National Approaches to Electrification – Technology

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Technology: The physical means by which electricity is generated, transmitted and distributed

Grid-connected mini-grids and distribution systems  share characteristics with both Grid Extension and Isolated Mini-grids – They are linked to the grid system and are able to import electricity from and export electricity to it, so technically they have more in common with Grid Extension. However, in that they are owned and managed independently they are more similar to Isolated Mini-grids. These differences call for different policy and regulatory approaches, so a separate Technology category has been established.

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Grid Extension

Definition:

Establishment and extension to new users of a system that connects electricity generation plants to consumers via a transmission and distribution network across the country. Grid systems draw on a variety of generation sources, from nuclear and hydro-power to coal, oil and combined-cycle gas turbines and solar- and wind-power. Each form of generation has different characteristics in terms of flexibility, reliability and costs. A mix of generation sources is required to match generation to demand, with over-reliance on any one form of generation risking lengthy outages (for example, a drought can significantly affect a predominantly hydro-powered grid system). Technology advances, combined with environmental concerns, have led to an increasing focus over recent years on Renewable Energy based generation. Transmission and distribution system designs also vary, with low-cost distribution technologies such as Single Wire Earth return (SWER) being used to reduce costs in remote areas.

Internactions wiht other NAE Categories:

	Delivery Model	The national grid system may be publically or privately owned or combine both in a public-private partnership. Common public-private models for grid systems include: Publically owned generation and transmission, and privately owned distribution; Independent Power Producers (IPP) connected to a publically owned transmission/distribution system). (Where individual distribution areas are separately owned, eg by municipalities or regional bodies, these may be regarded as grid-connected distribution systems and are discussed under that category).
	Legual Basis	Grid systems almost always act as monopoly concessions (because of the need to balance demand and supply across the system in real-time, and the substantial investment required to establish and maintain the infrastructure). As a result, the right to transmit and sell electricity is often reserved to the national grid utility or company (at least within the area reached by the grid system).
	Price/Tariff Regulation	In line with the nature of the national grid as a single coherent system, uniform tariffs are almost invariably charged across the system (though often with different tariffs for different classes of user and levels of usage, or in some cases time-of-use pricing). Electricity prices are a highly political issue in almost every country, and therefore there is almost always some oversight of these tariffs. Without explicit regulation there is a risk of political pressure leading to tariffs which fail to cover costs, and hence system deterioration.
	Finance	Almost all national grid systems (including those in developed countries) are constructed using public funding, drawing on government funds sometimes supplemented by concessionary loans and grants from international agencies. Where the grid system is (wholly or partially) privately owned (often as the result of a privatisation process), private investment in infrastructure may be leveraged by subsidies (egfor connection charges). User charges are the other main source of grid system funding, and uniform tariffs mean that some element of cross-subsidy is inherent in grid-based electricity provision, with users who are more expensive to supply being subsidized by those who can be supplied more cheaply.
	Non-Financial Interventions	National energy planning is key to establishing the economically optimum extent of the grid. Institutional restructuring, regulatory reform and policy and target setting may all be beneficial in creating the institutional and policy basis for grid extension. Capacity building or technical assistance may be needed where the key actors involved in grid extension lack capacity. Technology development/adoption and adoption of appropriate technical standards can enable grid extension at lower cost (as shown in the NAE Case Study:Tunisia where adoption of standards allowing MALT (Mise A La Terre) distribution lowered costs), while demand promotion may be needed to increase revenues and make it economically sustainable.

Advantages and Disadvantages (Including Level of Electricity Provided)

Grid extension (combined with construction of additional generation capacity) is particularly appropriate for densely populated areas with higher demand levels, close to the existing grid system. Grid systems provide the ability to build large, efficient generating plants in optimum locations, and make use of economies of scale. These economies may, however, be overwhelmed by the costs of the transmission and distribution infrastructure needed for smaller, more remote communities where mini-grid and off-grid technologies may provide better solutions. Significant extension of the grid also calls for a series of major infrastructure projects, requiring planning, procurement and project management capabilities and is therefore often a lengthy exercise, meaning that other solutions, even if more expensive, may merit consideration as a means to achieve electrification more quickly.          Grid systems are usually designed to provide a high level of electricity, suitable to serve all household, commercial, industrial and community requirements (Tier 51). However, where generation is inadequate (or liable to interruption); or transmission and distribution systems are insufficiently robust or poorly maintained; reliability and quality of supply may deteriorate. Thus while users have a physical connection to the grid, they may not in fact have reliable access to electricity (bringing the supply Tier 3 or lower). It is therefore important to couple grid extension with  development of additional generation capacity to support the resulting additional demand.

Further Informaiton and Guidance

Barnes, D. (2007). The Challenge of Rural Electrification: Strategies for Developing Countries. Book Chapter https://books.google.co.uk/books?id=iOBi17Pr3fIC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false ESMAP (2005), Meeting the Challenge of Rural Electrification in Developing Nations: The Experience of Successful Programs https://static.globalinnovationexchange.org/s3fs-public/asset/document/Meeting0the0Ch10Discussion0Version0.pdf?q3Tol9Bdn4yH4J43t3P9t3hq5lh6ZipT IEA, (2010), Comparative Study on Rural Electrification Policies in Emerging Economies https://www.iea.org/publications/freepublications/publication/rural_elect.pdf Kaundinya, D. P., Balachandra, P., & Ravindranath, N. H. (2009). Grid-connected versus stand-alone energy systems for  decentralized power—a review of literature. Renewable and Sustainable Energy Reviews, 13(8), 2041-2050 http://www.academia.edu/11422615/Grid-connected_versus_stand-alone_energy_systems_for_decentralized_power_A_review_of_literature Vietnam. The World Bank, (2011). State and People, Central and Local, Working Together: The Vietnam Rural Electrification Experience. Washington. http://documents.worldbank.org/curated/en/601001468027856008/Vietnam-State-and-people-central-and-local-working-together-the-rural-electrification-experience

