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| | == Relevante Case Studies: == | | == Relevante Case Studies: == |
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| − | *[[NAE_Case_Study:_Brazil,_Luz_para_Todos_(Light_for_All)|Brazil, Luz para Todos (Light for All)]]<br/> | + | *[[NAE Case Study: Brazil, Luz para Todos (Light for All)|Brazil, Luz para Todos (Light for All)]]<br/> |
| − | *[[NAE_Case_Study:_Cambodia_“Light_Touch”_Regulation|Cambodia “Light Touch” Regulation]]<br/> | + | *[[NAE Case Study: Cambodia “Light Touch” Regulation|Cambodia “Light Touch” Regulation]]<br/> |
| − | *[[NAE_Case_Study:_Costa_Rica,_Distribution_Cooperatives|Costa Rica, Distribution Cooperatives]]<br/> | + | *[[NAE Case Study: Costa Rica, Distribution Cooperatives|Costa Rica, Distribution Cooperatives]]<br/> |
| − | *[[NAE_Case_Study:_Rwanda,_Sector-Wide_Approach_to_Planning|Rwanda, Sector-Wide Approach to Planning]]<br/> | + | *[[NAE Case Study: Rwanda, Sector-Wide Approach to Planning|Rwanda, Sector-Wide Approach to Planning]]<br/> |
| − | *[[NAE_Case_Study:_Tanzania,_Mini-Grids_Regulatory_Framework|Tanzania, Mini-Grids Regulatory Framework]]<br/> | + | *[[NAE Case Study: Tanzania, Mini-Grids Regulatory Framework|Tanzania, Mini-Grids Regulatory Framework]]<br/> |
| − | *[[NAE_Case_Study:_Vietnam,_Rapid_Grid_Expansion|Vietnam, Rapid Grid Expansion]]<br/> | + | *[[NAE Case Study: Vietnam, Rapid Grid Expansion|Vietnam, Rapid Grid Expansion]]<br/> |
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| | | style="width: 618px;" | | | | style="width: 618px;" | |
| − | <span><span>A system for generation and distribution of electricity to multiple users which is not connected to the main grid system.</span></span> | + | '''<span><span>A system for generation and distribution of electricity to multiple users which is not connected to the main grid system.</span></span>''' |
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| | + | Mini-grids exist at a wide range of scales, from those supplying a few households to systems covering several communities. Isolated mini-grids rely on one or more local, usually small-scale (diesel, bioenergy, biomass, hydro, solar, wind or hybrid), generating plants and must balance demand and generation at all times. While these include fossil-fuel based generation, technology advances combined with environmental concerns mean that policy-makers are increasingly focussing on encouraging Renewable Energy based generation. Being separated from the grid system, isolated mini-grids can used lower voltages and lower-cost technologies than the main grid, and may be designed to provide anything from lighting alone (a “skinny grid”) to a full grid-equivalent electricity service. <br/> |
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| | | style="width: 616px;" | <span style="color:#FFFFFF;"></span> | | | style="width: 616px;" | <span style="color:#FFFFFF;"></span> |
| − | <br/> | + | Isolated mini-grids are often privately owned, but may be publically owned or combine both in a public-private partnership. Common models include: |
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| | + | *An isolated mini-grid owned by a private developer, a user-cooperative or community organisation;<br/> |
| | + | *Mini-grids owned and operated by the national grid company in off-grid areas;<br/> |
| | + | *A mini-grid operated by a municipality or other local public entity to supply an off-grid community;<br/> |
| | + | *Isolated mini-grids developed under a Public-Private Partnership, for instance on a Build-Own-Operate-Transfer basis. |
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| − | <br/>
| + | Mini-grids require substantial, long-term, capital investment and hence a regulatory framework which will give developers, and particularly private financiers, confidence that there will be a market for electricity from the mini-grid for a long enough period to repay and provide an adequate return on their investment. Larger systems may require concessions (which protect against competition over a designated area and time period) to give investors the confidence in revenue forecasts to commit the long-term capital investment needed. For smaller mini-grids, with lower and shorter-term capital investment, a licensing regime (which grants a non-exclusive right to sell electricity) may be more appropriate, with greater flexibility and a generally less demanding process balancing lack of protection from competition for the investor, while still providing the means to protect users through price/tariff regulation and setting technical and safety standards. Mini-grids below a certain size (eg <100kW in Tanzania), are often unregulated, as the administrative burden (and costs) of regulation are seen as disproportionate to the protection it would provide to investors and users, and the right to operate instead being granted through a general derogation from regulation. |
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| | + | Under any regulatory regime a key question for private mini-grid investors will be what happens when the main grid arrives? Grid extension into a mini-grid concession area within the concession period may be prohibited by the terms of the concession, or there may be explicit provision for compensation and transfer of assets to grid ownership. mini-grid licensees have less protection from grid extension than concessionaires, but even where there is no formal concession it is often beneficial to establish a compensation regime in the event of grid extension, to encourage private mini-grid investment in the interim. |
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| | + | Where mini-grids are delivered through a public model with purely public finance, the legal basis will generally be less critical as public financiers are less likely to be concerned about recovery of and return on investment through future revenues. |
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Grid-connected mini-grids and distribution systems share characteristics with both Grid Extension and Isolated Mini-grids – They are linked to the grid system and are able to import electricity from and export electricity to it, so technically they have more in common with Grid Extension. However, in that they are owned and managed independently they are more similar to Isolated Mini-grids. These differences call for different policy and regulatory approaches, so a separate Technology category has been established.
