2023 has been an exciting year for Gridworks, and as we approach the end of the year, I would like to give you an update on the progress that we’ve made.
Before I focus on the development of our projects and our market-shaping impact, I want to say a few words about an important shift we’ve seen in global attitudes towards grid infrastructure.
This year has seen a shift in public appreciation of the role of electricity networks within the energy transition. Well-run, stable grids are fundamental to our ability to absorb more intermittent renewables and to connect areas of high renewable generation potential with areas of high, and growing, demand. This is as true here in developed Western economies, as it is in Africa. A number of prominent commentators have begun to talk about the surge of investment needed for global grid infrastructure. Bill Gates, for example, was quoted this year as saying:
“Climate change is the hardest problem humanity has ever faced. And if you care about climate change, you should care about transmission.”
Increased awareness amongst policy makers and the investment community has led to significant interest in our sector. We hope that the work we’ve been doing in Africa can provide important lessons as the world’s focus on grids grows. As well as climate benefits, our efforts to develop and finance Africa’s electricity networks will deliver important social and economic improvements by connecting more of those African families and businesses that do not currently have access to good quality electricity, or indeed any.
I’d now like to tell you about some of the important work we’ve been doing and the progress we’ve seen in our portfolio and in our pipeline as we grow from a start-up to an increasingly established business with a portfolio; a pipeline of projects in development; a strong, well-regarded team of sector experts; and brand recognition in the market.
Investing in transmission
Gridworks’ most advanced project in the transmission sector is Amari Power Transmission, a US$70 million pilot project for private investment in the electricity transmission sector in Uganda, which we announced in June 2022. Amari has progressed well this year, and the team is now very close to closing what may be the first Independent Transmission Project on the continent of Africa. It involves Gridworks developing and funding an upgrade of four key substations on Uganda’s electricity grid. The project will benefit households and businesses in Uganda and ensure that high quality renewable power is available to drive development. We expect to close in the next few months. This will be a remarkable achievement given that project development only began in earnest in 2022, after almost 18 months of discussion with the Government of Uganda about the merits of a privately funded model. Transmission infrastructure is essential for a better climate, economy and electricity access, but funding for it remains in woefully short supply in Africa. Amari can serve to demonstrate a replicable model that can unlock critical projects across the continent.
Gridworks has also made strong progress over the past year across a broad pipeline of greenfield transmission projects, which has become a major focus for the business. We currently have five transmission projects in development across four countries. For example, in July, we signed a memorandum of understanding with the Government of Tanzania that set out our intent to develop and invest in the country’s North-East Grid transmission project. This will improve the network connecting the central, coastal and north-eastern regions of the country and deploy new substations. The project forms part of the Tanzania’s plans to improve power access and reliability, as it manages rising demand for electricity in the country. Approximately 6,200 MW of new generation capacity is planned to be added to the grid by the end of the decade, and Tanzania is putting in place the transmission network needed to evacuate this power.
Africa’s transmission market is reaching a point where privately funded projects are now seen as a viable and credible option for governments. I believe we are at the beginning of a market change similar to the proliferation of electricity generation IPPs in Africa that began in the 1990s.
Investing in distributed renewable energy
We’ve also made progress across our distributed renewable energy projects. Each of them, in their own way, is contributing to sector development by demonstrating a different approach to distributed power business models.
We announced our investment in Virunga Power in the final fortnight of 2022 and brought the deal to close in March this year. Virunga Power develops, invests and operates hydropower projects which include rural utilities that bring reliable and sustainable electricity to communities in East and Southern Africa. Our investment of up to US$50 million is helping to fund new projects, including in Malawi, Zambia and Kenya. I’m particularly proud of an initiative announced this autumn, that will see Virunga Power and the Government of Burundi create Weza Power, a new electricity distribution company that will aim to bring grid power to over two thirds of Burundi’s population. Burundi is the world’s poorest country and only 12% of the population has access to electricity, so this will be a profound challenge with profound benefits. The project will be the first new private-sector electricity distribution company operating at a national level in sub-Saharan Africa for a decade. It marks a major step forward for the sector and will demonstrate a grid-connected model for delivering new electricity connections at scale. The Interim Concession agreement was signed by the Government of Burundi last week, on 8 December, allowing the project to proceed and the initial investment phase to begin in 2024 with the aim of beginning to deliver power in 2025.
Our longest-standing investment is SPS, a company providing solar energy and battery solutions to commercial & industrial users across sub-Saharan Africa. In 2023, SPS secured larger, more complex projects with increased use of battery storage and wheeling, reflecting the rapid evolution of the energy landscape, particularly in South Africa, which has been driven by Eskom’s poor record. In 2023, SPS added an additional 29MW under construction and has helped to save 86,000 tonnes of Co2 emissions.
The final business in our portfolio of distributed renewable energy projects is Moyi Power, an ambitious project to build greenfield, solar-powered utilities that will provide electricity to almost a million people in three isolated cities in the north of the Democratic Republic of Congo. This year has seen our team make some progress on the key work streams despite a challenging project development climate. We have made real headway on the important work on the feasibility of the project and the setting of affordable, sustainable tariffs. Moyi, in particular, is a reminder of the challenges of developing greenfield infrastructure projects in often testing markets. This work requires patience and persistence in order to yield results. The team working on Moyi has shown great character responding to these challenges.
As Gridworks’ ambitions have grown, we’ve recruited selectively and strategically this year to meet the needs of our portfolio and pipeline. In particular, we have grown both our Engineering and our E&S functions. We now have a respected team with a strong profile in the market. I want to thank the team members for their dedication and commitment this year.
Gridworks is now finishing its fourth full year since its launch in the summer of 2019. At the beginning of the year, we spent time thinking carefully about our track record and the impact we’re having. This analysis led to the launch of our Development Report at the Africa Energy Forum in Nairobi in June. This is our first major publication and demonstrates how we’re shaping the energy market in Africa, the lessons we’ve learned in that time, and the part we’re playing to meet the Sustainable Development Goals. It also sets out the ambition we have and how we expect to do more. If you haven’t done so already, please take a look: https://impact.gridworkspartners.com/
None of the work we have done would be possible without our shareholder, BII. So finally, I would like to take this opportunity to thank our colleagues at BII for their continued support and commitment to our approach to the market.
Thanks for reading. Wishing you and your families a restful Christmas break and a successful year ahead.
Simon Hodson