How do we power rural communities? By providing off-grid solutions

Off-grid solutions

Extending the national grid would ensure a satisfying quality of power to rural communities in Africa. But the solution often remains expensive for remote areas who lack existing infrastructure and are located at the edge of the electric grid, sometimes called the ‘last mile’.

One example is the country of Ethiopia. Even though the country has the second highest generation capacity in sub-Saharan Africa—mostly based on hydropower—the nation’s huge energy resources are at odds with their electrification rate. Despite the substantial investments to expand the grid network to almost 70% of towns and villages, Ethiopia’s power sector falls short on effective and reliable delivery.

In areas like this where grid extension is not economically feasible, electrification through decentralized renewable-based solutions have gained momentum as a means of achieving universal energy access.

Off-grid systems include solar home systems for individual or household use. Solar home systems, which are competitive with kerosene and diesel, have been the most widely deployed technology. They are made affordable to even the poorest communities, using new mobile platforms and pay-as-you-go (PAYG) financing.

Mini-grids

Another option for electricity is adopting mini-grid systems. Mini-grids are localized power networks of larger capacities up to 10 megawatts (MW). These systems are a viable option for providing reliable and high-quality electricity to entire communities.

Depending on population density and distance from the main grid, mini-grids satisfy electricity needs when solar home systems and main grid extensions are not practical options. In many cases, they remain the cheapest and fastest solution for the electrification of rural towns and villages.

Mini-grids can cater to large appliances like refrigerators and air conditioners. But they can also meet other productive energy uses such as irrigation, small industry, food-processing, and telecommunications. For these reasons, mini-grids are slowly becoming an integral part of rural governments’ industrialization strategies. In fact, the number of people connected to mini-grids has more than doubled between 2010 and 2019, growing from 5 to 11 million people.

Clean cooking

Access to electricity through off-grid solutions also means cleaner cooking for the three billion people who still do not have access to clean fuels and technologies. Cooking with polluting fuels is a major global health issue linked to inhaling harmful toxins from traditional open fire cookstoves.

There are various technologies available to replace charcoal, wood, or other polluting fuels for cooking. These include electric, solar, biogas , liquefied petroleum gas, and natural gas. Improved cookstoves for cleaner and more efficient combustion of biomass and solid fuels are also a promising and low-cost opportunity.

The innovative idea of selling bioethanol fuel—a natural fuel produced from plants—through ATMs has been introduced as a way for customers to buy clean fuel in small quantities. These ATMs are placed inside local convenience stores close to people’s homes and villages.

A new way of approaching business models

Goals around electricity access and small-scale decentralized supply in remote areas require new business models. However, a lack of knowledge of the technology and business model data available have made investors skeptical. 

But successful business models do exist. They may vary by ownership, project size, and focus. But they all have one common goal: To provide universal access to electricity. Some take on a basic retail model to serve households and small businesses. Others are tariff-based and require the user to pay before or after usage and may have limits on consumption.

There are several business models that exist to supply electricity effectively and efficiently to developing countries. One such business model that exists is the PAYG model. Here, the energy service provider rents or sells energy systems—such as solar home systems—in exchange for regular payments.

Whatever the case, new business models must plan for the successful operation of the business. They must also identify sources of revenue, the intended customer base, products, and details of financing. 

Financing

Although the overall trend in public financing has been positive over the past decade, and has even increased threefold from 2010–2018, support is still failing to reach many of those most in need.

Yes, the financial coordination between private and public players is constantly improving. But additional support from the public sector is needed to attract more private funds. Creating a better financial environment to expand energy access in rural areas will require the public sector to provide the same amount of support and subsidies that the on-grid sector receives.

The two main financial instruments currently used by mini-grid developers are the traditional commercial loans and the private equity. However, their design is not adapted to the off-grid sector. For example, mini-grid developers have difficulties accessing low-cost and long-term loans. They also have trouble attracting private equity because they are too small.

Universal energy access is achievable. Decentralized electricity systems offer scope for achieving faster and more affordable electrification in rural areas and can play a complementary role alongside grid expansion. Accelerating universal energy access across developing countries will require off-grid solutions, practical business models, and long-term financing.

Rural communities will benefit from affordable, reliable, and sustainable energy while also advancing human development, alleviating pollution, and curbing climate change. By incorporating our energy access goals into our climate strategies, we can take on two major issues at once.