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Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
Charlie Grover
September 2017
www.pwc.com.au
Africa AustraliaTechnology + Infrastructure Conference
PwC
Agenda
1. The African context
2. The off-grid & micro-grid opportunity – evaluating current global trends
3. Off-grid growth in Africa
4. Impact of standalone systems and its lessons from micro-grids
5. Technology considerations
6. Regulatory and commercial considerations
7. The path forward – stimulating investment
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September 2017Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
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Glossary
Off-grid
Power systems not connected to a larger centralised grid. Electricity is generated, stored and consumed within a closed distribution system ranging from standalone systems to micro-grids.
Standalone systems
Electrification systems for individual appliances/users that are not connected to any grid outside of the individual user premises.
Micro-grids
A power source of a typical capacity ranging from a few kWs to a few MWs, supplied in a remote location through a local distribution grid. The power source could be a diesel-powered generator, a renewable energy power plant, or a hybrid of various technologies.
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The African Context
Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
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The electrification challenge Close to 620 million people in Sub-Saharan Africa have no electricity connection, including over 90% of the rural population.
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Access to electricity
(percentage of population)
0-10
11-20
21-30
31-40
41-50
51-60
61-70
71-80
81-90
90-100
Source(s): Africa Progress Panel, World Bank
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Targeting localised solutions
• Main-grid connectivity is suitable for concentrated urban areas given population density cuts network costs per household.
• Beyond a certain distance, the cost of grid extensions becomes prohibitive, and standalone systems and micro-grids offer distinct cost advantages.
• The capital costs and transmission/ distribution losses of extended utility-scale projects become too great.
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Source(s): World Bank, Bloomberg New Energy Markets, IEA
No data
< 28.66
28-46
46-61
61-74
> 74
Urban population
(percentage of population)
Electricity Distribution Method Levelised Cost of Energy (LCOE) (Per MWh)
Main-grid, existing infrastructure $100.00
Main-grid, new infrastructure > 3km $450.00 +
New micro-grid (solar PV) $310.00
New micro-grid (diesel) $330.00
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The off-grid & micro-grid opportunity
Global trends in micro-grid & off-grid renewable technology, and the feasibility
Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
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The uptake of off-grid systems
• 20 million brand-quality portable solar lights had been sold by July 2015.
• 89 million people in the developing world have at least one solar lighting product in their household already.
• Consumers save on average $3.15 for every dollar spent on pico-PV in Africa
• 87% of direct investments into off-grid solar companies in 2014 and 2015 have been made through pay-as-you-go companies.
• Annual investments into the sector have risen fifteen-fold since 2012, to $276 million in 2015.
• One in three off-grid households globally will use off-grid solar by 2020.
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Source(s): Bloomberg New Energy Finance
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Not there yet
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Source(s): Africa Progress Panel
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• Sticky systems; Diesel micro-grids commonplace; Variable costs of diesel;
• Renewable low running costs, and constantly advancing.
The role of renewable generation in micro-grids
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Source(s): IRENA, GlobalPetrolPrices.com
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The micro-grid opportunity
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Source(s): Africa Progress Panel, EUEI PDF
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Standalone systems vs Micro-grids/ Mini-grids
Evaluating micro-grids as alternate pathway to attain predictable supply in Africa
Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
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The main off-grid alternatives
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Source(s):
Standalone systems
Service
• Limited by capacity and reliability
Regulatory considerations
• Retail largely unregulated
• Mobile payment options
• Quality standards
Commercialisation
• 3 established business models –upfront/lease/PAYG
• Consumer driven
Micro-grids
Service
• Reliability through interconnectivity
Regulatory considerations
• Licencing & quality standards
• PPA, tariff & consumer disputes
• Grant and subsidy schemes
Commercialisation
• 4 established business models –utility/private/community/hybrid
• Degrees of top-down support required
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Types of micro-grids
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Source(s): IRENA
Autonomous Full service
Renewable sources are typically solar PV, hydro
and wind, with diesel generators as back-up.
Service – 24 hours/day, interruptible
Supports larger commercial users.
Users – remote communities with major commercial
requirements
Autonomous Basic service
Renewable sources are typically solar PV,
hydro and biomass.
Service – less than 24 hours/day
Supports lighting and basic communication.
Users – remote communities
Interconnected Community application
Renewable sources are typically solar PV, wind and
limited biomass.
Service – 24 hours/day, interruptible
Targets 100% reliability either as a back up to the
main grid or vice versa.
Users – medium to large gird-connected
communities e.g. universities.
Interconnected Large Industrial application
Renewable sources are typically solar, wind and
limited biomass.
Service – 24 hours/day, uninterruptable
Targets ‘99.999%’ reliability with users willing to pay
for reliability and resiliency.
Users – data centres, industrial processing or other
critical uses.
