Mini-grid Project Lifecycle - Revision history

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Business Model + Tariff Definition

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Ranisha: Created page with " = Introduction = The mini-grid project includes four phases: consultation and planning, construction, operation and maintenance and end use of electricity (Bhogle & Rodrigue..."

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Created page with " = Introduction = The mini-grid project includes four phases: consultation and planning, construction, operation and maintenance and end use of electricity (Bhogle & Rodrigue..."

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= Introduction =

The mini-grid project includes four phases: consultation and planning, construction, operation and maintenance and end use of electricity (Bhogle & Rodriguez, 2017; Energy 4 Impact & INENSUS, 2019)(Bhogle & Rodriguez, 2017)(Bhogle & Rodriguez, 2017).

= Consultations and planning =

This is the first stage in the mini-grid life cycle where the planning of the mini-grid regarding its site selection, sizing and the customers it will serve is done. This stage includes the following sub-steps:

== Site Selection ==

This is a critical factor as the sustainability of the mini-grid depends on selecting a good site. There are different factors for selecting a good site such as the location of the site, demand assessment of the potential customers and resources assessment at the site (Murunga, Gichungi, Koech, & Gochi, 2014).

Demand Assessment of the potential customers is done by looking at the current electricity demand as well as forecasting future demand (Blechinger, Papadis, Baart, Telep, & Simonsen, 2016). Community consultation is key for assessing the demand as precisely as possible. Resource assessment of renewables is important for sizing the mini-grid technology accordingly. For solar and wind resources, data from satellite and meteorological stations are more readily available. For hydro and biomass, a detailed assessment at the site is necessary (Kondev, 2016). In many cases, the community can also be consulted to look at the resource profile (water tables for MHP or available biomass for biomass based mini-grid) over a period of time.

== Business Model + Tariff Definition ==

There are different business models for mini-grids as highlighted in figure 1. The appropriate tariff can also be selected based on the cost of the mini-grid (both fixed and variable) and the willingness to pay for the generated electricity. The biggest challenge of the mini-grid is to find a tariff model that will ensure a balance between the financial sustainability of the mini-grid as well as the willingness to pay of the consumers (Energy 4 Impact & INENSUS, 2019).

== Technical System Design ==

Accurate load assessment and demand forecast is the key to sizing a mini-grid adequately. Lack of this information will result in either an oversized mini-grid with a higher payback time and lower efficiency or an undersized mini-grid system with unreliable supply, resulting in possible blackouts (Blechinger et al., 2016). The mini-gird system should be designed based on the four guiding principles (Energy 4 Impact & INENSUS, 2019): • it should adhere to all safety standards; • it should be rightly sized; • it should be upscale if there is a demand for it (might not apply for all mini-grids e.g. MHP) and • it should deliver the pre-defined quantity and quality of power

= Construction =

In community owned mini-grids, the whole community is involved in the construction providing free labor. In other business models, either the targeted community or external labor can be hired for construction. Involving the local community gives them a sense of ownership of the mini-grids and also helps to reduce cost. Men and women both could be involved in the construction of the mini-grids (Hornor, 2014).

= Operation and Maintenance (O&M) =

The operator is the key person responsible for keeping the mini-grid running and carrying out all the maintenance duties. For quality O&M of the mini-grid, the operator has to be properly trained (USAID, 2018). The operation of the mini-grid can be done either in-house or sourced out to an external company, depending upon the chosen business model (Energy 4 Impact & INENSUS, 2019). There are also new technologies such as smart metering, mobile payment and remote monitoring that make it easier to manage the mini-grid (Contejean & Verin, 2017). The mini-grid management committee has to look at the overall management including legal compliance, financing and resource management, human resource management as well as monitoring and evaluation of the mini-grid (Energy 4 Impact & INENSUS, 2019).

= End Use of Electricity =

The end use of electricity is the biggest source of income for the mini-grid. When electricity is used for a variety of activities, it stimulates the demand and thus increases the revenue for the mini-grid. There are four different end users of electricity (Contejean & Verin, 2017):

== Domestic Use ==

Rural households use electricity for lighting and running household appliances such as televisions, refrigerators and mobile charging. This demand is usually low and depends on the economic conditions of the household (Contejean & Verin, 2017).

