NEWS Providing a jolt of support to power the minigrid market

Pro­vid­ing a jolt of sup­port to power the mini grid market

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Staff from Mera Gao Power install a solar-​​powered micro­grid in India. Indian Prime Min­is­ter Naren­dra Modi is among the donors and pol­i­cy­mak­ers posi­tioned to help the min­i­grid mar­ket real­ize its poten­tial in emerg­ing mar­kets. Photo by: Anna da Costa /​ CC BY-​​NC-​​ND

Indian Prime Min­is­ter Naren­dra Modi and United States Pres­i­dent Barack Obama announced Tues­day two new ini­tia­tives mobi­liz­ing up to $1.4 bil­lion to finance India’s com­mit­ment to uni­ver­sal energy access.

Min­i­grids are renew­able energy-​​based elec­tric­ity gen­er­a­tors that serve a set of con­sumers. They make up a major part of Modi’s promise to pro­vide elec­tric­ity to all Indi­ans by 2019. Many have asked whether min­i­grids could be the next big oppor­tu­nity beyond the grid. And with this influx of cap­i­tal, Modi is well-​​positioned to put that ques­tion to the test as he looks to power the more than 18,000 vil­lages that cur­rently lack electricity.

Because there are far less sus­tain­able ways for India to meet its ambi­tious tar­gets, part of the path­way to the global goal of uni­ver­sal access to elec­tric­ity by 2030, the stakes are high and the world is watching.

We believe that these remote areas which have been left out can­not be ser­viced with the reg­u­lar grid,” Tarun Kapoor, joint sec­re­tary of India’s Min­istry of New and Renew­able Energy, said last week at Ener­gy­Ac­cessX, an event that took place in San Fran­cisco as part of the annual Clean Energy Min­is­te­r­ial. He asked the audi­ence to pro­vide feed­back on a draft national pol­icy out­lin­ing how micro­grids and min­i­grids can pro­vide cost effec­tive off-​​grid energy. “We will have a model of grid con­nected micro­grids,” he said.

As the pol­icy acknowl­edges, while the world has seen tremen­dous growth of solar home sys­tems in the devel­op­ing world, bar­ri­ers con­tinue to stall the expan­sion of minigrids.

When you look at the actual expe­ri­ence with min­i­grids, it’s not just not as good as the poten­tial, but many have mas­sively under­achieved,” said Dan Kam­men, a pro­fes­sor at the Uni­ver­sity of Cal­i­for­nia, Berke­ley and a U.S. Sci­ence Envoy.

Min­i­grids are a more obvi­ous fit for areas where the con­cen­tra­tion of homes and busi­nesses is too far to con­nect to the exist­ing grid but large enough to pro­vide economies of scale. So it is harder for the min­i­grid sec­tor to take off in coun­tries with less pop­u­la­tion den­sity, let alone less reg­u­la­tory sup­port, than India. Tech­no­log­i­cal improve­ments and cost reduc­tions have helped min­i­grids over­come some of the bar­ri­ers they once faced, but devel­op­ment banks and aid donors play a key role in cat­alyz­ing the growth of the min­i­grid industry.

Scat­tered across the tables at Ener­gy­Ac­cessX were book­lets from Sierra Club and Oil Change Inter­na­tional giv­ing inter­na­tional pub­lic finance a big red F for dis­trib­uted clean energy access. The rec­om­men­da­tions for mul­ti­lat­eral devel­op­ment banks included increas­ing fund­ing for off-​​grid and min­i­grid clean energy projects and mov­ing beyond pilot projects to incor­po­rate off-​​grid and min­i­grid lend­ing into core energy portfolios.

Min­i­grids raise chal­lenges that more tra­di­tional devel­op­ment donor invest­ment prac­tices are not always well adapted to con­front, said Justin Guay, cli­mate pro­gram offi­cer at the David and Lucille Packard Foun­da­tion in San Fran­cisco. This is due in part to a dis­con­nect between the exper­tise and incen­tives of most devel­op­ment bank staff, who tend to focus on exten­sive due dili­gence for a small num­ber of large projects, and the new oppor­tu­ni­ties to reach energy impov­er­ished cus­tomers, which require numer­ous smaller invest­ments with higher risk.

