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| | + | '''Basic Energy Services in a Nutshell: '''[[Basic Energy Services - Overview|Context]] | [[Basic Energy Services - Overview#Basics|Basics]] | '''[[Basic Energy Services - Overview#Energy Systems|Energy Systems]]''' |
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| | = Overview<br/> = | | = Overview<br/> = |
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| | Implementation of mini-grids have proved to have a positive social impact by fostering and improving the local governance structure through the involvement of the community in the decision making process linked with the energy system. There are hundreds of diesel-based isolated grids worldwide which lend themselves to be retrofitted with renewable energy technologies. Sharing limited resources and power among users in a mini-grid requires rules and a tariff structure that ensures sustainability in the operation. In general, mini-grids involve intense preparation to ensure the systems operation and maintenance will be sustainable.<ref name="Rural electrification with renewable energy: http://www.ruralelec.org/fileadmin/DATA/Documents/06_Publications/ARE_TECHNOLOGICAL_PUBLICATION.pdf The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">Rural electrification with renewable energy: http://www.ruralelec.org/fileadmin/DATA/Documents/06_Publications/ARE_TECHNOLOGICAL_PUBLICATION.pdffckLR The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdffckLR</ref><br/> | | Implementation of mini-grids have proved to have a positive social impact by fostering and improving the local governance structure through the involvement of the community in the decision making process linked with the energy system. There are hundreds of diesel-based isolated grids worldwide which lend themselves to be retrofitted with renewable energy technologies. Sharing limited resources and power among users in a mini-grid requires rules and a tariff structure that ensures sustainability in the operation. In general, mini-grids involve intense preparation to ensure the systems operation and maintenance will be sustainable.<ref name="Rural electrification with renewable energy: http://www.ruralelec.org/fileadmin/DATA/Documents/06_Publications/ARE_TECHNOLOGICAL_PUBLICATION.pdf The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">Rural electrification with renewable energy: http://www.ruralelec.org/fileadmin/DATA/Documents/06_Publications/ARE_TECHNOLOGICAL_PUBLICATION.pdffckLR The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdffckLR</ref><br/> |
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| | = Opportunities<br/> = | | = Opportunities<br/> = |
| | <u>There are a lot of opportunities that have been observed with mini-grid systems:</u><br/> | | <u>There are a lot of opportunities that have been observed with mini-grid systems:</u><br/> |
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| | *For countries where the grid system is not well developed and there is a vibrant private sector, mini-grids provide opportunities and they are adaptable due to the fact that they can be connected to the grid as they expand.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><br/> | | *For countries where the grid system is not well developed and there is a vibrant private sector, mini-grids provide opportunities and they are adaptable due to the fact that they can be connected to the grid as they expand.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><br/> |
| | *Conversely as the cost of fossil fuel increases, mini-grid systems are becoming more economically attractive as the cost of renewable energy resources decrease. However subsidies are still required for the different schemes but they are a smaller percentage of the investment than on-grid subsidies<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><br/> | | *Conversely as the cost of fossil fuel increases, mini-grid systems are becoming more economically attractive as the cost of renewable energy resources decrease. However subsidies are still required for the different schemes but they are a smaller percentage of the investment than on-grid subsidies<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><br/> |
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| | <u>Technological failure may arise from the implementation of the scheme. Common reasons of such failures include:</u><br/> | | <u>Technological failure may arise from the implementation of the scheme. Common reasons of such failures include:</u><br/> |
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| | **Future policies- This policies are important in determining the future investment capacity in renewable energies, as an example it should include suitable sites and an ambitious rapid rural electrification programme. | | **Future policies- This policies are important in determining the future investment capacity in renewable energies, as an example it should include suitable sites and an ambitious rapid rural electrification programme. |
| | *Development of schemes without attention to developing supplementary programes dealing with issues such as market access, '''small medium enerterprise (SME)''' development and working with local financing institutions, has contributed to a lack of demand and inability to sustain the schemes. | | *Development of schemes without attention to developing supplementary programes dealing with issues such as market access, '''small medium enerterprise (SME)''' development and working with local financing institutions, has contributed to a lack of demand and inability to sustain the schemes. |