== Community Use ==

Community centers such as schools and hospitals use electricity for meeting specific needs like running computers or projectors in school as well as running medical appliances in the hospital. This is a recurring electricity demand (Contejean & Verin, 2017).

== Anchor Load ==

It refers to specific energy intensive customers such as telecom towers and industrial plants. These institutes have specific energy needs and can serve as an anchor load for the mini-grid, providing a sustainable source of revenue (Contejean & Verin, 2017).

== Productive Use of Electricity (PUE): ==

Individuals and enterprises use electricity for earning an income as well as to increase their work productivity (Contejean & Verin, 2017). PUE could be in the agriculture sector (e.g., milling, water pumping, grinding and milk chillers); service sector (e.g. televisions and refrigerators in bars and restaurants and electric razors in barbershops) and in various manufacturing industries (e.g., welding, carpentry and tailoring). PUE also depends on several factors such as climate, culture, types of crops and rainfall patterns (Contejean & Verin, 2017). There is no clear distinction between the domestic use of electricity and the PUE and they could overlap each other. A household with access to electricity can use the lights to carry out household duties as well as run small-cottage industry from home. In this case, access to electricity serves both the domestic and the PUE (EUEI PDF & GIZ, 2011).

Rural areas have low population density as well as low energy consumption. Thus, mini-grid supplying electricity for lighting will have a small load factor. The mini-grid operator will then have to charge either a high tariff which might not be affordable or a low tariff that is affordable but not enough to cover all the O&M costs (Pueyo & Maestre, 2019). Thus, promoting PUE in rural areas increases the financial viability of the mini-grid (EUEI PDF & GIZ, 2011). However, it is important to understand that the provision of electricity will not automatically boost productivity but active support is required to increase the uptake of PUE in rural areas (EUEI PDF & GIZ, 2011; Osunmuyiwa & Ahlborg, 2019; Terrapon-Pfaff, Gröne, Dienst, & Ortiz, 2018). Additional activities such as access to appropriate financing, access to the market for selling the products, 11 appropriate training and skill development is needed (Contejean & Verin, 2017; Pueyo & Maestre, 2019).

= Further Information =

*[[Portal:Mini-grid|Mini-grid portal on energypedia]]

= References =

<references />

@@ Line 15: / Line 15: @@
 [[Assessment_of_Renewable_Energy_Resource_Potential_for_Mini-grids|Resource assessment]] of renewables is important for sizing the mini-grid technology accordingly. For solar and wind resources, data from satellite and meteorological stations are more readily available. For hydro and biomass, a detailed assessment at the site is necessary<ref name="Kondev, 2016">Kondev, B. (GIZ). (2016). Assessment of renewable energy resource potential for mini-grids. Retrieved December 17, 2019, from Energypedia website: https://energypedia.info/wiki/Assessment_of_Renewable_Energy_Resource_Potential_for_Mini-grids</ref>. In many cases, the community can also be consulted to look at the resource profile (water tables for MHP or available biomass for biomass based mini-grid) over a period of time.
 == Business Model + Tariff Definition ==
-There are different business models for mini-grids as highlighted below. The appropriate tariff can also be selected based on the cost of the mini-grid (both fixed and variable) and the willingness to pay for the generated electricity. The biggest challenge is to find a tariff model that will ensure a balance between the financial sustainability of the mini-grid as well as the willingness to pay<ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>.
+There are different [[Mini-grid_Operation_Models|business models for mini-grids]] as highlighted below. The appropriate tariff can also be selected based on the cost of the mini-grid (both fixed and variable) and the willingness to pay for the generated electricity. The biggest challenge is to find a tariff model that will ensure a balance between the financial sustainability of the mini-grid as well as the willingness to pay<ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>.
 == Technical System Design ==

