ThisseriesonInclusiveInnovationsexploresbusinessmodelsthatimprovethelivesofthoselivinginextremepoverty.EditorsareElaineTinsleyandCristinaNavaretteMoreno.ResearchedanddevelopedbyEndevaandAshleyInsight.

INCLUSIVEINNOVATIONS

ElectrifyingRuralandRemoteAreasthroughMini-GridsIsolatedgridsconnectmillionsofpeopleatthebottomofthepyramidtopowerforthefirsttime

SummaryPowersupplyiscriticaltodevelopment,bututilitiesinmanylow-andmiddle-incomecountrieseitherlackthefinancialcapacitytoexpandtheirgridstoisolatedruralareasorchoosenottodosobecauseofthelowreturnoninvestment.Connectinghouseholdstomini-gridsisacost–effectivesolutioninmanyareas.DevelopmentChallengeSome1.2billionpeopleblackedaccesstoelectricityin2013(IEAn.d.).MostofthemliveinruralareasinSub-SaharanAfricaandSouthAsia.Theyrelyontraditionalbiomass,kerosene,andbatteries,whichareexpensiveandposeenvironmental,safety,andhealthrisks.Lackofregularaccesstopoweralsohindersruraldevelopment,slowstheformationofhumancapital,andreducesthequalityoflifeforpeopleatthebottomofthepyramid.Powersupplyiscriticaltoeconomicandhumandevelopment,bututilitiesinmanylow-andmiddle-income countries either lack the financial capacity to expand their grids to isolated rural areas orchoosenottodosobecauseofthelowreturnoninvestment.Off-gridsolutionsarethereforeneeded.BusinessModelComponentsoftheModelAmini-gridisasetofelectricitygeneratorsandstoragedevicesconnectedtoadistributionnetworkthatprovideselectricitytocommunitiesandcustomersthatarenotconnectedtothemaingrid.Mostofthemuselowalternatingcurrent(AC)voltage(220V–380V)ordirectcurrent(DC)withacentralizedproduction and storage system and have installed capacity of 5kW–500kW (World Bank 2008).Companiesoperatingmini-gridsusuallybuildthegrids,generateanddistributethepower,andtakecareofallcustomer-relatedservices,includingmarketingandbillpayment(figure1).

HIGHLIGHTS• Mini-gridsprovidedecentralized,efficientelectricity,connectingremotecommunitiesthatlackaccesstothemaingrid.

• Mini-gridsbridgethegapbetweensmallsolarhomesystemsandlargegrids,offeringcustomersnearlythesameserviceasagridconnection.

• Manysystemscanexpandasdemandforenergyincreases.

• Customer-friendlypaymentschemes,includingmobilepayment,prepaidscratchcards,andsmartmetering,makesystemseasytouseandprovideback-endinformationaboutgriduse.

June 2017 / 2

Figure1.Componentsofthemini-gridmodel

Mini-gridsusearangeoftechnologies.Diesel-poweredmini-gridsareexpensiveandunreliable.Forthisreason,manymini-gridscombinedieselwithhydroorotherrenewableenergyresources,whichreducesstoragecosts.Manymini-gridscouldbereconfiguredwithrenewablesourcesofenergy.Mini-gridsbridgethegapbetweenbasicandfull-scaleenergyaccess,enablingpeopletouseelectricitytolighthomesandpowerdevicessuchascookstoves,refrigerators,andmobilephones.Anestimated29millionruralorperi-urbanhouseholdsworldwidecouldbeservedonacommercialbasisbyisolatedmini-grids(Tenenbaumandothers2014).CostFactorsThesizeoftherequiredinvestmentandpaybackperiodvary,dependingonsize,technologyused,andotherfactorssuchasdistributionline.Villagegridsthatcanbeconnectedtothenationalgridatalaterstagecostmorethanlow-voltageDCmicro-gridsthatcannotbeconnectedtothenationalgrid.InTanzania,Devergycoverstheinstallationcostofthemicro-grid,exceptforasmallfeechargedtousers at the time of first connection. The initial investment of USD 6–12 per household coversmetering,wiring,twoLEDbulbs,andinstallation.Thebalanceisbuiltintotheper-useenergychargesuserspay.ThisarrangementmakesDevergy’spropositionmoreaffordablethansolarhomesystems,whichrequirelargerupfrontcapitaloutlays.ThepaybackperiodofaDevergysystemisabouttwoandahalfyears.Table1.Monthlyend-usercostsforelectricityprovidedbyselectedmini-gridprovidersCompany/country Volumeofenergyprovided MonthlycostDESIPower(India) 11W USD1.50Devergy(Tanzania) Enoughpowertocharge2LEDlightsanda

mobilephoneAboutUSD5.00

HuskPowerSystems(India)