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| | <u>Four main approaches can be distinguished based on the institutional and financial system</u><ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><u>:</u> | | <u>Four main approaches can be distinguished based on the institutional and financial system</u><ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><u>:</u> |
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| | #'''Utility-based approach: '''In this approach, a utility company is responsible for all or part of the electricity system. The company may be a national public institution, investor owned or a cooperative. The utility-based approach is the most common for rural electrification in developing countries. | | #'''Utility-based approach: '''In this approach, a utility company is responsible for all or part of the electricity system. The company may be a national public institution, investor owned or a cooperative. The utility-based approach is the most common for rural electrification in developing countries. |
| | #'''Hybrid business model: '''This approach combines different aspects of the approaches above in order to maximise effectiveness and efficiency. Hybrid business models are very diverse and may involve different entities owning and operating different parts of the system. | | #'''Hybrid business model: '''This approach combines different aspects of the approaches above in order to maximise effectiveness and efficiency. Hybrid business models are very diverse and may involve different entities owning and operating different parts of the system. |
| | + | <br/><u>The systems however have their advantages and disadvantages</u><ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><u>:</u> |
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| − | <u>The systems however have their advantages and disadvantages</u><ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref><u>:</u>
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| | | style="width: 109px; background-color: rgb(204, 204, 204)" | '''Model''' | | | style="width: 109px; background-color: rgb(204, 204, 204)" | '''Model''' |
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| | | style="width: 222px; background-color: rgb(204, 204, 204)" | '''Advantages''' | | | style="width: 222px; background-color: rgb(204, 204, 204)" | '''Advantages''' |
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| | | style="width: 251px; background-color: rgb(204, 204, 204)" | '''Disadvantages''' | | | style="width: 251px; background-color: rgb(204, 204, 204)" | '''Disadvantages''' |
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| | | style="width:109px" | '''Community''' | | | style="width:109px" | '''Community''' |
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| | *Improves maintenance by increasing sense of ownership | | *Improves maintenance by increasing sense of ownership |
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| | | style="width:109px" | '''Private''' | | | style="width:109px" | '''Private''' |
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| | | style="width:222px" | | | | style="width:222px" | |
| | *There is great efficiency. | | *There is great efficiency. |
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| | | style="width:109px" | '''Utility''' | | | style="width:109px" | '''Utility''' |
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| | *Responsibility is left to an experienced organization. | | *Responsibility is left to an experienced organization. |
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| | *Quite often they are inefficient and bankrupt. | | *Quite often they are inefficient and bankrupt. |
| | *Political agendas govern them. | | *Political agendas govern them. |
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| | | style="width:109px" | '''Hybrid''' | | | style="width:109px" | '''Hybrid''' |
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| | *This combines the advantages of all the above systems such as the technical capacity of a utility with the financial capability of a private entity. | | *This combines the advantages of all the above systems such as the technical capacity of a utility with the financial capability of a private entity. |
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| | *The difference in management for each entity can increase the transaction costs for the scheme. | | *The difference in management for each entity can increase the transaction costs for the scheme. |
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| | Building a sustainable financial structure can be challenging despite the vast and growing understanding of financial barriers in project development and an increase in financing tools. While mini-grids may stand out as being economically attractive than grid connections especially in remote areas, they are usually accompanied by high upfront costs which are usually predominant in certain renewable generation technologies as compared to the conventional option such as diesel run generators. Financial schemes are designed in a way that they need to be able to pay for themselves in order to be sustainable and that is achieved by setting realistic tariffs for the consumers despite potential equality implications.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> | | Building a sustainable financial structure can be challenging despite the vast and growing understanding of financial barriers in project development and an increase in financing tools. While mini-grids may stand out as being economically attractive than grid connections especially in remote areas, they are usually accompanied by high upfront costs which are usually predominant in certain renewable generation technologies as compared to the conventional option such as diesel run generators. Financial schemes are designed in a way that they need to be able to pay for themselves in order to be sustainable and that is achieved by setting realistic tariffs for the consumers despite potential equality implications.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> |
