How should governments integrate mini-grids into national electrification planning?

Short Answer

Mini-grids occupy a unique part of the energy ecosystem. They are larger than a single-family home system, but smaller than regional or national grids. Mini-grids are too expensive to be built without significant resources and planning, but are often considered to be too much of an unproven approach to be a formal part of national grid operators’ build-out strategies. Since national utilities often see mini-grids as competition to their established markets, mini-grids are frequently overlooked in efforts to improve national power systems.

Mini-grids are most successful when they have the support of the national government. Governments can mandate that mini-grids be considered part of formal energy planning processes and help support them with financial resources and incentives where required. The German development agency, Deutsche Gesellschaft für Internationale (GIZ), found in 2016 that two of the most prominent barriers to mini-grid development are best addressed by the government: (1) prevailing regulations that prioritize grid expansion over decentralized systems, and (2) tariff models that discourage private investment. Government intervention is essential to promoting mini-grid technology.

Promoting mini-grid development is easiest when it is incorporated into the following key energy policy and planning documents:

  • Energy policy or rural electrification policy
  • Rural electrification strategy
  • Electricity act or energy law
  • Electrification master plan

While most countries have national electrification plans, many of these plans may not include off-grid energy development. When mini-grids play an important role in a country’s national electrification master plan, private companies and donors are more likely to invest, communities are more likely to support projects and utilities are more likely to prioritize off-grid energy development.

To support their policies, governments also need to create an effective regulatory environment for mini-grids. Key regulatory documents are licensing procedures, tariff guidelines and grid interconnection guidelines.

India, Kenya, Mali and Tanzania have so far been the most successful in building mini-grids into their formal energy access strategies. Of these cases, Price Waterhouse Coopers reports, “Where mini-grids have been successful, their role is likely to have been clearly defined in national energy plans, and the projects themselves are rooted in funding and governance models that are sustainable and able to cover repair and maintenance costs and processes. In Kenya, for example, the Kenya Energy Regulatory Commission licensed Powerhive East Africa Ltd., making it the first private company in Kenya’s history to receive a utility concession to generate, distribute and sell electricity to the Kenyan public.” In India, from 2012 to 2016, Husk Power Systems has installed 84 mini-power plants that use rice husk waste to generate electricity in rural communities. In both nations, mini-grids were explicitly included in energy planning processes, the regulatory environment and national policies.

Further Explanation of Key Points

Planning and Policy Documents

The sections below describe how a country’s key energy planning and policy documents can incorporate and promote mini-grid development.

Energy Policy or Rural Electrification Policy

A country’s energy policy, or rural electrification policy, establishes the government’s goal for universal energy access, including specific targets and planned activities to meet those goals. The policy typically precedes an energy law or rural electricity act that establishes an institutional and legal framework. In many cases, the energy policy identifies new laws needed to achieve energy access goals. In other cases, subordinate legislation—such as regulations, rules and bylaws—provides enough support for governments to begin implementing the policy.

An energy policy can do more than lay the groundwork for future legislation. The policy can establish universal energy access goals and prioritize mini-grids and other off-grid solutions as a pathway to achieving those goals.

A country’s energy policy is often the first official document to signal a change in direction and open the way for the private sector to provide power to rural communities. In Tanzania, for example, the National Energy Policy of 2003 led to development of a framework that mobilized private investment in rural and renewable energy. Before the government issued the policy, the state-owned utility led rural electrification largely through grid extension and a dozen isolated diesel generators.

Rural Electrification Strategy

A rural electrification strategy lays out a plan of action to achieve the national energy policy. Some governments combine the energy policy and rural electrification strategy into a single document. Uganda’s Rural Electrification Strategy and Plan (2013–2022) establishes a specific plan for off-grid electrification, including targets and a dedicated budget. Uganda’s 10-year strategy calls for off-grid expansion to provide 138,500 new service connections through solar home systems and mini-grids, with $8.5 million specifically dedicated for mini-grid systems.

Electricity Act or Energy Law

An electricity act, or energy law, establishes the legal and institutional framework for rural electrification in general and mini-grids in particular, usually through an act of parliament or congress. After a ministry decides that a new law is necessary to implement its rural electrification policy, the relevant department drafts a bill, shares it with the relevant cabinet committee and solicits public input. The minister tables the final bill in parliament. Once parliament passes the law, it is legally binding; the government can prosecute violators in court.

An electricity act often outlines key actors’ responsibilities in facilitating and regulating generation, transmission, transformation, distribution, supply and tariffs for urban and rural electrification. The law also directs the ministry and specific agencies to prepare additional plans and strategies as needed. For example, the Tanzania Electricity Act of 2008 directed the minister to prepare a rural electrification plan and strategies for mainland Tanzania and to update the plan periodically in consultation with Tanzania's Rural Energy Agency.

