59 Replies Latest reply: Nov 19, 2013 5:55 PM by nic.jacobson RSS

    E-Discussion #4 - The Minigrid Option for A-B-C Business Models

    1231309 C4D Extraordinaire

      Description

      Minigrids have been deployed in several developing countries for decades to provide access to remote and rural communities. These low voltage electricity networks supply power from renewable and non-renewable distributed energy resources and range from few kilowatts to few megawatts in size. Recently, ‘microgrids’ or minigrids with advanced control and communication systems have attracted the interest of developed countries seeking to improve reliability, resilience, efficiency, and penetration of renewables. The 'Anchor-Business-Community' (ABC) models are affected by reliability, resource allocations, and economic competitiveness of power systems. Trends and changes in minigrids and microgrids sectors will have implications for ABC models. This discussion will focus on minigrids and microgrids covering technologies, business models, and policy and regulatory environments.

      .....

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      The discussions will be facilitated by Mr. Gunjan Gautam, ESMAP, World Bank

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      Gunjan_Photograph_Mugshot.jpg

      Gunjan Gautam has been involved in the renewable energy and energy access sector since 2007. His experiences range from working as electrical engineer in microhydro power and small solar home system deployment projects to contributing in technology and policy research of numerous multilateral agencies. At present, he works in SEGEN and ESMAP joint initiative on grid modernization and smart grids. He is currently developing a brief on minigrids and microgrids focusing on the evolving technological aspects.

        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
          1203634 C4D Enthusiast

          Dear Colleagues,

           

          Thank you for participating in the World Bank Institute’s “E-Discussion #4: The Minigrid Option for A-B-C Business Models.”

           

          The discussion has been divided into three sessions.

               Part I: Evolution of Minigrid Technologies: Is minigrid the best solution for your ABC model? May 15 – May 24

               Part II: Minigrids Business Models: Under what conditions a minigrid is economically viable? May 25 – June 4

               Part III: Policy and Regulatory Environments: How can they affect your project? June 5 – June 15


          We will begin the discussions with Part I: Evolution of Minigrid Technologies focusing on issues such as:

          • “To grid or not to grid?”- When are minigrids economically better options than grid extension for improving access?
          • What are minigrids and what are microgrids?
          • Can minigrids and microgrids be long term solutions for electrification? Can they be expanded to meet the growth in demand? What are the technical constraints for wider deployment of minigrids and microgrids?
          • How do minigrids and microgrids reliably supply electric power? Can they help in mitigating rotating load shedding and contribute to resource adequacy?
          • Can minigrids and microgrids integrate with bulk power grid? What are the advantages and disadvantages? What are the constraints?

           

          We are pleased to introduce the expert contributors for Part I: Evolution of Minigrid Technologies. In this session, expert contributors will share their views on the technical aspects of minigrids and provide their insights on issues raised by all other participants.

           

          Robert H. Lasseter, Emeritus Professor, College of Engineering, University of Wisconsin- Madison

          Bob Lasseter received his Ph.D. in Physics from the University of Pennsylvania in 1971. He worked for General Electric Co. until he joined UW-Madison in 1980. His research is on the application distributed energy resources and power electronics to utility systems. This work includes microgrids, FACTS controllers and DC systems. His research over the last 13 years has been focused on microgrids. This includes the basic concepts, technical solutions and commercial implementation. He is the technical lead of the CERTS Microgrid Project, a Life Fellow of IEEE, and IEEE distinguished lecturer in distributed resources.


          Bhola Shrestha, Deputy Chief of Party at USAID's Liberia Energy Sector Support Program, Winrock International

          Bhola Shrestha worked for Intermediate Technology Development Group (now Practical Action) Micro Hydro Program in Nepal in various capacities since 1990. From 1995-99, he was Program Manager for EU/DFID funded Nepal Micro Hydro Sector Support Program. He contributed to the design of Micro Hydro Component of Energy Sector Support Program (ESAP), which was the start of micro hydropower scaling up program in Nepal in 1999. He continued to carry out consulting activities for ESAP from my consulting firm Energy Systems during 2000-2005. During 2006-2010, his involvement was more on grid connected small hydro systems in the private sector in Nepal and tea industries in East Africa. From 2011, he has been working with Winrock International in Liberia in the USAID’s Liberia Energy Sector Support Program in the planning and implementation of pilot off grid mini and micro hydro systems.

          Terry Mohn, CEO, General Microgrids and Chair, Minigrids/Microgrids Working Group, The Energy Access Practitioner Network, UN Foundation

          Terry Mohn is CEO of General MicroGrids, an international microgrid consultancy and developer. He also is Managing Partner of CleanSource Energy Partners, LLC, an international renewable energy project developer. He is also Program Director of the Global Microgrid Center, a non-profit microgrid test and certification center. He is Chairman of the United Nations Foundation Microgrid Working Group and presently serves a three year appointment as the U.S. Department of Commerce's federal advisor to National Institute of Standards and Technology in its Smart Grid Federal Advisory Committee. Terry has 30 years' experience in large-scale system architecture, business strategy, and technology investment strategy. Terry is an advisor to the US Department of Energy for smart grid and advisor to the California Energy Commission for demand response and emerging technologies."

           

          Santiago Grijalva, Associate Director for Electricity Strategic Energy Institute (SEI); Georgia Power Distinguished Professor Electrical Energy, Georgia Tech

          Santiago Grijalva is the Strategic Energy Institute Associate Director for Electricity and Associate Professor of Electrical and Computer Engineering at the Georgia Institute of Technology. Dr. Grijalva is a leading researcher on power system control and management architectures. He has pioneered work on de-centralized and autonomous power system control, renewable energy integration in power and unified network models and applications. He is currently the principal investigator of various future electricity grid research projects for the US Department of Energy, ARPA-E, EPRI, PSERC as well as other Government organizations, research consortia, and industrial sponsors. His graduate degrees and postdoc in electrical engineering are from the University of Illinois at Urbana-Champaign.

           

          Anders Pedersen, Energy Specialist, AFTG1, World Bank

          Mr Anders Cajus Pedersen is an energy specialist with The World Bank based in Nairobi focussing on RE solutions for East Africa. He has a particular interest in integration of RE into weak national grids and in off-grid applications of RE. He is a graduate in business studies and economics from Copenhagen Business School.

           

          Xavier Vallve, Associate Manager, Trama Tecno Ambiental and Member of Alliance for Rural Electrification

          Xavier Vallvé studied Engineering at the University of Waterloo in Canada and received a M.Sc. degree in 1979. In 1986 he co-founded in Barcelona, Spain the engineering and consultancy firm Trama TecnoAmbiental, S.L. where he currently is associated partner. He has more than 25 years of experience in renewable energy rural electrification projects for distributed generation both grid-tied to the national grids and autonomous RE hybrid technology for islands and isolated villages. He has been involved in feasibility studies, engineering, project management and commissioning of many PV rural micro grids in isolated villages in Africa, Asia and South America. He has also been an active member in international codes and standards committees on this subject. He has been project director or lead consultant for private and government clients and also for projects by UNDP, UNOPS, UNIDO, UNEP, AECID, IDB, WB, EC and other agencies. He is director and lecturer of the Master degree “Master en Ingeniería y Gestión de las Energías Renovables” at IL3 (University of Barcelona).

           

          We sincerely thank the expert contributors for participating in this discussion.

            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
              C4D Explorer

              Setting a foundation will establish a working framework and context for lively discussion. The base issues raised: terminology, grid independence, scalability, smart grid and integration should be explored from a number of viewpoints. The first area of interest is the business case. Are we looking at donor solutions or investment-grade solutions? My belief is we will not really adequately address energy poverty in a purely donor mentality. Therefore, we need business cases that attract private capital. Anchor tenants are the easiest to qualify, particularly those with good credit ratings. Yet with proven payment history from diverse communities, we can also make a case for multi-tenant investments.

               

              But then we ask, is it electric capacity ONLY, or is it managing load with capacity. This is particularly important when we move away from the utility model. That model overbuilds capacity, creating a margin, to anticipate peaks. But with smart grid, we can manage capacity and LOAD simultaneously. Therefore, we can reduce capacity if we balance loads, perhaps prioritizing loads. If we reduce capacity, our capital costs are lower and the business case is easier.

               

              Shall the microgrid exist independent of the grid? Why not? Can we negotiate with the grid operator to integrate their system into the microgrid as they grow their grid? We sure can if we anticipate that integration. Likewise, we can cluster microgrids together, creating networked microgrids. There is a new body of work underway to deal with transactive energy. This way we can keep independent microgrid owners "whole" when they export their energy products (energy, frequence, reactive power).

               

              Finally, we need to discuss scalability. Horizontal scale is analogous to population growth: geographic microgrid growth. Vertical scale is increased energy appetite: as we find more uses for our energy, we want even more. We must design systems that are fully scalable in both dimensions.

               

              We look forward to your questions and opinions on this subject so that we can establish a basis to build future discussions upon.

              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                C4D Enthusiast

                What are minigrids and what are microgrids

                To begin the discussion I will make reference to one of the issues introduced by Gunjan which is the concept of a Minigrid. Before we enter into its definition o definitions we can consider the terms we commonly use.

                The terms microgrid, mini-grid, small grid, independent grid and others are, at present, being used sometimes as synonyms for the same concept and sometimes for different concepts and sometimes for different concepts but with an interchange of the term. The prefix micro or mini means the same thing (one in Greek the other in Latin). Here I think that the tradition in English as well as in Latin languages has been to use always micro to create new terms for new concepts (microbe, microscope, etc, but also micro-switch,…) and mini is not generally used in that way but rather the common term is used (in English would be small).

                For me they are equivalent terms although can be applied to different concepts. Personally I use the term rural microgrid to refer to the ones supplying remote villages or islands. We can start to try to define it in following discussions.

                 

                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                    jeyeddu C4D Enthusiast

                    Thanks, for giving me the opportunity to participate in this discussion. Let me add my voice to Santiago Grijalva to congratulate the World Bank and the organizers for a timely discussion on micro and mini grid.

                     

                    I agree with you, Xavier, that “ the terms microgrid, mini-grid, small grid, independent grid and others are, at present, being used sometimes as synonyms for the same concept and sometimes for different concepts and sometimes for different concepts but with an interchange of the term. The prefix micro or mini means the same thing (one in Greek the other in Latin)” unquote.

                     

                    I would wish, maybe coming from a planning background that we should fix the definitions to promote uniformity as done for hydropower. For instance, UNIDO has group small-scale hydropower plants into three groups as follows:

                    • Micro: Below 100 kW
                    • Mini: Below 1 MW to 100 kW
                    • Small: 1-10 MW

                     

                    This also helps in design, costing, etc. Of course, countries particularly the large ones like China and the United States can have their own classifications provided it is stated or indicated in whatever document they put in the public domain.

                    A case point in point is found in Bhola Shrestha’s contribution. He says Mini grid or off grid systems are economically better options to electrify isolated rural areas with small populations (few hundred households)”. What are the electricity consumption of these households? Some small populations can have significant power consumption depending upon income levels of the populations.

                    Yes, you are right, Bhola, there is no grid outside Monrovia, capital of Liberia. Can we consider Monrovia as small-grid, mini-grid or micro-grid? We need to fix the definitions. Folks, let me hear your take on this.

                • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                  1203634 C4D Enthusiast

                  The Anchor Business Communities (ABC) uniquely brings together three different electricity consumer groups -  anchors such as telecom towers that value reliability and power quality, small businesses such as agro-processing mills, carpentry workshops, internet cafes, etc. that depend on affordable supply, and communities that are eager to get access to electricity. ABC business models create opportunities for rural electrification entrepreneurs to differentiate their products and services and improve their financial performance. This discussion complements previous discussions that focused on innovative business and financing models for rural electrification.

                   

                  E-Discussion#4: The Minigrid Option for A-B-C Business Models is an attempt to encourage interactions between experts and non-experts from minigrid, microgrid, and rural electrification sectors to shed light on technological, business, and regulatory aspects of minigrid and microgrid solutions. 

                   

                  Please participate openly in the discussions, share your views, ask questions, and gain insights from the expert contributors.

                   

                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                    C4D Explorer

                    Congratulations to the World Bank and the organizers for a timely discussion on micro and mini grid.

                     

                    Providing electricity to geographically distant or rural areas is critically important for any society. Several studies indicate that the long term cost to society of not providing electricity is much higher than the cost of providing it pretty much regardless of the technology. This is very clear in developing countries where access to electricity represents not only access to an energy supply to meet fundamental needs, but also a means for access to information and hence to education --the only mechanism to bring people out of poverty. The inter-dependencies of access to electricity, information, education, and development must be carefully designed for the program to be successful. The realization of minigrids can be greatly enhanced by private participation or participation of an anchoring program. The rules of the game must be clearly stated regarding revenue and value streams of the program and benefits to the parties. A win-win-win situation for investors, the government (and related agencies) and the population is possible.

                     

                    Once a business model (which shall include a development model) is set up, the technology issues must be addressed. Regarding the question of weather to grid or not to grid, I must mention that networked systems are a natural consequence of requirements of reliability, option, and economy. Technologies must hence be compatible and have options for an eventual interconnection with the traditional (ac) grid. Thinking long-term is important. The cost of power electronics and inverters has come down significantly and plug and play components for connection of a DC minigrid to an AC system is feasible. Controlling and coordinating the grid operation is required for an interconnection and that requires sensing, communication and control. A proposition that could facilitate eventual interconnected operation is that the anchor program provides a basic communications platform for electricity infrastructure control.

                    • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                      C4D Explorer

                      When are mini grid economically better options than grid extension?

                       

                      Opening remarks by Bhola Shrestha

                       

                      Mini grid or off grid systems are economically better options to electrify isolated rural areas with small populations (few hundred households).

                       

                      Example of Nepal Nepal is a mountainous countrywith thousands of isolated, small rural communities living far away from the road.  The prospect of electricity gri reaching these isolated communities (and also road) is remote as grid extension
                      is cost prohibitive. As a result off grid micro hydro power systems has flourished in Nepal during the last two decades. There are thousands of off grid systems in Nepal providing electricity to group of households to entire villages of few hundred households. These systems are owned by individual, group, entrepreneurs, community based organization.

                       

                      This service delivery supported by development of micro hydro sector

                      The micro hydropower sector in Nepal evolved during the last two twenty five years with the development of local
                      turbine manufacturing industry, provision of some subsidy from the government, credit facility from local bank. There are dozens of consulting firm that provide survey, feasibility study and design of micro hydropower plants. The construction and installation are carried out by qualified manufacturing companies and installation companies.

                       

                      Pilot projects in Liberia

                      The experience of Nepal can be relevant to other countries with similar situations. Liberia has one of the lowest rural electrification rate (2%) in the world. There is no grid outside Monrovia, capital of Liberia. Liberia has small, rural communities scattered around the country, which makes grid extension cost prohibitive. USAID’s Liberia
                      Energy Support Program, implemented by Winrock International aims to demonstrate sustainable rural electrification through off two micro/mini hydropower (1 M and 15 kW each) and two biomass power plant (60 kW and 35 kW
                      each).

                       

                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                        C4D Enthusiast

                        Microgrid technology is mature and can support small individual microgrids that are individually scalable, can work with a central grid system when needed and/or interconnect with other microgrids to create a network of microgrids. The basic issue is how to develop a low cost energy source based on locally familiar technologies such as automobile engines that can be easily maintained.

                         

                        The basic microgrid source can be plug-and-play and not dependent on a central controller. When needed, an individual can walk to each source and change its operation point performing the function of a central controller. Each source should be small and have the same control functions. Adding more sources without additional engineering is key to expanding the microgrid. Adding sources should be no more complicated that adding additional loads.

                         

                        See the article on microgrids from IEEE power and Energy Magazine published in 2008.

                        http://freepdfdb.com/pdf/a-larger-role-for-microgrids-are-microgrids-a-viable-46289473.html

                          Since this article was published there has been an explosion in the acceptance of this technology, but this is a result of over 12 years of research, development and commercial implementations. I am very confident that this can become a powerful technology for providing electrical access to remote and rural communities, but we must keep it simple and maintainable.

                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                            C4D Connoisseur

                            "The basic issue is how to develop a low cost energy source based on locally familiar technologies such as automobile engines that can be easily maintained." ..


                            Professor Lasseter, I wonder why you chose automobile engines as example and not solar panels, or wind turbines, or diesel generators?


                            Also, "Each source should be small and have the same control functions. Adding more sources without additional engineering is key to expanding the microgrid. Adding sources should be no more complicated that adding additional loads."