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| | Funding of mini-grids in many countries has been mostly through grants and subsidies, this is in order to cover the upfront capital cost and sometimes the ongoing cost. Although this is a good method, it can prevent the development of sustainable electricity market if not carefully designed. Another approach that can be used is through the use of microfinance schemes, however there is a limitation to these mainly due to lack of coordination between the energy and the microfinance sector as well as high perceived investment risk within the financial institutions.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> | | Funding of mini-grids in many countries has been mostly through grants and subsidies, this is in order to cover the upfront capital cost and sometimes the ongoing cost. Although this is a good method, it can prevent the development of sustainable electricity market if not carefully designed. Another approach that can be used is through the use of microfinance schemes, however there is a limitation to these mainly due to lack of coordination between the energy and the microfinance sector as well as high perceived investment risk within the financial institutions.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> |
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| | Investment barriers can also be experienced from complicated or out of date energy regulations such as those related to the process of tariff setting. For example, KFW has been using a negative concession system to identify providers (i.e. lowest price for a preset number of connections) in countries such as Senegal and Mali and to increase efficiencies in delivery. In practice, however, this has led to very long and complex procedures with high transaction costs that are unattractive to investors.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> | | Investment barriers can also be experienced from complicated or out of date energy regulations such as those related to the process of tariff setting. For example, KFW has been using a negative concession system to identify providers (i.e. lowest price for a preset number of connections) in countries such as Senegal and Mali and to increase efficiencies in delivery. In practice, however, this has led to very long and complex procedures with high transaction costs that are unattractive to investors.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> |
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| | While mini-grids schemes help in increasing access to electricity in rural area at a significant scale in some countries where the poorer members of the community may remain without energy access, the evidence between the impacts of mini-grid systems and poverty reduction is limited. On the other hand rural electrification programmes indicates that they have often failed to improve access for poor people. This is due to their incapability of paying fees and tariff structures which can result to them paying more. For example, if minimum monthly payments are required, people may face higher costs through payments for reconnection or find it hard to make payments due to fluctuating income throughout the year. In schemes which target poorer people, elite capture in management systems can result in inequities in supply. These opportunities and challenges are likely to vary between the different business model approaches.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> | | While mini-grids schemes help in increasing access to electricity in rural area at a significant scale in some countries where the poorer members of the community may remain without energy access, the evidence between the impacts of mini-grid systems and poverty reduction is limited. On the other hand rural electrification programmes indicates that they have often failed to improve access for poor people. This is due to their incapability of paying fees and tariff structures which can result to them paying more. For example, if minimum monthly payments are required, people may face higher costs through payments for reconnection or find it hard to make payments due to fluctuating income throughout the year. In schemes which target poorer people, elite capture in management systems can result in inequities in supply. These opportunities and challenges are likely to vary between the different business model approaches.<ref name="The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf">The history of mini-grid development in developing countries: http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf</ref> |
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| | *[http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf GVEP international: The history of mini - grid development in developing countries]<br/> | | *[http://www.gvepinternational.org/sites/default/files/policy_briefing_-_mini-grid_final.pdf GVEP international: The history of mini - grid development in developing countries]<br/> |
| | *[[Basic Energy Services - Overview|Basic Energy Services - Overview]] | | *[[Basic Energy Services - Overview|Basic Energy Services - Overview]] |
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| | *[[Portal:Grid|Grid Portal on energypedia]] | | *[[Portal:Grid|Grid Portal on energypedia]] |
