Mini grids are expected to play a critical role in bridging the power access gap and for meeting the energy for all by 2030 targets in the developing world because they are considered the least cost option for these areas, according to Shashank Verma, the Head of advisory services at Energy 4 Impact.
While mini grids have a long history and were an integral part of the power sector development of many of the current high income countries, they are only now emerging as a scalable option for meeting energy demand in Sub Saharan Africa, South and East Asia and Small Island developing states.
Speaking at the first Africa Solar + Energy Storage conference in Nairobi in June, explained even though mini grids are the easiest to bridge this gap, they have been facing varied challenges in Africa
“There are cost reflective tariffs where selling of electricity is regulated, usually to protect one big state owned electricity distribution company that is responsible for selling power. Mini grids are therefore perceived as a threat,” he explained.
The Africa Solar +Energy Storage conference (AISEC) was organized by the Leader group of China as an avenue to bring different sector players into one place to discuss the challenges and prospects for bridging the power access gap in Africa. It was attended by leading players in Solar and Energy Storage from the around the world, financing intuitions, Insurance players, power regulators and government representatives at the LAICO Grand Regency Hotel in Nairobi.
Other challenges he said include the arrival of the national grid. 70% of the population lives within 700 meters of the national grid and yet it is not economically viable to connect them.
“The cost of connection for the grid is between $1000 and $2000 per connection. The question therefore is what will be the exit option when the grid arrives, because it’s no longer an issue of ‘if’ but ‘when’ it arrives,” he said.
Energy 4 Impact is a world Band funded NGO that provides support to businesses that are working to accelerate access to energy in developing countries. Since its inception in 2006, Energy 4 Impact has supported 3, 046 businesses that have raised $111m of capital, created 8,363 jobs and avoided 12.2m tones of co2 and provided 14.8m people with improved access to energy.
The other challenge Verma explained is that there are no proven business models on the ground. “It takes between 7 to 10 years to break even and yet it can be worse due to lack of freedom to set higher tariffs. The lack of proven business models also makes it hard to access business finance.
It is estimated that over 1.2 billion people, half of who live in Africa currently lack access to electricity and, according to Independent Evaluation Group. If the pace of new connections made during 2000–10 continues for the next 15 years, and population growth is taken into account, the number of people without access in low‐access countries would rise by an additional 40 percent by 2030.
The closest competition to mini grids is the solar home systems which are scaling up operations and attracting a lot of financing. “Of course SHS can only provide lighting and phone charging, although they are now providing other appliances such as vs. Mini grids would therefore need to figure out their strengths visa vis the SHS.
But even if there are still numerous challenges, industry players say that recent technological and institutional innovation, combined with an overall cost reduction have made them an attractive alternative.
In rural areas, mini‐grids now have the potential to provide high quality energy for productive uses to communities that otherwise might be waiting for years for grid connections. And as decentralized generation, electrical storage systems, smart meters, and efficient appliances continue to come down in price, independent power producers will find innovative ways to bring electricity services to new customers at affordable costs.