                            But is adding generation sources simple given that their performance attributes are variable, for example, due to intermittency of solar panels,  or when winds die down and wind turbines idle, and so on? If generation sources include solar panels, wind turbines, diesel generators, battery storage, and so on, we would need to set priorities among their uses for a) optimizing costs,  b) ensuring availability, and their c) relative "greenness." Given a choice, for instance, should we not prefer to use solar power and not diesel power, and use diesel only at night when other options may not be feasible? Thank you.

                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                            C4D Explorer

                            It is interesting to look at how provision of electricity historically developed.
                            In Scandinavia the national grid came into being much later than localized
                            mini-grids in towns and villages. In other words a town in Denmark would be electrified
                            through locally established means, typically local businesses and prominent
                            citizens would form a company or a cooperative to generate and distribute
                            electricity. Later national (first regional) grids would expand and absorb the
                            earlier established entities. The few still independent, locally (these days
                            municipal) owned, distribution companies in northern Germany and Denmark are remnants
                            of this way of electrification. The irony is that when looking at options for
                            under-electrified countries in Africa and elsewhere we tend to ignore how it
                            really happened in the north and assume that grid-extension is the way to go.
                            Yet as already pointed out mini-grids can work well and are often more cost effective.
                            Moreover, consumption of electricity is an "acquired taste" and often
                            (one of) the core cases for grid supply namely that lots of energy is needed
                            for transformation of the local economy may only come into existence after a
                            fairly long time of having access to electricity.       

                             

                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                C4D Enthusiast

                                Anders,

                                 

                                This is the case also in some areas of Southern Europe where the electrical generation was done at small hydro plants that were built by refurbishing existing medieval water mills. A micro grid was extended to nearby houses and hamlets by the owners and typically a flat rate was charged according to the contracted current or number of light bulbs. In our case, unfortunatelly they did no survive in as separate entities when larger utilities developed as it seems that they did in your part of the world.

                                 

                                When we design and build microgrids in remote areas based on PV hybrid generation one of the advantages is that, because of the universality of the resource, scale or I should say smallness is not a limiting factor. In general we physically interconnect all the nearby housholds and buildings with a LV distribution feeder but, if a building is too far and the extension is not cost effective, we install an individual plant. As a bussiness model those individual houses are still part of the micro grid solution because they are under the same management and tariff scheme.

                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                1203634 C4D Enthusiast

                                Thanks to all the participants for sharing their thoughts. We have quite a collage of ideas in the discussion. Terry set the framework for the discussion emphasizing on terminology, grid independence, scalability, and smart grid and integration.  I will summarize thoughts from the discussions.

                                On terminology,

                                • Xavier was of the view that terms ‘minigrids’ and ‘microgrids’ refer to equivalent systems.
                                • Joseph pointed to UNIDO’s size based distinction of hydropower
                                • Bhola indicated the isolated nature of minigrids
                                • Robert highlighted ‘plug and play’ feature that enables adding more sources without additional engineering
                                • Terry emphasized on controlling load as well as generation

                                On grid independence and integration,

                                • Robert mentioned individual scalability, ability to interconnect with central grid, and ability to network with other microgrids
                                • Terry described possibility of vertical growth and horizontal growth and rule in both autonomous and grid integrated operations
                                • Santiago urged us to think long term and consider the compatibility for eventual interconnection to the network, the natural consequence of requirements for reliability, option, and economy
                                • Xavier and Bhola both implied (mildly) the isolated/ islanded operation


                                In the discussion we have a case where smaller systems were aggregated to form larger network (Ander’s comment) and a case where they were displaced by grid extensions (Xavier’s comment).


                                My observation is that there is a lot of confusion among the practitioners on what a microgrid should be and do?


                                Practitioners in developing countries are more familiar with the ‘minigrid’ terminology – minigrids for providing access to isolated communities. Changes in the definition of micro-hydro (implying minigrids with micro hydro generation) in Renewable (Rural) Subsidy Policies provide interesting insights. Reclassification of these minigrid systems placed them in different subsidy brackets- a case of real investment implications of policy definition. 

                                Definitions

                                2000

                                2009

                                2013

                                Pico hydro

                                upto 3kW

                                upto 5 kW

                                upto 10 kW

                                Micro hydro

                                3kW to 100 kW

                                5 kW to 500 kW

                                10kW to 100 kW

                                Community/ Cooperative Mini hydro

                                N/A

                                N/A

                                100 kW to 1000 kW

                                Grid Connected Mini hydro

                                N/A

                                N/A

                                Recognized in 2013.

                                 

                                Practitioners in the developed countries are more familiar with the ‘microgrid’ terminology – microgrids for integrating distributed energy resources and for improving reliability. However, there is no clear consensus on what a microgrid is and should do. A recent paper from Georgia Tech (Design Considerations for Microgrids with Energy Storage by Andrew D. Paquette and Deepak M. Divan) surveyed 20 most frequently cited microgrid papers and found

                                13 of them to desire Seamless Islanding

                                13 of them to see primary use of inverter interfaced generation

                                16 of them to include storage for fully dispatchable inverters

                                17 of them to emphasize energy arbitrage


                                I kindly request the participants to deliberate on resolving this conundrum. As we expect these low voltage networks to grow both vertically and horizontally, should we define them on the basis of functions they support and components they use.More important question is what different business value propositions do these differently defined low voltage networks represent in the A-B-C Business Models.


                                Following is a simple illustrative example to classification to further the discussions. Is such a classification necessary? If yes, how do to this better?


                                Microgrid V.1 – Single Rotating Generation forms Grid, inverters operate as current source

                                Horizontal Growth Potential - Moderate

                                Ability to add load – moderate, constrained by parameter of rotating generation

                                Ability to add source – moderate, constrained by parameter of rotating generation

                                Vertical Grid Potential – Moderate

                                Ability to connect with grid – moderate, contingent on control interface of rotating generation

                                Ability to seamlessly disconnect – low to moderate, constrained by horizontal growth potential

                                Optimization of generation and load resources

                                Ability to dispatch generations – low to moderate

                                Ability to dispatch load – low to moderate

                                Value Propositions - ??????????????????????????


                                Microgrid V.4 – Peer to Peer Connected Inverters form grid, droop controlled inverters, central microgrid controller

                                     Horizontal Growth Potential – High

                                          Ability to add load – High

                                          Ability to add source – High, constrained by storage options

                                     Vertical Growth Potential

                                          Ability to connect with grid – High

                                          Ability to seamlessly disconnect – High, constrained by storage options

                                     Optimization of generation and load resources

                                          Ability to dispatch generations – high

                                          Ability to dispatch loads - high

                                Value Propositions - ?????????????????????????

                                     

                                A Framework for the Evaluation of the Cost and Benefits of Microgrids by Gerg Young Morris, Chad Abbey, and Chris Marnay of US: Ernest Orlando Lawrence Berkeley National Laboratory helps in exploring value propositions.

                                 

                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                    C4D Enthusiast

                                    The emergences of smaller generating systems (less than 2MWs) have opened new opportunities for power generation near loads.  Distributed energy resources (DER) have emerged, as a promising option to meet growing customer needs for electric power with an emphasis on flexibility, reliability, power quality and improved efficiencies. The portfolio of DER includes synchronous generators, inverter based generators, micro-turbines, energy storage, renewable energy technologies, and “smart” loads. Organizing these resources into microgrids can best capture the significant potential of DER.

                                    Issues and Benefits related to Emerging Generation Technologies

                                    The economy of scale that favors larger generation units over smaller DG units no longer exists. The microgrid concept allows for the same cost advantage of large DG as for many small units with the addition of higher reliability; for example a microgrid with 10 100kw generators can handle loss of a generator much easer than he loss of a 1MW generator.

                                     

                                    Most existing power plants, central or distributed, deliver electricity to user sites at an overall fuel-to-electricity efficiency in the range of 28-35%. This represents a loss of around 70% of the primary energy provided to the generator. To reduce this energy loss it is necessary to either increase the fuel-to-electricity efficiency of the generation plant and/or use the waste heat. The use of waste heat through co-generation or combined cooling heat and power (CCHP) implies an integrated energy system, which delivers both electricity and useful heat from an energy source such as biogas. Since electricity is more readily transported than heat, generation of heat close to the location of the heat load will usually make more sense than generation of heat close to the electrical load. 

                                     

                                    A basic issue for a microgrid with many distributed generation is related to control of a significant number of units. If a central control model is used the problem becomes complex. The fundamental problem with a complex control system is that a failure of a control component or a software error will bring the system down. DG needs to be able to respond to events autonomously using only local information. Any step change in load will require an immediate change in the output power control of the DER units.

                                     

                                    While some emerging control technologies are useful, the traditional power system provides important insights. Key power system concepts can be applied equally well to DG operation. For example the power vs. frequency droop and voltage control used on large utility generators can also provide the same robustness to systems of small DGs. From a communication point of view only the steady state power and voltage needs to be dispatched which can be done manually if necessary.

                                     

                                    What are Microgrids?

                                    A microgrid is an integrated energy system consisting of loads and distributed energy resources operating as a single system, either in parallel with or islanded from the power grid. Key microgrid features are:

                                     

                                    • Enhance system efficiency, including reduction of harmful emissions through effective use of waste heat.
                                    • Flexibility in technology and placement of DER units through plug-and-play capabilities. Plug-and-play also provides for reduction of engineering cost and increased reliability. This feature promotes the use of many small DER units, rather than a few large units.
                                    • Enhanced reliability and electrical power quality through many small energy sources operating under autonomous control.
                                    • Enhanced robustness using peer-to-peer concepts to insure autonomous self-healing. This implies the ability to share all energy resources to meet the needs of the loads.  The CERTS microgrid concept provides for continues operation during loss of DER units, and loss of networking lines/cables.
                                    How is this different from traditional methods for integrating DER?

                                    This microgrid concept represents an entirely new approach to integrating DER.  An example of traditional approaches is illustrated in back-up generation. This approach is effective if the generator is never connected electrically to the grid or to other back-up generators.  Currently the use of multi-generators in an island operation requires a fast coordination controller to insure acceptable operation. This greatly reduces the ability to add generation as needed, and loss of the controller results in loss of the generation. The CERTS Microgrid concept allows generation plug-and-play functionality without coordination controls.

                                     

                                    Microgrid Structure

                                    The daunting challenge of building a microgrid with a huge number of DER units requires a system approach with extraordinary flexibility. Controls need to be fast and smart. For major events such as loss of utility power or loss of a DER unit, the control response must be in milliseconds. This level of response is achieved by each component of the microgrid using autonomous controls, based only on local information.

                                     

                                    Autonomous Control

                                    Three basic components of an microgrid have autonomous control. They are the DER units, the interface switch (if grid connected) and the loads. For example, if the power utility collapses, the interface switch between the utility and the microgrid must open in milliseconds. This is done using local information at the switch. This results in loss of power from the utility that must be provided by the islanded DER units. The power unbalance is resolved through rapidly increasing the power output of all the DER units. The DER controllers intentionally reduce the frequency of the islanded microgrid, to coordinate power balance between DER units. If there is not enough generation to provide for the loads, the frequency will continue to drop. When frequency falls below the normal operating range, the least critical loads will shut down, based on a frequency threshold. An islanded microgrid also handles changes in the load demand by sensing frequency changes. When loads reduce their demand, the system frequency will increase, resulting in all DER units decreasing their power output. The basic autonomous control concepts are highlighted below.

                                     

                                    • Each DER unit is a voltage source. This allows all units to look identical to the system and seamlessly move from grid connected to island operation and back.
                                    • Each DER unit regulates the voltage at its connection point. A microgrid with multiple sources is fundamentally unstable since voltage tightly couples the DER units together. If the power flow in an islanded cluster of generators changes (i.e. due to a load change), all DER units will change, resulting in sustained oscillations. An analogy is a mesh of springs (i.e. a bunk bed) linked together. Moving one point will impact the complete mesh. This coupled interaction can be resolved by constraining each node of the mesh. In a microgrid, this is achieved by constraining voltage based on reactive power output at each DER unit.
                                    • Communication between components is through frequency. DER units have milliseconds to respond to major events. In this model, there is no fast central controller and all inter-device communication is through the ac frequency of the electrical system. Power control of each DER unit is through a power vs. frequency droop. When the is no central grid load tracking implies frequency changes; the greater the load, the lower the frequency. In current microgrids, the maximum frequency droop is 0.5 Hz or 59.5 Hz. Load shedding is also keyed on the ac frequency. A frequency droop greater than 59.5 Hz indicates there is not adequate power to meet the load demand. A typical system would shed the lowest priority loads at 59 Hz. There can be many frequency levels, depending on the importance of different loads related to the current priorities.

                                     

                                    Conclusion

                                    The plug and play features can apply to many sources such as tradition synchronous generators, inverter base ICE and storage provide they have a fast response. Traditional pv and wind can operate as part of the microgrid along as the microgrid has at least one of the three fast sources listed above. A key feature of a microgrid is that each DER unit will operate in an autonomous mode, having both plug-and-play and peer-to-peer characteristics. The plug-and-play model implies that an arbitrary number of sources can be connected to each other, without re-engineering the system. Peer-to-peer provides a higher level of reliability, since there is no master unit whose single point-of-failure can take the entire electrical system down. In fact, the addition of an extra source allows for loss of a unit without impacting the loads. These concepts allow for multi DER modules to be connected together and provide greater fuel efficiencies, enhanced redundancy, and high system reliability, as compared with current systems.

                                     

                                    Further Readings

                                    • Hatziargyriou, Hikos, H Asano, R. Iravani and C. Marnay, “Microgrids for Distributed Generation,” IEEE Power & Energy Magazine, July/August 2007
                                    • Lasseter, R.H., P. Piagi,  “Microgrid: A Conceptual Solution,” PESC’04 Aachen, Germany 20-25 June 2004
                                    • Piagi, P., R.H. Lasseter, “Autonomous Control of Microgrids,” IEEE PES Meeting, Montreal, June 2006. Available:http://certs.lbl.gov/CERTS_P_DER.html
                                    • Lasseter, R., J. Eto, B. Schenkman, J. Stevens, H. Volkmmer, D. Klapp, E. Linton, H. Hurtado, and J. Roy, “CERTS Microgrid Laboratory Test Bed,” 2010.  http://certs.lbl.gov/CERTS_P_DER.html

                                     

                                     

                                     

                                     

                                     

                                     

                                    Microgrid V.2 –plug-and-play CERTS model: Multi-Rotating Generation with current source inverters for pv
                                    Horizontal Growth Potential - high

                                    Ability to add load – high and flexible

                                    Ability to add source – high, limited only by the current ratings of the wires.

                                    Vertical Grid Potential – High

                                    Ability to connect with grid – high, no change in the individual DG controls
                                    Ability to seamlessly disconnect – high- demonstrated in many US demonstration sites

                                    Optimization of generation and load resources

                                    Ability to dispatch generations – easy
                                    Ability to dispatch load – it is not clear if this needs to be done.But autonomous load shedding is possible.

                                    Value Propositions – this has been proven to be the low cost solution in the US. With the use of waste heat the payback period  is 3-4 years.

                                    The basic issue for this application is how to develop a low cost  rotating generation source based on locally familiar technologies such as automobile engines that can be easily maintained.

                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                        C4D Connoisseur

                                        "The economy of scale that favors larger generation units over smaller DG units no longer exists." This undermines the historical basis of the regulated electric utility, namely, that utilities are natural monopolies due to economies of scale. Anyone can now be their own electric utility, the barriers to entry are lowered - household utility, street-level utility, community utility, and "municipalization."

                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                          C4D Connoisseur

                                          "The plug and play features can apply to many sources such as tradition synchronous generators, inverter base ICE and storage provided they have a fast response. Traditional pv and wind can operate as part of the microgrid as long as the microgrid has at least one of the three fast sources listed above."


                                          The optimum mix of "fast response" and "intermittent" sources would I suppose vary with load conditions for, say, a rural village. Yet would we not need some "rules" or "algorithms," arrived at through optimization, that specify when to turn on the internal combustion engine, when to use storage, and when to send excess solar to charge batteries, and so forth?




                                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                            C4D Connoisseur

                                            "Horizontal Growth Potential - high Ability to add load – high and flexible,  Ability to add source – high, limited only by the current ratings of the wires.

                                            Vertical Grid Potential – High Ability to connect with grid – high, no change in the individual DG controls, Ability to seamlessly disconnect – high- demonstrated in many US demonstration sites"


                                            May I propose for the purposes of this discussion group that we ignore, for the time being, issues of vertical integration with the classical grid? Further, "horizontal growth" is simply organic growth of the microgrid to larger and larger population clusters. This will simply happen.


