Cameroon, mini-grid operators are required to get an Authorization according to the conditions specified by regulations. An Authorization is a legal act issued by the Electricity Sector Regulatory Authority (ARSEL) following consultations with the Ministry of Energy and Water Resources (MoE) that allows a project developer to carry out several activities in the electricity sector while also establishing the conditions and obligations that the private sector operator must meet.
Section 37 of the Electricity Code identifies the activities that require an Authorization, while Sections 60 and 61 expand on its application to electricity development in the context of promoting rural electrification. A joint reading of these provisions shows that the following are subject to authorization under regulation: self-generation facilities, installing and running a power distribution system, the installation of private electricity lines on or near a public road or less than 10 meters from a public electricity, telephone, or telegraph line.
Under the Electricity Code, authorizations are only granted when public electrical service is unavailable or insufficient due to a lack of production, transmission, or distribution capacity. This provision forms the basis of one of the major challenges that private sector operators encounter when trying to develop mini grids in Cameroon. By virtue of the Concession contract between the Republic of Cameroon and Eneo (the power utility), the latter is currently the sole concessionaire with a distribution perimeter that covers a substantial part of the national territory. The concession agreement provides that under the terms of the concession, Eneo is entitled to distribute electrical energy to users on an exclusive basis throughout its distribution perimeter. Also, one of the key performance indicators of the concession agreement is that the State of Cameroon expects Eneo to contribute to increasing the rate of access to electricity, particularly in rural and peri-urban areas, by 2% per year, i.e., 20% at the end of the concession in 2031.
If the terms of this concession agreement are strictly enforced, private companies would be unable to obtain authorization to develop electricity lines in areas within Eneo’s designated geographical coverage. This creates a major challenge for developers, as the national utility has been assigned a territory it cannot adequately serve. It is therefore crucial for the government to clarify its stance on this issue, allowing independent mini grids to develop projects in local communities based on energy demand.
- Multiplicity of Licenses and Uncertainty around Licensing Fees
Within the Cameroonian context, there are diverse licenses required to design and operate a mini grid. Several licenses are needed for setting up generation facilities, installing and running a power distribution system, and the installation of private electricity lines. Considering the small nature of some mini grid projects and the fact that they are developed within rural settings, it would be ideal to have a unified licensing framework for mini grids.
Regarding the costs of available licenses, according to Ministerial Order No. 0193 / A / MINEE dated April 28th, 2014, non-refundable license costs for electricity generation and distribution are as follows:
XAF 25,000 for capacities below 100kW
XAF 100,000 for capacities between 100kW and 1MW
XAF 2,500,000 for capacities between 1MW and 5MW
XAF 100,000 for setting up distribution lines in remote communities
These fees are payable to the Electricity Sector Regulatory Agency (ARSEL). While the regulatory instruments specify these costs, we cannot confirm that they remain accurate at the time of writing this article. Additionally, we note that there are several extra expenses related to processing fees and additional documentation.
- Limited Grid Integration Policies
Uncertainty around the fate of mini-grids upon arrival of the National Grid in Areas where Mini-Grid Projects exist. There is no clarity in the legal framework for the fate of mini-grids upon arrival of the National Grid in Areas where Mini-Grid Projects exist. This makes it worse because of the situation around the wide territorial coverage of the national utility discussed above. Thus, if an Authorization is granted to a private company to develop a mini-grid in areas covered by national utility license covers, it decides to expand the grid in that community soon, thereby putting the mini-grid project in direct competition with ENEO.
Given this, developers must exercise caution when choosing the communities for its projects, making sure that they do not fall within the ENEO geography or that the chance of the national grid extension is very low. Developers also must ensure that it targets areas that have not been identified by the Rural Electrification Agency (REA) as priority sites. This definitely adds a layer of work, additional research on the developers’ side which makes it quite challenging.
- Lack of clear framework for partnerships with Municipal councils
PPP negotiations for a mini grid project development with council members of the Djohong Municipality in the Adamawa region of Cameroon. Photo by Carl Mbeng, July 2023.
One of the key obstacles to mini-grid development in Cameroon is the absence of a clear framework for Public-Private Partnerships (PPPs) between the private sector and public or municipal authorities. Collaborating with municipal authorities on mini-grid projects is crucial for navigating the regulatory landscape efficiently, ensuring that all necessary permits and licenses are obtained without unnecessary delays. Municipal authorities can advocate for supportive policies, such as favorable tariffs, grid interconnection standards, and renewable energy incentives. Additionally, they can facilitate community engagement, which is essential for gaining local support and understanding energy needs. This collaboration can lead to more sustainable and community-focused mini-grid projects that are well-integrated into the local context.
While the Cameroonian government has outlined ambitious goals, such as achieving universal electricity access by 2035 and facilitating 20,000 new off-grid connections annually by 2030, there is no concrete legal structure that defines how private developers can collaborate with the government to form PPPs. The legal basis for decentralized local governance in Cameroon is established by Law No. 2019/024 of December 24, 2019, known as the “Decentralisation Law.” This law provides guidelines for regional and local authorities and permits municipalities to engage in partnerships with private companies for project development. Additionally, the more recent Law No. 2023/008 of July 25, 2023, which replaces the 2006 partnership law, offers a clearer framework for PPP contracts. This law emphasizes how government bodies and private sector entities can collaborate to develop projects and deliver essential services beyond the government’s capacity alone.
