This article was published in The Beam #6. Subscribe now to read more on the subject.
A race is underway to provide energy access to 1 billion, mostly rural, people living without electricity. That access will be delivered in many ways; through the traditional grid, via rooftop solar for homes, and increasingly by scaling an innovative, community-based approach called ‘mini-grids’.
By some estimates, at least 100,000 mini-grids — small, localised power plants and transmission that not only provide electricity for homes, but local business and industry — are needed to bring power to 140 million Africans. Thousands more will be needed in Asia and island states.
But instead of requiring US$15,000 per kilometre to extend often over-stressed and unreliable grids, or limiting people to lighting and phone charging as some rooftop solar systems do, mini-grid technology allows small power plants to be built where they are needed, and if well designed, to reliably power whatever loads and appliances are needed. The International Energy Agency (IEA) has said mini-grids and other non-centralised solutions are the least-cost option for connecting three-quarters of those still living without basic electricity.
All that’s required is US$15 billion a year between now and 2030, the IEA says, to fund the needed mini-grids. That might seem like a lot, but to put it in perspective, it’s just one-third of what American consumers spend each year on pet care.
Access to energy, and opportunity
The UN Sustainable Development Goals (SDGs) aim to wipe out poverty by 2030. SDG 7 specifically targets energy poverty, with a goal of providing modern, reliable, affordable and sustainable electricity.
Mini-grids, which can be powered by solar, hydro, biomass or wind, are certainly sustainable energy. They are highly reliable (data shows downtime of mini-grids significantly lower than the main grid in many countries), and the cost of connection is on par or less than the centralised grid, so affordable. But what about “modern”?
That is where mini-grids are distinguishing themselves. Privately- and community-owned companies are demonstrating that mini-grids can do much more than provide access to basic levels of electricity. They can provide access to opportunity. Mini-grids are powering schools and health clinics, reverse osmosis water purification plants, pumps for crop irrigation, replacing diesel generators to power telco towers, and empowering entrepreneurs to start retail, welding, barber and many other micro-enterprises, while generating new jobs to service those businesses.
When impact is measured over a longer period of time, the story gets really compelling. Over the last five years, for example, an RVE.SOL mini-grid in Kenya’s Sidonge village has boosted the local community. A combination of access to power, small business education and third party finance has empowered the creation of 14 small enterprises ranging from a hairdresser to a hugely popular community video hall.
In education and healthcare, the impact in Sidonge has also been felt, with a 180% increase in school attendance by girls. Why? Mini-grid electricity is cheaper than kerosene so homes have more disposable income. They can afford school uniforms, and girls can study at night without affecting their ability to do traditional daytime chores. Lighting has also enabled night-time study groups, upping the average primary school grades by 40%.
Mini-grids don’t just provide access to electricity, they are a catalyst to economic growth and improved livelihoods.
Ready to scale
On the heels of the global explosion in recent years of ‘pay-as-you-go’ solar for rural families, mini-grids are now poised to scale as well. Work in India has already brought the capital costs of mini-grids down significantly, and now a new effort being led by the Rocky Mountain Institute aims to drive down costs further by 20% by 2020.
Several governments in East Africa have already adopted, or are in the process of adopting, regulatory frameworks that will mainstream the mini-grid solution. The Nigerian government has also identified 10,000 sites for private sector mini-grid development, and the World Bank has loaned $350 million to the country to support rural electrification, including mini-grids.
Technology is not the barrier to scale. Most mini-grid developers use “off-the-rack” technology that has been proven around the world at commercial and industrial scale.
The final barrier to scale is in fact efficient and cost-effective financing. Finance that understands the intricacies of the power utility business: generation capacity, demand forecasting, appropriate subsidies, OPEX, consumer demand and affordability, and of course, quality of service. What in more advanced markets is simply called infrastructure finance.