                                            Let us choose say 5 isolated un-electrified villages with relatively concentrated populations and implement the solution Professor Lasseter describes so well. It should prove a fantastic test bed. We prioritize "availability" more than "reliability," and local "renewables" to the maximum extent possible over fossil fuel sources that nevertheless are needed. Then we model its economics. We aim for scalability, replicability, standardization and support some customization. The solution should be boxed like IKEA furniture and shipped where needed. 

                                             

                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                C4D Enthusiast

                                                Test sites in isolated villages are important both from a technically/practical and a cost point of view. A bottom up approach is an excellent way to go. This needs to be incremental with the ability to add more sources and loads at low cost.  There is also a basic issue between sustainable through renewables (solar panels & wind) and power availability. For example a microgrid with solar and batteries is possible but the cost may be prohibitive.  This implies that dispatchable, rotating generation is needed.

                                                 

                                                There is a very successful model in Tecogen’s Inverde-100. This is a 100kW combined heat and power machine. It’s installed cost is around $1.5/watt. The prime mover is based on an automobile V- 8 block converted to natural gas with a power electronic interface to improve efficiency for partial loading. In the north east of the US the payback period for this system is less than 5 years. Without the power electronic interface is should be possible to have even lower cost generation, but use of waste heat is important. For Tecogen the automobile engines can be easily maintained using local automotive mechanics. Other than minor problems the engine is usually replaced on site with a new engine. One question is this a low cost solution for isolated power systems in remote areas of the world.

                                                 

                                                Can this approach be applied here? Can use of rotating generation with some solar panels be low cost and scalable? 4-cylinder engine that running on bio-gas or diesel in the 40-50 kW range would be ideal.  Waste heat use could maximize the fuel to useful energy efficiency to around 70%. One minimal system would have two 50kW gen-sets and 100kW of solar. The total max load is 200 kW with a min of 100kW when there is no solar.

                                                 

                                                The issue with solar and storage is one of cost. Currently in the US storage is not practical from a cost perspective and are build as a demonstration projects. In an isolated solar microgrid the trade offs are between storage lifetime cost vs rotating generation including fuel lifetime cost. For example consider the system above. If we replace the two gen-sets with storage we need ~ 100kW of storage for some time say 20 hours. This becomes a 2MW hr storage system. This is a minimum system since it cannot handle same 24-hour load levels as the gen-sets if there is no solar energy due to lack of sun.

                                                 

                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                    C4D Connoisseur

                                                    "Can use of rotating generation with some solar panels be low cost and scalable? 4-cylinder engine that running on bio-gas or diesel in the 40-50 kW range would be ideal.  Waste heat use could maximize the fuel to useful energy efficiency to around 70%. One minimal system would have two 50kW gen-sets and 100kW of solar. The total max load is 200 kW with a min of 100kW when there is no solar."


                                                    Appreciate your reply. I looked up the Tecogen Inverde 100 solution, and it is indeed impressive. At $ 1.5/watt is appears reasonably priced too. They use an engine - I wonder if that means a diesel generator based engine? New generation of IC engines claim 25% greater efficiency and the ability to support many fuels, including gas. Will that materially help overall economics?


                                                    From an economic modeling perspective, let us say we plan for a 200 kW system as you propose, and a minimum of 100 kW when there is no solar. Let us add some micro wind, some minimal battery storage, and gas or diesel generators. We work backward from such a system to target $ 0.12/15/18/kWh cost. We can adjust cost of money, time period for amortization, novel financing, and so forth. We avoid all subsidies. The marketing challenge is to purchase at scale to reach this price point. Can Tecogen develop such a stand-alone, rural microgrid solution if we place an order for multiples of 100 units? That is, the first order is for 20 mW. I think (gut feeling) that with falling solar prices and efficient next generation diesel/gas engines, and some demand management (e.g., no use of major appliances at night?) we can do this. We then have the next generation, standalone, off-grid utility, for rural applications and for campuses and communities. I would appreciate comments on whether this would be feasible? Thank you.



                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                        C4D Explorer

                                                        Please let me join this interesting discussion. I was earlier reading on what is the A-B-C model? in the presentation by Mohua Mukherjee at http://einstitute.worldbank.org/ei/webinar/incubating-innovation-rural-grid-electrification-presenting-telecom-energy-initiative. With respect to the A-B-C types of customers, I think the CERTS microgrid solution is more focused on addressing the needs of (B-type?) customers, and I am guessing that Mahesh Bhave's is intended for communities and households (C-type customers?). Is this a correct understanding.

                                                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                            1203634 C4D Enthusiast

                                                            Mr. Illindala, thanks for your participation. I don't see why CERTS microgrid solution would emphasize only on business customers. I think it can serve all customer groups. Dr. Lasseter and Dr. Grijalva can best answer the question pertaining to efforts required in deploying CERTS microgrid solution to serve Anchor (high reliability requirement), Businesses (price sensitive), and communities ( desiring access).

                                                             

                                                            My questions to the discussants are

                                                            - what are the constraints to using CERTS microgrids in ABC Business Model? My concern are anchor customers that could desire reliable supply including seamless transitions to and from islanded operation.

                                                            - what (additional) software controls in the CERTS model would allow it to facilitate (remote and automatic) economic dispatch of generations ( and loads)? Who are some of the key vendors providing software solutions (EMS) to CERTS microgrids?

                                                            - how do microgrids with centralized controllers compare with CERTS microgrids, in terms of performance and cost?

                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                C4D Enthusiast

                                                                The CERTS microgrid is designed to reduce cost through the plug-and-play model and its independents of a central control system. It has the potential to effectively serve all customer groups. For example we can start with a minimum community system and then expand, (with out replacing the original equipment) to the other  classes through the addition of more CERTS DER units. It provides the flexibility to meet local conditions and needs without additional engineering.

                                                                 

                                                                For example Sacramento Municipal Utility District in California is installing a CERTS microgrid to lower energy cost through use of waste heat and provide high level of power quality for their critical control center. This system has three 100kW CHP CERTS units and an interface switch. In the future they will add 500kW of storage without any changes to the current microgrid or its controls.

                                                                 

                                                                Anchor customers could increase reliability through adding redundancy to the microgrid or if another power grid is available they could connect using an interface switch to allow islanding. Adding this feature does not require any modification of the existing microgrid to operate with or without the grid.

                                                                 

                                                                The principle constraints are the need for CERTS components that are appropriate for a given area. For example 40 kW gen-set may be better for an application than 100kW unit. Currently 40 kW CERTS generators are not available.

                                                                 

                                                                The question of software controls needs some background.  CERTS DER units control both voltage and frequency based on a power set point. Assume that we have a microgrid with solar and four CERTS units each operating at a dispatch power that balances the load. If load is added each CERTS unit instantaneously increases its output without re-dispatch. This is achieved through a power vs. frequency droop. In the other direction if solar has an increase in its output the dispatched CERTS sources reduce their output without re-dispatching. Basically the CERTS controls allow for load tracking and maximizing renewables without a central controller.  The need for software controls is to allow for re-dispatch for the local needs that will differ from site to site. This could take many different forms from EMS to wireless dispatch using a smart phone. There are some venders but they do not become practical until we move into the multi-Megawatt world.


                                                                The CERTS microgrid control technology is the most radical of all options-as well as the lowest cost-as it is embedded into a 100-kW CHP system offered by Tecogen”

                                                                          “Distributed Generation,” September/October 2011,   Peter Asmus; Senior Research Analyst, PikeResearch

                                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                    C4D Connoisseur

                                                                    Dr. Lasseter, When we have CERTS DER, is there special hardware and associated software that has to be installed at each generation source? Is the signaling of the need for more power communicated to the DER, when a load is added, for instance, through the power cables itself (powerline communications), or is there an overlay control infrastructure of communications cables albeit without a central controller?


                                                                    Also, who has developed this hardware and software that is installed at each DER? Is it proprietary? Does it cost much? Why are there no 40 kW CERTS generators?


                                                                    As a telecom person, I am curious to know also whether the topology of the communications network - bus, star - matters, and whether the communications is data intensive. I am all for distributed processing (and generation), and "edge" solutions over "cloud" solutions, at least in telecommunications and computer networking, though the world is going in the opposite direction, for now. Since the electricity infrastructure is fundamentally not a wide area networking solution at all (except for historical reasons), a scalable, additive, de-centralized control-oriented CERTS-type solution appears attractive to me, except I don't understand it sufficiently. Thank you for your help. 

                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                        deanc C4D Explorer

                                                        This is Dean Cooper, Energy Finance Programme Manager at UNEP.  Just a quick note to say thanks to the World Bank for hosting this discussion, which I hope will identify some of the key issues that need to be addressed for the sustainable application of mini-grids in developing countries.  I'm currently in the process of formulating the mini-grids programme concept that we aim to implement in Africa, Asia and Latin America.  As you know, interest in the whole area of mini-grids has grown ernormously over the past 12 months.  Our involvement stemmed from the Powering Africa Strategy Summit in 2011 where interest in this approach was registered by senior decision-makers.  We've since conducted a range of assessments and consultations in order to determine where UNEP could play a role.  Our focus is on the potential for mini-grids in developing countries, powered by clean energy.

                                                         

                                                        Focusing on the subject for this part of the discussion (Is minigrid the best solution for your ABC model?), I'd be very grateful for some guidance.  Our aim is to attract private sector investment into mini-grid applications by demonstrating commercial viability and hence sustainable applications.  Some of the questions that we face and the issues that we're planning to address are as follows:

                                                         

                                                        1) A key factor is scale.  There needs to be sufficient demand to justify the necessary level of investment.  Anchor clients and business customers then become indispensable in order to develop an attractive investment opportunity.  We've found that there is good potential for private sector investment into mini-grids at >3MW.  For developing countries, this may be limited to island communities where the demand is more focused and combines ABC clients.  For rural areas, there may be some options in locations currently supplied by diesel, or prospects for the required scale to be achieved by a single operator serving multiple sites - but has there been any consideration/experience of this related to ABC customers?

                                                         

                                                        2) Green field / brown field?  Is there really potential for the development of commerically viable mini-grids for currently unserved communities?  Or should we focus only on existing grids powered by fossil fuels (primarily diesel).  Our current approach is to aim for the greatest percentage of diesel replacement as possible.  This will address some of the environmental concerns, but not the issue of access.  How relevant is the ABC model for mini-grids in rural areas where communities are spead over large distances, thereby raising a question over connection costs and transmission losses.

                                                         

                                                        3) Mini-grid and stand-alone?  In rural areas, communities are offered scattered and therefore not economically viable to connect to a mini-grid structure.  We're currently considering the combination of mini-grids with stand-alone systems, but using the same financial structure (so community members will pay the same price whether grid-connected or standalone).  Has there been any other experience of this approach? (This helps our aim to meet the local demand rather than simply impose the technology i.e. a bottom up approach driven by the potential market - which is of course how most consumer markets function in the developed world). But is the ABC model still effective - can the returns from A and B outweigh the costs of C?

                                                         

                                                        4) Are mini-grids possible to supply with only local clean energy resources?  There are examples of mini-grids powered by solar, hydro and some by wind.  But very few don't have some form of hybrid arrangement with a diesel generator.  Clearly a secure supply cannot be guaranteed by intermittent renewable energy supplies.  (Batteries can be used to partially address this issue, but the batteries are usually the most expensive component in such an arrangement and so reduce the affordability to local consumers).  One alternative that we're considering is the use of bio-energy.  There are a range of potential local sources, whether biomass or biogas (though we have to be aware of the energy-food-water nexus associated with this approach).  But is there any experience of bio-energy powering mini-grids?

                                                         

                                                        The overall question is: are there any specific assessments or expereince related to ABC for mini-grids - what proportion of demand from an anchor customer and business users is necessary to make a mini-grid viable?  Is the determining factor for commercial viability solely scale, or are there other key issues to consider?  With a demand >3MW there is a clear business model that can be developed for independent grid structures.  But there are very few, if any, currently unserved locations that would represent such a demand.  For this reason, we're addressing communities that have existing grid structures but are supplied by fossil fuel, generally diesel.  Our aim is then the replacement of the largest percentage possible of diesel.  Target locations are likely to be island communities where there is suffcient concentration of demand to make this scale of clean energy activity economically viable.  But are we missing smaller-scale opportunities by following this route?  Can ABC provide commercially viable opportunities for remote rural communities without any current infrastructure?

                                                         

                                                        Lots more to say on this, but for now I hope the above raises some legitimate questions.

                                                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                            jeyeddu C4D Enthusiast

                                                            Great Dean, for sharing with us your concerns which are really legitimate. Is it good you brought them out now to psyche us up for discussions on Part II: Minigrids Business Models: Under what conditions a minigrid is economically viable? scheduled for May 25 – June 4. I believe most of the issues raised would come up for discussion. I am really pondering on them and hopefully I can be of help soon. Thanks.

                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                              C4D Enthusiast

                                                              Scale may be a key factor from the point of view of investment but from the technical and economic point of view, and thanks to the modularity of solar PV technology, the LCOE of a PV or PV hybrid rural microgrid starts to be competitive in general at 30kWp with a typical yield of ~100 kWh/day. This often enough to electrify a village of 500 to 1000 people that will typically have very low demand (less than 1 kWh/day per connection) but with a high capacity to pay for that small amount of energy that they value a lot. The potential of replication is very high because there are so many villages that size. Most of those villages today have nearby one or more cell phone antennas running on small diesel gensets 24/24. To me with scale is not necessarily looking for large villages but developing large projects that involve many villages in a range of sizes and also the scattered clients with individual solutions under the same operational scheme. In a village like this typically the electricity to run the antenna is the same order of magnitude than the demand of the village.

                                                              Batteries are needed if the energy source is renewable and 24/24 service is desired, except in hydro applications that are very site specific. If well managed typical high quality lead-acid batteries can live up to 8 years and the cost of replacing then is part of the required LCOE and tariff study.

                                                               

                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                              C4D Enthusiast

                                                              We often spend a lot of time trying to classify the power sources but not enough to characterize and understand demand and the associated degrees of freedom.

                                                              A good performance in a rural microgrid has to do with the correct match between the selected type of plant design and the load. For example a small village with very low demand will have a load profile dominated by evening loads; if there are services and some commercial uses you will have some daytime loads that flatten the curve and may even become dominant in some cases; If there are some deferrable loads like water pumping, ice making, etc., these can be used at the most convenient time when you have lower generation costs; if additionally there are anchored telecommunications loads these will essentially be a base load.

                                                                Also the acceptance of interruption is different for different loads/clients and this can be considered when designing and establishing the business model.

                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                              C4D Explorer

                                                              Hello all,

                                                              I'm happy to join Part 2 of the discussion as an 'Expert Contributor', focusing on business models for mini-grids and what conditions are necessary for economic viability. As a Laos-based company focused on rural electrification, often in Least Developed Countries, our team at Sunlabob Renewable Energy has found that a profitable business model for mini-grids is a challenge for a variety of reasons, with one main reason being that our end-users are some of the poorest households in the world. When adding in elements encountered in many developing countries such as a lack of national feed-in-tariff or subsidy scheme, economic viability for mini-grids is an uphill battle.

                                                               

                                                              To keep it brief at this stage of the Part 2 discussion, I'd like to point out a few critical aspects that can enable - but certainly not guarantee - a sound business model for mini-grids in rural communities of developing parts of the world:

                                                              • If a national feed-in-tariff scheme doesn't exist, work with government and utility players to establish an agreement for your project. We negotiated Laos' first F-I-T for a private renewable energy generation for a solar-hydro hybrid village grid we established in 2007, which was a key aspect to the project moving forward.
                                                              • Particularly when selling energy services to Base of the Pyramid end-users, a pricing gap subsidy from an institutional player like the IFC can be a necessary piece of the "viability" puzzle. For example, if your calculations determine that $0.24/kWh is your price point needed to be economically viable, it is oftentimes unlikely that payments from BoP end-users, and even the addition of an F-i-T, can meet that price point. We believe gap-filling subsidies from multilateral agencies can close the gap.
                                                              • Keep the social aspects in mind when planning and projecting energy usage and payments. For example, in one of Sunlabob's village grid projects in Laos, we were forced to adjust monthly tariff rates so that our off-grid customers would be paying comparable rates to grid-connected customers in the country (a challenge in a place like Laos where grid power is almost all hydropower and incredibly inexpensive). After all, a rural mini-grid customer doesn't want to hear that he's paying 5x more for electricity than his cousin living in a grid-connected area of the country.

                                                               

                                                              I recognize that each country is a different, unique scenario when building a mini-grid business model, so I very much am looking forward to hearing the insights of everybody else in this discussion and hopefully arriving to some productive, useful outcomes.

                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                1203634 C4D Enthusiast


                                                                Part II: Minigrids Business Models (May 25 - June 4)

                                                                 

                                                                Part II: Minigrids Business Models focuses on innovative business solutions that minigrids can provide to all three customer classes - anchors, businesses, and communities.