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A mini grid, also sometimes referred to as a "micro grid or isolated grid" can be defined as, a set of electricity generators and possibly energy storage systems interconnected to a distribution network that supplies electricity to a localized group of customers. This power delivery architecture can be contrasted to a single customer system such as in the case of a solar home system (SHS). Where there is no distribution network interconnecting customers it can be connected to a centralized grid systems, where electrical energy is transmitted over large distances from large central generators where local generators are generally not capable of meeting local demand.[1]
Mini-grids have a unique feature as they can operate autonomously without being connected to a centralized grid. However the mini-grid may be designed to interconnect with the central grid which means it operates under normal conditions as part of the central grid with disconnection occurring only if power quality needs to be maintained. For instance in the case of a central grid failure. Alternatively, a mini-grid may be designed to operate autonomously in a remote location with the option to connect to a central grid when grid extension occurs.[2]
A mini-grid can be supplied by all sorts of energy resources and power plants, however most of the time a mini-grid will use low AC voltage (220-380V) with a centralized production and a storage system and will have an installed capacity of between and 5 and 300kW even though bigger systems exist.[3]
Implementation of mini-grids have proved to have a positive social impact by fostering and improving the local governance structure through the involvement of the community in the decision making process linked with the energy system. There are hundreds of diesel-based isolated grids worldwide which lend themselves to be retrofitted with renewable energy technologies. Sharing limited resources and power among users in a mini-grid requires rules and a tariff structure that ensures sustainability in the operation. In general, mini-grids involve intense preparation to ensure the systems operation and maintenance will be sustainable.[4]
Despite the opportunities with mini-grids, their penetration remains low in most developing countries. Progressive development in mini-grids has been greatest in China where there is an estimated 60,000 schemes, and in Nepal, India, Vietnam and Sri Lanka which have 100-1000 mini-grids each. Majority of the schemes however use diesel or hydro power generation and are run and maintained by the government.
Institutional and financial structures for mini-grids are more diverse, and they can be owned and managed by the state, private sector or the community. Often however a combination of different actors is involved, owning or managing different parts of the system. Different financial models may also be applied in order to cover upfront capital costs and the on-going operation and maintenance costs.[5]
Building a sustainable financial structure can be challenging despite the vast and growing understanding of financial barriers in project development and an increase in financing tools. While mini-grids may stand out as being economically attractive than grid connections especially in remote areas, they are usually accompanied by high upfront costs which are usually predominant in certain renewable generation technologies as compared to the conventional option such as diesel run generators. Financial schemes are designed in a way that they need to be able to pay for themselves in order to be sustainable and that is achieved by setting realistic tariffs for the consumers despite potential equality implications.[5]
Funding of mini-grids in many countries has been mostly through grants and subsidies, this is in order to cover the upfront capital cost and sometimes the ongoing cost. Although this is a good method, it can prevent the development of sustainable electricity market if not carefully designed. Another approach that can be used is through the use of microfinance schemes, however there is a limitation to these mainly due to lack of coordination between the energy and the microfinance sector as well as high perceived investment risk within the financial institutions.[5]
Investment barriers can also be experienced from complicated or out of date energy regulations such as those related to the process of tariff setting. For example, KFW has been using a negative concession system to identify providers (i.e. lowest price for a preset number of connections) in countries such as Senegal and Mali and to increase efficiencies in delivery. In practice, however, this has led to very long and complex procedures with high transaction costs that are unattractive to investors.[5]
While mini-grids schemes help in increasing access to electricity in rural area at a significant scale in some countries where the poorer members of the community may remain without energy access, the evidence between the impacts of mini-grid systems and poverty reduction is limited. On the other hand rural electrification programmes indicates that they have often failed to improve access for poor people. This is due to their incapability of paying fees and tariff structures which can result to them paying more. For example, if minimum monthly payments are required, people may face higher costs through payments for reconnection or find it hard to make payments due to fluctuating income throughout the year. In schemes which target poorer people, elite capture in management systems can result in inequities in supply. These opportunities and challenges are likely to vary between the different business model approaches.[5]
