Rural Electrification through Mini-Grids: Challenges Ahead

10 Pages Posted: 25 Apr 2019

See all articles by Jörg Peters

Jörg Peters

RWI - Leibniz Institute for Economic Research; University of Passau - Business Administration and Economics

Maximiliane Sievert

RWI - Leibniz Institute for Economic Research

Michael Toman

World Bank - Development Research Group (DECRG)

Date Written: April 24, 2019

Abstract

Recent debates on how to provide electricity to the roughly one billion still unconnected people in developing countries have identified mini-grids as a promising way forward. High upfront costs of transmission lines are avoided, and unlike home-scale solar, mini-grids can provide sufficient electricity for productive uses. Indeed, mini-grids play a crucial role in accomplishing the goal of the UN Sustainable Energy for All (SE4All) Initiative to provide universal access to electricity by 2030. This note outlines the challenges the mini-grid sector faces to achieve that potential. To date, few examples of sustainably working mini-grid programs exist. We identify regulatory issues, low electricity demand in rural areas, high payment default rates and over-optimistic demand projections as among the key challenges. Business models that account for high transaction costs in rural areas and that are based on realistic demand forecasts could considerably increase the commercial viability of mini-grids.

Keywords: public infrastructure, rural electrification, energy access, energy planning systems

JEL Classification: H54, O13, O21, Q48

Suggested Citation

Peters, Jörg and Sievert, Maximiliane and Toman, Michael, Rural Electrification through Mini-Grids: Challenges Ahead (April 24, 2019). USAEE Working Paper No. 19-402, Available at SSRN: https://ssrn.com/abstract=3377033 or http://dx.doi.org/10.2139/ssrn.3377033

Jörg Peters (Contact Author)

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
45128 Essen
Germany
0049-201-8149-247 (Phone)

HOME PAGE: http://www.rwi-essen.de

University of Passau - Business Administration and Economics ( email )

Wirtschaftswissenschaftliche Fakultaet
Passau, D-94030
Germany

Maximiliane Sievert

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Michael Toman

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street N.W.
MSN3-311
Washington, DC 20433
United States

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