The Economics of Mini-Grids

When is a mini-grid the best economic choice? What are the costs? How do costs depend on technologies and the level of service to be provided? How can productive use of electricity from mini-grids improve mini-grid economics? This module explores these questions with reference to actual mini-grid projects.

During the project design phase, mini-grid developers need to compare the economics of different options. Project developers can use two key cost measures—levelized cost of electricity and connection costs—to determine whether a mini-grid or national grid extension is the most cost-effective solution. Costs are only one part of mini-grid economics, however. Project developers must also assess customers’ willingness and ability to pay for electricity. Productive use of electricity can increase household incomes, potentially increasing customers’ ability to pay for these new services.

When are renewable energy mini-grids more cost-effective than other options?

Project developers need to consider the level of electricity services needed, projected load profile and costs to determine the best electrification approach. Read more »

How does willingness to pay influence mini-grid economics?

Financial feasibility of a mini-grid project depends largely on the ability of users to pay a tariff that generates enough revenue to cover the costs of operations, maintenance and repairs for a mini-grid system. Read more »

How can developers use levelized cost of electricity to compare technologies?

Levelized cost of electricity allows project developers to compare the cost of electricity produced by different generation technologies with varied capital costs, fuel costs and lifetimes. Read more »

What are typical household connection costs?

Costs vary depending on the type of connection, the mini-grid technology and whether the connection cost includes deep connection costs. Read more »

What productive uses can mini-grids power?

Productive uses often include increased mechanization for agriculture, processing, storage and transport but may also include lighting for education and business. Read more »

Last updated: February 13, 2018

Share This Page