Enoughpowertocharge2x15WCFLlightsandamobilephone

USD2.20

June 2017 / 3

RevenueStreamsMini-gridsgeneraterevenuesbysellingelectricitytoconsumersandothercustomers.InIndiaDESIpowersellselectricitytoanchorclients,suchastelecomtowersandricemills.Revenuesfromthesecustomerscross-subsidizesserviceforhouseholduse.FinancialViabilityCostsandtariffstructuresofmini-gridsvary,dependingonthesizeandenergysourceofthemini-grid,thesocioeconomicstatusofusers,thetypeofoperator(privateorpublic),theownershipmodel,and the funding structure (for-profit, partly or fully subsidized). Mini-grids may be owned andmanaged by the state, private sector or communities. Often a combination of different actors isinvolved,owningormanagingdifferentpartsofthesystem,suchastheproduction,distributionanddemandmanagementsystems.(GVEP2011)Manymini-grids are set up as part of the national electrification initiative and are at least partlyfinancedbygovernments.Othercompaniesarestrictlyprivate.One,HuskPowerSystems,isprofitableattheplantlevel,withagrossmarginof20percent.Ittypicallytakestwotothreemonthsforaplanttoreachoperationalprofitabilityandtwoandahalftothreeyearstorecoupcapitalexpenditures(withsubsidies).HuskPowerSystemshassecuredformalequity investment,butgrantsandsomeequity fromtheownersstill financecapitalandoperatingcosts.Thecompanyisstrugglingtosecurecapitalneededtodevelopitsfranchiseapproach,becausebanksarenotwillingtotaketheriskonanearly-stageventure.PartnershipsEnterprisesoperatebasedonfourmainmodels:

• Theutility-basedmodelisthemostcommonapproachtoruralelectrificationindevelopingcountries.Theutilitiesmaybenationalpublicinstitutions,privateunits,orcooperatives.Theyfocusmainly on areas consigned by governments. Powerhive East Africa Ltd., an impact-driven,for-profitmini-griddeveloper,isthefirstprivatecompanyinKenyatoreceiveautilityconcessiontogenerate,distribute,andsellelectricitytotheKenyanpublic(Powerhive2015).

• Privatesectormodelsareeitherfullyfor-profitorpartiallysubsidized.Commercialentitiesdevelopthemini-gridsandeitheroperate,lease,orsellthemtootheractors.For-profitvillagegridschargetariffsthatallowthemtoearnprofits,achievedthroughtheABCmodel(Anchorclient, Business, Consumer). Under this approach, the operator sells electricity through apowerpurchaseagreementtoananchorcustomer,suchasamobilephonecompany.Smallbusinessesandindividualswithlowerenergyconsumptionareservicedatanaffordablepricethankstotheeconomiesofscaleachievedthroughtheanchorclient.

• Community-drivenmodelstendtobepartiallyorfullysubsidized.Governmentorganizationssuch as the Orissa Renewable Energy Development Agency (OREDA) in India fund theimplementationandoperationofsmallvillagemini-grids.Thecommunity—oftenrepresentedby a village electrification committee—manages operations, tariff collection, andmaintenance.Communitymodelscanoffersubsidizedtariffsforbasicenergyservicesforafewhoursadaytolow-incomecustomers.

• Hybrid business models combine aspects of various approaches in order to maximizeeffectivenessandefficiency.

Implementation:DeliveringValuetothePoorAwarenessAll stakeholders—customers at thebaseof thepyramid, local businesses, government (from localgoverningstructurestonationalgovernments),andthebankingsector—needaccesstoinformation

