In the last few years interest in non-grid-based options for rural electrification in has been growing. Falling solar PV prices partly account for the shift in mind set, as do advances in gasification technologies and the promise of small concentrating solar power systems. Mobile enabled applications for fee collection and system monitoring are also part of the evolving picture.
Recognising the potential, an increasing number of developing country governments are adopting policies which encourage the development of micro-grids either as permanent or temporary solutions. And the private sector is increasingly looked to as the provider. All of this appeals to donors looking for better returns on their aid. Micro-grids, of course, have existed for decades but their deployment by for profit businesses operating at scale is new. So what’s working and where is the sector going?
Microgrids for Rural Electrification: A critical review of best practices based on seven case studies, published in February by the UN Foundation, is a useful summary of the current issues. The researchers document case studies from India, Malaysia and Haiti, including for-profit, part subsidised and fully subsidised models. A critique of existing ‘best practice’ literature is presented based on the findings. The report is by a team of US academics led by Jay Apt at Carnegie Mellon University and Daniel Kammen at University of California, Berkeley.
As might be expected, the authors find that success factors vary from context to context. But they do identify a matrix of common factors which need to be managed by any developer of a service. Where these elements are controlled operators can create a ‘virtuous circle’ where revenue supports maintenance and enhancement of the service thereby encouraging customers to continue paying.
There is much agreement with previously published advice from bodies like the World Bank, but also some interesting new insights. Affordable, incrementally expandable micro-grids are hard to design and difficult to finance through revenues alone. This means that managing demand, including reducing losses from theft, is an important element of the economics of most micro-grids. There is no easy way of managing this currently and room for innovative new approaches.
The report questions the widely held view of many in the sector that encouraging ‘productive use’ helps improve the economics of micro-grids. The evidence suggests that having a number of anchor customers is vital, and where demand for power for commercial activity already exists this should be planned for. However, actively simulating ‘productive use’ where demand does not exist is likely to be difficult and time consuming.
The existing literature on micro-grids also puts great emphasis on the importance of involving communities, partly because much previous effort has focused on community managed facilities. The report’s authors suggest that community management models often fail and that with the growth in private business led delivery attention needs to shift towards customer education.
The report lacks examples from Africa, but the authors promise that these will be forthcoming soon.