At sunset in rural and remote areas of Sierra Leone, the signs of energy poverty are starkly evident. Families light kerosene lamps. Shops close down, unable to operate without power. Many families remain in the dark, a lack of electricity denying them basic lighting.
Providing electricity reliably and sustainably is a challenge that extends across many African countries. Mini-grids — electricity generation and distribution systems that service smaller areas than centralized grids — offer one promising solution. However, this approach has yet to gain sufficient traction to make a substantial impact on energy poverty across the continent. In Sierra Leone, for instance, only 0.6% of households are currently served by mini-grids.
The key challenge in scaling the mini-grid model lies in balancing operational sustainability with affordability. If customer tariffs are set too low, operators lack sufficient revenue to maintain and expand their services. But if these prices are set too high, mini-grid electricity isn’t accessible enough to drive widespread adoption and ensure these companies’ long-term viability.
CrossBoundary’s Mini-Grid Innovation Lab, with the Global Energy Alliance for People and Planet and the Government of Sierra Leone, launched a one-year Tariff Harmonization Pilot across Sierra Leone in December 2022, to test the impact of lower prices on customers. As we’ll discuss below, the results demonstrated the transformative impact of more affordable electricity — and the need for governments, policymakers and private sector players to work together to identify sustainable ways of providing affordable mini-grid power.
Electricity access and generation in Sierra Leone
Sierra Leone, a West African nation of 71,740 square kilometers with a GDP of $7.41 billion in 2024, finds itself in an unsustainable energy situation. Only 36% of the population has access to power — a number that plummets to 5% in rural areas — leaving over 5.6 million people unelectrified. The country’s power generation relies largely on Karpowership, a subsidiary of the Turkish Karadeniz Energy Group, which has been operational there since 2018 and supplies 80% of the nation’s electricity through its floating power plants.
The risks of this over-reliance became evident in 2023, when a $40 million payment dispute led to widespread blackouts, leaving citizens and businesses without power for extended periods. This crisis underscores the vulnerability of depending so heavily on a single external power provider, and points to an urgent need for energy source diversification.
However, the expansion of reliable electricity access through power grids faces multiple challenges. The country’s existing transmission and distribution infrastructure is weak and limited, and power utilities struggle with operational inefficiencies that lead to significant losses in both technical operations and revenue collection. Generation capacity falls short of demand, while hydroelectric power output fluctuates with seasonal changes. Additionally, both institutional frameworks and regulatory systems pose obstacles to improvement.
In efforts to boost the national electrification rate and provide more affordable power to Sierra Leoneans, the government has progressively made important policy and regulatory enhancements that support initiatives to increase electricity access. As part of those efforts, mini-grid expansion presents a huge opportunity to connect more people, especially those living in remote areas.
Working within the framework of ECOWAS (the Economic Community of West African States, a regional political and economic union of 15 West African countries), the country developed ambitious renewable energy targets through its Sustainable Energy for All (SEforALL) Action Agenda. This plan sets a goal of 92% electricity access by 2030, with renewable-powered mini-grids and standalone systems expected to provide a significant amount of power for newly connected users. More recently, the government implemented the Sierra Leone Rural Renewable Energy Project, funded by the UK Foreign, Commonwealth and Development Office. This has provided around 5 MW of solar mini-grids across rural communities. Other mini-grid initiatives that are contributing to energy access expansion in the country include the multi-funder Universal Energy Facility.
While mini-grids offer numerous advantages over other forms of electrification — including rapid deployment compared to traditional utilities, decentralized clean power generation with minimal environmental impact, and agile problem-solving through private sector management — their sustainability hinges on economic viability. This creates a complex dynamic where private operators must determine how much they need to charge to generate sufficient revenue to sustain their businesses, while also keeping prices low enough to attract and keep customers in the longer term. In Sierra Leone, mini-grid operators needed to charge customers tariffs as high as 80 cents per kilowatt hour — 10 times more expensive than main-grid tariffs — making electricity unaffordable for many potential users.
