Our Impact

Why is investment needed?

Our mission is to invest in and develop the electricity networks needed to transform people’s lives. In Africa today, over 600m people have no access to electricity. For those that do have a connection, their consumption is only 20% of the global average. Without reliable and well-run power infrastructure, companies don’t invest and grow, and economies fail to reach their potential.

Low rates of electrification in many African countries have been identified as the most pressing obstacle to economic growth, more important than access to finance, red tape or corruption. Improved access to energy in Africa has the potential to alleviate poverty, promote industrialisation and improve gender equality.

What’s the challenge facing Africa?

The funding needed to electrify Africa far surpasses the investment currently available from African governments and foreign donors. Governments, multilaterals, and private investors all have a role to play in funding the estimated US$345 billion needed by 2040 for transmission and distribution alone. With African economies expected to grow at an average of 4% per year between now and 2040, lower-carbon and renewable technologies will play an important role in decoupling carbon emissions from economic growth. These statistics demonstrate the extent of the challenge:

Only 1 in 3 Africans have access to electricity. This compares to almost 4 in 5 in South Asia.

Just 7 countries in sub-Saharan Africa (out of 54) have more than 50% of their people able to access electricity. On average, the region suffers 6.3 outages per month (equivalent to 76 outages per year) and 5.5 hours per outage.

There are 229km of electricity transmission lines per million people. Africa lags behind most countries, for example Peru (339km), Brazil (610km), and the US (807km).

51% of businesses across sub-Saharan Africa rely on diesel generators to make up for the lack of grid power. For Africa’s largest economy, Nigeria, it’s as high as 71%.

The need for investment in transmission and distribution

Over the past two decades, the African power generation sector has seen significant growth in investment. Much of this investment has come from private investors developing, building and operating grid-scale power plants. However, to create truly sustainable, efficient power sectors, areas beyond power generation require similar investment. Once generated, electricity still needs to reliably reach its intended users in a practical and efficient way.

Investment in transmission will alleviate the burden of oversupply in some countries and provide under-supplied regions with much-needed electricity. Investing in existing electricity networks can help them operate more effectively, increasing the quality of electricity that users receive, and ultimately helping to reduce GHG emissions.

Gridworks will therefore focus on these critical and under-invested areas.

How do we measure our Impact?

For every business we finance, we assess our development impact before investment, and measure that impact during and after the life of the investment. Several bespoke metrics are tracked for each investment and could include:

• Network loss reduction (both technical and commercial)

• Number of new connections

• CO2 emissions saved

• Power traded

• Job creation, specifically induced and indirect jobs

• New renewables capacity added to the grid

Evidence on Impact: How electricity supports economic growth and changes lives

There is widespread evidence demonstrating the link between economic growth and access to high quality, reliable power. Increasing generation and transport of energy has a powerful impact on economic output, especially in sectors highly dependent on reliable power supply, notably manufacturing, trade, transport, and services:

• A recent study conducted by CDC and Steward Requeen highlighted the impact of additional power on an economy. The study showed how a 2.6% increase in GDP in Uganda over 2011-2014 came about as a result of the construction of the 250MW Bujagali power plant, which enabled the national utility Umeme to improve its operations. This, in turn, led to reduced load shedding and the creation of more than 200,000 jobs nationwide. In Senegal, almost 70,000 jobs were estimated to be created or induced by the development of 90 MW of added capacity on the grid (Steward Requeen 2017).

Research by the International Growth Centre in Ghana in 2019 shows the link between unreliable power supply and non-payment of tariffs. It finds that unreliable power supply exacerbates non-payment, creating a “revenue trap” for the utilities supplying electricity. The report estimates that intermittent power leads to a loss of productivity and economic growth in the order of $320- $924 million per year, or 2-6% of GDP.

• A study by Anton Eberhard and Gabrielle Dyson from the Power Futures Lab at the University of Cape Town explored the evidence linking new or improved access to energy in low- and lower-middle income countries to impacts on people, businesses and the environment. The study found evidence of positive impacts across a wide range of pathways, although the strength and quantity of evidence varied.

• Unreliable electricity access can negatively impact healthcare. A recent study of 11 major sub-Saharan African countries found that roughly 1 in 4 health facilities had no access to electricity, and only about one-third of hospitals had reliable electricity access. (Adair-Rohani et al, 2014).

CDC Steward Redqueen report on Uganda

IGC report in Ghana

The contribution of energy infrastructure to climate change mitigation

Improvement in energy infrastructure can contribute to climate change mitigation by:

• reducing the extent of losses on the network

• enabling grid connections for firms and households that currently use kerosene

• building transmission lines that share electricity more efficiently within and between countries

• establishing trading mechanisms to share electricity efficiently across the continent

• improving the stability of grids, enabling more renewable energy generation

Targeting the SDGs

Gridworks’ mandate to invest in power transmission and distribution will specifically target three of the UN’s Sustainable Development Goals.

SDG 7: Ensure access to affordable, reliable, sustainable and modern energy for all. In particular, SDG 7.1 which targets universal access to affordable, reliable and modern energy services; and SDG 7.2, which aims to increase substantially the share of renewable energy in the global energy mix. 

SDG 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. In supporting the development of energy infrastructure, we enable businesses to become more efficient and productive and economies to grow, providing more opportunities for employment.

SDG 13: Take urgent action to combat climate change and its impacts. Our work will support off-grid renewables solutions and the development of transmission and distribution (T&D) networks that allow for the greater use of renewable sources of generation.

 

“The development impact that can be achieved from successful improvements in transmission, distribution and off-grid is potentially vast. Improved utility capacity and performance can increase the quantity and quality of power available to users and reduce the tariff needed to sustain the network. It can also cut injuries and fatalities of users on the network, reduce carbon emissions and encourage other private sector investors and lenders to fund further critical infrastructure.”

– Simon Hodson, Gridworks’ Chief Executive