Devel­op­ment fund­ing agen­cies can’t really go out and fund a hun­dred $1 mil­lion dol­lar rural elec­tri­fi­ca­tion projects. The paper­work is mas­sive, there’s a vet­ting process for all con­stituents, and they want trace­abil­ity in terms of where all dol­lars are going and what pay­back is going to be,” Flu­idic Energy CEO Steve Scharn­horst told Devex. The Inter­na­tional Finance Corp., the World Bank’s ven­ture cap­i­tal arm, has invested in his clean energy com­pany, which is lever­ag­ing its metal and air bat­ter­ies to store elec­tric­ity in renew­able energy min­i­grids in emerg­ing markets.“If you can bring scale through a min­i­grid and do 100 vil­lages or 500 vil­lages and make it a con­sol­i­dated finan­cial effort where the agen­cies are vet­ting a half dozen part­ners for a large invest­ment, it makes it eas­ier to get done.”

The Global Facil­ity on Mini-​​Grids aims to remove the bar­ri­ers con­strain­ing the expan­sion of low cost, clean energy min­i­grids in emerg­ing mar­kets, Mal­colm Cosgrove-​​Davies, global lead for energy access at the World Bank, told Devex.

The group will host an event focused on min­i­grids in Nairobi, Kenya, later this month to eval­u­ate suc­cess­ful min­i­grid projects. It will eval­u­ate suc­cess­ful min­i­grid projects to under­stand what has worked from tech­nol­ogy to pol­icy to finance. Case stud­ies might include the Infra­struc­ture Devel­op­ment Com­pany Lim­ited pro­gram in Bangladesh, which has been called the most suc­cess­ful off-​​grid pro­gram in the world. Events such as these rep­re­sent one way the global devel­op­ment com­mu­nity can rally mar­ket actors around a com­mon vision and build momen­tum for min­i­grid mar­ket growth, said Kristina Skierka, cam­paign direc­tor of Power for All, a key orga­nizer of EnergyAccessX.

For these suc­cess sto­ries to scale in Africa, min­i­grids must rely on cham­pi­ons who can mobi­lize the money needed to bridge the mar­ket imperfections.

I’m becom­ing increas­ingly obsessed with min­i­grids,” said Andrew Her­scowitz, coor­di­na­tor for the United States government’s Power Africa ini­tia­tive. He said it is incum­bent on donors and gov­ern­ments to give min­i­grids a chance to be a part of the solu­tion beyond India. “We have to try,” he said.

Her­scowitz named two part­ners in Beyond the Grid, a Power Africa sub-​​initiative, as exam­ples of com­pa­nies that are demon­strat­ing points of com­mer­cial via­bil­ity across mul­ti­ple places on the African con­ti­nent. He men­tioned Pow­er­hive, which part­ners with util­i­ties and inde­pen­dent power pro­duc­ers to pro­vide micro­grid elec­tric­ity, and Virunga Power, which devel­ops, invests in, and oper­ates rural dis­tri­b­u­tion grids.

In Tan­za­nia, Dev­ergy, which deploys min­i­grid sys­tems for low income peo­ple in rural vil­lages, is part­ner­ing with Simu­so­lar, which pro­vides and finances energy effi­cient appli­ances, to test out a com­bined offer­ing of micro­grid and off-​​grid sys­tems. Michael Kuntz, the San Francisco-​​based co-​​founder of Simu­so­lar, said this effort will serve as a case study for how the two approaches are com­ple­men­tary rather than competitive.

Sim­i­larly, he hopes the Indian gov­ern­ment will pro­vide data as it imple­ments its micro-​​grid and min­i­grid pol­icy. Its suc­cess will depend on the details, from how the sys­tem is designed and pre­sented, to how incen­tives from stake­hold­ers are aligned, to how the prod­uct life cycle is man­aged, Kuntz said.

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