@@ Line 12: / Line 12: @@
 This is a critical factor as the sustainability of the mini-grid depends on selecting a good site. There are different factors for selecting a good site such as the location of the site, demand assessment of the potential customers and resources assessment at the site<ref name="Murunga, Gichungi, Koech, & Gochi, 2014">Murunga, J., Gichungi, H., Koech, C., & Gochi, H. (2014). Where shall we put it? Solar mini-grid site selection handbook. Retrieved from https://energypedia.info/images/4/48/GIZ2014-en-where-shall-we-put-it-kenya.pdf</ref>.
-Demand Assessment of the potential customers is done by looking at the current electricity demand as well as forecasting future demand<ref name="Blechinger, Papadis, Baart, Telep, & Simonsen, 2016">Blechinger, D. P., Papadis, E., Baart, M., Telep, P., & Simonsen, F. (2016). What size shall it be? A guide to mini-grid sizing and demand forecasting. Retrieved from https://energypedia.info/images/0/0f/Mini-Grid_Sizing_Guidebook.pdf</ref>. Community consultation is key for assessing the demand as precisely as possible. Resource assessment of renewables is important for sizing the mini-grid technology accordingly. For solar and wind resources, data from satellite and meteorological stations are more readily available. For hydro and biomass, a detailed assessment at the site is necessary (Kondev, 2016). In many cases, the community can also be consulted to look at the resource profile (water tables for MHP or available biomass for biomass based mini-grid) over a period of time.
+Demand Assessment of the potential customers is done by looking at the current electricity demand as well as forecasting future demand<ref name="Blechinger, Papadis, Baart, Telep, & Simonsen, 2016">Blechinger, D. P., Papadis, E., Baart, M., Telep, P., & Simonsen, F. (2016). What size shall it be? A guide to mini-grid sizing and demand forecasting. Retrieved from https://energypedia.info/images/0/0f/Mini-Grid_Sizing_Guidebook.pdf</ref>. Community consultation is key for assessing the demand as precisely as possible. Resource assessment of renewables is important for sizing the mini-grid technology accordingly. For solar and wind resources, data from satellite and meteorological stations are more readily available. For hydro and biomass, a detailed assessment at the site is necessary<ref name="Kondev, 2016">Kondev, B. (GIZ). (2016). Assessment of renewable energy resource potential for mini-grids. Retrieved December 17, 2019, from Energypedia website: https://energypedia.info/wiki/Assessment_of_Renewable_Energy_Resource_Potential_for_Mini-grids</ref>. In many cases, the community can also be consulted to look at the resource profile (water tables for MHP or available biomass for biomass based mini-grid) over a period of time.
 == Business Model + Tariff Definition ==
@@ Line 20: / Line 20: @@
 == Technical System Design ==
-Accurate load assessment and demand forecast is the key to sizing a mini-grid adequately. Lack of this information will result in either an oversized mini-grid with a higher payback time and lower efficiency or an undersized mini-grid system with unreliable supply, resulting in possible blackouts <ref name="Blechinger, Papadis, Baart, Telep, & Simonsen, 2016">Blechinger, D. P., Papadis, E., Baart, M., Telep, P., & Simonsen, F. (2016). What size shall it be? A guide to mini-grid sizing and demand forecasting. Retrieved from https://energypedia.info/images/0/0f/Mini-Grid_Sizing_Guidebook.pdf</ref>. The mini-gird system should be designed based on the four guiding principles <ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>: • it should adhere to all safety standards; • it should be rightly sized; • it should be upscale if there is a demand for it (might not apply for all mini-grids e.g. MHP) and • it should deliver the pre-defined quantity and quality of power
+Accurate load assessment and demand forecast is the key to sizing a mini-grid adequately. Lack of this information will result in either an oversized mini-grid with a higher payback time and lower efficiency or an undersized mini-grid system with unreliable supply, resulting in possible blackouts <ref name="Blechinger, Papadis, Baart, Telep, & Simonsen, 2016">Blechinger, D. P., Papadis, E., Baart, M., Telep, P., & Simonsen, F. (2016). What size shall it be? A guide to mini-grid sizing and demand forecasting. Retrieved from https://energypedia.info/images/0/0f/Mini-Grid_Sizing_Guidebook.pdf</ref>. The mini-gird system should be designed based on the four guiding principles <ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>:
 = Construction =
-In community owned mini-grids, the whole community is involved in the construction providing free labor. In other business models, either the targeted community or external labor can be hired for construction. Involving the local community gives them a sense of ownership of the mini-grids and also helps to reduce cost. Men and women both could be involved in the construction of the mini-grids (Hornor, 2014).
