Mini-grids in Somalia: how they work, how they're licensed and financed

Where Xidig members may contribute

Learning, service and collaboration openings, not confirmed contracts or tenders:

• Operations support: metering, billing, loss reduction and maintenance for town providers.
• Licensing and compliance: helping small providers meet reporting and service standards.
• Solar hybrid design: sizing solar and batteries for existing diesel networks.
• Pooled investment: a members' group could study co-owning or co-financing solar at a town provider, or a new mini-grid where none exists. It would likely need an NEA licence or general licence, depending on size, and in practice coordination with any existing provider.

Possible services, research, supplier or collaboration roles

• A feasibility study for solar at one town provider, including tariff effects.
• A metering and billing service for small providers.
• Research: a members' map of which company supplies each town, and its current tariff.

Who may find this useful

• Electrical and power-system engineers.
• Energy economists and finance professionals.
• Diaspora investors interested in hometown power.
• Regulatory and legal specialists.

How mini-grids work today

The system.

• How it is organised: "The electricity system in Somalia comprises isolated diesel-based minigrids operated by ESPs" (electricity service providers).
• Capacity: in 2020 the major towns had about 138 MW of installed capacity, and "nearly 100 percent of generation is derived from" diesel generators. There were at least 227 generator sets, with a median size of 315 kW (World Bank, 2021).

Why it is costly.

• Prices: electricity cost "US$0.25–US$1.30 per kWh, with a weighted average of about US$0.61" outside Somaliland, on 2017 data.
• Losses: system losses were "25 to 40 percent".
• Metering: some companies charge a fixed fee based on "the number of lightbulbs".
• Duplication: most companies "operate independently with significant infrastructure and operations duplication" (World Bank, 2021).

Licensing.

• The legal basis: the Electricity Act 2023 requires licences for generation, transmission and distribution. Small providers below a threshold set in regulations are treated differently; the published text is unclear whether they need a general licence or none (see Somalia's Electricity Act 2023, explained).
• Interim licences: the National Electricity Authority issued interim licences to 13 providers for June–December 2024, and planned to extend them to June 2025.
• Licences for 20 providers: on 1–2 November 2025 it issued licences to 20 providers. The Africa Minigrids Program wrote: "It marks the first time since the collapse of the central government in 1991 that ESPs are operating under a unified, legally recognized licensing system." It says the licensing process introduces "clear service standards, reporting obligations, and consumer protections" and "a predictable framework for tariff setting".
• Tariff methodology: the NEA's tariff methodology covers integrated operators such as today's town companies.

Adding solar.

• Earlier results: an earlier UK-funded project in Somaliland (ESRES) financed "nine hybrid mini grids" with 5.7 MWp of solar and 2.6 MWh of batteries. The World Bank cites it as a lesson: "Eight of nine ESPs reduced the tariff by about 34 percent."
• Contracts awarded: under the current project (SESRP), four contracts worth US$43.6M were awarded for solar and batteries at providers in Baidoa, Galkayo and Garowe. Three more, in Berbera, Borama and Kismayo, were expected by the end of November 2025 (World Bank, November 2025).
• Expected effect: preliminary feasibility assessments cited by the World Bank suggest "a likely reduction of upto 50%" in tariffs at participating providers.
• Who is chosen: providers are selected partly on land at their existing sites and their "willingness to enter into agreement with government on the operations and maintenance of the assets".

Barriers.

• Duty: the World Bank's regulatory scorecard (RISE; data year not stated) answers "No" to duty exemptions for mini-grid systems or components.
• Scale: the World Bank describes "a highly fragmented private electricity sector" with "lack of economies of scale".

A community model nearby.

• The cooperative: in Melkadida refugee camp in south-eastern Ethiopia, a refugee cooperative, IFTIIN, has run a solar mini-grid since 2020, funded by the IKEA Foundation. It reaches about 31,230 refugee and host households and built a second mini-grid from its earnings (USA for UNHCR, 2023).
• Mixed results: an Oxford evaluation in 2020, before the second mini-grid, found that "the energy and environmental cooperatives faced particular challenges".

What this means.

• Where solar is going: in Xidig's reading, the fastest route to cheaper power in Somali towns is upgrading the existing private mini-grids with solar and batteries, under the new licences.
• Open questions for the government's proposals: the off-grid plants would need to fit alongside existing providers, and SONEC would need to work with them.

Dependencies and implementation constraints

• A licence or general licence from the National Electricity Authority, depending on size.
• Land for panels and batteries near existing networks.
• Coordination with existing providers in the same town.
• Import costs for equipment; RISE records no duty exemption.
• Security and maintenance capacity.

Risks and unknowns

• Licence thresholds and fees, set in regulations that Xidig could not read online.
• Tariff approvals under the new framework.
• Fit with national plans: how SONEC and the government's proposed off-grid plants would fit with existing providers.
• Old data: the cost figures date from 2017.

Questions members should verify before acting

1. Which company supplies power in your town, and is it licensed?
2. What tariff does it charge, and how is it metered?
3. Is it part of a World Bank solar-hybrid contract?
4. What licence would a new or community mini-grid need?

What is confirmed, and what isn't

Confirmed

• The structure and costs of the sector (World Bank, 2021).
• Interim licences (2024) and licences for 20 providers (November 2025).
• The solar-hybrid contracts and preliminary estimates of tariff reductions (World Bank, November 2025).
• No duty exemption recorded (RISE).

Our interpretation

• Upgrading existing providers is the quickest route to cheaper power.

Not yet verified

• Current tariff levels.
• The types of licence issued in November 2025.
• Awards after November 2025.

Relevant next steps

• Follow the National Electricity Authority and the World Bank's electricity projects for licensing and procurement news.
• Share your town's provider and tariff through Xidig to help build a members' map.

Not legal advice. Licensing requirements depend on regulations and the size of the operation; anyone planning a mini-grid should take legal advice.