Our blogs Blogs home
Energy in Transition

Energy in Transition


Sustainable energy in far away places

Bringing electricity to remote areas is expensive

On 16th December 1935, the Pickwick Electric Cooperative was set up to bring electricity to a poor and heretofore backward part of the US state of Tennessee. A local farmer, when invited to speak at his local church about his experiences, is alleged to have said, “the greatest thing is to have the love of God in your heart, and the next greatest thing is to have electricity in your home.”

Eighty years on and 17% of the world’s population (about 1.2 billion people) is still waiting for access to electricity. Lack of electricity access is most often indicative of people living far from the population centres. For example in Sub-Saharan Africa 59% of urban dwellers have electricity compared to 17% in rural areas. It is this portion of the population which is most expensive to serve with reliable electricity. Myanmar (Burma), one of the least developed of the major South -East Asian countries, has remarkably similar levels of urban and rural electrification with 59% and 18% respectively. It has been estimated that it could cost between USD 68 billion and USD 113 billion to build the distribution and transmission networks required to supply all of its 54.7 million people. This equates to between USD 1,266 and USD 2,104 per person in a country where the real per capita GDP is equivalent to USD 1,173.

A possible alternative to this sort of large capital investment is the implementation of smaller islanded off-grid systems. These may include, but not necessarily be restricted to, renewable electricity generation. However, renewable energy does have the advantage of negating fuel transportation costs and exposure to fluctuating fuel prices.

A 1.05 MW solar PV and microgrid project was installed by Sustainable Energy Services International (SESI) in Bamyan, Afghanistan to supply 2,500 homes as well as businesses and government offices. The project was installed by Afghan personnel trained to an international standard. Locals from the region were employed to perform unskilled work, such as digging ditches or carrying equipment. The project cost a total of USD 14.2m, slightly more than half of which was hardware, the rest being labour, transport and other installation related expenses. At 13,524 USD/kW installed, this was an expensive undertaking. An on-grid solar PV project of comparable scale in the USA would typically have cost approximately 2,170 USD/kW in 2014. This large variation in PV installation costs results in a similarly large difference in levelised cost of electricity (LCOE), as can be seen from Figure 1.

blog chart 1

Figure 1: LCOE by PV installation costs

This is because, as was found in Bamyan, an off-grid project in a remote, underdeveloped area involves expenses additional to the power generation equipment itself. Facilities to distribute, control and meter electricity must be built from scratch. The cost of transporting equipment to this remote location must also be added on top. Furthermore the project needs to include the facilities to ensure a continual reliable supply of power when intermittent renewables are not available. This may be provided by fossil fuel generators or battery storage; the Bamyan project also includes back-up diesel generators.

The first few watts are the most valuable

The actual electricity usage of the anonymous Tennessee farmer mentioned above is likely to have been very modest by the standards of a modern developed country, probably not more than a few lightbulbs. However, as his testimony eloquently demonstrated, for someone who has no access to electricity at all, the first few watts are the most valuable. A household today would need about 50 W of electricity to light two medium sized rooms (using LED lightbulbs) and charge a mobile phone. An additional 150 W could power a table fan, a small fridge and a sewing machine.

Tony Woods of SESI has described off-grid typical arrangements for purchasing electricity in remote regions of Afghanistan. A consumer may be able to buy electricity from unregulated local generators through a small, informal distribution network. These can effectively charge whatever the market will stand and prices may vary from area to area. Consumers might typically pay a 300 Afghani (USD 4.88) flat rate per month for access to sufficient electricity capacity for a 20 W light bulb for 4 hours per day. Assuming this service is used to its full extent, this equates to a cost of electricity of 1.80 USD/kWh. In Indonesia it is not uncommon for villagers living off the grid each to pay USD 5-10 every ten days for someone to travel to the nearest town in order to charge a batch of 30-40 mobile phones. This service effectively costs consumers between 400-800 USD/kWh for the electricity delivered.

This seems to suggest that the value of electricity to the consumer tends to be higher at the lower levels of consumption. The concept of a marginal value of electricity was raised by US electricity industry association Edison Electric Institute (EEI), which estimated the value of electricity by annual household consumption. This is plotted in Figure 2, together with the cost of electricity paid by Bamyan consumers.

blog chart 2

Figure 2: Marginal value of electricity by annual consumption[1]

We are not suggesting that supplying consumers in underdeveloped areas with small volumes of expensive electricity should be a long term aim, but rather that small off-grid electricity projects could have a positive impact on economic development which is disproportionate to the amount of electricity supplied.

Electricity in your home is the second greatest thing

Access to electricity has many positive benefits. It offsets the need for other expensive energy sources, such as kerosene, and produces a better quality of light. This allows people living in rural communities to expand their economic and educational opportunities as it allows them to work and study later into the evening. It is safer and better for health as it produces no emissions. It helps to reduce the use of local biomass fuel, the gathering of which can be a source of danger, local tension and environmental damage. Finally it allows consumers to keep their mobile phones charged, giving them continuous access to market information in the nearest town.

The EEI data shown above represents consumers in the USA and may not be appropriate to developing countries. Further study into the marginal value of electricity to such consumers could help to understand their impact economic development programmes. The long-term expectation must be that the cost of electricity will come down as consumption goes up. Consequently such projects should be built so as to allow for future expansion and possible incorporation onto a wider transmission grid.

Small consumers need to pay their bills

There are still a number of challenges before sustainable off-grid could be a viable widespread solution to meeting development needs of people living in rural regions in developing countries. Those challenges related to system cost are gradually being addressed; renewable off-grid energy components, such as solar PV and electricity storage costs, have been falling steadily. There is an increasing trend towards mass production of ‘kits’ comprising the components of an off-grid system packaged within a single shipping container.

Governance and development risk are more intractable difficulties. The Bamyan project was supported by the New Zealand Ministry of Foreign Affairs and Trade. However, relying on foreign aid would not be a viable model for all such developments. Developers of small scale energy projects need to have certainty that their customers will pay for the electricity consumed and will not steal from the grid. This is a challenge in regions with a history of instability, poor governance and low standards of enforcement of contracts.

A partial solution to this is the use of pre-paid arrangements, similar to those used in mobile phones. The careful governance of small scale community projects can help to combat theft. In small communities, potential thieves will be deterred if they are known personally by their neighbours and it is understood that their theft must be borne by the whole community.

DNV GL supports off-grid energy

Some have argued that off-grid systems could leapfrog traditional networks in the same way that mobile phones have made inroads into areas where there was never a landline network. This is a possible scenario, but it is not certain as the national grid model can still bring economies of scale, allowing lower electricity prices. An alternative scenario might see off-grid island systems gradually merging together into ‘archipelagos’ and ultimately a full national grid.

However off-grid energy systems develop, DNV GL Energy stands ready to support the development of the technology, economics and market regulations. We can deliver consultancy, research and innovation on off-grid energy systems of all sizes. We provide technical advisory on renewable energy systems and components, system configuration and economic analysis. This includes solar energy assessments, owner’s engineer and independent engineering services on distributed renewable energy, electricity storage and the complete off-grid energy system. Our clients range from energy system developers, end clients, investors, local and national governments, and technology developers.


[1] Data from EEI and SESI

0 Comments Add your comment

Reply with your comment

Your email address will not be published. Required fields are marked *