Decentralised generation of electricity through micro-grids is a safe, reliable technology that complemented with an adequate regulation and innovations could be massively implemented in rural contexts. Why not explore a change of paradigm towards small-scale solutions to expand energy access?
Access to energy in remote rural zones has never been an easy task to address by local governments. However, by implementing decentralised micro-grids of solar and wind power or stand-alone systems, these regions can now be reached and the Sustainable Energy For All goals achieved; several demonstrations of this can be found in Tanzania, Kenya, Uganda (where companies as SunFunder are implementing solar projects funded by crowdfunding and private donors and lenders) and India (where SELCO launched a year ago its first off-grid photovoltaic plant in Mangalore).
Still, the expansion and success of these innovations might be partially eclipsed due to regulatory and legal barriers in several regions, including Latin America, India and Bangladesh, as a recent report from IIED states. Restrictive regulations are the most critical factor affecting funding mechanisms and trust from private sector investors, since they increase the risk and diminish the return of investment.
To overcome the current scenario, policies promoting the uptake of renewables have to seriously consider technological progress in other sectors, when proposing regulatory and legal changes within the energy field; otherwise, regulation will not be as effective as desired. An exponential expansion of micro-grids is not only about innovation in the energy field, but enabling an adequate regulatory environment that includes co-evolutionary innovations.
Co-evolutionary technological improvements
Co-evolution refers to two different processes that are inter-linked and inter-dependent. This means that sometimes developments in one field influence developments in another sector; a situation that we can currently observe between technological improvements in telecommunications and how they are boosting energy access all around the globe.
In this sense, one could argue that energy and telecommunications transitions are linked and depend on each other (mobile phones need electricity to be charged). Thereby, the exponential increase in the spread of mobile technology is good news for the low-carbon energy transition. In words of Ryan Levinson, founder of SunFunder, there are high hopes that solar energy can leapfrog the electric grid, similar to how cell phones have surpassed the landline system around the world; in fact, a process of “leapfrogging” already skipped the initial stages of development of wind and photovoltaic technologies, and implemented sustainable technologies before any other carbon-based grid in developing contexts. Among the many factors promoting this leapfrogging process we can identify far-reaching political will and proper regulations for innovation as key ones. Luckily, several innovations are boosting different leapfrogging processes and overcoming many of the barriers we explore next.
Project-level barriers and technological strategies
There is a number of project-level barriers affecting the trust of the private sector in micro-grids that are worthy of attention. Common factors of concern for investors are the availability of funding sources, maintenance of unreliable technologies and collection of payments from final users. These different dimensions demonstrate the range of issues that projects must address including maintenance, the ownership of the grid and eventually, the hardware and software production of smart-meters; as well as technologies to collect payments.
Some ways in which the “mobile revolution” is improving the collection of payments - which has a direct influence on the credibility of the project presented to potential investors – is by technologies like Pay As You Go (PAYG) and smart-meters. PAYG tools replace personal collection -debt collectors visited remote villages to reunite fees personally in group meetings-. Besides requiring a lot of discipline to be effective, this old-fashioned method presents another inconvenient: the customer base may expand faster than the internal processes of the company collecting the money. Thus, laws allowing PAYG systems need to be rapidly implemented in developing contexts.
Related to the reliability of the micro-grid, an important task is to build local willingness to pay. Poor maintenance due to longer distances to rural communities can be avoided by implementing new approaches for operations and maintenance of plants, alerting local suppliers via SMS about technical issues. This huge contribution from the telecommunications field helps to provide a reliable and functioning service, plus stimulates the end user to pay on a weekly or monthly basis, ensuring the continued sustainability of the micro-grid.
Same with funding sources: mechanisms like crowdfunding and crowdloaning, where people can donate or lend money for off-grid projects from their phones have to be promoted, excluding existing barriers and restrictions for foreign lenders and private donors.
These improvements from the telecommunications revolution are already helping businesses to absorb a higher level of capital and meet the risk requirements of more conventional investors, expanding the funding mechanisms available for SMEs and local entrepreneurs.
All the technical barriers mentioned above will affect the implementation of micro-grids and need to be taken into account by policy makers. Nevertheless, if regulatory and financial environments are properly designed, Deshmukh argues that every micro-grid:
“can thrive (...) if they carefully design their revenue stream, customer relationships, ongoing maintenance, and community involvement for their particular context” .
Consequently, public sector role and responsibilities cannot be underestimated in people’s over-excitement about private sector investment; regulators should pay special attention to different co-existing technological improvements related to the energy field to overcome the project-level barriers above exposed, in order to stimulate private sector where it needs extra help and in reaching the areas that privates can´t reach: a regulation aligned to the current technological tools.