How does a Green Mini-grid work? - Renewables in Africa
Published: 01 Oct 2018 By Renewables in Africa
I could see from where I am sitting that many of you are feeling particularly excited to return to work and students to return to school.
If that could give you some comfort, some of us have spent the entire summer carry on working and have not been blessed yet to enjoy that nice holiday break. So do us a favour, keep your vacation memories for yourself, lol. Especially those of you who were vacationing on the continent.
Now, RiA has given itself a mission to contribute on sharing and improving your knowledge on Renewable Energy and this week we want to focus on green mini-grid.
What is a green mini-grid?
First all love green but let’s be clear, a green mini-grid is not referring to the color but a mini-grid powered from renewable energy sources. Most likely solar, wind or hydro.
A mini-grid, also referred to as isolated grid, is a set of small-scale electricity generators and possibly energy storage systems interconnected to a distribution network that supplies electricity to a small and localized group of customers, operating independently from the national transmission grid. They usually range from 10 kW to 10MW. Smaller mini grids are called micro-grids w or nano-grids. Anmd to give some perspective, the number of houses covered by a 10 kW mini-grid would depend on the energy demand demand, determined by the type of appliances used. While in an urban area in Lagos that mini-grid would barely covered in a house or two, in a rural area like Senoufou in Burkina Faso, that same mini-grid could cover 10 houses.
Mini-grids serve a variety of customers from private households, commercial businesses to industrial customers.
What are the technical components of a mini-grid?
A mini-grid is grouped into three systems:
The production system generates electricity from either a single energy source or a mix of energy sources, in which case it will be referred to as hybrid.
This system will consist of generation technologies, inverters, a management system and in some cases batteries (storage).
Inverters will be used when end users need a different type of electrical current than what the energy production technology generates. Some energy generation technologies, like Solar, produce direct current (DC) while others produce alternating current (AC).
The distribution and transmission
The distribution and transmission, also called T&D, moves electricity from the generation site to end customers. The system consists of distribution and transmission lines, transformers and poles. It is most common to overhead lines rather than underground as it is far cheaper to build. However, when they are not well-maintained, they could be damaged by elements of the natures like hurricanes in the Caribbean.
The end-user system provides connections that allow customers to use electricity. End-user systems take into account consumers’ requirements and energy uses. Metal workshops in urban area in Namibia that are operating machinery for productive uses would need different systems than households that use electricity for lighting and small appliances. The end-user system consists of connections to and from the mini-grid and systems to prevent electrical shocks that could harm both equipment and users. Matching electricity demand with supply is important for the project economics of mini-grids, particularly solar mini-grids, which generate only in daylight hours.
What are the usual challenges?
Although a very attractive and promising option for electrification of Africa, there are still significant hurdles for the development of mini-grids and we can mention three here.
Tariffs, licensing and arrival of the national grid
Most African countries are using a uniform tariff whether you are talking households connected to national grid or a mini-grids in a remote area. While stated-owned mini-grid are subsidized like the grid while private mini-grids make their return on their investment. In addition, risk for a mini-grid to be taken over by expanding national grid is a major concern by private investors. Kenya and Tanzania have set up regulations to deal with these situations.
Proven business model
According to ownership (public, private, community) and size, business models may differ. If the most scalable model is the public-private partnership (PPP), where is any mini-grid that is funded, developed and operated through a partnership of public and private entities, Mini-grids that focus on industry and businesses are more likely to reach a critical mass of customers and cover their fixed costs than those that focus only on households.
Lack of access to finance
Many mini-grids are financed through a mix of grants and subsidies, commercial equity and in some cases, loans. Grants offered to mini-grids are usually inflexible, have high transaction costs, and at times disbursement delays causing cash-flow problems for developers. Commercial investors would tend to be put off by the lack of a proven, scalable business model in the sector, the low risk-adjusted returns and lack of successful exits. Accessing credit is even more challenging for mini-grid developers than other types of financing but some solutions have started to emerge, especially for larger mini-grids (above 1 MW) that are supplying with anchor client like for example a Dangote manufacturing plant.
Why are mini-grids important?
As mentioned in our article last year the UN SDG 7 goal is challenging us to provide affordable, reliable and sustainable electricity and modern energy to all by 2030. With 52%, Africa has the lowest electrification rate and there is a common consensus now that Mini-grids and offgrid systems have a great role to play to reverse the trend. IEA has predicted (in Africa Energy Outlook 2014) that by 2040, 70 percent of new rural electricity supply in Africa will be from stand-alone systems and mini-grids. Besides Kenya and Tanzania already mentioned, another country which is apparently making bold steps towards mini-grids is Nigeria. The Rural Electrification Agency (REA) announced earlier this year a target of 10,000 mini-grids providing 3,000 MW (the equivalent of 3 small nuclear plants) by 2020. According to the report prepared by the Rocky Mountain Institute and the Nigerian Economic Summit Group, these 10,000 sites, each with a 100-kW capacity, would power 14 percent of the nation’s population and create a $20 billion investment opportunity.
So friends, still doubting the mini-grids market? I bet you’re not! Too much at stake!