To start setting up a mini-grid business, the developer has to assess feasibility of the project, decide on a corporate structure and hire local staff.

Assess Feasibility

The first step for any developer is to carry out a feasibility study on the mini-grid opportunity ie assess the viability of the proposed projects in the local market.

The feasibility study typically covers the following:

• Existing and potential for rural electrification;
• Local legal, policy and regulatory framework, permitting and compliance requirements;
• Proposed project sites;
• Projected demand (usually based on an extrapolation of socio-economic data from the last national census which needs to be confirmed through a detailed demand assessment for the final technical design);
• Preliminary technical design, cost and revenue projections, economic, financial, environmental and social analysis; and
• A realistic implementation work-plan.

Assuming the feasibility study has positive results, developers then have to choose a corporate structure for their business.

Corporate Structure

The choice of corporate structure will depend on the goals and origin of the developers and local regulations.

• Are the developers local or international?
• Are they planning to hold the mini-grid assets for a long time or sell them?
• Are their motivations more strategic such as those of a utility or manufacturer?
• Are they an existing solar home system or energy efficient company looking to diversify, or a financial investor?

Whatever their intention, developers will generally need to set up a local company (often on a limited liability basis) to hold the mini-grid assets if they want to generate, distribute and sell electricity in the relevant country.

Hiring Local Staff

The next step is the hiring of local staff.

We recommend developers create staff organograms, with clearly defined roles and responsibilities. Staffing needs depend a lot on the business model of the developer and whether they plan to do things in-house or contract third parties.

Developers are often faced with a lack of skills and experience in the mini-grid market.

This challenge affects all staff levels, including company management, finance and accountancy, project management and local engineers. The lack of skills is a common theme across many industries in Africa, although the relative immaturity and rural nature of the mini-grid sector makes the situation more acute.