How can productive uses enhance the economics of mini-grids?

Speeches Shim

Kaukab Jhumra Smith / USAID

Productive use keeps money flowing in the local economy. It increases earnings, thus increasing people’s ability to purchase more electrical services.

By milling grain at a local mini-grid-powered mill, the customer benefits from lower costs and time saved by not having to transport grain or flour. The miller benefits by earning an income for his/her services. The community benefits, because the money saved by the customer and the money earned by the miller circulate within the local economy rather than flowing out to surrounding cities.

Karl Wurster / USAID

Productive uses help the economics of mini-grids by diversifying income streams, helping ensure that people can pay year-round for electricity.

The addition of electrically powered productive use (sewing, agricultural processing) into a village allows households to augment their seasonal agricultural incomes, increasing the chance that the mini-grid will have paying customers year-round.

Susan Quinn / USAID

Increased consumption of electricity through productive use increases opportunities for economies of scale, lowering the levelized cost of electricity.

Larger solar arrays, wind turbines, biomass generators and hydropower turbines have lower cost per watt than smaller systems. Larger diesel generators and biomass generators also operate more efficiently, transforming fuel into electricity with lower losses. Larger production and sales of electricity also allow for fixed cost of administration and distribution systems to be spread over larger quantities of kWh sold.

Power Africa

Productive uses can often be scheduled during off-peak hours, increasing load factor and thus increasing asset utilization.

For example, at the LUMAMA village hydropower project in Njombe, Tanzania, corn milling and welding are allowed only from 9:00 a.m. to 6:00 p.m. After 6:00 p.m., these large loads must be shut off so that households have sufficient electricity for lighting.

In Ghandruk, Nepal, lodges use micro-hydropower during the day to cook bread, during the evening for powering lights, and during the middle of the night to heat water. Round-the-clock consumption means the hydropower generates useful electricity for more hours of the day at no additional cost, since the water flows regardless. For solar photovoltaic (PV), daytime productive use can lead to efficiency improvements by avoiding the cycling of electricity through a battery.

Electricity in mini-grids can, with the installation of appropriate equipment, also be prioritized. For example, freezers for fish must run continuously to prevent spoilage, but where there is water storage, pumping can be deferred. Priority load controllers can ensure that sufficient electricity is routed to priority productive uses, deferring other loads if necessary.

Last updated: February 13, 2018

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