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From farm to market: key lessons from Volt-Terra’s KeyMaker mini-grid model unlocking economic potential in Ugandan agriculture communities
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Volt-Terra is a joint venture between INENSUS, a leader in the mini-grid sector with over 18 years of experience in Africa, and Gourmet Gardens, bringing over 25 years of Ugandan farming expertise in agro-processing. This partnership focuses on researching and developing mini-grid solutions for productive use and providing cost-effective and dependable electricity to local communities, enabling them to unlock their economic potential.

In July 2021 Volt-Terra was selected to receive a grant from PREO to test the technical and economic feasibility of applying the cutting-edge KeyMaker Mini-Grid Business Model in agricultural value chains.  This model harnesses the mini-grid-generated electricity to catalyse local agro-processing activities in rural communities, creating additional income streams for mini-grid operators.

The project was implemented in the sub-county Kayonza in central Uganda, home to approximately 17,000 residents engaged in agriculture and forestry. These local farmers face challenges in crop cultivation and price exploitation due to a combination of factors, including the inherent short shelf life of most agricultural products and limited or lack of energy access to promptly process the harvest. With PREO funding, Volt-Terra developed a pilot 60kWp PV mini-grid to supply electricity to the community for farming activities. The project also supported vanilla and bird’s eye chili cultivation, establishing a supply chain for accessing value-added markets and acquiring an electric dryer for local harvest processing.

As the project concluded in June 2023, PREO had the opportunity to sit down with Andrea Cabanero, mini-grid expert at INENSUS, to hear insights on the challenges, successes, and valuable lessons learned throughout the project.

Q: Could you provide an overview of the project’s key objective and how PREO funding was put to use?

The primary aim of the project has been to establish Volt-Terra Farm & Energy Solutions using the KeyMaker Model. In this approach, a solar mini-grid company diversified its business beyond electricity generation and distribution by venturing into vanilla and bird’s eye chili cultivation and processing powered by the mini-grid. With PREO’s financial support, Volt-Terra set up a mini-grid in Nsambya village, situated in the Kayonza Subcounty of Uganda’s Kayunga District. Alongside this, we developed a farmland using a block-farming approach, in close collaboration with 45 local partner farmers. Volt-Terra not only purchases farmers’ produce but also provides training, acts as a reliable buyer of crops, and utilises an on-site heat pump dryer fuelled by the mini-grid’s electricity for processing. As the farmland becomes fully operational, increased revenue from chili and vanilla production will enable farmers to afford larger amounts of mini-grid electricity.

Bird’s eye chili and vanilla were strategically chosen due to their local abundance and the associated value that can potentially be achieved by electrically-powered processing. Processing chili directly at the farm preserves its quality and increases its value by preventing aflatoxin development. Additionally, the high value of vanilla makes it vulnerable to theft, a common challenge faced by partner farmers. Establishing electricity generation near vanilla farms allows effective monitoring using cameras, enhancing crop security. By focusing on these crops, Volt-Terra creates an additional revenue stream whilst improving working conditions for local farmers, providing them with a reliable market.

The funding from PREO was used to create a solar mini-grid connecting 71 customers and to prepare a 3.2-hectare farmland. This included planting two chili batches, constructing support structures for vanilla trees, and conducting organic farming capacity-building sessions for 45 partner farmers, with a strong emphasis on collaborating with female farmers, especially single mothers. PREO’s support also covered the procurement, shipment, and installation of an electric dryer, totalling approximately USD 9,000.

Q: How crucial is the development of new economic opportunities for farmers in stimulating increased energy consumption?

While electricity is essential, its presence alone doesn’t guarantee income growth. Identifying ways for on-site customers to enhance their earnings becomes imperative. Developing new economic opportunities for rural farmers is vital not only for driving energy consumption but also for enabling the community to advance economic development. Mini-grids, while integral for furthering access to energy, face profitability challenges in remote areas. Enhancing mini-grid profitability hinges on leveraging electricity for value-added economic activities.

