Solar Mini-Grids Can Connect 789 Million People Globally Without Access To Electricity: Report

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  • The report estimated that 238 million households will need to gain electricity access in Sub-Saharan Africa, Asia and island nations by 2030 for the achievement of universal access
  • The report said that new technologies are making it possible for electricity to be provided through more decentralised networks
Image for representation (pic credit-ceth ksu)

Mini-grids can play a critical role in providing electricity to rural communities and businesses and help to connect the 789 million people worldwide who currently do not have access as per the State of the Global Mini-Grids Market Report 2020. The report estimated that 238 million households will need to gain electricity access in Sub-Saharan Africa, Asia, and island nations by 2030 for the achievement of universal access. It added that mini-grids can serve almost half of this total which is an estimated 111 million households.

This report from the Mini-Grid Partnership (MGP), published by BloombergNEF (BNEF) and Sustainable Energy for All (SEforALL) – is a study, looking at technologies, businesses, regulations, financing, economics and impact assessment in the industry. The report also said that now the mini-grid market is nascent, despite it being the least-cost option for electricity access in many areas.

Damilola Ogunbiyi, CEO of Sustainable Energy for All, said, “In the fallout of COVID-19, countries have a unique opportunity to ‘Recover Better’ and reset their economies while accelerating energy access. Now, more than ever, we need a thriving mini-grids sector that can power critical infrastructure and give access to the 789 million people worldwide who lack electricity. We must improve regulatory frameworks, commit greater finance, and scale innovative mini-grid business models. This research offers critical insights for all mini-grids stakeholders that can help the market reach its full potential and deliver Sustainable Development Goal 7 progress.”

Low- and medium-density areas

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The report looks into the most effective policies for mini-grid development in different countries, including subsidies, licensing, tariff setting, and grid arrival. The report includes case study analysis on six locations. This includes the state of Bihar in India, Indonesia, Nigeria, the Philippines, Tanzania, and Uganda.

As per the report, mini-grids are the most suitable option for many low- and medium-density areas. They can address a larger number of low-income families more economically than alternative options.

Takehiro Kawahara, frontier power lead analyst at BloombergNEF said, “As the market matures, funding deployment must be quicker. This is linked to the policy and regulations of the countries where recipients of funding are located. Governments need to promote robust regulatory frameworks that support the development of mini-grids.”

Costs of PV modules and lithium-ion batteries have fallen

The report said that new technologies are making it possible for electricity to be provided through more decentralised networks. The costs of PV modules and lithium-ion batteries have fallen by 86 per cent and 85 per cent respectively between 2010 and 2018. Remote connectivity, control, and data analysis have expanded the range of available options. Solar hybrid mini-grids that integrate PV and other decentralised energy resources like diesel generators and energy storage can complement and compete with main grid extensions in terms of the cost of electricity and the speed of deployment.

As per the report, “Grid extension is still the predominant approach for providing electricity access in remote areas. However, the areas that the main grid can reach more economically than off-grid alternatives are slowly being exhausted, and in some places, the incremental costs of adding new rural customers via this route are becoming prohibitive. Given that many state-owned utilities are debt-ridden and the need for electricity access is urgent, it is critical for governments and utilities to take a least-cost approach that takes advantage of the breadth of technology options.”

Levelised costs of electricity

The report identified 7,181 mini-grid projects in Sub-Saharan Africa, Asia, and small island nations with some in Latin America, as of March 2020. It found out that 5,544 mini-grids were operational, of which 63 per cent were solar or solar hybrid systems. Information on these projects is stored in the open-source mini-grid project database that accompanies the report.

The economic analysis in the report compares the levelised costs of electricity (LCOEs) of different mini-grid types. The report said that LCOEs ranged from $0.49 to $0.68 per kWh for solar hybrid mini-grids operating in isolated areas and serving both households and productive-use customers in the six case study countries. Installing PV modules in mini-grids improve their economics as compared to just using diesel. Adding daytime demand can cut the overall cost of electricity as it correlates with the generation profiles of PV systems powered by the sun. As per the report, this boosts the utilisation rate of the mini-grid and leads to a lower cost of electricity and higher average revenue per user.

As per the report, “The report found that 14 funders belonging to the Mini-Grids Funders Group had approved a total of $2.1 billion by March 2020, of which only 13 per cent had been disbursed. This suggests that there can be significant delays in getting funding, and therefore in projects moving forward. There is also a lack of pure commercial financing as the mini-grid market lacks scale and developers’ project track records are limited.”

There are two big challenges that need to be overcome for mini-grids to scale up and realise their potential. Firstly, rural customers in need of electricity access often have limited power demand and sometimes lack the ability to pay. The other one is that there is a general lack of policies and regulations to support mini-grids.

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