Rethinking the Grid: Mini-Grids Grow Up

By Traver Kennedy, Chairman and CEO on July 24, 2018
Traver Kennedy
Home  / Blog  /  Rethinking the Grid: Mini-Grids Grow Up

The grid is not what it used to be. More than 100 years ago, when the first electric cables were laid along streets and highways, the best model from the technology and the business standpoint, was to have a central “power station” from which all the electricity for a region would be distributed. From a technological point of view, centralizing the distribution of power made sense, given that large-scale infrastructure was required to produce most of the electricity―like dams and coal plants―and an equally large infrastructure was needed to distribute it to homes and businesses. From the business perspective, centralization also made for a more profitable financial model, as a large volume of customers was needed to cover the high capital costs necessary to build the grid.

For much of the twentieth century, the centralized electric grid model worked well, for most, anyway. The grid brought electricity, and with it, economic progress, to around 85% of humanity. The economies of scale stopped there. The remaining 15% of people were either too remote or too inaccessible for grids to reach. Traditional grid economics could not justify the expense. Paying for the infrastructure to lay down cables to remote villages or even to poverty-stricken inner cities made no business sense. Some governments mandated “universal service” for all, but in many places, that did not happen; therefore, over one billion people were left in the dark. For decades, this became the norm, and a class of “energy poor” citizens emerged. These were people who had no electricity for basic human needs like cooking, storing food, and healthcare. The lack of energy left them poor.

Today, the centralized grid model is no longer the only option to take electricity to where it is needed. Technology now makes it possible to locally generate and deliver electricity to everyone. This approach also makes them energy independent, even in the middle of otherwise thriving cities. A new model of decentralized energy is emerging to power the energy needs for the world we live in today.

Remote places no longer need to be tethered to faraway grids in order to have power.

The New Normal: 100% Electricity Coverage

A month ago, we wrote an article about the importance of focusing on the off-grid world to make energy available to those who still lack it. We explored how technological breakthroughs, such as the Internet of Things (IoT), can help close the “100-year gap” when it comes to finally bringing electricity to people who still don’t have access to it. IoT, for instance, allows smart, connected technology to sense and process data in the cloud from anywhere in the world, enabling energy delivery systems located off the traditional electricity grids to operate better than ever before.

Closing the 100-year-gap is a social imperative for our society. In the twentieth century, the electricity gap was mostly due to technological limitations. It was cost-prohibitive for the traditional grids that powered cities to reach remote places, and the political will in many places was not strong enough to mandate universal service. Even many peri-urban areas that surround megacities where millions live were kept in the dark by the lack of technology to connect these outlying communities in a way that made economic sense for utilities. Fortunately, things are changing. We have new technologies that are capable of lowering costs, making it economically viable to bring energy to all people, no matter where they are. Better still, we can now bring clean and affordable energy to all from renewables like solar, wind, and hydrogen. What we need is the will to make it real.

Enter Mini-Grids

Last week, The Economist published an article on mini-grids, asserting that “people can be connected to clean, reliable power faster than ever before,” adding, “to realize the potential, governments need to rethink the role of utilities.” The article analyzes how traditional utilities are not in a healthy financial position and have no cash to grow the grid to where it needs to reach. For example, the article points out that emerging economies like China and Thailand “took 20 years to improve electrification rates from about 30-40% to 85-90%,” while India still has 240 million people in the dark. Even in the United States, utilities are struggling to adapt to new energy demands arising from our always-connected digital lives―for instance, supplying high-quality and reliable power to energy-hungry data centers.

Innovation in renewables and power distribution makes mini-grids economically feasible to solve the issues we face today. Energypedia defines a mini-grid as “a set of electricity generators and possibly energy storage systems interconnected to a distribution network that supplies electricity to a localized group of customers. They involve small-scale electricity generation (10 kW to 10MW), which serves a limited number of consumers via a distribution grid that can operate in isolation from national electricity transmission networks.”

The power sources that feed mini-grids vary depending on the local resources. Renewables such as sun, wind, and water can work in concert to supply all the energy that these systems require, making them clean energy alternatives. Variable sources of power, such as solar and wind, can be complemented by new technologies, such as Hydrogen 2.0, which can produce clean energy from water 24/7.

Making Mini-Grids Work

The Economist explores the role mini-grids can play in closing the 100-year gap, provided that government and the private sector work together. They refer to data from the International Energy Agency (IEA), which indicates that mini-grids could account for $300 billion of investment by 2030, “making them the most important means of achieving universal access.”

The article illustrates some of the ways that mini-grids become attractive alternatives to dirty diesel engines and kerosene, “mini-grids provide round-the-clock electricity capable of powering machinery, irrigation systems and freezers, as well as lighting.” The Economist points out that while the cost of deploying these local energy systems decreases, “providers are using specialists in rural development and microfinance to teach people how to set up businesses that benefit from a lot of power. They find that if people learn how to make money from electricity, they willingly pay for it.”

The main barrier to closing the electricity gap is no longer technology. We now need the will of governments to make room through regulation for the new commercial models of electricity delivery that make sense for today’s world, like mini-grids, while continuing to support existing traditional infrastructure where it makes sense. “Both problems,” the article indicates, “can be solved if governments see mini-grids not as autarkic outposts, but as part of a master plan. Mini-grids and rooftop solar systems can one day be hooked up to the main grid; they should not compete as paths to rural electrification. The more strategic planning of this sort there is, the less risk that mini-grids will end up as stranded assets.” Other initiatives that governments can promote include a reallocation of the “subsidies available for extending grids to lower the cost of expanding mini-grids,” and the promotion of “mini-grids across neighboring villages to improve the economies of scale for developers.”

From any angle you see it, closing the 100-year gap finally appears to be within our reach.

 

Photo courtesy of Christopher Michel.
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