                                                                 

                                                                Focus Areas

                                                                • Who does what in minigrid business models? Who finances minigrids? Who develops minigrids? Who owns minigrids? Who operates minigrids? Who provides repair and maintenance services?
                                                                • What are the revenue requirements for minigrids and microgrids? What avenues exist for generating revenue from minigrids and microgrids?  How are tariffs set?
                                                                • Do minigrids need financial assistance to be economically viable? How can financial assistance be designed to support minigrid business?
                                                                • What are ‘prosumers’ in the microgrid network? What business models can support their participation?

                                                                 

                                                                We are pleased to introduce the expert contributors for Part II: Minigrids Business Models. In this session, expert contributors will share their views on the technical aspects of minigrids and provide their insights on issues raised by all other participants.

                                                                 

                                                                Saifur Rahman, Joseph Loring Professor of Electrical and Computer Engineering, Virginia Tech

                                                                Saifur Rahman grew up in Bangladesh where he did his undergraduate degree in electrical engineering. He did his masters and PhD work in electrical engineering at State University of New York and Virginia Tech respectively. Besides Bangladesh and the United States, he has lived and worked in Japan, Indonesia and Ethiopia. Saifur Rahman's teaching, research and training activities cover electric power generation, transmission and distribution, renewable energy, energy efficiency and smart grid. He has given lectures, offered training workshops and done projects in these areas in over 30 countries on all six continents. In addition to his work at Virginia Tech, he helps to run Akash Solar Engineering, a Bangladesh registered company, providing solar energy solutions for both off-grid and on-grid applications. Akash Solar is now working in Bangladesh to provide solar power for off-grid telecom BTS stations.

                                                                 

                                                                Terry Mohn, CEO, General Microgrids and Chair, Minigrids/Microgrids Working Group, The Energy Access Practitioner Network, UN Foundation

                                                                Terry Mohn is CEO of General MicroGrids, an international microgrid consultancy and developer. He also is Managing Partner of CleanSource Energy Partners, LLC, an international renewable energy project developer. He is also Program Director of the Global Microgrid Center, a non-profit microgrid test and certification center. He is Chairman of the United Nations Foundation Microgrid Working Group and presently serves a three year appointment as the U.S. Department of Commerce's federal advisor to National Institute of Standards and Technology in its Smart Grid Federal Advisory Committee. Terry has 30 years' experience in large-scale system architecture, business strategy, and technology investment strategy. Terry is an advisor to the US Department of Energy for smart grid and advisor to the California Energy Commission for demand response and emerging technologies."

                                                                 

                                                                Joseph K. Essandoh-Yeddu, Head, Planning and Policy, Ghana Energy Commission

                                                                Joseph Essandoh-Yeddu has a B.Sc in Physics and holds an MSc Engineering degree in Environment and Energy Planning from Chalmers University of Technology, Gothenburg University in Sweden in 2001. He had his PhD research at the Bureau of Economic Geology of the University of Texas at Austin, Texas, USA from 2006-2009. Whilst in Texas, he worked with at the Bureau as an energy economist. Joseph has been with the energy sector of Ghana since 1989. First as a programme officer for solar energy, then renewables until 1999 when he left for his advance studies. Upon his return in 2001, he moved to energy planning where he was the Ghanaian  leader of the national team that produced Ghana’s first Strategic National Energy Plan (SNEP) 2006 – 2020. The SNEP is currently being updated to cover 2010-2030. He has been a member of Ghana’s negotiating team on UN Climate Change convention and Kyoto Protocol since 2005. He has head the Strategic Planning and Policy of the Energy Commission since 2003. Energy Commission is the advisory agency of the and is also a regulatory body that issues licenses for investments in the power and natural gas projects in Ghana. Joseph also consults for UNEP on sustainable energy and climate change issues for some African countries and does part-time lecturing locally, on energy and environment courses.


                                                                Andy Schroeter, Chief Executive Officer, Sunlabob Renewable Energy, Ltd., Laos

                                                                Andy Schroeter is co-founder and CEO of Sunlabob Renewable Energy, Ltd., a Laos-based company that specializes in renewable energy and clean water projects in developing regions of the world, including Asia, Africa, India and the Pacific. Mr. Schroeter has more than 15 years of experience with rural electrification initiatives in remote, off-grid communities and has been recognized internationally for Sunlabob's innovative approaches to creating long-lasting, holistic solutions for energy access.


                                                                Xavier Vallve, Associate Manager, Trama Tecno Ambiental and Member of Alliance for Rural Electrification

                                                                Xavier Vallvé studied Engineering at the University of Waterloo in Canada and received a M.Sc. degree in 1979. In 1986 he co-founded in Barcelona, Spain the engineering and consultancy firm Trama TecnoAmbiental, S.L. where he currently is associated partner. He has more than 25 years of experience in renewable energy rural electrification projects for distributed generation both grid-tied to the national grids and autonomous RE hybrid technology for islands and isolated villages. He has been involved in feasibility studies, engineering, project management and commissioning of many PV rural micro grids in isolated villages in Africa, Asia and South America. He has also been an active member in international codes and standards committees on this subject. He has been project director or lead consultant for private and government clients and also for projects by UNDP, UNOPS, UNIDO, UNEP, AECID, IDB, WB, EC and other agencies. He is director and lecturer of the Master degree “Master en Ingeniería y Gestión de las Energías Renovables” at IL3 (University of Barcelona).

                                                                 

                                                                Mohua Mukharjee, Senior Energy Specialist, The World Bank

                                                                Mohua Mukherjee is a development professional with over two decades of experience at the World Bank in Washington DC. She currently works on energy projects in South Asia and Africa, both on-grid and off-grid. Her specialty is the development of off-grid business models through commercially viable public private partnerships. She has a strong background in private sector/SME development and renewable energy, and is partnering in the development of an innovative, private sector led business model in Nepal at the moment, with a grant that the Nepal government has received from the Scaling Up Renewable Energy Program (SREP). Mohua has managed development projects for the World Bank in thirty countries.

                                                                 

                                                                Pepukaye Bardouille, Senior Energy Specialist, IFC

                                                                Pep Bardouille is a Senior Energy Specialist with IFC's Clean Energy Advisory Team. She leads work on energy access business models (with recent work covering an electrification roadmap for South Africa, and mini-grids development in Tanzania and India) and grid-connected renewables. Prior to joining IFC, Pep worked with the World Bank, and in management consulting. She holds a PhD in Environmental and Energy Systems Studies.


                                                                Daniel George Bauer, Doctoral Candidate, Florida Atlantic University

                                                                Daniel is currently a doctoral candidate and Instructor in the School of Public Administration at Florida Atlantic University specializing in procurement, program evaluation, behavioral finance, public-private partnerships and ICT Climate and Energy Policy. Mr. Bauer also has an Executive MBA in International Business and Finance from Florida Atlantic University College of Business. Mr. Bauer has over 30 years experience in the telecom and power industry sectors both domestically through AT&T and CBS as well as abroad through VirtU LLC and Quantum Group in development of partnerships and expansion and creation of smart grid ventures and operations. He is a Canadian and American citizen.


                                                                We sincerely thank the expert contributors for participating in this discussion.

                                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                    C4D Explorer

                                                                    Part II: Minigrid Business Models: Under what conditions a minigrid is economically viable?

                                                                     

                                                                     

                                                                    In this discussion “Minigrid” and “Microgrid” are used interchangeably. A microgrid is defined as an electrical network that serves loads with low voltage (usually 480V or less) and has its own generation sources. It could run on both AC or DC.  It may or may not be connected to large power grid for backup power supply. In many cases the local generation comes from solar, wind, biomass or small hydro power plants. Solar includes both photovoltaics (PV) and thermal (like concentrated solar power, or CSP). This renewable energy generation is usually supplemented by small diesel or gasoline generators for reliability purposes.

                                                                     

                                                                    The first criterion to make a microgrid economically viable is to have some load that is always on so that the infrastructure and operation and maintenance costs can be spread out over a 24/7 operation. Therefore a big success factor for a profitable microgrid operation is to have an anchor customer like a mobile BTS tower operator, cold storage plant, water pumping load, saw mill, rice mill, local market, etc. who need stable daytime supply. Such loads, in the presence of typical night-time loads, will allow a balanced system operation with a high load factor.

                                                                     

                                                                    Thus, if one wants to develop a microgrid for off-grid (rural or semi-rural) applications, the typical local area load (which starts off with lighting load only) needs to be built up over time through electric fan, refrigeration, television, computers and related applications. On the other hand, as the load begins to grow in size and diversity, one has to be careful about the timing of such loads coming on line. Because, if the microgrid is fed by solar photovoltaic energy alone, then the size and the cost of the battery becomes a significant factor for night-time operation. This is because with the cost of solar panels declining sharply, and the cost of batteries going up, now the cost of panels is about the same as the battery cost for stand-alone operations. So there is an incentive to minimize the battery cost. One way to deal with this is to use some amount of diesel or gasoline generation, which has its own environmental and maintenance issues that must be taken into account.

                                                                     

                                                                    Saifur Rahman, PhD

                                                                    Joseph Loring Professor & Director
                                                                    Virginia Tech Advanced Research Institute
                                                                    Arlington, VA 22203, USA

                                                                    www.saifurrahman.org

                                                                     


                                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                        jeyeddu C4D Enthusiast

                                                                        Thanks, Rahman for your exposition on microgrid and minigrid. Maybe this should be the beginning of standardizing the definitions.

                                                                        Your second paragraph brings us back to the very core discussion – Anchor Business Community and its linkage to the over-arching topic - the Telecom-Energy Initiative. 

                                                                        Once again, it makes me recall my own country – Ghana between mid-1980s and the mid 1990s. With the Government of Ghana determination to increase the country’s telephony penetration, more telecom repeater stations were installed powered by stand-alone solar PV power units. However, as the country’s universal electrification increased, exceeding 50% in the late 1990s, most of the repeater stations were connected to the central grid. After the year 2000, the telecom utility then began to replace the seemingly redundant solar PV units which had lived an average of 20 years with diesel gensets but this time also employing individual security personnel at most of the repeater stations. The security personnel were mostly employed from the local host communities and so the exercise was also seen as employing local content. The telecom utility found that arrangement cheaper than replacing the aging solar arrays and the huge battery banks with same kind. After all, except for in times of power crises as the country is currently facing, average power outages had been less than two hours a day for most years in grid connected areas of the country, until August last year 2012, when the West African Gas Pipeline carrying gas from Nigeria for the thermal power plants got ruptured through a maritime accident.

                                                                        The telecom utility dismantled most of the solar modules and sold them out to local solar companies at their salvaging values. That was Ghana.

                                                                        However, if I think of countries of less than 20% universal grid electricity access like my beloved brotherly country – Liberia, it will also be an opportunity to increase the country telephony coverage by installing more mobile/cell phone telecom repeater stations powered by a hybrid of standalone PV unit and diesel gent set in not just remote locations but closer or in the midst of remote communities. The telecom tower would be the anchor customer for the power service provider and the excess power made available to the communities. The closer it is to the communities the better to reduce power transmission losses and also reducing the size of power conditioning units. Where viable, the solar unit would run during sunshine hours and the diesel genset operates during periods of long no-sunshine hours. . As indicated by Rahman, such loads, in the presence of typical night-time loads, will allow a balanced system operation with a high load factor.

                                                                        Implementation could be by any of the models outlined in Terry Mohn’s contribution depending upon what is tenable in the host country and the interest of potential stakeholders in such a project. What an opportunity to implement such a concept.

                                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                        jeyeddu C4D Enthusiast

                                                                        Hello folks, I deem it a honour to be invited as an Expert Contributor’ to Part 2 of the discussion on the A-B-C model, this time focusing on models for small/micro//mini-grids and the conditions necessary for their economic viability particularly in rural settings.

                                                                        micro/minigrids may not be new to most of us in Africa due to low electrification rates in our countries. For instance in Liberia, as indicated in Bhola Shrestha's contribution (14th May), Monrovia, the capital is serviced by a small grid or distributed generation. Most of the micro/minigrids are however are serviced with expensive diesel generation.  It was also same in mid-to northern Ghana where most of the towns were ran on micro/minigrids powered by diesel plants until the mid-1980s  when the oil price shot up to the roof. The government then decided to discontinue all such diesel powered distributed generation and rather extended the central grid being powered by our large hydropower-Volta dam from down-south to up-north. The national electrification scheme (NES) as it is called has become so popular that universal electricity access is now over 70% and off-grid inhabitants dream for it. The NES originally targets 100% access by 2020. Please before I continue, allow me to use micro and minigrid inter-changeably since we have not agreed on a definition yet.

                                                                         

                                                                        The difference now is that instead of diesel-based micro/mini-grids, we are advocating for small/mini-grids that are powered by sustainable and cleaner energy systems; solar, biomass, wind, small-mini-hydropower, etc. With increasing cost of oil on the global market, say crude oil selling at US$100 per barrel translates into diesel being sold between US$130-140 per barrel. This converts into $22-24 per MMBtu which would generate electricity at a cost of 24-30 US cents per kWh, depending upon the age and efficiency of the generation set.  At this benchmark price range, it makes distributed generation or minigrid from most renewables much more favourable, in short, economically viable. For countries with comparable micro-mini-hydro and wind resources, it is a dream come true. For solar thermal or PV electricity, the issue is the back-up during no-sunshine hours. A hybrid system will therefore be essential, to avoid relatively expensive battery charging system and such adds to the total cost.  

                                                                         

                                                                        In Liberia, some communities close to wood milling industrial complexes are hooked to micro/minigrids run by the industries and powered by the wood wastes from their operations.  Such could also be economically viable since it makes the industry's operations self-sustaining. Such examples used to exist in Ghana too, until the 1990s. Oil Palm mills, sugar factories beside wood mills, all used to meet part or all of their power needs from the wastes generated out of their operations. The excess power was giving to the nearest communities via micro/minigrids. However, as the locations got connected to the central grid powered by the less expensive Volta hydropower (1,020 MW). So micro/mingrids are not necessarily less expensive than central grid, but it depends on the power source and the quality of the supply of the grid.  In order to arrest the situation, Ghana now has a Renewable Energy law that encourages such micro-minigrid connections by the said industries and the like. The utilities through the regulators pays the industries for such services under the renewable energy act.

                                                                        A key challenge however has been productive uses of electricity in the beneficiary communities. For instance, for most distributed diesel generation-minigrid communities in Ghana in the past, power was in most cases available for about 10 hours a day; from 6-8am then from 6-10pm. Such were not taken kindly by the youth who were eager to use the electricity for machining, auto-mechanic work and other commercial activities during day time; they therefore saw the arrival of the hydro-powered central grid as a superior alternative. Thus in my opinion, electricity should not just be for lighting and light-duty work but to create jobs for the growing youth as well, which is now a challenge in most African countries. I am therefore looking at a mix (cocktail) of say stand-alone and micro/minigrid where solar battery charging units for charging cellphones are available, also creating business enclaves in small/minigrid communities where they can have sustained power during the day for auto-mechanics, run offices and other electro-based commercial activities, small businesses like agro-processing mills, carpentry workshops, internet cafes, etc, as earlier mentioned by Gunjan Gautam (14th May discussion).  Affordability is relative and  so far as the youth are in economic activities, they can afford to pay their bills.

                                                                         

                                                                        Yet still, not everyone may be able to pay for the services of small/minigrid. The relatively poor can thus have just rechargeable solar lamps (minus the solar charger) where they can recharge at the solar battery recharging units/stations for a small fee if they are unable to procure the lamps with the solar units at a go. This model is gradually picking up in some off-grid island communities on the Volta lake in Ghana.

                                                                        I foresee a scenario where such business enclaves are powered by solar grid-connected with diesel as back-up in locations where cost-effective renewable energy alternatives are not available. The minigrid may be economically viable in this instance in the long run.

                                                                        For small/mini-hydropower systems, there should be a careful balance to satisfy various interest groups in water usage besides electricity, such as for agriculture, drinking and to some extent recreation to ensure job creation and sustainability in general and avoiding usage conflict. Taking advantage of the value-chain and not just looking at electricity generation would make such a model economically viable. I saw such model whilst in Austin, Texas. We should not be surprised to see such advocacy very soon in Africa as knowledge grows and enlightenment expands.


                                                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                          C4D Explorer

                                                                          This discussion on microgrid business models is very interesting. One can look at the question from many perspectives.  My other colleagues have done a wonderful job parsing out the economics.In my case, I will center on the entire system ownership model. The following is a concept I prepared for a couple east African energy ministries as well as at the Clean Energy Ministerial last month. It follows similar work conducted last year at the Asia Development Bank in a series of workshops.