June 2017 / 4

aboutallavailableenergysolutionstofindoutwhichsolutionisaffordableandbestfitstheirneeds.Tanzania’sScaling-UpRenewableEnergyProgramingLowIncomeCountries(SREP)programmappedoutwhichhouseholdscouldbeconnectedtothegrids,howmanywouldbestbeconnectedthroughmini-grids,andhowmanycouldbeconnectedbystand-alonesolutionssuchassolarhomesystems.Itcreatedawarenessaboutthedifferentsolutionsandprovidedthepoliticalframeworksupportingthedevelopmentofmini-grids(ClimateInvestmentFundandSREP2013).Tocreateawarenessatthecustomerlevel,MeraGaoPowerstaffvisitsvillagesforandcollaborateswithNGOs.AcceptanceStrategicplanning,notjustasiteanalysisandtheidentificationoftechnicalsolutions,isakeyaspectof running a successful mini-grid business (Inversin 2000). In-depth studies of the nationalelectrificationagenda,theeconomiccircumstancesofpotentialcustomers,andprojectionsoffuturedevelopment inthecommunity(forexample,thepotentialproductiveuseofenergyandplansforextendingthecentralgrid)areessential.Successfuldevelopersintegratelocalpartnersinthedevelopmentofnewsites;localknowledgeisasvitalastechnicalknowledge.TheGermanenterpriseInensusfundedthejointventureENERSAS.A.withtheSenegalesecompanyMatforceCSItosetupmini-gridsinSenegalinordertobeabletotaplocalknowledge.Monitoring and maintenance are critical to ensure the smooth operation of the grid. Remotemonitoringincombinationwithalocalserviceteamhelpsimprovetheefficiencyofoperationsandthusincreasecustomersatisfactionandprofitability.AvailabilityMini-gridoperationsare locallybased;muchof theday-to-daybusinesscannotbeperformedataheadquarters locatedelsewhere.Manycompanies(includingHuskPowerSystems,India)thereforeuse a franchise model to facilitate scaling, transferring responsibility for local operations andinvestments to the franchisee (the franchisor provides general strategic, technical, and practicalexpertise).AffordabilityTariff structuresandexpected loadsaredevelopedtomatchthecustomerbaseandcost-recoveryrequirements.India’sD.E.S.IPowerprojectsfuturecustomeruseofpowertosizethegridcorrectlyinordertostriketherightbalancebetweenaffordabilityandfuturegrowthofthegrid.Tariffcollectionthatmeetstherealityofcustomers’situationsiscritical.Powerhive,inKenya,offerscustomerstheopportunitytoprepurchaseelectricitythroughmobilebankingservices.ResultsandCost-EffectivenessScaleandReachThe number of customers ranges from a few to a few hundred per mini-grid. Devergy startedoperationsinTanzaniain2012;itnowservesalmost1,000customers.HuskPowerSystems,foundedin2007inBihar,India,serves210,000peoplein250villages,through91plantspoweredbyricehusk.OREDA serves customers in IndiawhoearnUSD16–24amonth. They canafford its servicesonlybecause they are subsidized. In Tanzania Devergy has connected about 1,000 households in sixvillages.Itisconnectingmorethan100newhouseholdseverymonth.DesiPowerprovideservicesto14villagesinIndia,reaching2,000people.Itsbiomassgasifiersprovideelectricitythatismorereliableandabout25percentlessexpensivethandiesel-basedgeneration.In