+In community owned mini-grids, the whole community is involved in the construction providing free labor. In other business models, either the targeted community or external labor can be hired for construction. Involving the local community gives them a sense of ownership of the mini-grids and also helps to reduce cost. Men and women both could be involved in the construction of the mini-grids<ref name="Hornor, 2014">Hornor, C. (2014). Commercially operating mini-grid systems workshop. Retrieved from
 = Operation and Maintenance (O&M) =
-The operator is the key person responsible for keeping the mini-grid running and carrying out all the maintenance duties. For quality O&M of the mini-grid, the operator has to be properly trained (USAID, 2018). The operation of the mini-grid can be done either in-house or sourced out to an external company, depending upon the chosen business model <ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>. There are also new technologies such as smart metering, mobile payment and remote monitoring that make it easier to manage the mini-grid (Contejean & Verin, 2017). The mini-grid management committee has to look at the overall management including legal compliance, financing and resource management, human resource management as well as monitoring and evaluation of the mini-grid <ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>.
+The operator is the key person responsible for keeping the mini-grid running and carrying out all the maintenance duties. For quality O&M of the mini-grid, the operator has to be properly trained (USAID, 2018). The operation of the mini-grid can be done either in-house or sourced out to an external company, depending upon the chosen business model <ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>. There are also new technologies such as smart metering, mobile payment and remote monitoring that make it easier to manage the mini-grid<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>. The mini-grid management committee has to look at the overall management including legal compliance, financing and resource management, human resource management as well as monitoring and evaluation of the mini-grid <ref name="Energy 4 Impact & INENSUS, 2019">Energy 4 Impact, & INENSUS. (2019). Green mini-grid help desk. Retrieved December 17, 2019, from https://greenminigrid.afdb.org/</ref>.
 = End Use of Electricity =
-The end use of electricity is the biggest source of income for the mini-grid. When electricity is used for a variety of activities, it stimulates the demand and thus increases the revenue for the mini-grid. There are four different end users of electricity (Contejean & Verin, 2017):
+The end use of electricity is the biggest source of income for the mini-grid. When electricity is used for a variety of activities, it stimulates the demand and thus increases the revenue for the mini-grid. There are four different end users of electricity<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>:
 == Domestic Use ==
-Rural households use electricity for lighting and running household appliances such as televisions, refrigerators and mobile charging. This demand is usually low and depends on the economic conditions of the household (Contejean & Verin, 2017).
+Rural households use electricity for lighting and running household appliances such as televisions, refrigerators and mobile charging. This demand is usually low and depends on the economic conditions of the household<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>.
 == Community Use ==
-Community centers such as schools and hospitals use electricity for meeting specific needs like running computers or projectors in school as well as running medical appliances in the hospital. This is a recurring electricity demand (Contejean & Verin, 2017).
+Community centers such as schools and hospitals use electricity for meeting specific needs like running computers or projectors in school as well as running medical appliances in the hospital. This is a recurring electricity demand<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>.
 == Anchor Load ==
-It refers to specific energy intensive customers such as telecom towers and industrial plants. These institutes have specific energy needs and can serve as an anchor load for the mini-grid, providing a sustainable source of revenue (Contejean & Verin, 2017).
+It refers to specific energy intensive customers such as telecom towers and industrial plants. These institutes have specific energy needs and can serve as an anchor load for the mini-grid, providing a sustainable source of revenue<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>.
 == Productive Use of Electricity (PUE): ==
-Individuals and enterprises use electricity for earning an income as well as to increase their work productivity (Contejean & Verin, 2017). PUE could be in the agriculture sector (e.g., milling, water pumping, grinding and milk chillers); service sector (e.g. televisions and refrigerators in bars and restaurants and electric razors in barbershops) and in various manufacturing industries (e.g., welding, carpentry and tailoring). PUE also depends on several factors such as climate, culture, types of crops and rainfall patterns (Contejean & Verin, 2017). There is no clear distinction between the domestic use of electricity and the PUE and they could overlap each other. A household with access to electricity can use the lights to carry out household duties as well as run small-cottage industry from home. In this case, access to electricity serves both the domestic and the PUE (EUEI PDF & GIZ, 2011).
