Why is an organisation like Gridworks needed?
Two out of three Africans currently have no access to electricity.
No country can achieve sustained economic growth without the right infrastructure. Sustainable, affordable and reliable power is one of Africa’s largest infrastructure challenges.
Over recent decades, there has been significant focus and investment in power generation to address the need for reliable electricity. However, to create sustainable, efficient and reliable power sectors requires considerable, targeted investment in the electricity networks that transmit and distribute that power.
Developing countries have many conflicting pressures on their national budgets, and the status quo simply isn’t serving the people of those countries well – 600m without electricity in Africa, poor supply for many of the remaining 400m. There is an enormous, multi-billion-dollar shortfall in investment for electricity network improvements, and private sector investment will be necessary alongside government and multilateral funding.
Today, estimates (McKinsey 2018) suggest $345 billion of investment is needed in power transmission and distribution (T&D) by 2040 to absorb current and planned power generation.
Gridworks was created as part of the response to this need. We were established in early 2019 as a dedicated platform for development and investment in electricity networks.
Our investment approach is underpinned by a focus on the financial viability of insolvent utilities; on identifying replicable business models; and on mobilising private capital.
Which countries are you targeting? Are there particular parts of Africa more ready for private sector investment than others?
Gridwork’s is currently focussing its development activities on Africa, but we are also able to look opportunistically beyond the continent for investments in other countries in British International Investment’s geographical remit.
Some countries in Africa already have private sector investment in their utilities, there are other countries that recognise the need for private sector investment and are reforming their regulatory systems to cater for increased private finance. Gridworks will make more progress in countries which are receptive to attracting private sector capital. And we hope that more successful private investments in electricity networks will encourage other countries to follow suit.
The challenges of entering the Transmission & Distribution space in Africa are well documented – how will you overcome those barriers?
One of the reasons the private sector hasn’t invested enough is because the sector is inherently political, and has a complex mix of stakeholders from governments, regulators, civil society, customers and unions. Coalescing those interests and overcoming these hurdles will be necessary to bring about improvements.
Gridworks is uniquely able to address these challenges because we are able to take development risk; we can invest patiently and withstand significant development costs and long development cycles. We can finance operational turnarounds and take a long-term time horizon.
How will you measure your development impact? Is your activity linked to the UN’s Sustainable Development Goals?
We apply a rigorous methodology, developed in conjunction with independent experts, to assess the projected development impact of each investment we make. We then measure that impact during and after the life of the investment.
While we don’t have specific impact targets, we measure impact through a number of metrics, that could include: reduction in electricity losses; power traded; kms of lines built; renewables added to the grid; CO2 emissions avoided; people reached. All the impact frameworks are linked to the SDGs. Gridworks was created specifically to tackle SDGs 7, 8 and 13, but we recognise that there will be a positive impact on other SDGs.
How will your investment increase the number of people in Africa with access to electricity?
The majority of electricity sectors across Africa are under-invested and financially unsustainable and are therefore not well-placed to provide affordable high-quality power to business and consumers or to expand their networks. Our investments will seek to increase network capacity and fund operational improvements, leading to networks that are better placed to serve their populations.
Our aim is to provide least-cost, affordable power in a financially sustainable system. By improving the efficiency and operating practices of electricity networks we will work to cut their running costs. We know that financially sustainable national electricity sectors are, as a result, better equipped to improve access. Gridworks focuses on the quantity and quality of power, not only the number of connections.
How will you measure your impact on climate change?
There are a number of positive, climate -friendly impacts that arise from a well-run and efficient T&D sector. These include fewer technical losses, which put less burden on the generation sector and means that a smaller quantity of non-renewable sources is required. A better performing network is also able to absorb more renewable power by managing the unpredictable generation of some renewable sources, and also connects more firms and homes that currently use diesel or kerosene.
Gridworks doesn’t generate power and the utilities that we invest in can’t typically pick and choose the generation sources that they distribute. For each investment however, we consider whether it is supporting that country in its low-carbon growth pathway and is aligned with the Paris climate agreement. Non-renewable baseload is currently an important part of the energy mix for some countries and is Paris-aligned where alternatives are not available.
Is Gridworks UK aid money?
Gridworks is owned and funded by British International Investment (BII), the UK’s development finance institution. BII is owned by the UK government’s Foreign, Commonwealth & Development Office. The capital that it receives from government is counted as Overseas Development Assistance. However, unlike much traditional grant aid, BII and Gridworks’ investments aim to make a financial return, as well as having a powerful development impact.
How can you overcome the widely recognised problems of corruption in the T&D sectors of many African countries?
Gridworks has zero tolerance for corruption. We’re subject to the UK Bribery Act and funded by the UK government. When we make investments, we carry out extensive business integrity due diligence, identify key risks and bring in action plans to improve governance. Our contracts with governments and other entities will include robust anti-bribery and anti-money laundering clauses.
How can I learn more about working with Gridworks?
Please get in touch: Gridworks Development Partners LLP, 123 Victoria Street, London SW1E 6DE +44 (0)20 7550 7010 [email protected]