Rural Electrification Master Plan

A rural electrification master plan establishes how the government will achieve the energy access goals and targets in the energy policy. The master plan provides a roadmap to achieving specific goals and targets, often over a 10- to 20-year timeframe. The timeline should demonstrate how proposed activities will achieve the universal access targets established in the energy policy. Master plans usually integrate various approaches to enhancing energy access, establishing where the government will extend the grid and determining where it will support off-grid electrification.

Key Components of Rural Electrification Master Plan
  • Spatial Data about Existing Energy Systems and Resources
    • Location of national grid
    • Existing and planned distribution concessions
    • Locations of licensed mini-grids
    • Distribution of renewable energy resources
  • Demographic Data about
    Un-electrified Areas
    • Population densities
    • Average incomes
    • Agricultural production
    • Economic development opportunities
    • Potential anchor clients for generation facilities
  • Electrification Strategy
    • Planned grid extensions, including locations and timeframes
    • Priorities for off-grid projects, including mini-grids and household energy systems

Identifying where the grid will expand enables mini-grid developers to target their investments in off-grid and near-grid areas. The government of Namibia, for example, developed in 2007 a separate master plan for off-grid electrification that identifies areas for off-grid solutions, including mini-grids.

Governments, however, might hesitate to specify which parts of the country will receive grid-connected electricity and which will not, because consumers tend to believe that the national grid supplies more reliable, higher-quality services. To build local support for mini-grids, governments can educate communities about the high-quality energy services they can potentially provide. Supportive messaging about off-grid energy services is critical to gaining local support.

Donors can play a key role in helping governments integrate mini-grids into their national energy strategies. In particular, donors can help governments prepare the rural electrification master plan and a regulatory framework for mini-grids.

Putting it Into Practice

The following table provides examples of countries that successfully integrated mini-grids into their rural electrification strategies, as well as countries showing progress in doing so. Afghanistan, China and Nepal integrated hydropower mini-grids early in their rural electrification planning. Brazil and the Philippines have promoted mini-grids to reach un-electrified remote and island communities. As early as 2000, Mali, Senegal and Tanzania developed policy and regulatory frameworks to mobilize investments in mini-grids.

Resources

Deshmukh, R., Carvalho J. P., Gambhir, A. (2013). Sustainable Development of Mini-grids for Energy Access: A Framework for Policy Design.
The goal of this framework is to help policymakers integrate renewable energy mini-grids into off-grid energy access programs. The report analyzes policies and programs in Brazil, Cambodia, India, Nepal, Sri Lanka and Tanzania as they apply to mini-grids.

EU Energy Initiative Partnership Dialogue Facility (2014). Mini-Grid Policy Toolkit: Policy and Business Framework for Successful Mini-Grid Roll-Outs.
This toolkit serves as a guide for designing a national policy and regulatory framework to promote mini-grid investment, with a focus on Africa.

Innovation Energie Développement (2014). National Electrification Program Prospectus: United Republic of Tanzania.
This prospectus supports Tanzania’s electrification goals by proposing a grid-based and off-grid strategy for 2013–2022. The document outlines likely investments and proposes financing mechanisms.

International Renewable Energy Agency (IRENA) (2016). Policies and Regulations for Private Sector Renewable Energy Mini-grids.
IRENA produced this report to help policymakers design enabling policy and regulatory frameworks for mini-grids. The report analyzes policies and regulations related to licensing, tariff regulation, grid arrival risks and access to financing, with examples from Bangladesh, India, Kenya, Madagascar, Malawi, Mali, Nepal, Nigeria, Rwanda, Senegal, Tanzania, Uganda and other countries worldwide.

Knuckles, J. (2015). Mali: Programs to Support Private Mini-Grids for Rural Electrification. Chapter 4 in Policies to Spur Energy Access: Volume 2: Case Studies of Public-Private Models to Finance Decentralized Electricity Access.
This case study describes activities in Mali to promote privately run mini-grids and hybridize systems powered by diesel generators. The publication is part of a collection of case studies from Bangladesh, Ethiopia, Mali, Mexico and Nepal designed to support policymakers in accelerating off-grid energy access.

Sustainable Energy for All Africa Hub (2017). Green Mini-Grid Help Desk.
This website provides complete information service for developers of green mini-grids in Africa. The website includes market reports, links to industry and financial stakeholders, instruction guides, business forms and templates and financial models.

Last updated: February 12, 2018

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