Assumptive vs Realistic Demand: Tips for sizing mini-grids

Tips for Sizing Mini-Grids

A major challenge to the profitability of mini-grids is stimulating regular demand. Even in that, there is a need to consider the ability, willingness and commitment to pay on the consumer’s end. From our experience deploying mini-grids in off-grid rural communities since 2017, here are some lessons we have learned with regards to sizing mini-grids. 

Becoming a Mini-Grid Designer

As much as the technical design expertise is important, a mini-grid designer also has to be business-minded in their designs. As a mini-grid designer, if the mini-grid being designed isn’t a charity project, then it is necessary for you to design technical systems with a knowledge of project development, financing, commissioning, operation and maintenance of the system.

Site Demand Assessment

While conducting an energy audit on the host rural community, the common basic equipment will be light bulbs, mobile phone charging and petty shop appliances.

With proper community engagement, it is expected that you would get a great buy-in from the customers in the pre-development phase of a mini-grid project. Most community inhabitants would even opt to buy additional appliances such as televisions, electric fans, refrigerators because of the excitement of having constant power supply. Bear in mind that these people are not fully aware or in control of their purchasing power. 

In 2016, we deployed our first mini-grid in Kigbe community. The project was sized based on the expected demand of our customers because it is expected that customer electricity demand/needs will increase with the presence of reliable electricity. Over the months after we deployed the solution, utilisation of the system was lower than expected. Do you know what this means? Lower revenue. 

What happened? We sized the mini-grids based on Estimated Demand. 

In rural electrification, without proper education, rural dwellers have low expectations which are usually limited to household consumption. In addition to encouraging energy efficiency and conservation, developers should introduce electricity demand stimulation approaches. Considering different types of customers, how do we size the mini-grid in a way that it is affordable to the end-user and profitable for the developer?


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Sizing Mini-grids: Estimated Demand or Current Demand

Sizing a mini-grid based on estimated or current demand can mean over-sizing or under-sizing. It is necessary to consider the nature of activities in every community while estimating demand growth. 

With sizing based on current demand, the users are fully utilising the power generated from the mini-grid;  the developer is making at least 80% revenue and faster payback time if the project is expected to be commercially viable. When demand rises over supply, a scale-up plan is introduced. Financing the scale-up phase is expected to be much easier based on the historical records of high demand from the initial phase of the project. Some disadvantages of this would be lesser reliability on the system and an effect on the consumer’s trust.

Sizing based on expected demand usually results in an oversized mini-grid. This will increase the capital cost of the project as well as the tariff for end users. There is a greater probability of waste of resources, lower revenue and an inability of the mini-grid to deliver the projected financial returns (breakeven, IRR etc). This then creates an urgent need for demand stimulation activities in the commercial and productive areas of the project. 

Learning from our first experience, we now size our mini-grids based on current/actual power demands of the community with a plan to scale-up the capacity when necessary. From our experience with rural electrification projects, it may be more beneficial to design mini-grids in a fashion that allows supply rise to meet the demand and not otherwise.

 

Featured Image: Dotun Omiyale



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