                                                                           

                                                                          For perspective, a successful microgrid system requires a strong management team, which could involve either the local community or a private operator. To allow for future demand growth, a commercial operation of the plant is required and is best when linked with parallel economic services and productive use of electricity for income generating activities. Four models are outlined here. There may be more models overall, but these should capture a majority of successful implementations.

                                                                           

                                                                          Community based model: Community-based mini-grid management mostly occurs if a mini-grid in isolated areas does not attract private-sector or utility interest. In this case, the community becomes the owner and operator of the system and provides maintenance, tariff collection, and management services. However, this type of socio-business structure faces many challenges. First of all, local communities usually lack the technical skills to design, install, and maintain the systems; business skills to pursue a sustainable operation are weak, and often hampered by social relations in small communities; the community may lack financial resources in case of calamity, particularly if tariffs have been set too low. This more often than not results in technical and financial failure. Therefore, a community-based model requires substantial technical assistance and training to develop sufficient local management skills for proper operation and maintenance, while assistance in management support and supervision may still be needed during the lifetime of the power plant.

                                                                           

                                                                          The community organization that manages the system is especially vulnerable to social conflicts, certainly if the system does not include individual meters, or other devices to measure and limit the consumption of each user to avoid potential conflicts within the community.

                                                                           

                                                                          Private sector model: Private sector service providers enter into rural energy market through subsidy schemes or regional concessions. Therefore private sector-led mini-grids are particularly feasible when government support raises an interest. The principal advantage is that it usually provides electricity more efficiently than any other model. If a business plan is well structured, companies are also able to ensure long-term operation and maintenance and have the technical ability to address urgent problems and replacement issues. Moreover, private players may have the investment capacity to maintain and expand such plants, which is much needed in rural areas.

                                                                           

                                                                          However, given the situation of most rural areas in small island countries, the private sector cannot generally be expected to build up a system and/or serve rural populations without some form of public financial and technical support. For setting up a private sector mini-grid it is essential to find interested and qualified companies to bid for rural electrification concession contracts.

                                                                           

                                                                          Utility base model: The principal advantage of this approach is that the primary responsibility lies with a usually experienced party with the financial resources and technical capabilities to implement and manage its network. Due to their public or quasi-public position, utilities also directly benefit from a privileged legal position and have better access to financing mechanisms. Their centralized position and large stock of spare parts give them the possibility to offer extensive maintenance services. However, they often focus on the main island or a few towns only, and tend to limit service in other areas. The success of these utilities usually rely more on whether or not innovative business approaches are adopted. Many of them are now inefficient and almost bankrupt. The utility model runs the risk of being rejected by the local communities which may result in a diminished willingness to pay, and may eventually lead to financial failure.

                                                                           

                                                                          Private public partnership model: PPP models can be quite diverse, tending to adopt different and innovative types of O&M contracts earlier and combining different ownership structures (i.e., one actor owns the grid, the other the generation capacity). For example, a utility or a private company implements and owns a renewable energy mini-grid power system, a community-based organization manages it on a daily basis and a private company provides the technical back-up and management advice. The collaboration enjoys the technical expertise and experience of the utility with the possibility to realize economies of scale in the realization of big infrastructure works (grids), the local involvement of the community-based organization, and the financial investment, technical expertise and efficiency of a private company.

                                                                           

                                                                          Another approach involves a partnership between the national state-owned utility and local distribution entities. Under this arrangement, the utility typically constructs medium- and low-voltage lines and then sells power at a wholesale rate to local distribution entities, which may be private operators, cooperatives, or affiliates of the national utility. These entities, in turn, resell it at retail prices.

                                                                           

                                                                          Yet another approach is to assist private diesel genset owners to invest in hybrid PV-diesel systems while setting up a low-voltage distribution system for the neighborhood. The diesel owner enjoys the use of cheaper electricity for his own purposes, and earns money from the sale of electricity to his neighbors. The public assistance could be an interest free loan to invest in the PV capacity and the network.

                                                                           

                                                                           

                                                                           

                                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                              C4D Connoisseur

                                                                              Terry does well to highlight the organizational issues. I propose one additional organizational form - the co-operative. Now rural electricity cooperatives have been fairly successful in the US, but not so in India. In contrast, the Indian milk cooperatives, the iconic Amul (and others too), have been successful. Can milk cooperatives diversify into electricity? I proposed this in an article "Solar Power, Amul Style" in the Hindu Business Line in Nov 2012 - Solar power, Amul style | Business Line

                                                                               

                                                                              The cooperative, roughly, may be considered as an organizational form that combines the best parts of the private sector model - accountability, for instance - with participation and ownership by stakeholders, who are direct beneficiaries of the electricity system, and not through money only. For many reasons, PPP does not work, though it appears attractive in theory; nor does the utility model work - the historical culture and regulated mindset of utility employees are unlikely to deliver what is needed.

                                                                               

                                                                              Further, top-down approach may not work for rural electrification (see Prayas Energy Group's 2011 critique of India's RGGVY, the rural electrification program, Rajiv Gandhi Rural Electrification Program : Urgent Need for Mid-course Correction,) and we should rather have bottom-up, self-sufficiency oriented approaches rather than a public utility approach. The good news is that large size - economies of scale, with giant generation plants and sprawling transmission network -  are no longer necessary for economic viability; we have favorable economics for small systems. The network "edge" is the new "center," now in electricity as it has become in telecommunications.

                                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                C4D Enthusiast

                                                                                Ownership and institutional scheme is definitely a key factor for the long term success of a rural micro grid Project or a Programme. I have known first hand several models and, although each has inherent pros and cons, the relevant issues are that the different roles to operate, manage and maintain are clearly defined and also financially sustained by tariffs.

                                                                                In Argentina, for example, each Province has jurisdiction to regulate electrical services and some of the rural areas are serviced by privately owned and operated micro grids, both with diesel gensets and also with PV or WTG (small wind turbines). Tariffs are regulated and a full tariff should cover investment, commercial and operational costs. In some cases a partial subsidy to the investment has been obtained but, in general, full tariffs are higher than the ones of clients connected to the Provincial grids or higher than their capacity to pay. Regulatory agencies recognize this and cross subsidize the service by establishing a consumer tariff and the full tariff. Tariffs are audited and reviewed every few years. The difference between the two is paid by the regulatory agency as a sort of “feed in tariff”. It seems like a very robust scheme but it has been working very well in some Provinces and not successful in others. One of the causes of the difference can be related to the institutional commitment to adequately and transparently review the tariffs.

                                                                                In another case, in Morroco, there are PV rural micro grids owned and operated by the Community with a subcontracted electrical contractor for maintenance and repairs. The scheme is not very robust because in case of a major incidence they lack the technical and management skills and also because often success will depend on the ability to involve the right people in the community. But there are examples of success with good performance of the service and also governance school for the community (electing the board of the electricity association, managing tariffs, applying rules of the service, etc)

                                                                                A third case, also successful, is in Cabo Verde in Africa where the micro grid is owned by the municipality but its operation concessioned to a private company for operation and management.

                                                                                In Spain there are a few small micro grids in hamlets in mountain areas that are community owned but operated by a user’s association that operates several of them in different regions and collects directly the tariff from each client.

                                                                                 

                                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                C4D Enthusiast

                                                                                What are the revenue requirements for minigrids and microgrids? What avenues exist for generating revenue from minigrids and microgrids?  How are tariffs set?


                                                                                Buenos días to all. To debate revenue requirements for rural micro grids we must understand its cost structure and be able to match cost and income.

                                                                                The cost structure can be grouped in three categories: amortization of capital investment; management, operation and maintenance; and fuel. In general the first two categories are more or less fixed and the third is variable, which means if you do not consume you do not burn fuel.

                                                                                As one transitions from fossil fuel schemes to sustainable renewable generation a first step is to offset part of the load with renewable energy, and let us consider PV to make the point using an example. As the cost of PV modules becomes more competitive the electricity during sunshine hours tends to become cheaper and this matches well with commercial clients’ needs. But in most communities a big part of the load is during evening hours and, in a hybrid solution, this is provided by burning fuel genset and this will result in a cost structure where one has reduced the LCOE but the share of amortization of investment has increased and the fuel associated costs have decreased. As the cost of fuel continues to increase it makes more and more economical sense to introduce energy storage (batteries) to even further decrease the LCOE and turn the functionality of the genset into a mere back up or auxiliary. This logical technological trend has a major impact on the cost structure because now we only have two categories that now they require a fixed continuous revenue.

                                                                                No longer one is selling kWh’s, no longer we can take the risk of having over capacity because if we sell less we do not spend less (no longer fuel savings because there is very little fuel consumption). We are selling service. The approach to set the tariffs has been to establish a clear commitment from consumers paying flat rates based on a concept of Energy Daily Allowance. A catalogue of tariffs to choose from has to be offered that matches the needs of A-B-C clients and, ideally, the aggregate of all the Allowances sold should be close to the microgrid's average energy generating capacity.

                                                                                Flat rates means revenue with little uncertainty that should be able to pay the costs. But if the resulting required tariff is higher than the capacity to pay of that village it may be necessary to seek a partial rebate or subsidy of the investment costs but the revenue should in all cases be able to support at least the M, O &M costs and part of the amortization of equipment.

                                                                                 

                                                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                    C4D Connoisseur

                                                                                    Thank you for this insightful note. I appreciate the argument that more and more cost is associated with amortized capital cost and less with fuel costs, and that this leads to flat rate pricing, Energy Allowance, just as we have "bundles of usage" as service plans on telecom networks, and not by minute or per call or distance-based pricing as it used to be.

                                                                                     

                                                                                    Whereas I have looked at LCOE for solar, wind and other component generation technologies as compared to today's grid pricing, I have not come across studies that combine multiple generation sources - solar, diesel, wind, battery-storage - optimized to give a microgrid-wide, a system-wide LCOE. When will this cost be lower than today's grid pricing?

                                                                                     

                                                                                    I look forward to the day when diesel is mostly backup or auxiliary or insurance, and one time capital costs amortized, over say 20 years, offers superior economics to whatever the pricing by the classical utility.

                                                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                        C4D Enthusiast

                                                                                        A LCOE of a combined multisource plant for a micro grid can be calculated but in general it will be very site specific rather than universal. This is because, even if the costs of the equipment are well established, the generation potential will depend on the particular resources (solar radiation, wind regime, etc) of the site or the region. Also the revenue will depend on the final energy sold (of course selling “bundles of usage” reduces significantly this uncertainty).

                                                                                        The LCOE for a hybrid RE solution concept that can be fully autonomous (needs batteries) is higher than the grid’s pricing in most industrialized countries, but in many parts of the world the grid is nonexistent or unreliable and in this case, these solutions are already offer the lowest LCOE for a reliable service.

                                                                                         

                                                                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                          jeyeddu C4D Enthusiast

                                                                                          I write in support of the response made by Xavier (on May 28, 1.50pm) to your submission. Yes, LCOE of a combined multisource plant for micro/minigrid would be very site-specific, i.e.  depending upon the remoteness of the location and would vary from country to country as well. This would therefore call for case by case bases.

                                                                                          Distributed generation (DG) based minigrids are largely uneconomic in advanced countries compared to the central grid, as indicated by Xavier. Further, for most developed countries, DG powered minigrids are usually unmanned and automated/remotely controlled. I have seen a number of small-to-minihydro plants in Sweden, Italy, United States, etc being unmanned and remotely controlled. Such do not exist in poor developing countries, particularly in Sub-Saharan Africa. Even if they do, it may work against direct job creation. Deciding on a location for a power generation plant would depend upon cost and accessibility of fuel, water for cooling and at times for transportation, and adequate land availability. For most developing and poor countries without developed natural fuel resource, major generation plants are powered by diesel. Besides, universal electricity covered is usually less than 20%. The alternative is for a home to run its own gasoline/ diesel genset which is more expensive. Or, rely on poor quality and limited lighting sources such as candles, kerosene or dry-cell lamps. A proverb in my country goes like this “in a community of blind men, one-eyed man is better”. Please, this is no intention to offend any under-privileged in society.

                                                                                          Diesel would yield power at an average cost of 22-30 U.S cents per kWh depending upon the country. In such instances, a range of renewable energy technologies including small-to-mini-hydropower,  wind power,  biomass-waste power, solar grid-integration become cost competitive.

                                                                                          For such case studies on combined or hybrid multiple generation sources, yes they exist. I came across them at U.S National Renewable Laboratory (NREL) in the 1990s during my internship there; NREL had a lot of studies done in the 1990s for a number of countries in Latin America.  A popular software or modeling tool used for such hybrid multisource system was HOMER. One may visit NREL’s website www.nrel.gov for more information on such reports as well as information on HOMER.

                                                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                        C4D Enthusiast

                                                                                        Do minigrids need financial assistance to be economically viable?  How can financial assistance be designed to support minigrid business?

                                                                                         

                                                                                        Let me just give some first thoughts on the issue to get the subject started. They most likely need loans because microgrids with RE generation are based on amortization of assets (up front investment) and low operating costs. If the clients are A and B consumers this may be enough if one can assure long term performance and revenue. But if C clients are to be included there are be limitations to their capacity to pay and a rebate on part of the investment is needed. The advantage is that, since operating costs are low, even tariffs collected from C clients should be able to assure sustainability of the service.

                                                                                         

                                                                                        On the contrary we are seeing at present many diesel genset based micro grids (low initial investment costs) that are not able to collect enough revenue to pay the fuel costs to operate and need a permanent subsidy on fuel.

                                                                                         

                                                                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                          C4D Explorer

                                                                                          Hello all,

                                                                                          I'm happy to join Part 2 of the discussion as an 'Expert Contributor', focusing on business models for mini-grids and what conditions are necessary for financial, technical and social viability. As a Laos-based company focused on rural electrification, often in Least Developed Countries, our team at Sunlabob Renewable Energy has found that a profitable business model for mini-grids is a challenge for a variety of reasons, with one main reason being that our end-users are some of the poorest households in the world. When adding in elements encountered in many developing countries such as a lack of national feed-in-tariff or subsidy scheme, economic viability for mini-grids is an uphill battle.

                                                                                           

                                                                                          Mr. Mohn does a great job of detailing different ownership and operational models, many of which we've explored as a company. We've seen successful elements from PPP approaches, community ownership models, etc. but we always feel improvements and adjustments can and should be made. At this stage of the discussion, I'd like to point out a few critical aspects that can enable - but certainly not guarantee - a sound business model for mini-grids in rural communities of developing parts of the world:

                                                                                          • If a national feed-in-tariff scheme doesn't exist, work with government and utility players to establish an agreement for your project. We negotiated Laos' first F-I-T for a private renewable energy generation for a solar-hydro hybrid village grid we established in 2007, which was a key aspect to the project moving forward.
                                                                                          • Particularly when selling energy services to Base of the Pyramid end-users, a pricing gap subsidy from an institutional player like the IFC can be a necessary piece of the "viability" puzzle. For example, if your calculations determine that $0.24/kWh is your price point needed to be economically viable, it is oftentimes unlikely that payments from BoP end-users, and even the addition of an F-i-T, can meet that price point. We believe gap-filling subsidies from multilateral agencies can close the gap.
                                                                                          • Keep the social aspects in mind when planning and projecting energy usage and payments. For example, in one of Sunlabob's village grid projects in Laos, we were forced to adjust monthly tariff rates so that our off-grid customers would be paying comparable rates to grid-connected customers in the country (a challenge in a place like Laos where grid power is almost all hydropower and incredibly inexpensive). After all, a rural mini-grid customer doesn't want to hear that he's paying 5x more for electricity than his cousin living in a grid-connected area of the country.

                                                                                           

                                                                                          I recognize that each country is a different, unique scenario when building a mini-grid business model, so I very much am looking forward to hearing more of the insights in this discussion and hopefully arriving to some productive, useful outcomes.

                                                                                           

                                                                                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                            C4D Explorer

                                                                                            Its great to read the comments from the various contributors.  My own practical experience has been on microgrid development here in the US, so the insight into some of the particulars of microgrid deployment in the developing world context is a nice shift from my normal focus.

                                                                                             

                                                                                            I'd like to weigh in on the four main topics for this section of the discussion (Who the stakeholders are, What are some of the revenue requirements, Is Financial Assistance required, and what about Prosumers) but first wanted to bring up one technical consideration that seems to keep coming up.   The following is my basic understanding of one of the technical constraints of island mode operations - Prof.  Lasseter is certainly much, much more qualified to speak on the topic so I defer to his input.

