Private sector mini-grids have an important role to play in socio-economic development in rural Africa. Together with stand-alone renewable power systems, they are part of a shift away from traditional rural electrification based on extension of the main grid to off-grid solutions.
Green mini-grids offer advantages over connections to the main grid, such as enhanced reliability of supply, better quality power, better environmental performance, and lower cost in remote locations. With the cost of solar PV technologies falling sharply in recent years, mini-grids have become an increasingly attractive option versus traditional diesel engines. Depending on the size of the mini-grid, they are also able to support larger productive use loads than stand-alone systems.
Mini-grids can help improve rural livelihoods, increase economic activities, create jobs, and add value to local products and services. They improve quality of life at the household level and can support the growth of local businesses, including primary industries such as agriculture, fishing and timber, light manufacturing such as wood and metal workshops and commercial and retail businesses. Mini-grids can also improve existing community services, including schools, small health centres, and religious buildings.
Despite the benefits above, renewable mini-grids in rural areas still require grants and subsidies to be viable. The costs of supplying electricity to remote rural communities are many times higher than those in urban centres, partly because the high fixed costs of maintaining the grid are spread over a relatively small customer base. In addition, the ability of rural customers to pay for electricity is often lower.
Support from policymakers and regulators is critical if private mini-grids are to provide reliable, affordable and sustainable energy access. Key policy conditions include: 1) legalising private mini-grid operation; 2) allowing cost-reflective mini-grid tariffs; 3) streamlining licensing and permitting processes; and 4) appropriate compensation in the event that the mini-grid is eventually connected to the main grid.
For more information on mini-grid business models, please refer to the link on the Developers’ Help Desk.