June 2017 / 5

allvillageswhereDESIPowerhasinstalledaplantorsetupasolarpumpforirrigation,ithasreplacedthedieselgeneratorsets,reducingcarbondioxideemissions.ImprovingOutcomesMini-gridshaveavarietyofpositiveeffects.Theyextendvillagers’activitiesbeyonddaylighthours,enhancingthequalityoflifeandpromotingeconomicdevelopment,byallowinglocalshops,eateries,andsmall-scalemanufacturingunitstostayopenlonger.Theyincreasethetimechildrencanstudy,improvingeducationaloutcomes.Theyreduceindoorairpollutionandtheriskoffiresfromkerosene,improvinghealthandreducingaccidents.Theysaveconsumersmoney.Theypreventdamagetotheenvironmentfromtheimproperdisposalofzinc-carbonbatteries(widelyusedforoperatingradios).Theyalsocreatejobs.DESIPower,forexample,hascreatedatleast25directand200indirectjobspervillage.Cost-EffectivenessMini-gridscanbeaviableandcost-effectiveroutetoelectrification.RuralresidentsinTanzaniawhouseamini-grid,forexample,spendabout20percentlessonlightingandabout50percentlessonphonechargingthanruralresidentswithoutaccesstothemini-grid.Manydemonstrationprojectshaveprovedthetechnicalfeasibilityofthissolution.Thebusinesscaseformini-gridshasyettobemadefully,however,becauseofthecomplexityofregulatoryframeworks,financingchallenges,andotherfactors.ScalingUpChallengesThepaceatwhichmini-gridsarebeingconstructedremainslimited,becauseofavarietyofchallenges.Mostcanbetransformedintodrivers.RoleofGovernmentandPublicPolicyGovernmentscanpromotetheexpansionofmini-gridsinmanyways.Theycandevelopalong-termvisionforthesector(IFC2012)andshareinformationontheirplanstoextendthemaingrid.Theycanstreamlinelicensingandapprovals,setappropriatetariffs,helpincreaseaccesstofinancing,createamarketecosystem,trainingonmini-gridsoperations,andfacilitateinformationflows.Streamlining licensing and approval: The public sector can reduce costs and encourage entry bysimplifyinglicensingandapprovalschemes.SriLanka’srenewableenergypolicyisagoodexampleofhowregulationcanpromoteelectrification.Thecountrysetupanenablingregulationforrenewableenergysystemsbelow10MW(tofeedintothegrid)in1996.Regulationswererevisedseveraltimes;bytheendof2011,243MWofcapacityhadbeeninstalled,allofitoperatedbyprivatecompanies(Tenenbaumandothers2014).ThegovernmentofTanzaniafacilitatestheset-upofmini-gridsforupto1MWbyallowingthesesmallsystemstoforgocomplexlicensingprocess;systemsbelow100kWdonotevenneedapprovalofend-consumertariffs(Tenebaumandothers2014).ThisenablingpoliticalenvironmentinducedDevergytostart operations in Tanzania. In contrast, onerous licensing rules and high tariffs in Ghana forcedDevergy’slicensepartnertherehadtostopitsoperationsafterinstalling300connections.Setting appropriate tariffs: Electricity generation costs are higher for mini-grids than for gridconnections.Policymakershavetodecidewhethertostructuretariffstoreflectcostsorsetuniformnationaltariffs,whichwouldimplycross-subsidizationofmini-gridcustomers.Tariffsthatreflectcostsmaybethefastestwaytoprovideelectricity.

June 2017 / 6

Increasingaccesstofinancing:Mini-gridsrequireupfrontinvestmentofuptoafewmilliondollars.Thepublicsectoranddonorscanincreaseaccesstofinancingbyenterprises,leveragingpublic-privatepartnerships,providingsmartsubsidiesforgridextension,andguaranteeingloansfromcommercialbanks (IFC 2012).Debt financingmechanisms and guarantees, such as the German government'sexportcreditinsurance,cansupportthescalingofmini-grids.Results-based financing involves the cash payment or nonmonetary transfers by a national orsubnational government after predefined results have been attained and verified. Devergy hasdevelopedaprograminwhichcontractorsarepaidinfullonlywhenthequalityoftheinstallationhasbeen proven in operations. Combining results-based payment with results-based finance couldleveragethescalingprogress.Createamarketecosystem:Mini-gridcompaniesneedtoestablish linkageswith localandnationalbusinesses, communities, sectors with demand for power, international developers, technologyproviders,andfinanciers.Fosteringsuchamarketecosystemoffersahigh-impactopportunityforthepublic sector and donors. Support can be provided by enabling the development of a morestandardizedtechnology.Providetraining:Public technical institutesorvocationalschoolscouldoffer training toequipstaffwiththetechnicalqualificationsfor installationandmaintenanceofmini-gridsas,forexample,theEthiopianAdama Institute forSustainableEnergyat theAdamaScienceandTechnologyUniversitydoes.Facilitateaccesstoinformation:Publicsectoractorsanddonorscanhelpensureaccesstorelevantinformation for all stakeholders (public sector, communities, developers, investors, third sectororganizations).Thisincludespublicdisclosureofgovernmentplansandtimeframesforcentralgridextensions,asthis informsenterprisesofareasofmarketpotential.Facilitating informationaccessincludesraisingawarenessamongend-consumers thatenergy isapurchased (not free)product inordertodiscouragetheft.Table2.Enterprisesprovidingmini-gridaccessCompany/Economy Country DescriptionAgaKhanRuralSupportProgramme

Pakistan Pioneer in community-based development approachesbuilds locally managed mini-hydro plants throughoutChitral district. Community-owned and -operated plantsgenerateclean,affordable,andreliableelectricity24hoursaday.

Community,EnergyandTechnologyintheMiddleEast

Israel,WestBankandGaza

Israeli-Palestinianorganizationprovidesgreenenergyandclean water services to off-grid communities usingenvironmentally and socially sustainable methods,empowering someof the poorest andmostmarginalizedcommunities in the West Bank and Gaza through theconstruction of wind and solar energy systems, cleanpotable water solutions, capacity building, and reliablemaintenance.

