by Matthew Tilleard, Gabriel Davies and Lucy Shaw - CrossBoundary
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
How did we develop our minimum answer?
CrossBoundary started by combining the data on existing and planned high-voltage transmission lines from the World Bank with data on the population density of Africa by square kilometer from WorldPop. This allowed us to map out where each square kilometer of population is relative to the high-voltage grid. These data sets paint a clear picture of the challenges for electrifying rural Africa. First, Africa in parts is sparsely populated: Over 350 million people live in square kilometers that contain fewer than 100 people, equivalent to a family of five living on 10 football fields of land. Second, people often live remote from infrastructure: 135 million people live more than 100 kilometers from existing and planned high-voltage lines.
Next, we built up cost estimates to arrive at the tipping points between main grid extension, minigrids and solar home systems, allowing us to segment every square kilometer into its least-cost option. We did this by considering the costs of minigrids against the cost of main grid extension or solar home systems, assuming similar average electricity consumption. Our tipping points ultimately identify an average break-even distance from high-voltage lines where localized solutions become cheaper than main grid extension, and a break-even population density where minigrids are cheaper than solar home systems.
To establish the costs for minigrids today we have benchmarked costs for existing projects from 15 minigrid developers across East, South, and West Africa. To make sure we hit the rock-bottom of our estimate for the role of minigrids, we also made two generous assumptions for the existing grid and home solar:
- Power from the existing grid is free. The only additional cost is extending it.
- A reduction in home solar costs by 40 percent by 2030, with replacement twice in 20 years.
On these assumptions, minigrids are cheaper than grid extensions at an average tipping point of 25 kilometers from the high-voltage grids, and cheaper than home solar at an average tipping point of 400 people per square kilometer.
Minigrids are the least-cost option for electrifying at least 100 million people in Africa
Running this analysis allows us to identify the least-cost option for electrifying the roughly 600 million people the World Bank estimates live in unelectrified areas. For 2018, we estimate that 210 million people are most cheaply served by grid extension (green), 100 million by minigrids (blue), and the remaining 310 million people by solar home systems (gray).
African Off-Grid and On-Grid Populations by Source
So, returning to the original question: Should minigrids have a role in delivering universal access in Africa?
Yes, because they are the cheapest way to deliver power for at least 100 million people.
Our minimum analysis approach compares well with more complex and optimistic models. Other published estimates have more complex methodology and also projections on minigrid cost reductions and population growth. We are right at the lower end of estimates made by UN-DESA and IEA, both using the KTH Royal Institute of Technology model. The striking increase in IEA’s estimate from 140 million in 2014 to 290 million in 2017 is driven by falling costs of solar, better information on population densities, and rollout plans of the existing grid. Our analysis establishes a minimum number that the most hardened skeptic can accept. These models establish more realistic estimates for those who already see the potential of mini-grids.
Number of People Minigrids Can Serve as a Least-Cost Option
There are still many questions that need to be answered on the best way to achieve affordable, reliable, sustainable electricity access in Africa. For example, how much subsidy will be required to achieve this goal? What mix of public- and private-sector interventions are required? Should Africa build a grid that resembles the legacy grid of developed countries or start building toward a more distributed grid of the future?
This analysis shows there is an immediate role for minigrids in reaching universal electricity access in Africa. Our analysis shows that the minimum number of people most cheaply electrified by minigrids today is at least 100 million. We estimate the investment required to connect those 100 million people by minigrids is $11 billion.
That number of people, and that amount of capital, is enough for donors and governments to allocate far greater levels of funding to minigrids today if we truly want to make sustainable energy access a reality.
Matthew Tilleard, Gabriel Davies and Lucy Shaw are with CrossBoundary Group.