The International Energy Agency (IEA) estimates that 548 million people in SSA currently have no access to electricity in their homes. Over the last two decades, the rate of rural electrification has been rapid due to grid extension programs in Asia, Latin America, and parts of Africa.
Yet in many regions, geographic variables and low rural population density make grid extension too costly a method to provide electricity access for every household. In order to fill the gaps, governments and development organizations have used off-grid solutions to provide rural households and villages with access to electricity.
One of the ways in which rural electricity access has been addressed through off-grid renewable energy solutions is through a market-based approach, which centers on the role of social enterprises (SEs). Such SEs have concentrated their efforts in rural areas of Sub-Saharan Africa, Latin America, and South Asia where poverty rates are high and grid connection is unlikely in the medium or long term.
There are numerous SEs whose objective is to provide poor rural households access to affordable solar home systems (SHSs) and pico-solar lights for lighting and charging cell phones. These include SunnyMoney, Ilumexico, Azur, as well as many others. SEs’ efforts have been notably helpful in SSA, wherein 2018, it is estimated that 25 million people receive household electricity access through SHSs and pico-solar lights purchased from SEs.
A 2017 report by Acumen Solutions examined the major challenges preventing the scaling of this method in SSA, finding that up-front costs, lack of availability in terms of finance and selection, as well as lack of knowledge of the product have prevented more rural households from purchasing SHSs or pico-solar lights. The report also identified and evaluated various strategies used by SEs to alleviate these barriers.
In order to alleviate the barrier of up-front costs, SEs have offered different payment plans, such as rent to own (households make periodic payments that eventually lead to ownership), perpetual leasing (households pay for electricity consumption but never own the product), and mobile money payment systems.
SEs have also utilized other strategies to increase access and publicize their products for furthering adoption. For example, in Senegal, SunneyMoney has utilized a “Lighting Library” model, which allows students in rural schools to rent pico-solar lights and small SHSs for cellphone charging. Through this model, SunneyMoney found that 35% of families in the targeted schools eventually purchased a product, compared to only 12% in other schools where this was not offered.
This approach has helped disseminate increased knowledge regarding off-grid renewable energy solutions in poor-rural areas of Senegal. However, it may be difficult to replicate this intervention, as it required a high amount of initial investment, indicating that outside financial support may be needed for scalability.
Despite the innovative approaches offered by SEs, there is a lack of evidence that they alone can provide rural households with access to electricity through renewable energy home systems. For example, the report by Acumen Solutions found that many households were still unable to purchase SHSs, even after the introduction of payment plans, because they could not afford the required down payment and suppliers were sometimes not located in their area.
As noted in the 2018 Poor People’s Energy Outlook, the social enterprise approach serves the easiest to reach first, resulting in renewable energy home systems not being available in some locations. Moreover, expanding household electricity access past tier 1 is difficult through such an approach, as higher capacity systems require batteries which make them unaffordable to the rural poor.
Thus, while the approach can deliver basic household electricity needs, the full productive capacity of a household may not be achieved. In 2019, Project Rise conducted a survey on rural households lacking electricity in Zambia and Uganda. It found that 40-50% of respondents indicated that they would like to use electricity for cooling, cooking, and “productive uses”.
Unfortunately, the types of SHSs offered through SEs in both countries cannot deliver the electrical capacity required for these activities. Various development programs have attempted to remedy this problem through end-user subsidies, not only to increase the number of households that can afford renewable energy home systems, but also to allow poorer households to purchase higher capacity renewable energy home systems.
In addition, some programs have also included subsidies for suppliers who operate in targeted remote areas so that underserved areas are addressed. One program that incorporated both aspects was the Renewable Energy for Rural Access Project in Mongolia (2006-12) – a program funded by the World Bank, Global Environment Facility, and the Mongolian government to increase the country’s rate of rural electrification through off-grid renewable energy solutions.
At the time, only 40% of Mongolia’s rural households had access to electricity. One of the program’s objectives was to increase that number to at least 50% by offering end-user subsidies to rural households who purchase high-end SHSs and wind turbine systems.
The program also offered subsidies for suppliers who operate in the areas targeted by the program. The program succeeded in expanding electricity access to rural households; 67,224 SHSs were sold and distributed, thereby resulting in a rural electrification rate of more than 50%. Moreover, a survey of those who received SHSs indicated overall satisfaction with the product, as many respondents indicated that it allowed for better lighting, mobile phone charging, and even televisions.
However, once the program ended in 2012, half of the suppliers abandoned their operations due to the subsidies ending. As a result, many households have been unable to repair or replace malfunctioning systems. Thus, while the program demonstrated that targeted subsidies could aid in providing access to electricity to underserved, remote, and impoverished areas, it also demonstrated that such an intervention needs to be prolonged for it to be sustainable.
A similar strategy was implemented from 1999-2018 in South Africa, however only end-user subsidies were implemented. The program resulted in the sale of 150,000 SHSs, while the initial target was 300,000. This was largely due to a lack of suppliers in the targeted areas.
