Mini-grids — the little-known clean energy revolution

London: Over the last decade, the number of people in the world without access to electricity has fallen drastically—from 1.4 billion in 2010 to about 900 million in 2018, according to the United Nations. And yet, if current trends persist, the world won’t be able to meet the UN’s sustainable development goal of universal access to electricity by 2030, with as many as 600 million still lacking basic 21st century services.

It doesn’t have to be so. A new technology has matured and become affordable that could help achieve the laudable goal, and it’s called mini-grids.

As the name suggests, mini-grids are small, isolated versions of larger power grids. They increasingly use solar power as an energy source, with support from batteries or diesel generators. Because the cost of solar power has fallen drastically , mini-grids have become much cheaper than installing long-distance transmission lines from a central electricity grid.

There are about 5,500 mini-grids in operation across 12 countries in Africa and Asia, according to The State of the Global Mini-grids Market Report 2020, published by the international non-governmental organization Sustainable Energy for All and BloombergNEF earlier this year. The report’s authors found that mini-grids could meet the needs of half the people who still need access to electricity in those regions.

Universal power access will require $128 billion of spending, the report found, but the world is on track to spend only about $63 billion on mini-grids over the next decade. Plugging the gap would cost less than $600 per target household reached.

The need goes beyond money. “Today the mini-grid market is nascent, despite being the least-cost option for electricity access in many areas,” the report concludes. The international Mini-Grids Partnership, which includes the World Bank and other development agencies from rich countries, has approved $2 billion in awards since 2012 but only disbursed 13% of the money, with many projects stuck because of policy uncertainties.

That’s no surprise. Countries where mini-grids will be most useful, such as in India, Uganda or the Philippines, suffer from corruption, bad policies, weak regulatory enforcement, red tape, or a combination of all four. “Fortunately, a small number of countries are setting up clear frameworks designed to expand the mini-grid market, and are attracting private sector interest,” the report says.

Nigeria is a prime example, says Amar Vasdev, an analyst with BNEF. “Nigeria learned lessons from what worked and what didn’t work in Tanzania and Rwanda.”

Africa’s most populous country struggles to provide electricity to its 200 million people. Only 55% of the country has access to electricity, and even there, people suffer from power cuts lasting between four and 15 hours every day. As a result, the country spends more than $16 billion annually to power diesel generators.

In 2017, the country passed a law to help mini-grid development, which streamlines the online application process, offers $350 in government subsidies per user once grids with more than 30 users are up and running, and provides for compensation if the main power grid eventually arrives in an area served by a mini-grid. Developers in Nigeria now have simpler processes and clearer guidelines to follow.

The upshot is that mini-grids have become a much more attractive investment. “Now you see a lot of companies flocking to Nigeria,” says Ruchi Soni, program manager at Sustainable Energy for All. “We hear from partners that they would like to replicate Nigeria’s success in their country.”

This offshoot of the clean energy revolution has three benefits: mini-grids can help provide access to electricity to those who lack it and do so in a cleaner and cheaper way. Few things in life are win-win-win.- Bloomberg

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