Testing the Impact of Lower Mini-Grid Tariffs on Customers
The Mini-Grid Innovation Lab’s Tariff Harmonization Pilot aimed to test the impact of lower tariffs on customers. To that end, it took a bold approach by reducing electricity tariffs by 41% across eight sites, while maintaining a control group for comparison.
The results demonstrated the transformative impacts of more affordable electricity, including:
- Substantial consumption growth: Treatment sites saw a dramatic 58% increase in energy consumption, compared to just 6% in control areas.
- Enhanced economic inclusion: The greatest beneficiaries were low-income users — primarily casual laborers and subsistence farmers — who comprised 63% of the user base and increased their consumption by 46%.
- Improved infrastructure efficiency: Treatment sites achieved a 24% increase in utilization rate, indicating better use of existing mini-grid capacity.
- Sustainable revenue model: Despite the 41% tariff reduction, sites maintained financial viability with increased average revenue per user.
- Broader socioeconomic benefits: Lower tariffs catalyzed multiple positive outcomes, including increased demand for electrical appliances, enhanced business productivity and expanded community welfare activities.
However, while the reduced tariffs successfully drove higher electricity consumption, maintaining this approach at scale requires careful consideration of financial sustainability. The pilot provided subsidies to operators to cover the difference between the base and reduced tariffs, but this was not enough to cushion the operators from macroeconomic shocks, including high inflation and significant currency devaluations. The average revenue per user in local currency terms increased by 10% over the pilot period, but in US dollars it decreased by 30%. This posed operational sustainability challenges for operators, who incur a portion of their costs in hard currency.
Making Affordable Mini-Grids Work for Everyone
To implement tariff reduction at scale, mini-grid operators, governments and development partners need to consider a suite of interventions. These include:
- A comprehensive subsidy framework combining upfront capital support and operational subsidies for lower-consuming customer segments, to ensure both the initial development and ongoing affordability of mini-grids.
- Currency risk management mechanisms, such as dynamic tariffs with dollar-denominated components and specialized hedging products, to protect operators while maintaining reasonable consumer prices.
- Results-based financing models that incentivize operational excellence and service reliability while supporting commercial sustainability.
Policymakers must create supportive regulatory frameworks that enable these innovative financing and subsidy mechanisms, as demonstrated by Sierra Leone’s Energy and Water Regulatory Commission. Their role is crucial in establishing clear rules that protect consumer interests while ensuring that operators can maintain viable businesses. Financiers and funders can strengthen these frameworks through interventions such as the above-mentioned hedging mechanisms that address currency risks associated with the operation of mini-grids.
The success of mini-grid initiatives ultimately depends on operators’ performance. Experience shows that when operators deliver reliable service, customers respond by investing in appliances and productive equipment, creating a virtuous cycle of increased consumption and revenue. This makes it essential for operators to focus on both operational excellence and capacity planning to meet growing demand.
Subsidies are utilized worldwide — including in developed economies — to provide affordable electricity to citizens. However, many African governments have limited capacity to fund comprehensive subsidy regimes at scale. This creates the need to establish sustainable and recurring funding sources to maintain subsidies at scale, and to deploy these subsidies as efficiently as possible throughout project lifecycles for maximum impact. CrossBoundary Innovation Lab is working to define optimized subsidy frameworks based on this analysis from Sierra Leone and global best practices. If these efforts are successful, effectively implemented mini-grids, supported by well-structured subsidies, could bring clean, reliable electricity to thousands of additional unserved rural households.
Download CrossBoundary’s report for more findings from the Sierra Leone pilot.
Tombo Banda is a Managing Director and Lead of CrossBoundary’s Innovation Lab, Lisa Kahuthu is a Communications Coordinator at CrossBoundary Group and Miriam Atuya is an Investment Professional.
Photo: Drone shot of Tikonko Site.
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