Despite these legal instruments, they are primarily designed for large-scale projects and involve complex, bureaucratic processes that can deter mini-grid developers. For instance, municipalities require approval from the State’s representative (Senior Divisional Officer) before entering agreements with private sector entities, adding an extra layer of complexity. As a result, the cumbersome requirements and slow approval process create challenges for private companies seeking to establish mini grids under a PPP model.
In this context, private developers are forced to explore alternative partnership structures, such as service contracts, concession agreements, or joint ventures, depending on the specific needs and characteristics of each project.
- Tariff Design Methodology and Considerations for Mini-Grids in Cameroon
Within the Cameroonian context, there is currently no specific tariff framework applicable to the sale of electricity to local communities in off-grid areas. The tariff for each project is determined using an Individualized Cost-Based Tariff model. One of the key requirements for filing for authorization is to provide a tariff study showing the suggested tariff and the formulas for adjusting these tariffs. Until more clarity is provided in this regard, it is the responsibility of the project developer to develop a suitable tariff methodology and propose it to ARSEL for validation.
In my opinion, this approach is not productive. Having clear guidelines and a well-defined tariff model would greatly benefit mini-grid developers. Clear regulatory guidelines can streamline the approval process, reduce uncertainties, and ensure compliance with local laws. A duly adopted tariff model would provide a predictable financial framework, helping developers to plan and secure funding more effectively.
- Complexity around the Requirement to possess Construction Permits
In Cameroon, a construction permit is an administrative authorization issued by the mayor of the community concerned or the government delegate for urban communities. It must be obtained before undertaking a new construction project or before the modification of an existing one. It is worth noting that a construction permit is only issued if the plot of land on which the construction is to be built has a land title. However, where such permits cannot be issued as a result of a lack of land certificates, the councils can issue a temporary permit to authorize the project developer to start development pending the acquisition of the land certificate.
It is worth noting that the existing instruments do not specify the requirement for building permits for mini-grid projects. However, because it is a general rule that all construction land in urban or rural areas requires permits, it is recommended that developers acquire tentative construction permits from the mayors of localities where they are developing projects just to ensure that the infrastructure it sets up is duly authorized and does not risk be demolished at any point.
- Uncertainty around ESG standards to be complied with:
Apart from the guidance provided in LAW NO. 96/12 OF 05 AUGUST 1996 relating to Environmental Management, which is quite limiting regarding key ESG standards for mini-grids, there is no specific direction for ESG standards tailored to mini-grid projects. Consequently, the same general rules that apply to large hydropower projects are often imposed on small-scale mini grids. This means developers must submit ESIAs, hazard assessments, and other complex ESG documentation typically reserved for large-scale power projects.
Streamlining and standardizing these requirements to fit the specific context of mini grids, following best practices, would significantly expedite the licensing process and boost confidence among investors and developers.
- Moving Forward: Progress and promise in Cameroon’s Mini-Grid Sector
Cameroon stands at a critical juncture where the development of a robust mini-grid sector could accelerate its path to universal energy access and sustainable development. Recognizing the challenges faced by mini-grid developers, the government has begun taking significant steps to create a more favorable environment for renewable energy development, focusing on two key areas: the customs regime and quality standards. Though much remains to be done, these efforts should be applauded.
Customs Regime Reforms
One of the most significant hurdles for mini-grid developers in Cameroon has been the complex customs regime for renewable energy products. Addressing this issue, the government implemented substantial reforms through the 2024 Finance Law:
A preferential customs regime was established for certain solar energy and off-grid electrification products.
Qualifying equipment can now be imported into Cameroon without incurring customs duties or taxes.
A Ministerial Circular was issued, detailing a specific list of renewable energy products that will enjoy this exemption for 24 months, beginning January 1, 2024.
These reforms will significantly reduce the financial burden on mini-grid developers, encouraging investment in clean energy solutions and contributing to the country’s sustainable energy goals.
Quality and Technical Standards
To improve clarity around quality and technical standards, the Standards and Quality Agency for Cameroon (ANOR) established 138 new Cameroonian standards in the field of renewable energy on August 16, 2024:
- 33 standards related to new and renewable energies
- 105 standards in the electricity and electrotechnical sector
These standards, developed through rigorous consultation and technical expertise, aim to meet market and consumer needs and expectations. They are essential for ensuring the safety, quality, and sustainability of energy infrastructure while supporting Cameroon’s economic and social development.
While these developments represent significant progress, there is still work to be done. The government has clearly demonstrated its commitment to integrating renewable energy as a key component of its energy strategy, with mini grids recognized as an essential means of harnessing this potential.
To build on this momentum, we recommend:
- Creating and implementing a clear licensing framework for mini grids that addresses all of the issues identified above.
- Developing standardized contractual documentations, tariff frameworks and financial models
- Continuing to create a more investor-friendly environment
By addressing these areas, Cameroon can fully unlock the immense potential of mini grids, transforming its energy landscape by reducing energy costs for households and businesses and lowering greenhouse gas emissions. The recent changes to customs and standards attest to the government’s willingness to honor its commitment to renewable energy development. As policymakers, regulators, and industry stakeholders continue to collaborate, the future of Cameroon’s mini-grid sector looks increasingly bright, promising significant strides towards universal energy access and sustainable development.
