STAGE | Project Delivery
TECHNOLOGIES | Devices and Automation, Solar Power, Data & Analytics
A microgrid is a network of interconnected local generation sources such as solar, hydro and diesel supply electricity to a relatively small number of local users, completely independently of the central electricity grid. Low-cost smart metering technologies allow developing countries to use microgrids to provide access to electricity to rural customers with confidence in revenue generation. This enables energy operators to develop decentralised infrastructure to serve rural communities that would be otherwise unable to be connected to the main grid due to significant infrastructure costs.
Rural electricity demand is typically low, and the losses incurred through transmission from a centralised source make building power lines economically unfeasible. Also, there are risks associated with decentralized projects in low-income areas where returns on investment are not attractive to public and private entities. Low-cost smart metering can provide a cost-effective means of accelerating national strategies to provide consistent access to power and ensure revenue to invest in future infrastructure. Microgrids have many advantages over centralised infrastructure for rural electrification such as better economics, environmental sustainability, and urban-rural regional equity. In many countries, the reach of the electricity grid is extremely limited and almost exclusively serves urban areas. The disparity of urban and rural electrification can be seen in Sub-Saharan Africa where the total electrification rate is 42% whereas the rural communities are at 25%.
Nearly 1 billion people have no access to electricity. 97% of urban areas are electrified but only 78% of rural areas. There is rapidly growing demand for electricity in developing countries in particularly in rural areas. The substantial capital and operational investments into new infrastructure needed to increase capacity and expand the grid to rural areas can be prohibitive. Microgrids and smart metering will enable access of renewable energy to rural communities, while increasing revenue and minimising the operation cost for energy utilities.
The access to electricity will provide continued boosts to social, health and economic outcomes and development to rural communities in developing countries. The successful decentralisation of energy generation with renewables can encourage more investment into developing sustainable energy infrastructure. Successful implementations of smart-metered micro girds will increase confidence in the return on investment for public and private energy providers. As the number of micro-grids grow, this aggregation of loads and generators on a larger scale unlocks greater economies of scale and more efficient management of the power system.
(Note: For application of micro-grids to established energy networks see the Microgrids and P2P Transactions use case.)
Improving efficiency and reducing costs:
- By opening the feasibility of micro-grids to supply electricity, infrastructure costs are lowered for grid operators as they seek to service rural areas.
- The use of meters can help to reduce loads and protect against electricity theft.
Enhancing economic, social and environmental value:
- Productivity, social, and education outcomes are increased though the provision of electricity to rural communities.
- The electrification of new areas can increase the revenue for grid providers.
- The cost advantage of micro-grids compared to extensions of the main grid can allow for a cheaper electricity cost to consumer when seeking to recover project costs through revenue.
Reshaping infrastructure demand and creating new markets
- New segment of rural customers being commercially feasible to service
- Greater demand for decentralised infrastructure making use of generators, solar panels, batteries etc.
POLICY TOOLS AND LEVERS
Legislation and regulation: There is a need for clear and effective public policy to guide public and private investment into microgrid solutions. Local and national government strategies and development targets should be set for electricity coverage, and there are many goals already in place. Flexible tariff adjustments and regulatory frameworks should be allowed as new and alternative business models may be new ground for regulators for tariff setting and pricing structures. Collaboration between regulators, operators, solution providers and communities are needed.
Transition of workforce capabilities: Local operators will need to be upskilled to install and operate renewable energy generation. This will require education and work experience in electrical trades.
Procurement and contract management: Governments could set up alternative procurement methods for electricity services that suit this style of provision which is atypical to traditional grid rollout. This may be using concessions or alternative methods to promote a smaller scale provider.
Funding and financing: Funding is required to invest in technology for rural areas and technology transfer to bring proven technologies into developing countries. New business models enabled by these new technologies can help to attract greater private finance.
RISKS AND MITIGATIONS
Risk: Implementing new electrification technologies in rural environments in developing nations will encounter challenges with appropriate design, demand management, maintenance, and safety. To ensure the microgrid and metering technologies are designed to operate in local conditions and future-proofed for future growth.
Mitigation: Risks can be mitigated by learning lessons and best practices from previous projects and other installations. Good project governance and using experienced providers where possible can help to reduce overall implementation risks.
Risk: Power generation operators may have area-monopolies where they are the sole provider of electricity in the community. This may lead to predatory pricing where communities may overpay for electrical services.
Mitigation: Regulatory bodies will need to be created to scrutinize and enforce pricing. The sustainable energy sources of generation technologies should assist in keeping generation costs down.
Risk: Digital payment platforms are at risk of cyber security threats which can jeopardize customer personal and banking details.
Mitigation: Appropriate cyber security measures need to be taken to ensure data safety.
Risk: Technologies using non-renewable energy sources produce greenhouse gases that contribute to climate change. While solar panels will turn into waste after their end of life.
Mitigation: While greenhouse gas emissions are undesirable, the alternative of centralised infrastructure with poor transmission efficiency may release more greenhouse gases. Plans to dispose end of life solar panels will need to be developed or panel be repurposed / recycled within rural communities.
Risk: The rollout of electricity provision can have an economic risk equivalent to the scale of the project.
Mitigation: Project governance suitable to the scale of the rollout needs to be included to minimise economic risks to the project. The source of funding, whether government or private, will direct who needs to ensure project governance.
Example: Gram power
Implementation: Building small scale (5-10 kilowatt) solar micro-grids in inaccessible villages of Rajasthan, India, and providing users with smart meters that allow users to regulate their power consumption.
Cost: Initially, 90% of microgrid capital cost came from government schemes. Currently, funding from private utilities are increasing.
Timeframe: The project has been ongoing since 2012. With more than 50 microgrids built since.
Example: Earth Spark/Sparkmeter
Implementation: In 2019, The Tiburon (Haiti) 95kW solar microgrid was launched using SparkMeter to enable pre-payment billing, load management, and theft detection. The grid will serve 500 homes and businesses with 24/7 electricity.
Cost: The grid was funded primarily by the OPEC Fund for International Development with additional support from USAID, The Pan-American Development Foundation, the Organization of American States, and individual donors.
Timeframe: This is part of a 10 year ongoing rural electrification project in Haiti.
Example: Green Village Electricity (GVE)
Implementation: The GVE project is an ongoing rural electrification scheme designed to provide clean and reliable energy to off-grid rural communities in Nigeria based on a Pay-As-You-Go (PAYG) revenue collection system. Once completed, the microgrids will provide energy access to an estimated 73,500 people.
Cost: The Renewable Energy Performance Platform (REPP) is providing funding and access to long-term debt to help build the project into a sustainable business that can attract funding from private sector financial markets.
Timeframe: To date, REPP’s support has enabled microgrid to be established in 24 of the 72 sites, directly supporting Nigeria’s high-priority target of universal energy access by 2030.
Ifeanyi B. Orajaka