This report represents the final report on the support study on
“Identifying the gaps and building the evidence base on low carbon
mini-grids”. The review forms part of a preliminary initiative of DFID
to promote Green Mini-Grids (GMG) in Africa under the International
Climate Fund (ICF) with the objective of providing guidance and
recommendations for DFID intervention and programme implementation.
The report is structured in 8 chapters:
Chapter 1, International Review of Mini-Grids and Data Collection,
provides an overview of the technologies, and of implementation schemes.
The reality of the target countries is that while there are a number of
diesel based mini-grids run either by private operators with low service
and high cost, outside any regulated framework, and some run through
various forms of Public Private Partnerships, there are extremely few
Green Mini-Grids. Some Renewable Energy Power Generation operations are
found to be for self-consumption or feeding into the grid, but very
seldom for powering a Mini-Grid isolated from the interconnected
network. Therefore there is, in reality, very little actual evidence to
Chapter 2, Relevance of Mini-Grid Solutions, proposes an approach to
help the planner identify whether in a given country/region, Mini-Grids
– and further Green Mini-Grids are a viable option for access to
electricity services. These mini-grid areas are those which will remain
out reach of the interconnected grid for a few years to come, and yet
where there is sufficient load density to ensure the economic viability
of a mini-grid (as opposed to those areas where stand-alone
individual/community systems are the most relevant). The objective here
is to establish whether there is a sufficient volume benefitting a
sizable population, which justifies the development of the whole,
complex value chain – technology, skills, business models, etc.
Chapter 3, Cost Benefit Modelling, confirms once again the benefits of
electrification from an economic perspective, which is that of the
society as a whole and in a long term view. From the point of view of
society, benefits of access to electricity widely exceed that of
“greenness” per se in the country context of this study. It also remains
that these Green Mini-Grids are capital intensive but viable in the long
term, also looking into the fact that we are on a learning curve. Case
studies will illustrate that we are sometimes borderline in terms of
comparison to fossil fuels, but considering the dynamics of rising
fossil fuel prices, cost of environmental degradation and the fact that
renewables are becoming cheaper and more reliable, GMG should definitely
Chapter 4, Financial Schemes and Modelling, highlights that GMG
investment returns generally do not match private sector expectations in
terms of returns, pay back and risk. Government-led programmes are being
– albeit modestly- observed, because this requires a significant outlay
of capital upfront, and most countries would naturally prioritised grid
extension which maximises the number of connections per € spent. Hence,
there clearly is a need for financial engineering to bridge the gap
between economic viability from the society’s perspective and
profitability from the investor’s perspective.
Chapter 5, Best Practices for Implementation and Operational Management,
actually offers some examples and good practices of implementation.
“Best practices”, given the reality of the number of schemes actually
implemented, is a total overstatement. The two key entry points of the
analysis here is that Green Power Generation Activity for a mini-grid
has to be distinguished from the Distribution activity – involving
customer management. In some cases, one may have a single player. Field
evidence shows that this is not the case as companies interested in the
generation side, are more often than not is a separate entity from
distributors with the local contacts. They want a (reliable) off taker,
who can be a DISCO (distribution company), a distribution cooperative,
or large anchor customers. Aside from that, the risks and returns of
distribution in a mini-grid are very different from Small Green Power
generation. One structure undertaking the two activities is observed in
the case of much smaller micro grids, or low tech village level approach
– which is a very relevant but different market segment.
Chapter 6 National Policies, Regulatory and Financial Frameworks shows
that formulating without a vision, strategy, quantified plan and
political commitment, GMG stand little chance of broad expansion beyond
pilot projects. Once this foundation is established, the legal basis,
authorisation, procedures, and transparency should be worked out,
further offering the incentives required for GMG to take off (i.e.
fiscal, financial, tax). Field reality shows us that this is starting in
countries which are already well advanced in grid expansion for rural
electrification. In countries where grid expansion still offers a
significant potential, policy makers will look at mini-grids only as
“pilots” to learn from in preparation for a future phase.
Chapter 7 on Smart Technologies and Innovative Energy Storage provides a
quick perspective on the very promising technology developments, which
is a strong argument in favour of making efforts to bridge the gap
between economic and financial viability.
Chapter 8, GMG Development Programme is the final chapter of the report
which suggests countries for priority intervention given DFID goals, and
the types of interventions which would be most effective in scaling up
the number of GMG from demonstrations to programmes.
Innovation Energie Développement (IED). Support Study for DFID. Low Carbon Mini Grids. &#8220;Identifying the gaps and building the evidence base on low carbon mini-grids&#8221;. Final Report. Innovation Energie Développement, Francheville, France (2013) 20 pp.
Support Study for DFID. Low Carbon Mini Grids. “Identifying the gaps and building the evidence base on low carbon mini-grids”. Final Report.