Edit publication: Publication - Sustainable energy, unsustainable business? Foreignness and the challenge of profitability for private mini-grid developers in sub-Saharan Africa

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Despite growing enthusiasm for private-sector-led rural electrification, private mini-grid developers in sub-Saharan Africa continue to face the profitability challenge.

While prior research has examined socio-technical and business factors related to this challenge, it has devoted little attention to foreignness and the multi-level nature of the challenge. Building on the concept of liability of foreignness, this qualitative case study of a foreign mini-grid developer in Kenya provides a multi-level investigation of the profitability challenge. Based on 23 in-depth interviews and 263 archival documents, findings reveal that foreignness plays an important role in explaining the profitability challenge and manifests at policy, community, venture, and founder levels. Our findings show several outcomes of this challenge for both communities and developers. For communities, it results in upheaval, vandalism, and electricity access being sustained in few communities. For developers, the challenge leads to the decommissioning of unprofitable mini-grid sites, the withdrawal of investor support, and pivots into new business opportunities. This study contributes to the literature by highlighting that the foreign nature of developers may create barriers to building profitable mini-grid businesses in sub-Saharan Africa. We lay out important theoretical and practical implications of our study. Theoretically, we call for integrating the liability of foreignness explicitly into energy access analyses and investigating how different degrees of foreignness affect profitability. Practically, our study questions reliance on foreign developers to achieve Sustainable Development Goal 7 and advocates for supporting local entrepreneurs through tailored programs and locally-informed funding schemes that respect indigenous ways of social and economic life.

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