The Democratic Republic of Congo (DRC) has enjoyed one of the highest economic growth rates in Sub-Saharan Africa over the last 10 years, mainly due to the country’s mining activities. This economic dynamism however is benefitting only marginally the local population, which has one of the lowest electrification rates globally (9%). After year of talks to build medium and large-scale hydro infrastructure, solar mini-grids now seem to offer the best solution to provide electricity in the near term.

The DRC is the second largest country in Africa, with an estimated population of 81 million. Despite the fact that the DRC is endowed with rich hydropower potential and other renewable resources, there is a substantial unmet electricity demand. The country has one of lowest levels of electricity consumption, at 0.11 MWh/capita/year. While the electrification rate for urban areas is approximately 19% on average (44% in the capital city Kinshasa), the rate in rural areas is below 5% on average and as low as 0.5% in the Kasaï Occidental region. Regular disruption of electric supply services, blackouts and general low reliability of power supply are prevalent even within grid-connected Kinshasa.

Given the rapid rise in demand, due to fast paced urbanisation and growth of mining, the construction of additional capacity as well as the upgrade of the current capacity is a key challenge for the country. The estimated unmet demand corresponds to just below 3GW according to UNDP’s 2014 figures.

Hydro accounts for 98% of the country’s generation capacity. We estimate current hydro installed capacity at 2,621MW, of which 1,377MW (50%) is out of service as a result of age and underinvestment. There are plans to build a large dam (Inga III), which could go up to 11GW in size, at the Inga 3 site though realistically the project is not likely to come online before 2030, if ever. The World Bank – one of the project’s most influential supporting institutions – pulled out in mid-2016 citing an uncomfortably high degree of local political influence at the planning and permitting level. The country has about 100GW of hydropower potential, the highest in Africa.

There are only three regional grids in the country, which explains the sizeable gap between the rate of electrification in Kinshasa and the rest of the country. SNEL (Société Nationale d’Électricité) is the vertically integrated, state-owned utility that has suffered from years of neglect and underinvestment. In addition to the grids, electricity is either supplied by SNEL-operated mini-grids, and increasingly (though moderately) by private sector led mini-grids, diesel-run micro-grids or individual systems. The privately-run micro-grids operate only a few hours per day (usually between 1800 and 2200 hours), providing a very basic (lighting and radios) and low quality service. About 30% of the urban population and 20% of the rural population benefits from these small micro-grids.

SNEL’s tariff is regulated, with rates set in 2009, which have only been marginally adjusted since then. Residential customers are charged $0.07/kWh – one of the lowest tariffs in the world, which do not even cover SNEL’s operational costs. Most of the electricity is purchased by the consumers at a fixed lump sum amount as meters are very scarce, leaving much at the discretion of officials. Furthermore, it is also common for public institutions (schools, health centres and public enterprises) to have large amounts overdue on their electricity bills.

The utility’s losses amounted to $330 million in 2014, about 1% of the country’s GDP. The imbalance between charges and revenues makes it difficult for SNEL to improve the quality of its services or add new customers by extending its network. The DRC has only 5,510 kilometers of high voltage transmission lines connecting the major power plants at Bas Congo (such as the Inga hydro units) to provinces in the central and south-eastern parts of the country. In addition, it has 4,484 kilometers of medium voltage lines and 12,133 kilometers of low voltage lines.

To improve this situation, the Government is supporting reforms in the power sector. The key objectives have been outlined in the “Electricity Law” [n°14-011] dated June 17, 2014 which liberalises the generation, transmission, distribution and export of electricity. SNEL was transformed into a commercial limited liability company in 2011. The 2014 Electricity Law has put an end to the monopoly of SNEL in the generation, transmission, and distribution of power and the DRC energy market is now open to independent power producers (subject to the compliance with the provisions of the Electricity Law).

The Electricity Law also proposed creation of two institutions under the supervision of the Ministère de l’Energie et des Ressources Hydrauliques (“MERH”, Ministry of Hydraulic Resources and Energy). These are:

• Autorité de Régulation de l’Electricité (ARE), the Regulatory Authority which aims at monitoring reforms in the sector and private sector participation (including tariff settlement). A decree [n°16/013] dated April 21, 2016 provides for the creation, organisation and functioning of the ARE.

• Agence Nationale des Services Energétiques Ruraux (ANSER), the Rural Electrification Agency which aims at increasing access to energy services in rural and peri-urban areas. A decree [n°16/014] dated April 21, 2016 provides for the creation, organisation and functioning of ANSER.

International development agencies such as the U.K. Department for International Development (DFID) and the U.S. Agency for International Development (USAID) are proactively collaborating with the local government and MEHR to improve the level of electrification in the DRC. In 2016 DFID launched Essor, a bold plan that aims to create solar mini-grids on a large scale, with up to 30 projects sized between 3MW to 10MW. They will target areas of at least 100,000 inhabitants, providing a consumer base of a sufficient size to increase the project bankability. Solar mini-grid power plants can be implemented more rapidly than hydroelectric ones and, as demand for electricity increases upon implementation of the mini-grids, their capacity can be further increased because of the modular nature of solar power. DFID published a memorandum of interest in November 2016, to which several parties responded with interest to finance, build and operate the mini-grids. Tenders are likely to be floated as early as 1Q 2018.

The size of the country, the abundance of renewable resources (hydro, biomass, solar), the poor performance of SNEL and its limited reach, and the presence of large energy consumers (such as mining companies in rural areas) are all conditions that should favour the development of small and independent power producers and distributors. Over the last decade, a few pilot projects have started operations. Electricité du Congo has a local generation and distribution concession in Tshikapa, which includes a 1.5MW hydro plant and 10,000 customers. In 2015, a 13.6MW hydro unit was built in Virunga National Park using assistance from the Howard G. Buffet Foundation (HGB). The $19.7 million project supplies 2.1MW to approximately 2,200 customers in the Rutshuru area. Independent power distributors apply tariffs that are significantly higher than the state-owned utility’s, reaching $0.20 to $0.30 per kWh.

The roll-out of ‘Pay as you Go’ solutions is still at the early stages, compared to Kenya and Nigeria, though some solar developers and solar shops are starting to adopt this mechanism. We expect this option to be widely available across several parts of DRC soon.

The DRC has no specific incentives for renewable energy projects. Imports of goods such as solar lanterns, and solar panels are subject to an import duty of 10%, an additional VAT of 16% and other import-related taxes. Overall, duties can go up to 40%. Exemptions on import duties and various taxes and levies can be obtained under the country’s investment code for a period of three to five years.