The Small Grid – Energy Security, With a Little Help from the Sun

Why in News?

• The private sector is leading a revolution to address the energy poverty for 500 million people which relies on the establishment of clean energy mini-grids in rural areas across continents and Small Island Developing States.
• These mini grids not only address the energy needs of numerous small businesses and households but also contribute to lifting people out of energy poverty.

The Concept of Clean Energy Solar Mini Grids

• A mini-grid is a decentralised electricity generation system with capacities exceeding 10 kW.
• Mini-grid is designed to meet diverse needs including homes, businesses, institutions, and small industries.
• Mini-grid serves a limited number of consumers via a distribution grid that can operate in isolation from national electricity transmission networks.
• The success of mini-grids followed a first generation of government-supported mini-grids, which taught two essential lessons:
  • The necessity of being adaptable to the needs of local communities,
  • And having a sustainable operational model.

Private Sector Solar Mini-Grids in India

• In India, about 700 solar mini-grids are owned and operated by a handful of private companies.
• Unlike state-run mini-grids, these mini-grids are unsubsidised and commercially viable purely based on customer payment.
• These grids are largely in the states of UP, Bihar and Jharkhand, which have seen significant progress on several sustainable development goals based on the success of these mini-grids.
• UP and Bihar have introduced regulations to enable private-sector entrepreneurs to set up mini-grids and to provide a mechanism for private-sector investors to look at this application favourably.

Importance/Benefits of Private Sector Owned and Operated Mini Grids

• To Address the Global Energy Challenges by Offering Cost Effective Alternatives
  • The World Bank has set a target to fund a thousand mini-grids in Nigeria to address the lack of electricity access for over 90 million people.
  • Private sector-owned and operated solar mini-grids are considered the most cost-effective and sustainable solution to provide electricity.
  • There are approximately 675 million people worldwide who still lack access to electricity, with a significant portion in Sub-Saharan Africa and these mini-grids are designed to benefit these people.
• To Provide Immediate Economic and Environmental Benefits
  • Solar mini-grids displace expensive and polluting diesel generation in rural communities.
  • Solar mini-grids offer a more cost-efficient and environmentally friendly alternative, contributing to immediate environmental benefits in addition to providing reliable power.
• Act as Rural Development Accelerators
  • Beyond delivering electricity, mini-grid companies are described as rural development accelerators.
  • They provide various services such as mobile telephony, irrigation, agro-processing, and e-mobility.
  • Additionally, these companies offer sales and financing of appliances, contributing to rural prosperity by facilitating economic activities and improving overall living standards.
• Multi-Sectoral Impact
  • The access to clean energy, facilitated by mini-grids, not only provides high-quality energy services but also enables other livelihood activities.
  • It provides opportunities in healthcare and agriculture sectors, which highlights the multi-sectoral impact of decentralised energy systems.
• Adaptable and Resilient to Climate Shocks
  • Mini-grids are described as essential components of adaptation and resilience strategies, particularly in regions like rural Africa and Asia, which are vulnerable to climate shocks such as drought, heat stress, and flooding.
  • The decentralised nature of mini-grids is seen as critical for enhancing resilience in farming-dependent communities.
• Play a Complementary Role to Centralised Grid Infrastructure
  • If centralised grid infrastructure reaches these communities, mini-grids can still play a crucial role.
    • For example, in Cambodia through the 1990s, hundreds of diesel-powered mini-grids were built and operated by local entrepreneurs. Eventually, they were connected to the main grid as local distributors.
    • Today, more than 250 formerly isolated mini-grids are part of the national grid, helping serve more than 1 million consumers.

Hurdles in Utilising the Full Potential of Solar Energy

• Insufficient Global Solar Investments
  • Solar is the cheapest form of energy generation in most countries, and its climate, energy and economic benefits are increasingly apparent.
  • However, the current level of global solar investments represents only 10 per cent of the required amount to achieve net-zero emissions.
• Disparity in Investment Distribution
  • Developing countries, which are home to over 50 per cent of the global population, received a mere 15 per cent of renewable energy investments in 2022.
  • In Sub-Saharan Africa, per capita investment in renewable energy saw a concerning 44 per cent drop between 2015 and 2021.
  • On the other hand, investments in North America are 41 times higher, and, in Europe, they are 57 times greater.
  • This glaring disparity, compounded by a bias towards large-scale solar projects, underscores a significant imbalance in the types of investments being made.

Ways to Unlock the Full Potential of Solar Mini-Grids

• Implementation of Financial Mechanisms and Guarantees
  • It is important to implement guarantees and introduce innovative financial mechanisms complemented by robust risk underwriting that can catalyse private sector investment.
  • The International Solar Alliance (ISA) is actively spearheading such an initiative through its Global Solar Facility (GSF).
• Address the Disparity in Investment Distribution
  • The GSF places special emphasis on underserved regions in Africa.
    • With a fund of $100 million, it aims to enable $10 billion in investments, providing clean energy access for 35–40 million African households by 2030.
  • This fund, fortified by payment guarantees, insurance, and investment vehicles, will mitigate risks and bolster investor confidence in decentralised solar applications in Africa.

Way Forward

• Increase Investment in Solar Energy
  • Solar energy presents a financially viable path to energy independence, bolstering security and reducing reliance on fossil fuels.
  • Moreover, the cost of solar PV energy is now highly competitive, standing at $24/MWh, lower than both coal and natural gas.
  • The substantial drop in solar module costs over the past decade underscores the holistic benefits of investing in solar energy.
• Need for a Diverse Energy Mix
  • Creating a diverse energy mix, with adequate centralised and distributed renewable generation, is the future of energy.
  • Moreover, energy mix is suitable especially in underserved markets where the cost of grid extension to rural, off-grid areas is prohibitive.
• Establishment of Well Planned and Well Run Solar Mini-Grids
  • Efficiently planned and well-run solar mini-grids rapidly provide strong and dependable grid-level electricity, surpassing the reliability and cost-effectiveness of alternative electrification methods.
  • India’s successful initiative to offer electricity through both large centralised grids and decentralised renewable energy sources is serving as an exemplar for clean energy adoption.
  • It also demonstrates how collaboration between private and public sectors can drive innovation, enabling developing economies to achieve a trajectory of robust energy supply with minimal carbon emissions. 

Conclusion

• Private mini-grids can provide a solution that can simultaneously address two pressing global challenges: providing urgent energy access to those who lack it and contributing to climate action.
• To utilise the full potential and to encourage their adoption and expansion, there is need for policy support, financial backing, and other forms of assistance.