DesiPower India Biomass gasification plants (30kW–150kW) help set upmicroenterprises/cooperativesbyensuringbiomasssupplyandplantload;targetsIndustrialcustomerswithhighpeakloadsrequiringreliablepower.

June 2017 / 7

Devergy Tanzania Provides low-power solar micro-grids that are typicallysharedbygroupsofuptofivehouseholds.Modularnatureof panels allows installed capacity to be easily expandedwhendemandincreases.

ElectricitédeHaiti(EDH)

Haiti

Diesel-run, municipal-owned mini-grids. Formalizedprocess to develop thesemicro-grids evolved over years,andcurrentlyinvolvesseverallevelsofpublicagenciesandprivate sector (for profit and NGOs) players workingtogether to build, operate and maintain a micro-grid toelectrifyruralcommunities.

FoundationRuralEnergyServices

BurkinaFaso,Guinea-BissauMali,SouthAfrica,Uganda

Small multinational uses market-based approach toestablish small-scale commercial electricity companies inareasthathavenogridaccess.

GreenEmpowerment/Tonibung/PACOS

Malaysia GreenEmpowermentandTonibungarenonprofitsworkingtogether to finance and developmicro-hydro-micro-gridswhile integrating community empowerment goals intorural electrification. The NGO PACOS is the communityempowermentpartner.

HuskPowerSystems India

Builds small-scale systems in remote rural villages thatgenerateanddistributepowercheaplyenoughforbaseofthepyramidconsumerstoafford.Eachsystemconsistsofa30kW–50kWpowerplantthatrunsentirelyonricehusks.Micro-gridconnectssubscribersdirectlytotheplantusinginsulatedwiresstrungfrombamboopoles.

IBEKA Indonesia Workswith communities to develop their local skills andbuilds their ownership to manage and maintain off-gridhydro schemes. Lobbied to change law so that nationalsupplier must buy electricity from small grid-connectedhydro-schemes,achangethathasenablednewschemestobe built under communitymanagement and existing off-gridschemestobeconnectedlaterifgridexpands.

InensusGmbH(SengaleseJV:INENSUSWestAfricaS.A.R.L.)

Senegal,Somalia,Tanzania

Integratessmallwindturbineswithsolaranddieselpowersources.Thehybriddesignoptimizespowerset-ups,withwind and solar resources complementing each other,reducingdieselfuelconsumptionandbatterycycling.

MeraGaoPower(MGP)

India

Provides service-specificmicro-grids tomeet lighting andmobilechargingrequirementsofruralpeople.

Powerhive Kenya Off-grid metering and control solutions offer customersopportunitytoprepurchaseelectricityforcommercialandresidential use through mobile banking services. Acts asintermediarybetweengeneratorsandusers.

RemoteVillageElectrificationProgram(CREDA)

India

Government agency installs and operates mainly solarpholtovotaicmicro-gridsthroughcontractors.

SaranRenewableEnergy

India

Provides reliable electricity to small businesses frombiomass gasifier and reliable income to farmers whoproducethebiomass.

June 2017 / 8

WBREDA India

Electrifies isolated communities, including villages in theSundarbans, amangrove-filled delta in theBay of BengalandaBengaltigerreserve.

ReferencesClimateInvestmentFund,andSREP(Scaling-UpRenewableEnergyProgramingLowIncome

Countries).2013.InvestmentPlanforTanzania.MinistryofEnergyandMinerals,DaresSalaam.IEA(InternationalEnergyAgency).n.d.EnergyAccessDatabase.

http://www.worldenergyoutlook.org/resources/energydevelopment/energyaccessdatabase/.IFC(InternationalFinanceCorporation).2012.FromGaptoOpportunity:BusinessModelsforScaling

UpEnergyAccess.Washington,DC.http://www.ifc.org/wps/wcm/connect/ca9c22004b5d0f098d82cfbbd578891b/energyaccessreport.pdf?MOD=AJPERES.

Inversin,AllenR.2000.Mini-GridDesignManual.Washington,DC:WorldBank.https://www.esmap.org/node/1009.

