SEEKING PRODUCTIVE POWER: A PROPOSAL FOR BLOCKCHAIN-ENABLED MICROGRIDS IN THE AFRICAN CONTEXT

In the past five years, significant advances have been made in providing energy access to base of the pyramid African consumers. Increased attention to energy poverty on a global scale has galvanized innovative business models and spurred new investment aimed at ensuring that energy consumers across the spectrum have access to electricity. Governments, non-profits, and for-profit entities are working to provide sustainable energy solutions to the more than 600 million Africans that lack access to electricity. This study investigates productive power, or electricity access enabling meaningful economic development at the community level. In particular, it identifies a gap in current methods for providing productive power to consumers in the peri-urban and near-grid market segment, and proposes a new business model to promote more rapid scaling of microgrid solutions. The first section of the paper provides an overview of the spectrum of African energy consumers, and examines the methods in which that energy demand is being met. It finds that central grid connections and solar home systems are meeting the needs of either end of the spectrum, i.e. rural, off-grid consumers and urban, grid connected consumers. However, there is a gap in effective, economically productive power for consumers in the middle.
The second section examines the methods being used to address the productive power gap, namely grid extension programs, expanded solar home systems, and microgrids. It shows that grid extension efforts are too slow to make in impact in electrification rates due to population growth rates, and that expanded solar home systems remain too small to offer true productive power solutions. Microgrids are an area that is experiencing significant innovation and investment interest. The third section identifies critical factors that limit scaling of renewable microgrids. These constraining factors are: a) means of selling the system, b) standardization of technology and regulation, and c) lack of financing due to perceived risk.
Finally, the author proposes a novel business model for microgrids that incorporates recent advances in smart metering devices and blockchain technology. By combining elements of three diverse businesses using these new technologies, the author argues that the three limitations to scale can be mitigated. The result is trading-enabled, ad-hoc microgrids that facilitate external investment by providing avenues for portfolio-based securitization, and international real asset financing. The paper concludes with recommendations of topics for further investigation that can help scrutinize operational feasibility of the proposed business model.