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Delivery Model
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The national grid system may be publically or privately owned or combine both in a public-private partnership. Common public-private models for grid systems include:
- Publically owned generation and transmission, and privately owned distribution;
- Independent Power Producers (IPP) connected to a publically owned transmission/distribution system).
(Where individual distribution areas are separately owned, eg by municipalities or regional bodies, these may be regarded as grid-connected distribution systems and are discussed under that category).
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Legual Basis
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Grid systems almost always act as monopoly concessions (because of the need to balance demand and supply across the system in real-time, and the substantial investment required to establish and maintain the infrastructure). As a result, the right to transmit and sell electricity is often reserved to the national grid utility or company (at least within the area reached by the grid system).
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Price/Tariff Regulation
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In line with the nature of the national grid as a single coherent system, uniform tariffs are almost invariably charged across the system (though often with different tariffs for different classes of user and levels of usage, or in some cases time-of-use pricing). Electricity prices are a highly political issue in almost every country, and therefore there is almost always some oversight of these tariffs. Without explicit regulation there is a risk of political pressure leading to tariffs which fail to cover costs, and hence system deterioration.
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Finance
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Almost all national grid systems (including those in developed countries) are constructed using public funding, drawing on government funds sometimes supplemented by concessionary loans and grants from international agencies. Where the grid system is (wholly or partially) privately owned (often as the result of a privatisation process), private investment in infrastructure may be leveraged by subsidies (egfor connection charges). User charges are the other main source of grid system funding, and uniform tariffs mean that some element of cross-subsidy is inherent in grid-based electricity provision, with users who are more expensive to supply being subsidized by those who can be supplied more cheaply.
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Non-Financial Interventions
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National energy planning is key to establishing the economically optimum extent of the grid. Institutional restructuring, regulatory reform and policy and target setting may all be beneficial in creating the institutional and policy basis for grid extension. Capacity building or technical assistance may be needed where the key actors involved in grid extension lack capacity. Technology development/adoption and adoption of appropriate technical standards can enable grid extension at lower cost (as shown in the NAE Case Study:Tunisia where adoption of standards allowing MALT (Mise A La Terre) distribution lowered costs), while demand promotion may be needed to increase revenues and make it economically sustainable.
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Delivery Model
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Grid-connected mini-grids are often privately owned, but may be publically owned or combine both in a public-private partnership. Common models include:
- mini-grids owned by a private developer connected to the main grid;
- A private enterprise installing generation to meet its own power demand building a local distribution system and supply to other local users and the grid;
- A municipality or other local public entity operating a grid connected distribution system;
- A private company, or public-private partnership taking on operation of a section of the grid distribution system as part of a privatisation process.
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Legual Basis
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Larger grid-connected mini-grids will generally require monopoly concessions (because of the substantial investment required to establish and maintain the infrastructure). Even for smaller grid-connected mini-grids, some form of licensing will almost invariably be appropriate to assure investors that they have the right to sell electricity (both to users and the grid), to ensure that technical standards for grid connection are met, and as the means of regulating prices for export and import of electricity from the grid and sale of electricity to users (see price/tariff regulation).
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Price/Tariff Regulation
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Grid connected mini-grids rely on the sale of electricity to the grid, and import of electricity from the grid and its sale to users, as well as sale of own-generated electricity to users. Clarity on how each of these tariffs is set and regulated will be key to securing investment:
- Setting a standard price for purchase of electricity from the grid, or defining what category of user grid-connected mini-grids fall under, and having a transparent process for adjusting these prices (rather than leaving them to be negotiated between individual developers and the grid company) will give investors confidence;
- A standard price for sale of electricity to the grid (a feed-in tariff), based for instance on the grid company’s avoided cost (as in Tanzania) or an expected average cost from a particular form of generation, will similarly reduce mini-grid development costs and risks;
- Regulation of user tariffs for grid-connected mini-grids will be particularly sensitive given that the mini-grid operator may be drawing on the grid system to supply its users. Applying a uniform tariff (particularly a grid-parity) tariff is likely to offer some grid-connected mini-grids super-profits while making others uneconomic, but an approach based on a margin above the price for purchasing electricity from the grid may be appropriate (particularly where the system acts primarily as a means for distributing electricity from the grid and has little own-generation capacity). In general a cost-recovery approach, taking account of system-specific costs and any subsidies is likely to work best, and clarity and transparency of the process will be key for investors.
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Finance
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The primary financing for grid-connected mini-grids will generally align with the delivery model, with publically-owned mini-grids using public finance and privately owned mini-grids drawing on private finance. However, where incomes are lower or system costs higher, some form of public-private partnership is likely to be needed with public funding (eg through grants and subsidies) making electricity from grid-connected mini-grids affordable to users and the mini-grid systems economically sustainable.
User charges are the other main source of funding with connection charges and ongoing tariffs are used to contribute to investment, cover ongoing operating costs and support repayment and return on investment. As with any system supplying multiple users there is likely to be some element of cross-subsidy between users connected to any individual mini-grid system. Cross-subsidy between grid-connected mini-grids or between the main grid and grid-connected systems may be appropriate, particularly if a uniform tariff is applied.
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Non-Financial Interventions
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National energy planning and sharing of market information are key to establishing the planned extent and timescales for grid extension and hence the scope for grid-connected mini-grids. Institutional restructuring, regulatory reform and policy and target-setting may all be required to create the framework for grid-connected mini-grids to be developed and establishment of technical standards is vital for enabling grid-connected mini-grids. Capacity building or technical assistance may be beneficial where potential developers or those (such as municipalities or user cooperatives) expected to take on responsibility distribution system operation lack capabilities. User awareness raising and demand promotion are often essential to increase revenues and make mini-grids economically sustainable.
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