AUTONOMOUS
INTERCONNECTED
HIGHER TIER OF QUALITY LOWER TIER OF QUALITY
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The uptake of micro-grid electrification
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Region Autonomous Basic service
Autonomous Full service
Interconnected Basic service
Interconnected Large Industrial
South America Mature Emerging Limited Limited
North Africa Mature Emerging Limited Limited
Sub-Saharan Africa Emerging/Mature Emerging Limited Limited
Central-North Asia Emerging/Piloting Limited Limited Limited
South-East Asia Mature Mature –Emerging Emerging Emerging
Source(s): IRENA
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The Success of standalone systems
Reviewing the impact of off-grid systems
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Especially the PAYG stand alone solution market segment is growing fast due to a number of success factors
Success factors in the PAYG market
PAYG are not regulated by energy regulations and do not require approval from public sector authorities
East Africa and Kenya in particular, are the frontier of mobile payments on the African continent, which allows digital loan payments.
Able to build a trusted brand with quality products that provide confidence in new technology
The business model is designed to respond to the needsof rural households and their ability to pay – customer centric focus
Distribution network and customer service centre's, that promotes customer interaction and service
M-KOPAMobisol,
M-PESA, AirtelMTN
1. Relatively small down payment for pico/SHS system
2. Mobile payment series within a year
3. Device is owned by customers
+ +
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The PAYG model for standalone systems
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Source(s): Bloomberg New Energy Finance
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Challenges to Mini-grids compared to Standalone Systems
Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
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Compared to standalone solutions, the development of mini-grids is more challenging
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Specific challenges:• Upfront investment• Procurement, Design, Safety• Policy framework / Regulations /
Compliance requirements• Grid connection timelines• Maintenance & Operations
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Targets for innovation and development of micro-grids
Powering Africa: The Micro-grid & Off-grid Renewable Energy Option
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Targets for technology innovation
• cloud-based data management and system controls (to remove the need for on-site personnel);
• control intelligence;
• export capabilities (securitising the supply for connection to any larger grid); and
• renewable resources prediction (for generation stability).
• Security and resilience of systems – a threat and opportunity for micro-grids
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Source(s):
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Battery and conversion technology
Targets for battery development:
• Reducing costs;
• robustness – ability to plug-and-play with different systems;
• reliability across different conditions; and
• durability – extending lifespans and reducing required ongoing maintenance needs.
Targets for invertor development:
• improving operation in weak or intermittent grids;
• bundling features from across different types of invertors (including battery invertors); and
• allowing compatibility with different battery brands and designs.
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Source(s): IRENA
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Regulatory, planning and development
• Balance the economic needs and limitations of communities
• Engage skilled advisors and technical tools
• Comply with local government electrification plans and development approval processes.
• Different approaches:
- government-led
- community-led
- business-led.
• Importance of Low cost & High simplicity.
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Source(s): IRENA
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Policy/government activity
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Economic Educational Regulatory Market
Technology development funds. Training and education scholarships
and funds for energy-related training.
Stronger intellectual property law to
stimulate technology development.
Consistency in taxation structures
across African states for micro-grid
infrastructure.
Concessional finance such as loans,
grants and public venture funds.
Fostering international cooperation
between energy developers and
markets.
Consistent product standards across
African states to ensure the
technology is applicable across
markets.
Lower GST and tariff charges for
micro-grid infrastructure.
Public private partnerships Review current standards which ‘do
not fulfil realistic needs anymore’
Removing technology barriers by
implementing plug-and-play
protocols.
Flexibility in tariff and metering
structures to allow developers to
tailor charges to community
characteristics.
Fostering relationships between
sources of development finance and
micro-grid business
Demonstration projects
Cooperative R&D programs
See IRENA – Innovation outlook p.91
Source(s): IRENA
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Off-grid Energy
Systems
Off-grid market transformation
Cu
sto
mer
d
riv
en d
ema
nd
time
Electricity access / reliability /price
Off-grid energy
systems
Battery and renewable technology development
Mobile payment expansion
Data analytics
Energy efficiency
Smart local energy
systems
Current market size - standalone
Current market size – mini-grid
(Large) battery storage
Mobile payment
Data analyticsStandalone solutions
Mini-grid
Future market size:
By taking these steps and due to further technological developments the off-grid market can go through a complete transformation, which will be driven by customer demand
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Energy efficient appliances
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Current grid connected customers will evaluate their options, which is driven by a number of forces and creates a transformation profile of the power utility industry
Demographic and social
change
Shift in global economic
power
Rapid urbanization
Climate change and resource
scarcity
Technological breakthroughsGlobal
forces
Low electrificationlevels & unreliable supply
Africa inter government relations & power pools
Increased global interestin Africa’s growth market
Aging and badly maintained systems
Skills scarcity
Local Energy Systems
Command and Control
Ultra Distributed Generation
Supergrids
Customer behaviour
CompetitionProduction
service model
Government,regulations
Distribution channels
Donors
Technological breakthroughs
Climate change and resource scarcity
Demographic changes Shift ineconomic power
Accelerating urbanisation
Africaforces
Disruptingfactors
Future marketmodel mix
TransformationprofilePower Utilityindustry
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Centralized
generation
Transmission &
DistributionTrading &
Retail
Behind-the-meter
(BTM)Metering
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Charlie Grover
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