The surprising, simple answer to Africa’s rural energy problems – Bitcoin mining

First, some numbers, and they are pretty shocking. According to the International Energy Agency, 600 million Africans (43%) have no access to electricity. Neither are they likely to get access to electricity. Why?

Because it is expensive to erect pylons, string cable and build substations to distribute electricity to small communities or villages in far-flung areas – the capex costs overwhelm the return, especially given the light demand in areas without industrial activity of any kind.

This means the only way to electrify those areas is with minigrids powered by renewables, usually between 20kW and 1MW, depending on the size of the community. But here, too, are many challenges.

A recent paper by The Green Africa Mining Alliance lays out the scale of the task.

“… [T]he number of minigrids in Africa needs to grow from 3,100 in 2021 to 160,000 in 2030, more than 50 times over nine years, with a cumulative investment of $91-billion by 2030.

“If the current pace of minigrid development continues, only about 44,800 minigrids will be installed by 2030, serving only around 80 million people in Africa.”

We first have to recognise some of the economic peculiarities of renewable minigrids in rural areas.

One is that community demand peaks from 6-9pm when the sun goes down. So the grid has to be “overbuilt” to handle that critical period. While consumption is likely to grow over time as energy-consuming businesses start to cluster around the available energy, the initial period of the build and deployment is at the apex of financial risk, with high upfront costs to satisfy community peak demand and then a long and unpredictable wait for new business customers to come on to the grid and pay for it.

Commercially minded investors take one look at this equation and quietly leave the room.

This means that the only way to electrify these underserved communities is to rely on development/aid institutions or governmental “universal” access programmes to fund renewable-powered minigrids. But, sadly, most governments in Africa do not have the fiscus, nor will nor execution capacity. 

Most development institutions are both stretched across many demands and extremely slow to move from aspiration to funding. Worse, they are often subject to the whims of politics.

In short, whatever help is coming to these communities is nothing more than a dribble, consigning hundreds of millions to lives of exclusion. It is no surprise that many of the minigrid initiatives promised on paper for decades have simply withered on the vine. 

An answer