GVEPInternational(PolicyBriefing).September2011.Thehistoryofmini-griddevelopmentindevelopingcountrieshttp://www.reeep.org/sites/default/files/Minipercent20Gridpercent20Developmentpercent20inpercent20Africa.pdf

Powerhive.2015.PowerhiveSubsidiaryBecomesFirstPrivateUtilityinKenya’sHistorytoBeLicensedtoSellElectricitytothePublic.Nairobi.www.powerhive.com/powerhive-subsidiary-becomes-first-private-utility-in-kenyas-history-to-be-licensed-to-sell-electricity-to-the-public.

Reegle.2015.ScalingupRenewableEnergyProgramme(SREP)Tanzania.http://www.reegle.info/policy-and-regulatory-overviews/TZ.https://www-cif.climateinvestmentfunds.org/sites/default/files/meeting-documents/srep_tanzania_investment_plan_design.pdf

Schnitzer,DanielDeepaShindeLounsbury,JuanPabloCarvallo,RanjitDeshmukh,JayApt,andDanielM.Kammen.2014.MicrogridsforRuralElectrification:ACriticalReviewofBestPracticesBasedonSevenCaseStudies.Washington,DC:UnitedNationsFoundation.http://energyaccess.org/images/content/files/MicrogridsReportFINAL_low.pdf.

SE4ALL.2014.HighImpactOpportunityCleanEnergyMini-Grids.Vienna:UnitedNations.http://www.se4all.org/hio/clean-energy-mini-grids.

Sevea.2013.CaseStudy:HuskPowerSystems.PowertoEmpower.LesMarches,France.http://www.riaed.net/IMG/pdf/Case_study_HPS.pdf.

Tenenbaum,Bernard,ChrisGreacen,TilakSiyambalapitiya,andJamesKnuckles.2014.FromtheBottomUp:HowSmallPowerProducersandMini-GridsCanDeliverElectrificationandRenewableEnergyinAfrica.WashingtonDC:WorldBank.

WorldBank.2008.REToolkit:AResourceforRenewableEnergyDevelopment.Washington,DC.http://siteresources.worldbank.org/INTRENENERGYTK/Resources/REToolkit_issues_note.pdf.

AdditionalReadingDuflo,Esther,MichaelGreenstone,andRemaHanna.2008.“IndoorAirPollution,Health,and

EconomicWellBeing”DepartmentofEconomics,MIT,Cambridge,MA.http://economics.mit.edu/files/2375.

GIZ(DeutscheGesellschaftfürInternationaleZusammenarbeit).2014.RECP:Mini-GridToolkit.PolicyandBusinessFrameworksforSuccessfulMini-GridRoll-Out.Eschborn,Germany.http://euei-pdf.org/sites/default/files/files/field_pblctn_file/RECP_MiniGrid_Policy_Toolkit_1pageviewpercent20(pdf,percent2017.6MB,percent20EN_0_0.pdf.

June 2017 / 9

Profile:DevergyUsingpay-as-you-gosolarmicro-gridsinTanzaniatoprovideruralconsumerswithaffordableenergyChallengeTanzania has one lowest electrificationrates in the world. Just 14 percent of itspeople—amere3percentinruralareas—hasaccesstoelectricity(WorldBankn.d.)Themainsourcesofenergy inruralareasincludetraditionalbiomass,kerosene,andbatteries,whicharenotonlyexpensivebutalso pose environmental, safety, andhealth risks. Lack of access to regularsupply of power also hinders ruraldevelopment. Utilities either lack thefinancialcapacitytoexpandtheirgridstoisolatedruralareasorchoosenottosobecauseofthelowpotentialreturnoninvestment.InnovationFoundedin2010,Devergy(http://www.devergy.com/)providesenergyservicesthroughlow-powersolarmicro-gridsthataretypicallysharedbyuptofivehouseholds.Themodularnatureoftheproductallowsthecompanytooptimizethesizeofthesystemtomeettheexactdemandofusers,which,atleast initially, typically use it only to charge theirmobile devices or provide lighting, avoiding the“oversizing”oftenassociatedwithtraditionalmini-grids.Devergycoverstheinstallationcostofthemicro-grid,exceptforasmallfeechargedatthetimeoffirstconnection.TheinitialinvestmentrangesfromUSD6toUSD12,whichcoversmetering,wiring,twoLEDbulbs,andinstallation.Thebalanceisbuiltintotheper-useenergychargespaidbyusers.ThisarrangementmakesDevergy’spropositionfortheend-usermorefavorablethansolarhomesystems,whichrequirehigherupfrontcapitaloutlays.ThepaybackperiodofaDevergysystemisabouttwoandahalfyears.Devergyusesdifferentialpricingbasedonusers’purchasingpower.Itchargesbetter-offcustomersahigher price in order to cross-subsidize the tariffs of lower-income customers. Prepaid energypackagesstartatUSD0.20aday.The systems generate energy in direct current (DC), saving 20 percent of the system costs byeliminatingtheneedforacostlyinverter.Asmostelectricalappliancesavailableinthemarketsaremadetorunonalternatingcurrent(AC),Devergyalsosuppliesenergy-efficientDCproducts(lightingproducts,refrigerators,TVs).Akeyfeatureofthesystemisthehouseholdenergymeter.UserscantopuptheenergyaccountbybuyingDevergyvouchersfromlocalstores,fromDevergyengineersinthevillage,orthroughmobilemoney.Sellingenergybasedonhoursoflight,phonecharging,orotherapplicationsmakesiteasierforcustomerstochoosetheservicestheywantandmonitortheirconsumption.Devergyusesacommunity-basedcommunicationapproach,whichmakesusersapartofthedecision-makingprocessfromthestartofaproject.Meetingswithvillagers,elders,andleadersareheldtodiscussandassessusers’needs.

