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11 Mar 2022

Sierra Leone: A Cost-Reflective Mini-Grid Tariff Framework (Case Study)

Tags
Electricity tariffs
Electricity utilities
Energy Access
Finance and Investment
Regulatory and Governance
Renewable Energy
Rural Electrification
Mini Grids

This case study highlights the cost-reflective mini-grid tariff framework in Sierra Leone.

To accelerate the pace of rural electrification and the deployment of mini-grids, the GoSL with support from international organisations, particularly the UK’s Foreign Commonwealth and Development Office (FCDO) and Department for International Development (DFID), and the United Nations Office for Project Services (UNOPS), has developed an enabling environment for the private sector. Split asset mini-grid delivery models have been introduced under the Rural Renewable Energy Project (RREP) to attract foreign direct investment (FDI) and scale up mini-grid deployment, with distribution assets including household connections financed and owned by the Ministry of Energy (MoE), while the private sector finances and owns the generation assets.

As part of the dedicated regulatory framework for mini-grids, the GoSL allows mini-grid operators to
charge cost-reflective tariffs, serving to attract international investors and reduce dependence on
government/donor funding for rural electrification.

The Mini-Grid Regulations (2019) define the tariff determination methodology, based on a cost-of-service approach. Tariffs are set taking into consideration operational costs, depreciation of assets, reserves for maintenance and replacements of assets, taxes, capital-related costs, and a reasonable profit margin depending on the quantity of electricity sold. The regulation further determines the compensation in the event of the extension of the main grid to a mini-grid site.