                                                                                             

                                                                                            It may have been discussed in the previous Technology section (I'm a little late to join the group and haven't read through all of the previous contributions), but one of the reasons that microgrids (or any multi-generator DG system that is configured to be able to run in island -ie. non-grid-tie- mode) require diesel generators is because of their ability to follow loads (cheaply).  With a synchronous standard or induction style connection to the macrogrid, operating local generation is not that difficult - the grid is essentially an infinite voltage source and all the local assets just energize the utility wires which, in turn, energize the customer's downstream bus.  So operating in grid-tie mode is pretty straightforward.   As a side note, there are certainly issues with getting interconnected to the utility in the first place -penetration limits for feeders that reflect fault current clearing capacities back at the the substation and voltage sources coming online downstream of the substation...etc.   Utility interconnection can be a very burdensome phase of a microgrid/DG project - time consuming and very expensive for the project developer.

                                                                                             

                                                                                            When the microgrid does need to operate without utility power, then, when there are multiple generators, they even with carefully coordinated ISOCH and droop controls, they can each vie for control of the load and create instabilities that can easily trip off sensitive equipment (like a PV inverter). This can lead to more instability and bring everything grinding down to a halt.  One of the reasons that DG projects that run alone with variable loads rely on diesels is that they happen to be pretty tough and can follow step loads better than most other sources.  Even a recip engine operating on natural gas will have slower response capabilities than a diesel genset. 

                                                                                             

                                                                                            None of this is to say that diesels are a good choice for local energy generation -  they're dirty and relatively inefficient (typically low 30% electrical efficiencies), but they're often chosen because of technical constraints that other technologies can't overcome.

                                                                                             

                                                                                            For a nice steady DC load like you see at a cell tower, fuel cells are certainly viable alternatives - they don't need to responsd quickly to load changes and they can achieve pretty high electrical efficiencies (especially if configured to use waste heat for increased CH4 reformer efficiency).

                                                                                             

                                                                                            I'll come back to the financials/economics discussion in a bit, but wanted to offer my input on one technical consideration.

                                                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                C4D Enthusiast

                                                                                                One of the objectives of the CERTS Microgrid concept was to reduce microgrid system cost and increase reliability. This includes plug-and-play functionality without communications. Plug-and-play concepts reduce engineering cost and errors since little site modification is required for different applications. Each CERTS device regulates voltage and frequency both grid connected and while islanded. These key concepts have been demonstrated at the American Electrical Power Microgrid Test Facility. This includes such transient events such as seamless separation and automatic re-synchronizing with the grid, Class I level power quality during utility faults, large unbalanced loading and stable operation during major events [1]. The CERTS concept has three critical components: the static disconnect switch, the micro-sources, and loads. The static disconnect switch has the ability to island the microgrid autonomously for disturbances such as faults, IEEE 1547 events or power quality events. Following islanding, the reconnection of the microgrid is achieved autonomously after the tripping event is no longer present. Resynchronizing to the utility uses the frequency difference created by the islanding event [2].

                                                                                                 

                                                                                                Each CERTS-controlled source seamlessly balances the power on the islanded microgrid using a power vs. frequency droop controller. In this application small diesel generators and perhaps some battery storage system need the CERTS frequency and voltage control while the pv is current sourced. The photovoltaic inverters run in a power mode and do not track load, control voltage or frequency. For example, if the load increases while in island operation, the diesel/storage system will provide the extra power instantaneously and reduce the operational frequency. At maximum output the frequency controls are designed to drop no more than 1%. If there is inadequate energy to meet the load, the frequency will drop below the normal operating range, signaling the non-critical loads to shed. The coordination between sources and loads is through frequency.

                                                                                                 

                                                                                                CERTS storage inverters and  diesel generators not only control the voltage but they also ensure that there are no large circulating reactive currents between units. With small errors in voltage set points, the circulating current can exceed the ratings of the units. This situation requires a voltage vs. reactive power droop controller so that, as the reactive power, Q, generated by the unit become more capacitive, the local voltage set point is reduced. Conversely, as Q becomes more inductive, the voltage set point is increased. At Santa Rita Jail this droop is 5%. In addition to the system voltage stability demonstrated at the AEP test site extensive analyses indicates that microgrid’s stability is independent of the number of CERTS devices in a microgrid [3]. Theoretical the system remains stable as we approach an infinite number of CERTS units.

                                                                                                The CERTS Microgrid controls do not rely on a “master” controller or source. Each source is connected in a peer-to-peer fashion with a localized control scheme implemented for each component. This arrangement increases the reliability of the system in comparison to having a master-slave or centralized control scheme. In the case of master-slave controller architecture, the failure of the master controller could compromise the operation of the whole system. Santa Rita Jail uses a central communication system to dispatch storage set points, voltage and power as needed to control the state of charge. However, this communication network is not used for the dynamic operation of the Microgrid. This plug- and-play approach allows for expansion of the Microgrid to meet the requirements of the site without extensive re-engineering. Plug-and-play implies that a unit can be placed at any point on the electrical system without re-engineering the controls, thereby reducing the chance for engineering errors.

                                                                                                • [1] R. H. Lasseter, J. H. Eto, B. Schenkman, J. Stevens, H. Volkmmer, D. Klapp, E. Linton, H. Hurtado, and J. Roy, CERTS Microgrid Laboratory Test Bed,”

                                                                                                http://certs.lbl.gov/pdf/lbnl-3553e.pdf

                                                                                                • [2] Lasseter, R., and P. Piagi. Microgrid: A Conceptual Solution” PESC’04

                                                                                                Aachen, Germany 20-25 June 2004. Available: http://certs.lbl.gov/CERTS_P_DER.html

                                                                                                • [3] M. Illindala, G. Venkataramanan, “Small Signal Dynamics of Inverter Interfaced Distributed Generaton in a Chain-Microgrid,” IEEE PES General Meeting, 24-28 June 2007

                                                                                                 

                                                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                              C4D Explorer

                                                                                              Hello,

                                                                                              I'm happy to join Part 2 of the discussion, focusing on business models for mini-grids and what conditions are necessary for financial, technical and social viability. I am based in India and also going to start work in a mini grid project for rural electrification with solar energy as well as for the Hybrid electrification of the Telecom Towers which are currently working in DG.

                                                                                              For the rural electrification with Solar Energy, Mini grid of 10kW to 100kW is required according to the number of the houses.

                                                                                              The Telecom Regulatory Authority estimates the diesel challenge as follows: “India has presently around 400,000 telecom towers, with average power consumption per tower being 3 to 4 kW. Assuming 8 hours of operation by DG sets, an average fuel consumption of 8760 liters of diesel every year per tower, total carbon emission on account of diesel use by telecom towers is estimated to be around 10mt of CO2, while the emissions on account of power drawn from the grid by towers is estimated to be around 6mt of CO2.”

                                                                                              This much combustion of diesel is not good financial and environmentally. After the Vehicles telecom Towers are polluting the environment by diesel combustion. 

                                                                                              Generally a tower required 10 to 20 kW power . If we start the hybrid electrification with renewable energy i.e. Solar and Wind Power, it will reduce somewhat global warming and also can save Petroleum Fuel.

                                                                                              Hope any one of you have worked on the same type of Project. Please discuss here and let me know more about this.

                                                                                              Thank You.

                                                                                                • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                  C4D Enthusiast

                                                                                                  In the US bring electric power to remote areas was achieved through  municipally-owned electric systems and electric co-ops. It may be fruitful to consider if this model in some form could work in this situation. The key components  are that the co-ops are private, independent, non-profit electric utilities owned by the customers they serve.

                                                                                                   

                                                                                                  History

                                                                                                  Public power was introduced to the Northwest through municipal utility systems.  Around the turn of the century, cities took on the job of pumping drinking water from nearby streams and rivers, a task which required electricity.  McMinnville Water and Light, established in 1889, was the region's first municipal electric utility, and it also provided power for street lamps and home lighting.


                                                                                                  As late as the mid-1930s, nine out of 10 rural homes were without electric service. The farmer milked his cows by hand in the dim light of a kerosene lantern. His wife was a slave to the wood range and washboard. The unavailability of electricity in rural areas kept their economies entirely and exclusively dependent on agriculture. Factories and businesses, of course, preferred to locate in cities where electric power was easily acquired. For many years, power companies ignored the rural areas of the nation. Most rural electrification is the product of locally owned rural electric cooperatives that got their start by borrowing funds from REA to build lines and provide service on a not-for-profit basis. Below are the “seven principles” for co-ops from their web page.

                                                                                                  Adherence to the seven cooperative principles is what makes cooperatives different.

                                                                                                  1. Voluntary and Open Membership - Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.
                                                                                                  2. Democratic Member Control - Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions. The elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote) and cooperatives at other levels are organized in a democratic manner.
                                                                                                  3. Members' Economic Participation - Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefitting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.
                                                                                                  4. Autonomy and Independence - Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.
                                                                                                  5. Education, Training, and Information - Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public, particularly young people and opinion leaders, about the nature and benefits of cooperation.
                                                                                                  6. Cooperation Among Cooperatives - Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.
                                                                                                  7. Concern for Community - While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.
                                                                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                    C4D Enthusiast

                                                                                                    There are some basic questions that need to be addressed.

                                                                                                    1. Is the cooperative model experienced in the 30s in USA applicable?
                                                                                                    2. Is it possible to have an arrangement where these co-ops are private, independent, non-profit electric utilities owned by the customers they serve?
                                                                                                    3. In a co-op model are the anchor telecom towers one of the customers/owners or does the co-op buy power to them?
                                                                                                    4. The rural electric cooperatives got their start by borrowing funds from REA to build lines and provide service on a not-for-profit basis. Is there a REA equivalent today?

                                                                                                     

                                                                                                      • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                        C4D Explorer

                                                                                                        Let me try to answer some of these questions.

                                                                                                         

                                                                                                        1. Is the cooperative model experienced in the 30s in USA applicable? The answer is generally NO, it is not applicable for remote area microgrids (the ABC model being talked about here). The reason is the following. In the US in the 30's there was central generation available, or could be made available if there was demand. What was missing was distribution lines to bring power to the end-users. The investor-owned utilities were not entering this market because the demand was not high enough for them to justify their investment. With low-interest loans from the US federal government, coops were formed and they pulled their resources together to build these low voltage (usually 12 to 34 kV) distribution lines to bring power to farmers, villagers and other rural customers. These distribution lines were fed by large scale central station generation which is still the case today.  In most developing countries today, there is central station generation shortage so there is no easy source of electricity that could be distributed just by building distribution lines. A good case in point in Bangladesh which attempted to supply power to the rural customers through the Rural Electrification Board (REB). REB was USAID funded and received technical support from the US National Rural Electric Coop Association (NRECA). After about two decades of positive growth, more than 80% of the REB coops are losing money today and can provide electricity only a few hours a day. The primary reason is generation shortage which was not the case in the US in the 30's.
                                                                                                        2. Is it possible to have an arrangement where these co-ops are private, independent, non-profit electric utilities owned by the customers they serve? It is possible, but if you do not have ample central station generation to feed them, they will not work.
                                                                                                        3. In a co-op model are the anchor telecom towers one of the customers/owners or does the co-op buy power to them? The telecom customer needs to be one of the major customers of he coop. Since they value electricity highly for their operation, it is expected that they are able to pay a premium price and pay regularly which will help with the coop cash flow and help to make the business viable.
                                                                                                        4. The rural electric cooperatives got their start by borrowing funds from REA to build lines and provide service on a not-for-profit basis. Is there a REA equivalent today? There may not be REA equivalent today in a direct sense. But different governments have different programs to sustain such a model. Again in Bangladesh there is a government owned company called the Infrastructure Development Company Limited (IDCOL) which makes low interest loan available for solar application in remote areas.

                                                                                                         

                                                                                                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                            jeyeddu C4D Enthusiast

                                                                                                            In my opinion, both you (Rahman) and Robert are right. To me it is just finding ways to merge experiences drawn from the US model (extending or building the lines) and the Bangladesh model  (expanding the generation capacity). The fact that the RED coops in Bangladesh were able to achieve positive growth for two decades was a significant achievement. For most bankable projects, economic life time is 20 years. What was lacking perhaps was for the authorities to regularly review the progress of the programme and to plan for removing the generation shortage barrier. The primary reason was thus not insurmountable. The challenge at first might have been as to who should take care of the expansion of the generation capacity? Was it to be borne by the rural communities or the government, or a shared responsibility?

                                                                                                            I recall from my own experience when I was executing a model solar community project in northern Ghana in the 1990s. It was not a minigrid for a start, anyway.

                                                                                                            I started with a 2.2kWp solar PV battery charging station for a population of about 2,000 people. The construction was financed by the government. The community provided the land for the installation of the battery-charging centre as well as labour for the construction. The station could charge 10 batteries at a time. The village established a solar cooperative committee to run the project; it was meeting regularly to assess progress of work.

                                                                                                            A local institution fabricated a battery-powered lamp for use by the rural inhabitants. They would bring their batteries to the station for recharging for a fee and take them back for their lamps. The battery-lamp units were given to them on credit.  I applied the popular Grameen model to give out the battery-lamp units on commercial basis to the interested indigenes and payment spread was over three years (based upon the minimum battery economic life-span). The tariff paid for re-charging the batteries was the same as found in neighboring grid connected areas but divided into three; one for the maintenance of the station, second for payment of the station technicians and the third was set aside as an insurance for the station. Maintenance of the individual battery-lighting units was at the cost of the users. Also, replacement of bulbs and wiring units of the beneficiary homes were borne by the users. User loses participation in the program if the battery of the lighting unit was found abused like using it for something else if the user has not finished paying for the system. Within one year, almost 90% of the 200 homes in the village had the lamps. This created congestion at the station. So those who could further afford, opted for solar home systems, under same Grameen payment arrangement. The solar PV module however was on long term lease; 10 years at half the market price.

                                                                                                            The project attracted international attention, such that the Danish Aid Agency, DANIDA joined by coming to construct a solar PV water pump in the village. DANIDA covered the cost of the whole solar water pump installation. The distribution/fetching of the water was also on commercial basis; one pays a token for fetching a bucket/gallon of water. This was a common practice for villages with borehole in the country and so it was no strange news.  The monies were for the maintenance of the tap system.

                                                                                                            Later, I also provided solar system for the basic primary school, solar street/park lights for the central market and some strategic locations in the village. The village luckily was close to a hippo sanctuary, and so the Tourism ministry took an advantage to open a guesthouse there. A dozen of government agencies like the Ministry of Agriculture and some NGOs also opened their offices there. All these public institutions signed up for the solar PV systems (a bit larger than the home systems) for a fee except for the local health centre where I provided the system for free; a solar vaccine unit, and lamps for the consulting and labour rooms, as well as OPD (out-patients department) hall. The religious meeting places also signed up for the solar lamps for a fee. The village became a tourist attraction, boosted particularly by the hippo sanctuary.

                                                                                                            With time, this attracted the district assembly’s (local authority) attention and they introduced a minigrid powered by diesel genset to cope with the human traffic. The once small solar village had become a town. The minigrid largely served the centre of the town which has become a commercial centre.  The project commenced in 1997 and by 2005 it has become a district capital and by law it was due for connection to the central grid. So by 2007, it had been connected to the central grid which is powered largely by our large hydro-power-Akosombo Dam. This unfortunately led to the abandonment of the solar battery station, i.e. 10 years after its first operation. People saw no more need to be carrying batteries to the centre. Those with the solar PV modules kept them as back-up to the central grid mains. This should not be viewed in a negative sense, mind you, in Ghana, as I indicated in my first contribution, connection to the central grid is the overall goal of the government and the dream of most rural communities. I however recommended the relocation of the battery charging station to other off-grid communities after refurbishing and saving the reusable components. Unfortunately, it was never done and later I had then moved to a new agency of the government.

                                                                                                            So I see implementation of such rural based micro/minigrids as shared responsibility between the central government/local authorities and the people; who pays for what?

                                                                                                            The Ministry of Health in Ghana has an arrangement where all medical doctors whether in public Mission hospitals besides those in Government hospitals are paid by the Government. The maintenance of the facilities however is by the missions for the mission health facilities. Applying this same to the micro/minigrid arrangement, the local authority representing the host Government should be responsible for the expansion of the generation capacity. For running of such a facility, the social enterprises (the NGOs) rather than purely private entrepreneurs are more likely to do a better job since their basic roles are not for profit making.

                                                                                                            Another option is for the micro/minigrid to be public-owned but operated on contract by a private entity. Subsidy to the project could be considered as the state’s contribution to rural and poor communities.

                                                                                                            The third option is to have existed privately financed by the community by operated on their behalf by a state utility. In Ghana, such a facility seizes to be owned by the private sponsors when taken over by the state utility. We are still “fighting” against this old “colonial arrangement but it has not worked.

