Minigrids Are the Cheapest Way to Bring Electricity to 100 Million Africans Today
By all measures, Africa is currently losing the battle to end energy poverty by 2030.
U.N. Sustainable Development Goals commit the global community to delivering accessto affordable, reliable, sustainable and modern energy for all. One barrier to success is the ongoing political debate about how best to provide power to the more than 600 million people in Africa without access to electricity. Vested interests, inertia, aversion to change — all traits of the energy sector — do not lend themselves to speed, nor to innovation.
The debate has huge financial, economic and social implications. To solve it, empirical questions on technical feasibility and cost must be solved. At the same time, tough judgments about what quality of power people should receive, how much they should pay for it, and the role of the private sector vs. the public sector must also be addressed.
Three main ways exist for providing electricity access: 1) extension of the existing electricity infrastructure (i.e., “main grid extension”); 2) minigrids; and 3) standalonesolarhome systems (i.e., residential solar). All three have a role to play.
Minigrids are self-sufficient electricity grids with their own power generation, storage and transmission capacities. They can serve households and businesses isolated from or integrated with the main grid.
The potential for minigrids to play a role in universal electrification in Africa has been well recognized. Beyond their ability to integrate with the main grid, they are also the least-cost option for many people in rural Africa. The International Energy Agency in 2014 estimated that minigrids could serve 140 million people by 2030. In an updated projection last year, it put that number at 290 million, or more than double the original estimate.
However, actual minigrid deployment is still extremely limited. As such, justifiable skepticism exists on whether this potential can be fulfilled.
In an effort to put that skepticism to rest, CrossBoundary developed a new analysis to calculate the minimum number of people in Africa who can be most cheaply connected by minigrids today, compared to the two other options.
Why is this important? Because when governments, donors and investors do reach consensus, they mobilize billions of dollars to support millions of connections. The pay-as-you-go solar home system sector in Africa — comprising systems serving single households — raised over $750 million from 2012 to 2017. This is dwarfed by the investments that single countries are making on expanding their existing grid infrastructure. For instance, the Kenyan government is investing $1.4 billion, supported by $675 million from the World Bank, African Development Bank and other development funders to build generation capacity, transmission lines and distribution networks.
In comparison to those sectors, the top five minigrid developers in Africa have raised less than $100 million over the last five years.
To help establish this "minimum role," CrossBoundary has undertaken a least-cost analysis (based on “like-for-like” connections — average 100 watts per household) in order to estimate the number of people for whom minigrids are the cheapest way to connect today. We took the most conservative view possible. No projections on population growth, no future cost reductions on minigrids, and no assumptions beyond minimum quality of power required. We used the costs now, for the people who live off-grid now.
What is the minimum number of people in Africa for whom minigrids are the most cost-effective option?
As the chart below shows, of the three paths, no single means of electrification is always the cheapest. Main grid extension is generally the least-cost option for people who already live close to the grid (such as urban and peri-urban populations). Minigrids are usually least-cost for people who live so far from the main grid that extension costs are higher than installing local generation and storage capacity, but in a location densely populated enough to support the fixed costs of building the minigrid infrastructure. Solar home systems are the least cost for everyone else -– those living in sparsely populated areas, where running poles and wires from even a local minigrid becomes expensive.
Range of Connections Benchmarked Across Africa for Main Grid Extensions, Minigrids and Standalone Systems