What are typical household connection costs?

Speeches Shim

Short Answer

Typical household connection costs (not including generation costs) vary from several hundred dollars to more than $1,000 per connection. These costs depend on the type of connection, the mini-grid technology and whether the connection cost includes simply the cost of the service drop and meter or includes deep connection costs (such as the transmission and distribution system). In many cases, prices paid by consumers are lower, reflecting subsidies or business models that seek to recover the cost of connections over time through electricity sales.

Connection Prices of Selected Mini-grids in Tanzania and Senegal
Mini-Grid/
Country
Power Characteristics Cost of Interconnection ($) Price of Interconnection ($) Notes
Devergy, Tanzania Direct current (DC) solar mini-grid, Max 200 W per household Undisclosed (much higher than interconnection price if generation included) $25 (200 W connection) 24-V DC connection, pre-paid meter
Inensus, Senegal Solar powered alternating current (AC) mini-grid with diesel backup $78–$235 (depends on wire length and connection type, does not include generation) $16–$64 (depends on max W capacity) Pre-paid meter, cable to house and circuit breaker
Undisclosed (Africa) Multi-MW AC mini-grid $400–$1,500. Average: $920 (including 33 kV network, transformers, distribution lines) $88 (first 2,600 AC single-phase connections)

$231 (after 2,600 connections)

First 2,600 connections subsidized by grants; includes meter and up to 30 meters of line

Source: Interviews with developers, September 2013–January 2015.

Further Explanation of Key Points

Deep and Shallow Household Connection Costs

The term “household connection costs” for mini-grids can vary in meaning, because sometimes it refers to the cost per connected household of all mini-grid generation and distribution costs together with the cost of extending the line to the customer and installing a meter (what might be termed “deep household connection costs”). In other contexts, connection cost just means the cost of the installed drop connection and meter (“shallow costs”).

Household wiring costs include a circuit-breaker panel, the device that channels electricity into circuits within the home and shuts off a circuit if it becomes overloaded. Circuit-breaker panels can be an expensive component of household connection costs. Typically, homeowners are responsible for hiring a contractor to install household wiring, which must be approved by the service provider to qualify for a connection.

Deep-connection costs vary, depending on the type of mini-grid and type of connection. Deep-connection costs can vary from hundreds of dollars (for a low-voltage DC connection to a pico-grid) to more than $1,000 (for a utility-grade connection to an AC mini-grid).

Cost vs. Price of Connection

It is important to distinguish between the cost of connection (the value of the materials and labor to complete the interconnection) vs. the price of connection paid by the end user. The price may be substantially lower or higher than the cost. Connection prices vary considerably from country to country. The World Bank’s Doing Business initiative collected connection prices and waiting times for a new connection to the national utility in 189 countries. The prices in this database include applications and contracts with electricity utilities, all necessary inspections and clearances from the utility and other agencies, and the external and final connection work.

Price may be lower than cost where connections are subsidized by the government, a donor (such as through an output-based aid program) or by the mini-grid utility expecting to earn back its loss-leader investment through electricity sales over time. In many cases, the connection fee is set high enough to make sure that customers are serious about their intention to use electricity but low enough to enable access for everybody who wants a connection.

Prices are sometimes higher than (shallow) connection costs when the mini-grid utility is aiming to cover a portion or all of its generation and transmission capital expenditure from hookup charges. Thus, the price of connection depends heavily on the mini-grid’s business model.

Illustrative Simple Connection Cost Calculation ($)
$2,500 Cost per installed kW for micro-hydropower plant
× 40 kW Installed capacity
= $100,000 Generation cost
+ $50,000 Distribution cost
= $150,000 Total capital cost
÷ 100 Connections
= $1,500 Average deep connection cost

Costs for more remote households will be higher than this $1,500 average because of the need for longer lines and more poles. Interconnection costs and prices for three mini-grids in Africa are shown in the table above.

Putting it Into Practice

Connection costs depend considerably on the cost of extending the line, including wires, poles and supports, transformer (if any) and meter costs. Costs also depend on the type of connection. A three-phase AC connection suitable for powering a three-phase motor for a grain mill or other industrial load is more expensive than a single-phase AC connection suitable for typical household lighting, TV and refrigeration loads. AC connections typically cost more than low-power DC. Costs also vary depending on whether the connection is overhead or underground, with the latter typically more expensive.

Pre-paid electricity meters suitable for mini-grids range in cost from $20 to $200. Higher-cost meters include special features like the ability to “talk” to the mini-grid inverter and turn off non-priority loads when electricity is scarce. For some mini-grids, especially those powered by micro-hydropower, a load limiter ($10–$20) is also part of an interconnection.

The following information should be collected to determine the interconnection costs for a particular mini-grid:

Information Required to Determine Mini-grid Interconnection Costs
  • Customers
    • Current/projected number and type (commercial, residential)
  • Type of Electricity Needed by Each Customer
    • Three-phase (generally only necessary for large motors, such as those used for milling, large water pumps or welding)
    • Single-phase (typical for households or small commercial customers). Consider single-wire earth return for distant homes.
    • If all customers require small amounts of power (200 W or less), then a low-voltage DC micro-grid or solar home system may be appropriate.
  • Unit Cost of Each Interconnection Component
    • Cost per distance to extend the line to house or small business, including poles, wire, supports and splicing supplies.
    • Cost of a drop from the distribution line to the house.
    • Cost of purchasing and installing an appropriate meter and load limiting (if appropriate).
  • Interior Wiring Needs
    • Total wiring from meter to circuit-breaker panel and then to switches, lights and electrical outlets
  • Subsidies for Interconnection Costs
    • Rural electrification agency and/or other government entities sometimes provide subsidies based on the number of new household connections.

Relevant Case Studies

Adaptive Solar PV Mini-Grids in Tanzania. Devergy, an energy services company in Tanzania, is providing rural villagers with access to electricity using PV-powered mini-grids with smart payment and monitoring technologies. This case study describes connection costs and prices for solar mini-grid serving 1,266 households and businesses across 20 villages in rural Tanzania.

Hydropower in Tanzania's Rural Highlands. The Mwenga Hydro Generation and Rural Electrification Project in Tanzania’s Iringa region provides electricity to more than 2,200 households in 17 villages, a local tea and coffee factory and the national grid. This case study describes connection costs and prices for multi-village mini-grid project in rural Tanzania.

Last updated: February 14, 2018

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