Therefore, if one wants to utilize a market-based approach, providing economic incentives for renewable energy home system suppliers to operate in underserved areas is vital for expanding electricity access to rural households. However, utilizing subsidies to spur rural electrification through off-grid renewable energy requires large public expenditures, which may not be realistic for most low-income countries.
Utilizing renewable energy mini grids
In addition to renewable energy home systems, stakeholders have also utilized renewable energy mini grids to deliver electricity access to rural households and communities. Some view such systems for rural electrification as superior to renewable energy home systems, as they tend to bring greater electrical capacity to each household, thereby allowing for more productive uses to generate income for poor households and communities.
Various stakeholders have utilized different approaches to bring electricity access to rural households and communities through renewable energy mini grid systems.
From 1996-2011, the Nepal government implemented its Nepal Rural Energy Development Programme with funding from both the World Bank and Global Environment Facility. The program targeted poor, remote villages that would not be connected to the grid within the foreseeable future. 80% of costs were covered through the program, while 20% was provided by the villages through in-kind labor to install the mini grid.
The program was widely successful: 454 micro-hydro mini grids were installed, delivering electricity access to over 58,000 households, representing 600,000 people. Once the mini grids were installed, ownership was transferred to an elected council from each village who determined tariff rates so that each household could afford the service.
Each village has been able to utilize the funds collected through tariffs to maintain and repair their mini grid, rendering the scheme financially sustainable. Two NGO’s – Green Empowerment and Guakia Ambiente – have replicated this model to bring electricity access to rural communities in both Malaysia and on the island of Hispaniola, both achieving high degrees of success.
Following the interventions of both Green Empowerment and Guakia Ambiente, villages utilized electricity access for not only lighting and mobile phone charging, but also for income-generating activities. However, other organizations and governments have attempted to replicate these results and have encountered various impediments with the model.
Most frequently, once the renewable energy mini grids were turned over to the communities, the communities failed to collect tariffs on a regular basis, resulting in a lack of funds to repair and maintain the mini grid. This may be due to a lack of understanding on the part of the community, or in some cases community members may not feel comfortable collecting tariffs from neighbors.
Cost barriers to large-scale mini grid implementation
Cost is the greatest barrier to the large-scale implementation of fully subsidized, community owned mini grids. For example, the Guakia Ambiente program on Hispaniola Island cost $14 million to extend electricity access to 4,500 households.
As previously mentioned, funding for this approach came from external donors and governments, with communities paying through in-kind labor. Thus, this approach cannot provide electricity access to 789 million people at a reasonable cost. For this reason, various organizations have attempted to mobilize the private sector by incentivizing the construction of commercial renewable energy mini grids for poor-rural communities.
The Smart Power for Rural Development Initiative in India was somewhat successful. Managed by the Rockefeller Foundation, the initiative worked with suppliers in India to construct commercial mini grids for 85 villages. However, it did so by targeting villages that had nearby anchor loads, such as cell towers, in order to ensure adequate electricity demand.
Many poor rural communities and households are not located near anchor-loads. Furthermore, in many instances involving commercial renewable energy mini grids, not all households are able to afford the tariff rates set by the private supplier. Thus, while this type of intervention has had success, it alone cannot bring wide-spread electricity access to most rural villages and households.
Combining renewable energy approaches
Each of the reviewed approaches and interventions have worked to varying degrees and scales. In certain countries and regions, it may be necessary to use different off grid renewable energy interventions to achieve universal electricity access for rural households. For example, in order to reach households that cannot afford the off-grid solutions offered by SEs, it may be worthwhile to provide end-user subsidies as in the case of the Renewable Energy for Rural Access Project in Mongolia.
In addition, if a lack of operating suppliers prevents households in certain regions from acquiring off-grid renewable energy solutions, then economic incentives for suppliers to operate in certain locations may help. Moreover, incentivizing the construction of commercial mini grids may also deliver electricity access to some rural communities and households.
However, for rural communities that do not draw private investors to construct commercial mini grids (due to there being no anchor load), it may be necessary to implement community owned renewable energy mini grids financed by governments, aid organizations, or NGOs.
Lastly, in designing an off-grid renewable energy solution for delivering electricity access, attention should be paid to geography, population density and electricity demand, as these variables will determine what type of renewable energy should be promoted (wind, solar, or hydro), as well as whether mini grids or home systems should be prioritized.
In 2018, the Kenyan government released its Kenya Off-grid Solar Access project. The project has already received $150 million in funding from the World Bank. It seeks to utilize all the above-mentioned strategies to deliver electricity access to 600,000 rural households through off-grid renewable energy by 2023. While there is no available data on the current status of the project, its potential success may serve as an important case study for the future.
About the author
Daniel Laurilliard is a current graduate student at the Elliott School of International Affairs studying International Development.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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