                                                                                                            Sources of funding for such projects particularly if based on renewable energy powered distributed generation could be the World Bank carbon climate finance facilities. Some are grants and most are low-interest loans.  This is however for the short-term. In the medium to long term, the micro/minigrids should be possible to be used for job creation activities to empower the inhabitants to enable them pay for the electricity services.

                                                                                                            The expansion of the micro/minigrid by extension and generation capacity add-on would at a certain point become a small centralized or decentralized grid. It would call for technology (power conditioning) upgrade. It comes back to my first submission, at what or which point do we call it a small (central/decentralized) grid? This would also call for regulation to ensure stability and quality of supply as well as safety or protection for users. Defining the stages properly and clearly would facilitate ease of regulation of each class.

                                                                                                            In Ghana, my agency is in charge of technical regulation of electricity supply of the central grid but we have not looked at micro/mini- or small grid yet. We also look at certifying qualified wiring technicians for all wiring to ensure universal safety. Is there any other experiences from elsewhere?

                                                                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                              C4D Connoisseur

                                                                                                              I am surprised Professor Rahman thinks the barrier to the success of cooperatives would be the existence of central station generation. Especially given the deliberations on microgrids in this forum, where we are (at least I am) considering moving away from central station generation (coal based and polluting) altogether as a preferred topology for next generation solutions.

                                                                                                               

                                                                                                              I rather think the barrier is organizational - the ability to conceive, organize, execute the projects, and manage the operations over multiple years. I think that a combination of solar, micro-wind, locally generated bio-gas, some diesel gen sets, ... can be optimally combined to lead to autonomous, self-sufficient electricity generation for rural communities, at economics comparable to what obtains from the macrogrid. Who should do this? Cooperatives, certainly, such as Amul milk cooperatives in India, and private entrepreneurial players.

                                                                                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                          1203634 C4D Enthusiast


                                                                                                          Part III: Policy and Regulatory Environments: How do they affect your projects?

                                                                                                          (June 5 - June 15)

                                                                                                           

                                                                                                          Part I of the discussions focused on the technical aspects of the minigrids. In Part II, the experts deliberated on minigrid business models. Thanks to all the discussants for their insights.

                                                                                                          Part III: Policy and Regulatory Environments will focus on innovative business solutions that minigrids can provide to all three customer classes - anchors, businesses, and communities.

                                                                                                           

                                                                                                          Focus Areas

                                                                                                          • What are some examples of policies and regulations pertaining to minigrids and microgrids? How have these policies and regulations affected stakeholders and services?
                                                                                                          • How can policies and regulations affect reliability, quality of service, and prices in minigrids and microgrids? Who should regulate quality of service from minigrids and microgrids? Should price be regulated? If so, how should costs be allocated to different customer classes (anchors, businesses, communities)?
                                                                                                          • What are interconnection rules and grid codes? What are some of the safety concerns? How do these affect implementation and operation of minigrids and microgrids?
                                                                                                          • What regulatory environment and contractual instruments facilitate deployment of minigrids and microgrids? What policy and regulatory barriers impede their deployment?
                                                                                                          • What institutional arrangements have complemented minigrid projects? Who should regulate minigrids deployment process including permits and social and environmental assessments?
                                                                                                          • How can minigrid projects contribute to gender and social inclusion in beneficiary communities?

                                                                                                           

                                                                                                          We are pleased to introduce the expert contributors for Part III: Policy and Regulatory Environments. In this session, expert contributors will share their views on the institutional, policy, and regulatory aspects of minigrids and provide their insights on issues raised by all other participants.

                                                                                                           

                                                                                                          Dr. Marcelino Madrigal, Senior Energy Specialist, Sustainable Energy Group – Energy Unit, The World Bank

                                                                                                          Dr. Madrigal is a Sr. Energy Specialist at the central Energy Unit of the Sustainable Development Vice-presidency at the World Bank.  He specialized in the technical and economic operations and planning of power systems and electricity markets.  Prior to joining the Bank, in 2008, he worked for the Inter-American Development Bank in the areas of electricity transmission, distribution, and regional energy (electricity and gas) integration and market design projects. Before that, he was with the Energy Regulatory Commission in Mexico as deputy general manager for research and regulatory development, and at the Energy Ministry as chief of staff for Electricity were he led different activities regarding electricity tariff regulation, renewable energy regulation, investment decision making, and electricity reform. He has extensively published in topics related to operations and planning of power systems and markets, and has delivered training in related fields to a number of electric utilities, regulators, and system operations in different countries. He holds a B.Sc, M.Sc., and Ph.D degrees in electrical engineering all with emphasis in the technical and economic operations, planning, and design of power systems and markets. He has received several awards, among them, the Outstanding Young Power Engineering Award by the IEEE Power and Energy Society in 2006.


                                                                                                          Dr. Shalom Flank, Chief Technology Officer, Pareto Energy

                                                                                                          Shalom Flank, PhD, is Pareto’s Chief Technology Officer and Microgrid Architect. Dr. Flank manages all technical and engineering aspects of Pareto‘s projects, from initial assessments and conceptual design, through full engineering and implementation. He also oversees the development of Pareto‘s proprietary microgrid technologies. Dr. Flank was trained at MIT, where he studied energy engineering, economics, and policy. His research there emphasized the development and deployment of new technologies, and the way diverse audiences understand the risks and rewards of different sources of energy. He has given presentations at national conferences and the MIT Energy Lab on these issues, including public education.
                                                                                                          Dr. Flank has been a frequent adviser to commercial companies and public agencies on energy technologies, whether working as an Associate with the Distributed Energy Financial Group or helping the National Science Foundation assess the commercial viability of new photovoltaic and fuel cell technologies. As a business consultant, Dr. Flank has worked with cutting-edge companies commercializing clean energy and energy efficiency technologies, such as utility-scale concentrating solar power (CSP) and new LED lighting technologies. He served for a number of years as a program manager at the Defense Advanced Projects Agency (DARPA) and as a staff member at Lawrence Livermore National Laboratory and the U.S. House of Representatives, and has held appointments at Harvard and MIT.

                                                                                                           

                                                                                                          Joseph K. Essandoh-Yeddu, Head, Planning and Policy, Ghana Energy Commission
                                                                                                          Joseph Essandoh-Yeddu has a B.Sc in Physics and holds an MSc Engineering degree in Environment and Energy Planning from Chalmers University of Technology, Gothenburg University in Sweden in 2001. He had his PhD research at the Bureau of Economic Geology of the University of Texas at Austin, Texas, USA from 2006-2009. Whilst in Texas, he worked with at the Bureau as an energy economist. Joseph has been with the energy sector of Ghana since 1989. First as a programme officer for solar energy, then renewables until 1999 when he left for his advance studies. Upon his return in 2001, he moved to energy planning where he was the Ghanaian  leader of the national team that produced Ghana’s first Strategic National Energy Plan (SNEP) 2006 – 2020. The SNEP is currently being updated to cover 2010-2030. He has been a member of Ghana’s negotiating team on UN Climate Change convention and Kyoto Protocol since 2005. He has head the Strategic Planning and Policy of the Energy Commission since 2003. Energy Commission is the advisory agency of the and is also a regulatory body that issues licenses for investments in the power and natural gas projects in Ghana. Joseph also consults for UNEP on sustainable energy and climate change issues for some African countries and does part-time lecturing locally, on energy and environment courses.


                                                                                                          Terry Mohn, CEO, General Microgrids and Chair, Minigrids/Microgrids Working Group, The Energy Access Practitioner Network, UN Foundation

                                                                                                          Terry Mohn is CEO of General MicroGrids, an international microgrid consultancy and developer. He also is Managing Partner of CleanSource Energy Partners, LLC, an international renewable energy project developer. He is also Program Director of the Global Microgrid Center, a non-profit microgrid test and certification center. He is Chairman of the United Nations Foundation Microgrid Working Group and presently serves a three year appointment as the U.S. Department of Commerce's federal advisor to National Institute of Standards and Technology in its Smart Grid Federal Advisory Committee. Terry has 30 years' experience in large-scale system architecture, business strategy, and technology investment strategy. Terry is an advisor to the US Department of Energy for smart grid and advisor to the California Energy Commission for demand response and emerging technologies."


                                                                                                          Dr Katharina Gassner, Senior Economist - Infrastructure Investment Climate Department, World Bank Group

                                                                                                          Katharina Gassner has been working as Senior Economist for Infrastructure in the Investment Climate Department since 2011. Prior to this position, she was in the Sustainable Development Anchor of the World Bank for eight years, specializing in questions of utility regulation and private sector participation in infrastructure sectors. In her current job, Katharina focuses on opportunities for improving power supply for businesses and households by making use of the private sector, for example by facilitating captive power arrangements or mini-grids in areas beyond the reach of the national utility. She has been involved in technical assistance projects in Sub-Saharan Africa, Central Asia, the Middle East, South Asia, East Asia and the Pacific Islands.

                                                                                                          Katharina has over 15 years of research experience in the area of infrastructure economics and regulation, covering policy and reform issues, applied regulatory work, and econometric studies. She has been teaching on the topic of infrastructure economics for over 10 years and is affiliate professor at the University of Georgetown Public Policy Institute (GPPI). She has been a frequent contributor to the PURC International Training Program in Infrastructure Regulation at the University of Florida since 2006, and was the World Bank representative for the East Asia and Pacific Forum for Infrastructure Regulators (EAPIRF) as well as for the African Forum of Utility Regulators (AFUR) from 2007 to 2010. She is published author of several articles and books, including a world-wide study measuring the impact of the private sector in the delivery of water and electricity services in 71 developing countries. Katharina also led the work on the Body of Knowledge in Infrastructure Regulation (www.regulationbodyofknowledge.org), an on-line repository of best practice knowledge material on infrastructure regulation.

                                                                                                          Katharina Gassner holds a BSc and MSc in Economics from the University of Lausanne in Switzerland, a MSc in Politics of the World Economy from the London School of Economics, and a PhD in Regulatory Economics from the same institution. She is fluent in English, German and French.

                                                                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                              C4D Explorer

                                                                                                               

                                                                                                              Hi all, it is a pleasure to be in this discussion. My comments below have the intention to incentivize a debate over the challenges that technically operating mini-grids can represent in the context of low-income countries and to elucidate on the technical solutions and their appropriateness for situations where technical capacity may be scarce. I invite the participants of previous sessions to provide inputs.


                                                                                                              As we all know smaller mini-grids (e.g. even up-to few tens of MWs) can be easily operated from the technical-standpoint with “plug-and-play-solutions” as in the CERTS concepts of previous discussion. For example the main generation asset (e.g. a diesel generator) will be equipped with voltage and frequency controls than can keep the balance, together with the inverters of the solar and wind units especially if their share is not too large. So the mini-grid will run smoothly as long as somebody continues to refill the fuel tank and performs some basic maintenance activities such as battery replacement (It has to be noticed that in some contexts, even doing that represents a challenge which requires properly setting an institutional arrangement that will guarantee proper maintenance and operation of the grid).


                                                                                                              Implementing a mini-grid in a low-income country will most-likely have the objective to serve demand that has been un-served and that will grow rapidly over the years, which is a considerably different situation from mini-grid that will serve a load that have already stabilized (little or no demand growth). Rapid demand growth of 7, 10, or 15% annual being completely normal in many places means the capacity of the mini-grid may need to double before the larger grid arrives. If such demand growth represents a tremendous challenge even for a “large grid” (where more sophisticated controls and the scares technical capacity are available), is the challenge even more for a small mini-grid?


                                                                                                              At what point in time plug-and-play devices will not be enough to maintain the mini grid operation and cost effectiveness. For instance, if the plug-and-play controls need to be expanded to include functions which are similar to these of larger grids (e.g. economic dispatch, secondary or tertiary coordinated frequency control) what are the provision that should be made during design?  Over sizing the solution may not be cost-effective and prohibitive in the absence of subsidies.  Updating the controls in the grid may not be feasible when it is not clearly specified in the obligations of the service providers, if technical capacity is not brought or made available, and/or if the cost of the upgrades are not clearly considered in the business/regulatory model. 


                                                                                                              The need to up-grade the controls in mini-grids to ensure they continue operation is occurring more frequency given the increased competitiveness of wind and solar power in some remote areas. Making a large addition of wind power to a small mini-grid system very early in the life of the mini-grid (and early in the share of renewables in the grid) may require intelligent dispatch function to ensure wind is accommodated during night by dispatching down diesel gen-set and also to ensure diesel gen-sets remain on-line if needed to ramp-up once wind dries out.


                                                                                                              What is the experience of all in this regard? Could you provide with examples where the mini-grid grew twofold in size and it was able to continue providing 24 X 7 services for a larger numbers of years (say 15 years), what was the strategy to make the mini-grid smarter as the control needs increased with the grid complexity (size of units and types)? Perhaps Dr. Lasseter and others can comment on this ?

                                                                                                               

                                                                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                C4D Explorer

                                                                                                                I am pleased to be joining this important discussion, even at this late stage.  From my perspective, microgrids provide an important opportunity for countries with less developed electric power grids and utility systems to avoid re-creating the barriers faced by many of today's developed nations.

                                                                                                                 

                                                                                                                When power grids first began to develop at the end of the 19th century, legal and regulatory frameworks did not yet exist, with many competing companies, incompatible technical approaches, and overlapping service territories (see Thomas Hughes, Networks of Power: Electrification in Western Society, 1880-1930, 1983). The resulting system in most countries involves publicly-owned, quasi-governmental (such as co-ops), and/or highly regulated private companies with exclusive franchises in complete control of all electric generation, transmission, and distribution within their territory. More recently, deregulation in the U.S. and elsewhere has decoupled generation and some transmission, but the local wires (from the substation down) remain firmly within the early-20th century model.

                                                                                                                 

                                                                                                                The result is a set of unnecessary barriers to local power. Exclusive franchises block new entrants from distributing their own power to other customers. Interconnection regulations highlight the incompatibility of the centralized, top-down grid with a distributed, renewable future. Standby tariffs, stranded asset charges, and other punitive economic measures maintain the existing utilities' monopolies. Legal frameworks can designate microgrids as fully regulated utilities, creating unnecessary complexity and overhead.

                                                                                                                 

                                                                                                                 

                                                                                                                Especially in urban areas with under-developed, incomplete, and/or unreliable electric service, a new regulatory framework can be optimized for a peer-to-peer network of local microgrids that could be implemented incrementally and organically, with opportunistic connections to a centrally managed bulk-power transmission backbone. The “non-synchronous” microgrid approach that we use at Pareto Energy (somewhat similar to the CERTS approach described earlier by Prof. Lasseter) helps to decouple each microgrid, while still enabling them to import and export power to and from each other, as well as a bulk-power grid.  Individual end-users can even receive non-synchronized service from multiple entities or microgrids, as well as adding their own on-site generation.

                                                                                                                 

                                                                                                                 

                                                                                                                The transactional model for this approach would not be the “wheeling rights” system that divorces electrons from economics at the transmission level. Nor would the “packet switching” approach for internet communications match the technical requirements of a power grid. Perhaps the closest analogy would be semi-independent cell-phone towers.  Economic balancing is achieved through "roaming agreements", where each entity has incentives to provide service to their own customers using their own infrastructure, but can still rely on all the other entities in a large urban area to supplement their capabilities, all with (mostly!) seamless service to the end user – a fitting outcome, since cell phones provide the best example of a leap-frog technology that avoids massive investment in outdated fixed-wire infrastructure.

                                                                                                                 

                                                                                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                    C4D Connoisseur

                                                                                                                    The semi-independent cell phone tower analogy is a good one, since electricity is mostly a local service, and only secondarily a wide area networking service. Also, the PBX analogy from telecom might be an analogue, with some differences.

                                                                                                                     

                                                                                                                    The microgrid, though, is important for industrialized economies too, and not only for emerging economies with the absence of electrification. It is the analogue of the CLEC - Competitive Local Exchange Carrier - from telecom. An "electricity CLEC" might parcel out campuses, localities, zones, clusters of buildings, municipalities, ..., and serve them independent of the macrogrid.

                                                                                                                  • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                    C4D Explorer

                                                                                                                    I'm very happy to join this forum as discussant for Part 3 of the minigrid debate, focusing on policy and regulatory aspects.

                                                                                                                    I'd like to start with the question of what is an appropriate regulatory framework to foster mini- and microgrids? The trade-off is between the benefits of regulation and its costs. Among the benefits are consumer protection and quality standards, and increased investor certainty and visibility. We might also add incentives such as feed-in-tariffs and preferential interconnection arrangements for grid-connected mini-grids. Among the costs are the regulatory burden imposed on small-scale entrepreneurs and the risk of choking off private or community led initiatives with red tape and undue regulatory zeal. The concept of 'light-handed' regulatory regimes has emerged in response to the latter point: light-handed regulation refers to a set of rules and regulations that enables the emergence of small power producers (SPPs) and provides more benefits for investors and consumers than it presents administrative and other costs. Even small village entrepreneurs should be able to navigate the requirements.