Thissolarpanelmountedona tripodprovidesaffordableenergytohouseholdsinaTanzanianvillage.

June 2017 / 10

ImpactDevergyhasconnectedabout1,000householdsinsixvillagestoitssolargrids,providingthemwithaccesstocleaner,safer,andlessexpensiveenergy.Morethannew100householdsinTanzaniaarebeingconnectedeverymonth.RuralresidentsinTanzaniatypicallyspendUSD6–25amonthonkerosene,phonecharging,andzinc-carbon batteries for radios. After installation of Devergy’smicro-grids, they spend asmuch as 20percentlessthantheyhadbeenspendingonkeroseneforlightingandabout50percentlessforphonecharging.Oneof the key impacts of access to energy is stimulationof economic activities by allowing localstores, restaurants, and small-scale manufacturing units to operate for longer hours. Micro-gridenergy also overcomes the risk of fire and accidents caused by kerosene use, and the lighting itprovidesallowschildrentostudyatnight.Lackofaproperdisposalsystemforzinc-carbonbatteries(widelyusedforoperatingradios)hassevereenvironmentalandhealthrisks,includingpollutionofthesoilwithtoxicmaterials.Devergymicro-gridshelpaddressalloftheseissues.Mostofthecompany’semployeesarelocalpeople,whoprovidethetechnicalsupportfortheinstalledsystems and act as a continuous interface between Devergy and the communities it serves. Byprovidingindividualsinthecommunitywithsolarengineeringtraining,Devergyaimstoimprovetheirincomeprospects.ScalingUpDevergyhasmainlytargetedhouseholdcustomers.Goingforward, itplanstodevelopsolutionstocater to the needs of businesses as well. Some of the solutions under development includerefrigeration,entertainmentapplications(suchascinemas),andagriculturalequipment(grainmillsandricehuskers).TheregulatoryframeworkinTanzaniaprovidesaconduciveecosystemforprivatesectorparticipation.Aprojectbelow100KW,forexample,doesnotrequireagovernmentlicenseorapprovalfortariffs.The government’s “Rural Energy for Rural Electrification” program promotes private and NGOparticipation to set up renewable energy mini- and micro-grids that sell power directly to retailcustomers.Thegovernmenthasalsoremovedvalueaddedtaxanddutiesonsolarcomponents,suchaspanels,batteries,inverters,andregulators,allowingend-userstobuysolaratanaffordableprice.Theregulatoryframeworkinothercountriesmaynotbeassupportiveas inTanzania,whichcouldconstrainthegrowthandreplicationofDevergy’smodel.ThepartnershipinGhana,forexample,didnotmovebeyondthepilotstagebecauseofregulatoryissuesregardinglicensingandtariffs.Afewfactorsconstrainexpansion.TheworkingcapitalrequirementsofDevergyarehigh,becauseitfinancesitssales.(Othersourcesoffinancingforcustomers,suchasmicrofinance,tendtogotowardincome-generatingactivities,notthepurchaseofhouseholdapplications.)Devergy’soperationsarenotyetprofitable.IthasreliedlargelyongrantsandinvestmentsbytheDOENFoundation,PersistentEnergy Partners, EEP Africa, and others. Additional grants and capital are required to sustain thegrowthmomentumandexpandtheuserbase.ReferenceWorldBank.n.d.TanzaniaEnergyDevelopmentandAccessProject(TEDAP)andSPPs.Washington,D.: World Bank https://www.esmap.org/sites/esmap.org/files/TEDAP percent20SPPs percent2011-18.pdf.