+Individuals and enterprises use electricity for earning an income as well as to increase their work productivity <ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>. PUE could be in the agriculture sector (e.g., milling, water pumping, grinding and milk chillers); service sector (e.g. televisions and refrigerators in bars and restaurants and electric razors in barbershops) and in various manufacturing industries (e.g., welding, carpentry and tailoring).
-Rural areas have low population density as well as low energy consumption. Thus, mini-grid supplying electricity for lighting will have a small load factor. The mini-grid operator will then have to charge either a high tariff which might not be affordable or a low tariff that is affordable but not enough to cover all the O&M costs (Pueyo & Maestre, 2019). Thus, promoting PUE in rural areas increases the financial viability of the mini-grid (EUEI PDF & GIZ, 2011). However, it is important to understand that the provision of electricity will not automatically boost productivity but active support is required to increase the uptake of PUE in rural areas (EUEI PDF & GIZ, 2011; Osunmuyiwa & Ahlborg, 2019; Terrapon-Pfaff, Gröne, Dienst, & Ortiz, 2018). Additional activities such as access to appropriate financing, access to the market for selling the products, 11 appropriate training and skill development is needed (Contejean & Verin, 2017; Pueyo & Maestre, 2019).
+PUE also depends on several factors such as climate, culture, types of crops and rainfall patterns<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref>. There is no clear distinction between the domestic use of electricity and the PUE and they could overlap each other. A household with access to electricity can use the lights to carry out household duties as well as run small-cottage industry from home. In this case, access to electricity serves both the domestic and the PUE<ref name="EUEI PDF & GIZ, 2011">EUEI PDF, & GIZ. (2011). Productive use of energy – PRODUSE A manual for electrification practitioners. Retrieved from http://www.produse.org/imglib/downloads/manual/euei_productive_use_manual_med.pdf</ref>.
-<br/>
+Rural areas have low population density as well as low energy consumption. Thus, mini-grid supplying electricity for lighting will have a small load factor. The mini-grid operator will then have to charge either a high tariff which might not be affordable or a low tariff that is affordable but not enough to cover all the O&M costs<ref name="Pueyo & Maestre, 2019">Pueyo, A., & Maestre, M. (2019). Linking energy access, gender and poverty: A review of the literature on productive uses of energy. Energy Research and Social Science, 53, 170–181. Retrieved from https://www.sciencedirect.com/science/article/pii/S2214629618306145</ref>. Thus, promoting PUE in rural areas increases the financial viability of the mini-grid<ref name="EUEI PDF & GIZ, 2011">EUEI PDF, & GIZ. (2011). Productive use of energy – PRODUSE A manual for electrification practitioners. Retrieved from http://www.produse.org/imglib/downloads/manual/euei_productive_use_manual_med.pdf</ref>. However, it is important to understand that the provision of electricity will not automatically boost productivity but active support is required to increase the uptake of PUE in rural areas<ref name="EUEI PDF & GIZ, 2011">EUEI PDF, & GIZ. (2011). Productive use of energy – PRODUSE A manual for electrification practitioners. Retrieved from http://www.produse.org/imglib/downloads/manual/euei_productive_use_manual_med.pdf</ref><ref name="Osunmuyiwa & Ahlborg, 2019">Osunmuyiwa, O., & Ahlborg, H. (2019). Inclusiveness by design? Reviewing sustainable electricity access and entrepreneurship from a gender perspective. Energy Research and Social Science, 53, 145–158. Retrieved from https://www.sciencedirect.com/science/article/pii/S2214629618311204</ref><ref name="Terrapon-Pfaff, Gröne, Dienst, & Ortiz, 2018">Terrapon-Pfaff, J., Gröne, M. C., Dienst, C., & Ortiz, W. (2018). Productive use of energy – Pathway to development? Reviewing the outcomes and impacts of small-scale energy projects in the global south. Renewable and Sustainable Energy Reviews, 96, 198–209. Retrieved from https://ideas.repec.org/a/eee/rensus/v96y2018icp198-209.html</ref>. Additional activities such as access to appropriate financing, access to the market for selling the products, 11 appropriate training and skill development is needed<ref name="Contejean & Verin, 2017">Contejean, A., & Verin, L. (2017). Making mini-grids work: Productive uses of electricity in Tanzania. Retrieved from https://pubs.iied.org/16632IIED/</ref><ref name="Pueyo & Maestre, 2019">Pueyo, A., & Maestre, M. (2019). Linking energy access, gender and poverty: A review of the literature on productive uses of energy. Energy Research and Social Science, 53, 170–181. Retrieved from https://www.sciencedirect.com/science/article/pii/S2214629618306145</ref>.
 = Further Information =
@@ Line 63: / Line 70: @@
 <references />