Volt-Terra’s mission embodies this principle by integrating electricity use with agro-processing. Partnering with local farmer mini-grid clients, we create a mutually beneficial relationship, strengthening alignment of interests. Our shareholder, INENSUS, piloted a similar concept via JUMEME Rural Power Supply Ltd in Tanzania, successfully deep-freezing tilapia fish. With Volt-Terra, we aim to demonstrate the concept’s applicability across diverse value chains, thereby increasing economic opportunities for farmers and rural energy consumption.

Q: Could you outline the key challenges encountered during the mini-grid construction?

The project development phase has been more extensive and challenging than anticipated. Operating within these markets presented bureaucratic hurdles, and the lingering effects of the pandemic disrupted supply chains during our power generation asset procurement period. Additionally, the merging of the Uganda Rural Electrification Agency (REA) with the Ministry of Energy and Mineral Development (MEMD) created communication disruptions, affecting our access to the connection grant. Notably, we faced several key bottlenecks, including:

  • Land lease agreement closure: Securing a land lease agreement for the power generation plant and farm encountered delays as landowners unexpectedly demanded price increases. In Uganda, establishing long-term (20-year) land lease deals is a delicate process that necessitates trust-building within local communities. To meet project timelines, we downsized the planned farmland from 6 hectares to 3.2.
  • Mini-grid license exemption: Engaging with Ugandan government authorities posed significant challenges. Acquiring the building permit essential for construction and installation at the project site was a protracted and intricate process. This delay subsequently affected the overall construction phase and registration with Electricity Regulatory Authority (ERA) to secure the mini-grid license exemption. The COVID-19 pandemic exacerbated the delay due to staffing shortages and the inability to conduct face-to-face meetings. Multiple requests for additional information prolonged the registration process by several months.
  • Distribution network construction: Delays in obtaining the mini-grid license exemption directly impacted connecting households to the mini-grid. Construction couldn’t commence until the license exemption was approved, thus disappointing promised electricity access and affecting farmer engagement. The project’s credibility suffered, but relief came with the installation of connections to the first farmer in December 2022, and the rest of customers were connected in March 2023.
  • Equipment procurement challenges: Firstly, shipping equipment from South Africa for the Nsambya site was plagued by delays, exacerbated by the broader impact of the pandemic on the freight value chain. Additionally, sourcing affordable distribution assets proved to be a challenge due to elevated prices, requiring extensive efforts to identify suitable equipment sources.
  • Operational challenges further compounded the situation. The power plant faced system failures in its early stages, which were solved with the involvement of the solar containers’ supplier Sustain Solar. Communication setbacks with Airtel and delays in implementing mobile payment systems added to the complexity. Moreover, the supply of Calin pre-paid smart meters from China was hindered for several months.

Q: The engagement of the local community seemed key to the successful execution of project implementation and development stages. How did you engage with them to ensure their continued trust in the project?

True, gaining farmers’ confidence and fostering local community engagement are pivotal for a successful project implementation. Amid the challenges outlined earlier, restoring farmers’ confidence proved to be a complex task. Delays experienced in mid-2022 had eroded the community’s faith in the project. Demonstrating tangible progress became imperative. Regular milestones were vital to show that, despite obstacles, the project was advancing. The commissioning of the PV generation plant marked a crucial milestone that helped rebuild community confidence. The arrival of containers and ongoing on-site work significantly bolstered trust and community involvement. Connecting customers, after nearly two years of project development and numerous challenges, represented a monumental achievement. As a result, 71 customers in Nsambya enjoy reliable power accessible via mobile money, eliminating the need for cash transactions. Following this, Volt-Terra has employed the on-site heat pump dryer to dry locally sourced mangoes and pineapples. This not only has improved farmer motivation but also holds the potential for an additional revenue stream to complement electricity sales. We are currently seeking an off-taker for these dried products.

Increasing presence within the community through regular visits, engaging farmers participating in the block farming model, and ongoing distribution network installation have all contributed to renewed confidence in the project. Visible progress on-site has instilled a sense of optimism within the community. There’s a growing belief that the project can enhance residents’ quality of life by providing clean electricity and water, and empowering local farmers through the introduction of the vanilla and chili-based KeyMaker model.