                                                                                                                     

                                                                                                                    The first point to note is therefore that it makes sense to differentiate regulatory regimes according to the size of the companies to be regulated. In many countries, generators below a certain size (often <1MW) are exempt from the licensing and regulatory requirements larger generators have to meet. (Registration requirements frequently remain even for the smallest entities: this has to do in many cases with approving and monitoring of subsidy schemes.)

                                                                                                                    The Tanzanian SPP program (created with assistance from the World Bank) and administered by the Tanzania electricity and water regulator EWURA is arguably one of the best recent examples of a light-handed regulatory regime. It applies to SPPs selling up to 10MW of power, either directly to consumers in off-grid scenarios, or to Tanesco, the national utility. The Tanzania example is not the only successful case to look at for those interested in mini-grids and small-scale producers more generally: Thailand has a very successful SPP program and Sri Lanka is often quoted as example for independent small-scale private initiatives in the sector. (These examples aren't exhaustive - Bernie Tenenbaum, Chris Graecen and Tilak Siambalapitiya have a entire book forthcoming on the topic.) The Tanzania example illustrates however that even a light-handed regulatory regime requires a lot of thinking and attention to detail. One of the key factors raising the bar is the option of grid-connectivity of mini-grids. The regulator in Tanzania has put out regulatory guidelines and templates that touch on a multitude of aspects of mini-grid businesses, including standardized PPAs, provisions for streamlined interconnection with the national grid, flexibility for developers of isolated mini-grids that sell electricity at retail prices, output based aid for new electrical hookups, and measures to address what happens when the national grid expands to reach the mini-grid. I hope we will talk about all these components of a good regulatory regime in greater detail as this discussion progresses.

                                                                                                                     

                                                                                                                    The second point I'd put forward is therefore that in the past decade or so, we have accumulated a lot more examples and best-practice documents for regulatory frameworks related to minigrids.

                                                                                                                     

                                                                                                                    The last point I'd like to make in these introductory remarks is a question: if it is correct to say that we know quite well what needs to be done to provide a good regulatory environment for minigrids, what are the remaining pain points in the regulatory area? I believe the following are likely candidates:

                                                                                                                    1. Governments and energy ministries give lower policy priority to electrification through individual private or community led initiatives than to grid extension by the utility. This is partly a consequence of ingrained habits, of higher political visibility of large projects and of the perception that grid extension will reach more households more quickly. It should not be an either-or question between individual minigrids and grid extension. But in environments with limited capacity and overstretched ministerial staff, the minigrid agenda receives less attention.

                                                                                                                    2. Limited resources also play a role at the level of regulators: the same argument of regulatory resources being focused on large-scale projects which receive greater political attention also applies. As the Tanzania example illustrates, a good regulatory framework for minigrids takes time and attention to detail.

                                                                                                                    3. The learning curve for the private sector remains steep in many developing countries and there is a relative lack of entrepreneurs able to successfully launch themselves in the sector.

                                                                                                                     

                                                                                                                     

                                                                                                                    I'm looking forward to the discussion on this!

                                                                                                                     

                                                                                                                    • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                      C4D Explorer

                                                                                                                      Hi Again, I'm looking forward to contributing to Part III, the final installment for this collaborative thread of discussion.

                                                                                                                       

                                                                                                                      Mini-grids can increase local communities‘ purchasing power by promoting activities that increase economic growth. This can help them overcome the economic barriers that prevent connection to the central grid. Development of mini-grids can also act as a stepping stone for future scaling up and connection to the central grid. Unlike small individual home systems, which are also commonly used for rural electrification, mini-grids establish the distribution and regulatory infrastructure for possible future connection to the central grid.

                                                                                                                       

                                                                                                                      To encourage development, certain policy, regulatory and institutional frameworks must support a market for economically and ecologically viable rural electrification. Some suggestions include:

                                                                                                                      • Recognize the role of mini/microgrids within the power value chain and support smart microgrid pilots to validate new capabilities, and the economic, environmental and social benefits/costs of decentralized energy, distributed energy and demand-side resources
                                                                                                                      • Link time-limited concessions to local economic productivity and environmental quality
                                                                                                                      • Establish “crosswalking” frameworks for sustainably Integrating and managing resources (energy, water, waste, telecommunication, buildings, transport), using smart grid, energy efficiency and renewable energy technologies
                                                                                                                      • Support the development of appropriate international and national mini/microgrid standards for health, environmental quality, safety, reliability and cyber security
                                                                                                                      • Address obligations between microgrid and customers; costs of building and operating microgrids; technical operation and obligations of mini-microgrids; and technical and financial relationship with central higher voltage utility to support commercial viability and public interests
                                                                                                                      • Enabling regulation for SPPs, SPDs and microgrid systems (standardized PPAs, tariff methods, FITs, interconnection, etc. (upstream and downstream)
                                                                                                                      • Promote sustainable rural community planning, zoning, siting and permitting processes
                                                                                                                      • Authorize “Development Companies” to address different facets of microgrid development (resource assessments, microgrid design/configuration, financing, marketing, operations & maintenance, integration of resources, training , partnerships, etc.)

                                                                                                                      It would be useful for the reader to also read “The Mini-Grid Policy Toolkit” by the Africa-EU Renewable Energy Cooperation Programme (RECP), in cooperation with the Renewable Energy Network for the 21st Century (REN21) and the Alliance for Rural Electrification (ARE).

                                                                                                                       

                                                                                                                       

                                                                                                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                          C4D Enthusiast

                                                                                                                          Hi Terry Mohn,

                                                                                                                          You wrote:

                                                                                                                          It would be useful for the reader to also read “The Mini-Grid Policy Toolkit” by the Africa-EU Renewable Energy Cooperation Programme (RECP), in cooperation with the Renewable Energy Network for the 21st Century (REN21) and the Alliance for Rural Electrification (ARE).

                                                                                                                          Please let me know if/where I can find a preliminary version of "The Mini-Grid Policy Toolkit", the RECP website advises that it will be available in early 2014.

                                                                                                                          Thanks in advance,

                                                                                                                          Nic

                                                                                                                        • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                          jeyeddu C4D Enthusiast

                                                                                                                          Hi folks, I take this opportunity to be the first discussant on Part III this new week.

                                                                                                                          There will surely be Policy and Regulation questions.

                                                                                                                          These will cover the generation, distribution and the consumption (users). Under the three said areas or components, policies and the regulations to guide and ensure their implementations will also cover environment, economics, social and perhaps gender.  It can be a whole day exposition, but let me provide some outline.

                                                                                                                          For the generation, the policy and regulation questions will include:

                                                                                                                          1. What fuel is to be used?
                                                                                                                          2. Is it environmentally friendly; what are the environmental issues related to the fuel?
                                                                                                                          3. If fossil fuel, what level of carbon emissions will be allowed?
                                                                                                                          4. What about effluent/sewage discharges from the generation plant?
                                                                                                                          5. Can the power plant be sited anywhere? What are the challenges?
                                                                                                                          6. Is the fuel resource or source of fuel reliable and sustainable in the long term (say 20 years)
                                                                                                                          7. With the issue of supply security, is there alternative supply of fuel?
                                                                                                                          8. Is the generation plant capable of handling dual-fuel?
                                                                                                                          9. Is the cost of fuel reasonable to provide relatively affordable tariff?
                                                                                                                          10. If Renewables, is the cost of generation going to make tariff affordable to the customers?
                                                                                                                          11. If not who subsidies for the cost of fuel and for how long/
                                                                                                                          12. Is the price of fuel volatile or stable? If unstable, will there a need to hedge the price of the fuel?
                                                                                                                          13. What percentage of generation losses would be allowed?
                                                                                                                          14. What generation efficiency measures can be instituted?
                                                                                                                          15. What generation capacity or size will define microgrid, minigrid and small grid?
                                                                                                                          16. Or is the classes of micro/minigrid going to be defined by the number of customers, geographical area or distance of coverage besides the generation size or capacity/

                                                                                                                           

                                                                                                                          For the distribution lines, the policy and regulation questions will include:

                                                                                                                          1. How far in terms of distance or area will the distribution network cover?
                                                                                                                          2. How much technical distribution losses will be allowed?
                                                                                                                          3. What types of distribution poles will be allowed?
                                                                                                                          4. What are the technical ratings of the power conditioning system will be adopted or allowed?

                                                                                                                          For the consumption-side or user end:

                                                                                                                          1. How much commercial losses will be tolerated?
                                                                                                                          2. What kind of consumption metering is to be used; pre-paid, credit, voltage limiters or all but depending upon the location or site?
                                                                                                                          3. What efficiency rating of appliances are to be encouraged?
                                                                                                                          4. Is there a need to apportion the tariff into customer classes?
                                                                                                                          5. What percentage of technical outages in terms of hours is to be allowed?
                                                                                                                          6. Is the micro/minigrid going to be energized 24 hours? If not how many hours per 24-hour-day and at what time period?
                                                                                                                          7. Are all customers going to be charged full cost of supply to their homes? If not which category of consumers are to subsidized and to what level of electricity consumption? Who pays for the subsidy? 
                                                                                                                          8. What are the wiring safety measures to be implemented at the user end?
                                                                                                                          9. Are street/public-park lighting going to be mandated or optional for each micro/minigrid?
                                                                                                                          10. What colour code for the lighting lamp  is going to be adopted? For instance it was found out that night-food sellers/vendors prefer and in the villages, yellow or amber colour lighting was preferred because it does not attract insects at night. The insects usually disturb their trade and for the villagers, they usually rally under the lights for night-gathering, etc and so the inserts tend to be a nuisance.  However, for urban areas and just for street lighting, it could either be the white or amber. 

                                                                                                                          Answering these queries provide enough information to prepare guidelines or regulations for any proposed micro/mingrid, with some modifications pertinent to the host country. First a policy has to be in place then regulatory framework or guidelines follow.

                                                                                                                          I can also draw some inspiration from my country’s (Ghana’s) on-going universal electrification programme called National Electrification Scheme (NES) aims at achieving 100% national access by 2020.

                                                                                                                          Under NES, the off-grid community;

                                                                                                                          • should have population of 500 and above.
                                                                                                                          • Should be within 20 kilometres from its district capital or nearest 33/11 kV line.

                                                                                                                          Candidate off-grid communities list was drawn up for the country. Step-down transformers largely used for the rural electrification are 33kVA.

                                                                                                                          There is also Self-Help Electrification Programme (SHELP) where an off-grid community could fast-track or move up the list, by undertaking the following self-help initiatives:

                                                                                                                          • Purchase own required number of low-tension or distribution poles.
                                                                                                                          • Have at least one-third of the community wired.

                                                                                                                          Until now, the electrification has largely been by connection to the national central grid. Decentralised minigrid was also envisaged but has not been quite successful. Albeit, there is a minigrid-solar home electrification taking place on some island communities on the Volta Lake, the source of our Akosombo Hydroelectric power dam.

                                                                                                                          Off-grid district capital is automatically qualified for connection to the national grid.

                                                                                                                          There are also industrial estates such as wood mills and Oil Palm mills operating minigrids in their operational areas. Their minigrid distribution network has been extended to surrounding off-grid communities largely as their corporate social responsibilities. Under Ghana’s Renewable Energy law, such companies earn revenue for such services provided the generation fuel is from Renewables and their operations are registered with the national regulator. 

                                                                                                                           

                                                                                                                          Thus first of all, the country should have a policy such as we have in Ghana. In this instance, a country can enact a National Telephony Energy Access where it has a dual aim of achieving say 100% penetration of telephone access and electrification access by say 2030.

                                                                                                                          The telecom masks can be the anchor for such a national access programme.

                                                                                                                          Then there should be regulations, such as;

                                                                                                                          • Minimum size of the off-grid community.
                                                                                                                          • Equipment and wiring regulations for the electrification.

                                                                                                                          Local contractor and wiring technicians should be shortlisted and registered for the local wiring jobs. There should be a special training and education programme to standardize the contractors and the wiring technicians.

                                                                                                                          Capacity of local contractors can be upgraded to meet the challenges by mandating the international consultants to hire or team up with the local consultants and contractors.

                                                                                                                          With time, the various micro/minigrids can be looped together to form a small central grid, depending upon the policy of the country.

                                                                                                                          With tariff, there have been a number of expositions by colleagues already.

                                                                                                                          The key questions will be how such projects will be funded? In Ghana, most of the rural electrification is funded with international donor grants, whilst those for regional or district capitals are largely funded with commercial and low-interest loans.


                                                                                                                          • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                            1203634 C4D Enthusiast

                                                                                                                            Thanks to all the discussants for sharing insights on policies, regulations, and institutional arrangements. We started this conversation with discussion on rural energy cooperatives and what roles they can play in electricity delivery.

                                                                                                                             

                                                                                                                            I would much appreciate your views on how policy and regulatory frameworks can be adjusted to accommodate rural energy cooperatives or similar member owned institutions. How these groups can collaborate with local (sub national) governments and secure public and private investments for rural electrification projects – both generation and distribution? We have had brief discussions on FIT and standardized PPA and its implications for private sector involvement. What other policy instruments help minigrids?

                                                                                                                             

                                                                                                                            Second request I have for the discussants is for their views on how policies and regulations can be adjusted to encourage participation of domestic financial institutions in rural electrification projects. Most practitioners are frustrated by the lack of creativity in lending products that are available to them for minigrids. Financial institutions often lack the local information to evaluate risks in minigrid projects, further they often abstain from tweaking lending products to best suit project characteristics. They often have plethora of products and tweaks for financing cars, same is not available for minigrids.

                                                                                                                            How can regulations and policies help in inciting financial institutions to lend to minigrid projects? Including minigrids in deprived sector and priority sector lending portfolio through directives from the central banks is one approach. My question is what other light(er) handed, information rich, and market oriented policy and regulatory approaches are available.

                                                                                                                             

                                                                                                                            My last request is for your view on necessity of standards and specifications that differentiate between minigrids/microgrids according to the functionalities they support. Can these standards and specifications help in procurement processes without picking one technology/vendor over another, especially in public sector supported programs.

                                                                                                                            Differences in system functionalities can mean differences services and in revenue streams for the projects. Differences in revenue streams can translate into differences risk profiles from investor/financer standpoint. Differences in services can mean differences in planning process and perhaps in subsidy allocations. After all, effective allocation of subsidies should differentiate between minigrids with low and high load factors and between minigrid with high and low penetration of renewables.    

                                                                                                                             

                                                                                                                              • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                                C4D Enthusiast

                                                                                                                                Rural electrification can be independent of grid extension. The development of scaleable microgrid technology implies that electricity service need not be part of a wide area network.   The basic microgrid  can start with a small diesel/biogas generator and rooftop solar in the 40-60 kW range. As the demand for electricity increases more energy sources can be added to the microgrid or a second microgrid can be created depending on location of the loads. Efforts should also be made to use the waste heat to push useful energy vs fuel efficiencies towards 70%. This bottoms up approach implies that traditional policies related to distribution lines, siting and discharges from generation plants, etc. are greatly reduced in importance. This model promotes local control and management of the electrical needs of each community including policies that are locally relevant. Perhaps discussion could focus on creating structures that promote local community solutions to local electricity needs

                                                                                                                                 


                                                                                                                                In the US the impact of distributed generation/microgrids are becoming disruptive to the current utility models, in fact it may be the final game changer. The industry structure of the existing electric utilities is under challenge  much as wireless in the US challenged traditional, wireline telephony.

                                                                                                                            • Re: E-Discussion #4: The Minigrid Option for A-B-C Business Models
                                                                                                                              1203634 C4D Enthusiast

                                                                                                                              Thank You for Participating in E-Discussion #4: The Minigrid Option for A-B-C Business Models

                                                                                                                               

                                                                                                                              Thanks to all the discussants for sharing their thoughts and insights on minigrid technologies, business models, and policies. We are pleased to inform you that the community of rural electrification practitioners along with professionals working with minigrid technologies have benefited tremendously from this discussion. Since we started this discussion in May, more than 200 practitioners have joined the Telecom-Energy Initiative to view your comments.

                                                                                                                               

                                                                                                                              Special thanks to Dr. Robert Lasseter, Mr. Terry Mohn, Mr. Xavier Vallve, Mr. Joseph Essandoh-Yeddu, Dr. Mahesh Bhave, and Dr. Saifur Rahman for their outstanding contribution to the discussion.


                                                                                                                              All posts will remain accessible through the Archive section of the platform. Please feel free to review the discussion and invite your fellow practitioners to join the group. If you have questions feel free to contact me at ggautam@worldbank.org or 202-473-9023.