Off-grid solar systems have become the preferred electrification choice for rural communities. This is because solar-powered mini-grids are cost-effective compared to grid extension for remote areas. In addition, the easy installation of these systems and scalability means that they can be built to meet the energy needs of individual communities. However, mini-grids deployed in rural areas are still subsidised by the government or development agencies because they often are not sustainable.
Electricity from mini-grids is often more expensive than that from the grid. Mini-grid tariffs range from 2X to 5X that paid by grid-connected consumers. As a result, low-income rural dwellers cannot afford to pay for the electricity generated by these systems. Also, capacity utilisation of mini-grids tends to be low as consumers do not have enough use for the energy generated. For example, in 2018, the United Nations Industrial Development Organisation (UNIDO) constructed four mini-grids in Rwanda, but utilisation rates were as low as six per cent.
Mini-grid consumers need to use energy productively to improve energy affordability and utilisation. Productive Use of Energy (PUE) is essential to promote electricity access, reduce poverty, generate employment and revenue streams. However, the lack of finance to purchase appliances and equipment hinders capacity utilisation, decreasing mini-grid projects’ economic viability.
Improving Productive Energy Use
Increasing energy demand requires providing the means via which consumers can utilise the electricity generated. Developers can reduce consumption risks by selecting locations with high economic activities before mini-grid development and providing schemes to stimulate customer demand once operations begin. These schemes should integrate the economic activities already present in the area and identify ways to improve productivity with an increased energy supply.
According to the World Bank, by 2030, mini-grids will provide electricity to over 500 million people worldwide. A large proportion of these systems will be deployed in Africa. While the accelerating deployment of these systems, some countries and organisations have made concerted efforts to improve productive energy use. GIZ employs productive energy use in its Energy Supply for Rural Areas program in Afghanistan. GIZ’s programme achieved its objective by studying the economic activities of community members, provision of machinery to aid agricultural processes and community sensitisation of peak and off-peak electricity consumption hours. In Nigeria, the Rural Electrification Agency (REA) has signed financing agreements with developers to increase access to funding for PUE equipment for rural mini-grid consumers.