Solar minigrids, or small isolated distribution networks increasingly powered by clean energy, could penetrate a $740 million sub-Saharan off-grid market, according to a report released by Rocky Mountain Institute (RMI).
Of the one billion people living in sub-Saharan Africa in 2015, approximately two-thirds do not have access to power. An additional 400 million people in South Asia, primarily India, also lack access to reliable electricity. For a significant portion of those over one billion people, minigrids may be the least-cost option for electricity access compared with the two main alternatives: grid extension and solar home systems.
The study, part funded by Virgin Unite, found that greater product cost-reduction and service improvements – supported by coordinated financing from development agencies and clear energy off-grid plans from African governments – could allow minigrids to reach 31 million people in the region who are without energy access but with the means to pay.
“The minigrid market has the potential to reach $1.5 billion annually and could include many millions more people if product manufacturers and services providers along with development agencies and African governments take action” said Stephen Doig, MD, Rocky Mountain Institute.
Economies of scale and technology improvement can further reduce costs over time – an average system price is predicted to reduce by 50–75 per cent by 2025
The report highlights that substantial cost-reduction opportunities exist that will greatly improve minigrids’ competitiveness and expand their market potential.
There is presently a 50 per cent gap between average and best-in-class system costs in sub-Saharan Africa. Increased emphasis on competitive procurement of hardware and managing soft costs through site selection and customer acquisition could close this gap. Economies of scale and technology improvement can further reduce costs over time – an average system price is predicted to reduce by 50–75 per cent by 2025.
The RMI report recommends the following next steps to accelerate minigrid adoption and innovation:
- Focus on continued cost-reduction and service improvements. Opportunities include better site selection, integrated hardware and software packages, modular capacity, specialized local project development and management expertise, aggregated finance
- Focus on end-use service instead of power consumption.
- Play a coordinating and financing role by facilitating discussion between governments and the private sector, and providing carefully placed technical assistance and advocacy for a clear set of minigrid enabling policies.
- Blended finance, coordinated by development partners, can begin to leverage outside investment while supporting efforts to better understand the due diligence and de-risking that will be required for full handoff to commercial financiers.
Provide predictable enabling environments for minigrids. Reduce regulatory risk for companies and their investors with;
- Clear, comprehensive off-grid energy plans;
- Streamlined import procedures;
- Dependable incentives for renewables and energy efficient appliances; and
- Education and awareness campaigns that communicate to citizens the role of off-grid products, and minigrids in particular.
Rocky Mountain Institute (RMI) – Carbon War Room (CWR) is the world leader when it comes to tackling climate change through market-based solutions. The organisation – with the support of Virgin Unite – is working to catalyse the energy revolution, combat climate change, bolster economic prosperity and tackle the social and environmental issues created by the global dependence on fossil fuels.
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