While there is evident market demand for bird’s eye chili, and Ugandan organic bird’s eye chili meets market standards in terms of quality, its cultivation proves to be labour-intensive due to its exceptionally high spiciness. For farmers accustomed to harvesting vanilla, which is more profitable and less demanding, growing chili requires an extra layer of motivation. As a complementary incentive/payment, Volt-Terra plans to reward farmer productivity with additional mini-grid electricity access tokens for their efforts.

Q: Could you provide more details regarding the utilisation of the electric dryer in the chili value chain and its primary outcomes in comparison to other drying techniques?

Analysing operational data for gas and electric dryers/heat pump dryers reveals that, at a grid-electricity cost of 0.22 USD/kWh, the electric dryer is more cost-effective, regardless of batch size. For instance, with a smaller chili batch of 10 kg (equivalent to 33% of gas dryer capacity and 6.6% of electric dryer capacity) the specific energy cost is approximately 0.65 USD/kg input with the gas dryer, and only 0.62 USD/kg input with the electric dryer.

In terms of the business case, gas-dried chili generates slightly higher average revenue. Surprisingly, this difference is due to chili output quality, with average better-quality grade achieved with gas dryer.  Given that the electric dryer has only recently been put to use, it is reasonable to assume that optimal quality results have not yet been achieved. With current fuel costs, the electric dryer can be viable if it can achieve equal output quantity and quality as the gas dryer through optimised operation, considering that new equipment requires an adjustment and learning phase for operational staff. The lower quality output with the electric dryer may also result from systematic undercapacity use. Re-evaluating results with the electric dryer operating at least at 50% capacity is essential to validate findings.

Q: Could you share more detail on the mini-grid installation and operation?

Customers displayed eagerness to embrace electricity use once connections and the mobile money system were established. The mini-grid in Nsambya now serves 71 customers, including 22 productive use of electricity (PUE)/commercial users, with 7 of them being women. Since Q1/23, the mini-grid has operated steadily.

During this period, we’ve generated 263 electricity tokens worth approximately USD 5,900 (an average of USD 1,180 per month). Notably, 71% of this revenue comes from a key anchor client who joined in December 2022, and the rest of the community began purchasing tokens on March 31, 2023, with an average token value of around USD 2.73 per community member. The Average Revenue per User (ARPU), excluding the mentioned key anchor client, stands at USD 4.88/customer/month, which is slightly above the sector average of USD 4.44 /customer/month as per the latest AMDA report “Benchmarking Africa’s Minigrids Report” of 2022.

In terms of electricity generation, Q2/23 saw an average daily solar power production of about 120 kWh. However, the power generation unit still has untapped solar potential, expected to improve with the addition of electric fruit drying operations on-site. Meanwhile, the average daily electricity demand is approximately 82 kWh, leaving around 40 kWh of daily excess electricity for self-consumption by the power container and other Volt-Terra operations on-site. To optimise the mini-grid’s usage rates and performance, increasing daytime electricity consumption is crucial.

While revenues align with our initial expectations, we recognise the need for scaling to ensure project profitability. Volt-Terra’s current strategic focus is on securing additional funds to expedite and expand the project.

Q: What key lessons from the project do you feel could benefit the wider sector?

In our journey, we’ve found effective partner relationships to be a linchpin. Close communication and trust with project partners, especially technology suppliers, are vital for smooth collaboration, especially during unforeseen challenges like fund delays or logistical hurdles.

Additionally, establishing a local presence and conducting face-to-face meetings significantly influenced our project’s success. It garnered community acceptance and facilitated navigating administrative and regulatory matters with government institutions in Kampala.

Networking within the market played a pivotal role, especially when facing administrative obstacles. This strong network expedites project development, ultimately reducing overall timelines.

Addressing uncertainties and their impact on project timelines is essential. Factors beyond our control can lead to delays in milestone achievements, emphasising the need for adaptable strategies. Lastly, managing expectations proves to be key. Delays in our mini-grid project commissioning led to questions from partner farmers, impacting farming operations. Setting realistic milestones from the project’s outset is crucial to align an

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