Policy Memo: Strategic Deployment of Mini-Grids to Enhance Rural Electrification in Djibouti

To: Djama Ali Guelleh, Director-General, Electricité de Djibouti (EDD) 

From: Youssouf Eusman, Renewable Energy Developer, World Energy Council 

Introduction 

To address the persistent energy access gap in Djibouti’s rural areas, Electricité de Djibouti (EDD) should prioritize the strategic deployment of renewable energy-powered mini-grids. These systems provide a scalable and cost-effective solution to extend reliable electricity to underserved communities, aligning with Djibouti’s Vision 2035 and global sustainability goals (World Bank, 2021; International Renewable Energy Agency, 2021). 

Background 

Djibouti faces significant challenges in achieving universal electricity access, particularly in rural areas where grid expansion is economically unfeasible. With the country heavily reliant on imported energy, there is an urgent need for sustainable, localized energy solutions that can meet growing demand and support rural development (African Development Bank, 2020). Despite Djibouti’s goal of achieving 100% renewable energy by 2035, rural electrification lags behind, threatening to exacerbate regional inequalities and undermine national development objectives (International Energy Agency, 2021). 

Recommendations 

1. Accelerate Mini-Grid Deployment: EDD should prioritize deploying 2,000 mini-grids annually, focusing on regions with the highest energy deficits. These areas can be identified using key indicators such as low electrification rates, energy consumption patterns, and economic development metrics. EDD can leverage data from the National Energy Access Database and collaborate with the World Bank and IRENA to pinpoint regions like Ali Sabieh and Dikhil, which have significant energy access gaps (World Bank, 2021; IRENA, 2021). 

2. Create a Conducive Policy Framework: Implement a cost-reflective, tiered tariff model where lower-income households pay reduced rates and higher-consumption users pay closer to market rates. Stabilize tariffs through a multi-year framework that adjusts based on inflation or fuel cost reductions. Provide 20-30% subsidies on capital costs for solar and wind technologies to reduce payback periods and attract private investment, ensuring rapid deployment and long-term sustainability (IRENA, 2021; World Bank, 2021). 

3. Foster Public-Private Partnerships: To mitigate financial risks and enhance project viability, EDD should promote Public-Private Partnerships (PPPs), which are collaborative agreements where the private sector brings in financing, technical expertise, and operational capacity, while the government offers regulatory support and incentives. These partnerships can attract international climate finance and reduce the financial burden on the government by leveraging private capital for initial investments. By sharing the costs and risks, PPPs enable EDD to accelerate rural electrification and achieve its renewable energy goals more efficiently. Additionally, PPPs help ensure long-term sustainability by incorporating global best practices and technical expertise from the private sector (African Development Bank, 2020; World Bank, 2021). 

4. Implement Capacity Building Programs: EDD should establish training programs for local technicians and operators, ensuring the long-term sustainability of mini-grid projects. Capacity building will not only support the operation and maintenance of mini-grids but also contribute to local economic development through job creation (International Renewable Energy Agency, 2021). 

Justification and Implementation Strategy 

Why Mini-Grids? 

Other options, such as extending the national grid or increasing reliance on diesel generators, are economically prohibitive and environmentally unsustainable. Grid expansion in rural Africa can cost nearly $30,000 per kilometer, making it an impractical solution for Djibouti’s remote regions (World Bank, 2021). Meanwhile, diesel generators not only contribute to greenhouse gas emissions but are subject to global fuel price fluctuations, with diesel prices rising by over 50% between 2019 and 2022 due to market volatility (International Energy Agency, 2021). In contrast, mini-grids provide a more cost-effective and scalable solution, offering localized, renewable energy that can be deployed rapidly to meet growing demand. 

Implementation by EDD 

EDD can leverage its central role to form public-private partnerships (PPPs) by collaborating with international development organizations and private investors. Using concession agreements or joint ventures, EDD can attract climate finance from sources like the Green Climate Fund and the African Development Bank, sharing financial risks while securing necessary funding. Capacity-building initiatives should include training programs to equip local technicians and operators with the skills to manage and maintain mini-grids, ensuring long-term sustainability and supporting local economic development (World Bank, 2021; African Development Bank, 2020). 

Addressing Feasibility and Strategic Alignment 

The recommended approach is both politically and economically feasible. The government’s commitment to renewable energy provides strong political support, while the potential for international funding reduces financial barriers (International Renewable Energy Agency, 2021). EDD’s strategic role in national energy policy positions it well to spearhead these initiatives, aligning with both national and global sustainability goals. Moreover, by emphasizing PPPs and capacity building, EDD can overcome common barriers to mini-grid deployment, such as financial risk and technical challenges (World Bank, 2021). 

Conclusion 

Strategically deploying mini-grids in Djibouti’s rural areas offers a practical solution to the country’s energy access challenges. This approach not only supports Djibouti’s renewable energy targets but also fosters economic development and social equity in underserved regions (International Renewable Energy Agency, 2021). By implementing the recommendations outlined in this memo, EDD can play a pivotal role in transforming Djibouti’s energy landscape, ensuring sustainable and inclusive growth (African Development Bank, 2020). 

^Footnotes

^{African Development Bank. "Mini-Grids for Rural Electrification in Africa: Lessons Learned." 2020.} 

^{International Energy Agency. "Renewables 2021." 2021.} 

^{International Renewable Energy Agency. "Djibouti’s Renewable Energy Prospects." 2021.} 

^{World Bank. "Scaling Up Mini-Grids for Least Cost and Timely Access to Electricity Services." 2021.}