Tech Talk | The mini-grids boom for rural electrification

Mini-grids are seeing unprecedented growth, particularly in sub-Saharan Africa, in the push to achieve universal energy access.

From the start of the implementation of the sustainable development goals (SDGs) over a decade ago now, the concept of the ‘mini-grid’ was considered a key technology for delivering electricity to people without access, particularly those living in rural areas beyond the reach of the grid or its practical extension.

Slow to take off as new mainly entrepreneurial developers emerged with new technology offerings and funding and business models, a new report from the Mini-Grids Partnership has revealed that mini-grid installations have now grown significantly, with the number globally having increased by six times since 2018.

At the same time, also they have become ‘greener’ with an increase in the share of solar PV systems from 14% to 59% over the period while the share of diesel capacity has dropped from 42% to 29%.

Have you read?
Blockchain crowdfunding platform to scale solar, mini-grids in sub-Saharan Africa
Manoj Sinha: ‘Innovation is attacking a problem from a multi-dimensional aspect’

The mini-grids (r)evolution

Back in 2012 when SDG7 was determined to deliver universal access for all, over 1 billion people were lacking access to electricity with efforts subsequently reducing the number to around 660 million currently.

Mini-grids – in essence a source of generation supplying one or more loads – have in no small measure played a key role in this, with their ability to be installed in remote and hard-to-reach locations and overall emerging as the least cost electrification option in these and other rural areas, where over three-quarters of the world’s unelectrified population resides.

According to IEA data, there are around 21,500 mini-grids globally supplying electricity to around 48 million people today.

Of the top 20 countries with extensive access to mini-grid electricity, nearly half are located in sub-Saharan Africa.

Two countries, the Seychelles and Nepal, are providing mini-grid electricity to over 5% of their populations.

Mini-grids growth

The Mini-Grids Partnership’s new report draws on databases covering over 1,100 mini-grids in over 45 countries, the majority in Africa, with the data indicating the number doubled in sub-Saharan Africa alone between 2019 and 2021.

These range in size from an average 55kW in Madagascar with a total installed capacity approaching 20MW up to 143kW in Nigeria where the installed capacity is 14MW.

The report attributes the growth to two primary factors.

One is the substantial increases in funding for the mini-grid sector over the past 15 years, with sub-Saharan Africa being the primary recipient of funding from private investors, governments and development partners.

In 2023 the total committed funding exceeded $2.5 billion in 2023, with a sixfold increase in private investment recorded from 2015 to 2022 from less than $100 million up to nearly $600 million.

The second is the declining costs of mini-grid components, including PV modules, inverters, batteries, battery inverters and smart meters, which have significantly enhanced the financial viability of mini-grid projects.

Market trends

The report identifies various market trends, among them that several governments are tailoring regulatory processes for different mini-grid scales to enhance flexibility and reduce costs.

In particular small-scale systems under 100kW are often exempt from licensing and tariff approvals, such as in Nigeria and India.

On the business side, the evolution of mini-grid business models has reflected a shift from merely supplying electricity to fostering the productive use of energy, such as providing appliances and developing value chains ultimately supporting rural development and economic growth.

Companies also are leveraging alternative applications for surplus energy during the early stages of mini-grid operations to enhance revenues and drive down tariffs, with one example being for bitcoin mining.

On the technology front, alongside state-of-the-art PV and smart meters, there is an increasing
prevalence of lithium-ion batteries as their cost continues to fall, offering extended lifespans and other benefits compared to lead-acid variants.

Advancements in remote monitoring and control technologies have facilitated efficient management at even the most remote sites, yielding substantial cost savings estimated at least 15% in O&M expenses.

Market outlook

With the large number of people still without electricity, mini-grids will continue to play an important role.

Despite the substantial increase in funding already noted, a significant financing gap still remains. While various mechanisms are being devised to de-risk investments, such as blended finance combining grants, equity and debt, and one-stop-shop financing platforms, resource requirement reduction can be achieved particularly through wider data sharing, the report suggests.

Innovative models such as inter-connected mini-grids also are likely to become more widespread.

The report also indicates that the productive use of energy will remain crucial and should prompt a shift towards proactive models such as the business acceleration and supplier-offtaker approaches, exemplified by initiatives that involve the provision of education, training and business development, aiming to enhance mini-grid profitability while empowering communities.

Jonathan Spencer Jones

Specialist writer
Smart Energy International

Follow me on LinkedIn