June 2017 / 11

Profile:DESIPowerProvidinggreenpowerinIndiathroughminigridsChallengeDespite its fertile land, the district ofArariaintheIndianstateofBiharisoneof the poorest in India. To escape itspoverty,manyyoungvillagersmigratetocitiesinsearchofjobs.Thechallengeistoreducemigrationbyimprovingagro-productivitybysellingirrigationwatertosmall-scale farmers and creatingnonagriculturaljobsinthedistrict.InnovationFounded in 1996, DESI Power(www.desipower.com)providesreliableand renewable electricity andemploymenttoreduceruralpovertyandpromoteeconomicdevelopmentbyinstallingandrunningbiomassmini-grids.Themini-gridsprovidehouseholdswithlight,farmerswithirrigationwaterandagricultureprocessing,andsmallentrepreneurswithincreasedearningopportunities.From1998to2008,DESIPowerbuilt,tested,andmodifiedpowerplantsandmini-gridsuntilitcreatedatechnologythatworkedintheruralcontext:stand-alonepowerplantsthatrunonlocalbiomassandsolar power. The company now operates mini-grids in 14 villages. To make the business modelfinanciallyviable,itsellselectricitytoanchorclientsliketelecomtowers,ricemills,andotherclientsthatuseelectricityforproductiveuse.Itusestherevenuesfromthesecustomerstocross-subsidizeserviceforhouseholduse.Theradiusofthelargerpowerstationsisonekilometer.Peoplewholiveoutsidethatpowerstation’scatchmentareacanbeconnectedthroughDESIPower’stinygrids,whichsupply10–20householdswithenoughpowertolighttheirhomes,chargetheirphones,andsupplyirrigationwater.DESIPowertrainsvillagerstorunandmaintainthevillagegrid,oftenemployingwomen.Itseekstocreateself-reliantvillageswithadecentralizedelectricity-drivendevelopmentprocessbasedonlocalvalue addition of agro-residues, renewable energy, andother resources. About two-thirds of newincomegeneratedstaysinthevillage.ImpactIn the14villages inwhichDESIPower isactive,2,000peoplebenefitdirectly from itspower.Thecompany’sbiomassgasifiersprovideelectricitythatisabout25percentlessexpensivethandiesel-basedgenerationandmorereliable.InallvillageswhereDESIPowerhasinstalledaplantorsetupasolarpumpforirrigation,ithasreplacedthedieselgeneratorsets,reducingCO2emissions.Inaddition,thecompanyhascreatedatleast25directand200indirectjobspervillage.ScalingUpDESIPowerhasscaleduponlyslowly,partlybecauseoflackoffinance.Onepowerplantandmicro-grid requiresUSD55,000–70,000of investment.Electricity-consumingmicroenterprises cancreatelocal jobs, but it costs about USD 15,000–25,000 per village to set up businesses and upgrade

DESIPowerempowersruralcommunitieswithelectricityandirrigationsolutions.

June 2017 / 12

machines.DESIPowerisnowintheprocessofraisingfundstobuildpowerplants,micro-grids,andsomeanchorloadsin100villages,aneffortthatrequiressubstantialfunds.The operations of DESI Power are not yet profitable, because of the large capital outlays, lack ofconstant load, and fact that no financial arrangements are available to help local entrepreneursdeveloptheirbusinessesinruralareas.ThefirstpilotpowerplantinavillagewasfinancedbythegrantDESI Power won from the World Bank’s Development Marketplace. Other donors, such as theRockefellerFoundation,areprovidingsoftloansandgrantstoinvestinnewpowerplants,micro-grids,andsomekeyanchorloads.Thegovernment’s focuson central gridexpansionand its lackof support fordecentralizedpowerprovision,limitscalingup.Withoutthegovernment’scooperation,DESIPowercannotcreateamicro-gridusingcentralgrid infrastructure,whichwouldenable it to speedupprojectdevelopmentandaccess tomanycustomers.There isnopolicy thatacceptsandpromotesmini-gridsasameansofreaching full electrification in rural areas. A solution for the coexistence and interaction of thecentralizedanddecentralizedsystems,wouldgreatlyimproveaccesstoenergyinruralareas.