Relevante Case Studies:

• Rwanda, Sector-Wide Approach to Planning
  
• South Africa, Integrated National Electrification
  
• Tunisia, Low Cost Distribution Technology
  

Grid-Connected Mini-Grids/Distributed System

Definition:

An electricity system connected to, but owned and/or separately managed from, the main grid system which supplies electricity to users within a local area. Grid-connected mini-grids and distribution systems exist at a wide range of scales from those supplying a few households to systems covering entire districts or regions. The term “grid-connected mini-grid” is most frequently used to refer to systems built around their own, usually small-scale (diesel, bioenergy, biomass, hydro, solar, wind or hybrid) generation and connected to the grid to allow import and export of electricity. While these include fossil-fuel based generation, technology advances combined with environmental concerns mean that policy-makers are increasingly focussing on encouraging Renewable Energy based generation. A “distribution system” generally refers to a larger system designed primarily to distribute electricity from the main grid system to users. However distribution systems often also include their own generation and there is no clear distinction between grid-connected mini-grids and distribution systems (and the term “grid-connected mini-grid” is used to refer to both in the description below). At the larger end of the scale, distribution systems may be closely integrated into the main grid system, and the distinction between electrification through grid extension and through grid-connected distribution system expansion is one of ownership and management rather than technology. Distribution systems generally use lower voltages than for transmission, but the specific boundary between the two varies from country to country. Separate ownership and management may allow grid-connected mini-grids to use lower voltages and lower-cost technologies than the main grid, but grid system technical requirements (and standards) will generally prevent the lowest capacity “skinny-grids” from becoming grid-connected.

Internactions wiht other NAE Categories:

	Delivery Model	Grid-connected mini-grids are often privately owned, but may be publically owned or combine both in a public-private partnership. Common models include: mini-grids owned by a private developer connected to the main grid; A private enterprise installing generation to meet its own power demand building a local distribution system and supply to other local users and the grid;     A municipality or other local public entity operating a grid connected distribution system; A private company, or public-private partnership taking on operation of a section of the grid distribution system as part of a privatisation process.
	Legual Basis	Larger grid-connected mini-grids will generally require monopoly concessions (because of the substantial investment required to establish and maintain the infrastructure). Even for smaller grid-connected mini-grids, some form of licensing will almost invariably be appropriate to assure investors that they have the right to sell electricity (both to users and the grid), to ensure that technical standards for grid connection are met, and as the means of regulating prices for export and import of electricity from the grid and sale of electricity to users (see price/tariff regulation).
	Price/Tariff Regulation	Grid connected mini-grids rely on the sale of electricity to the grid, and import of electricity from the grid and its sale to users, as well as sale of own-generated electricity to users. Clarity on how each of these tariffs is set and regulated will be key to securing investment: Setting a standard price for purchase of electricity from the grid, or defining what category of user grid-connected mini-grids fall under, and having a transparent process for adjusting these prices (rather than leaving them to be negotiated between individual developers and the grid company) will give investors confidence; A standard price for sale of electricity to the grid (a feed-in tariff), based for instance on the grid company’s avoided cost (as in Tanzania) or an expected average cost from a particular form of generation, will similarly reduce mini-grid development costs and risks; Regulation of user tariffs for grid-connected mini-grids will be particularly sensitive given that the mini-grid operator may be drawing on the grid system to supply its users. Applying a uniform tariff (particularly a grid-parity) tariff is likely to offer some grid-connected mini-grids super-profits while making others uneconomic, but an approach based on a margin above the price for purchasing electricity from the grid may be appropriate (particularly where the system acts primarily as a means for distributing electricity from the grid and has little own-generation capacity). In general a cost-recovery approach, taking account of system-specific costs and any subsidies is likely to work best, and clarity and transparency of the process will be key for investors.
	Finance	The primary financing for grid-connected mini-grids will generally align with the delivery model, with publically-owned mini-grids using public finance and privately owned mini-grids drawing on private finance. However, where incomes are lower or system costs higher, some form of public-private partnership is likely to be needed with public funding (eg through grants and subsidies) making electricity from grid-connected mini-grids affordable to users and the mini-grid systems economically sustainable. User charges are the other main source of funding with connection charges and ongoing tariffs are used to contribute to investment, cover ongoing operating costs and support repayment and return on investment. As with any system supplying multiple users there is likely to be some element of cross-subsidy between users connected to any individual mini-grid system. Cross-subsidy between grid-connected mini-grids or between the main grid and grid-connected systems may be appropriate, particularly if a uniform tariff is applied.
	Non-Financial Interventions	National energy planning and sharing of market information are key to establishing the planned extent and timescales for grid extension and hence the scope for grid-connected mini-grids. Institutional restructuring, regulatory reform and policy and target-setting may all be required to create the framework for grid-connected mini-grids to be developed and establishment of technical standards is vital for enabling grid-connected mini-grids. Capacity building or technical assistance may be beneficial where potential developers or those (such as municipalities or user cooperatives) expected to take on responsibility distribution system operation lack capabilities. User awareness raising and demand promotion are often essential to increase revenues and make mini-grids economically sustainable.

Advantages and Disadvantages (Including Level of Electricity Provided)

Mini-grids are particularly appropriate for relatively densely populated areas with higher demand levels (with off-grid systems providing the best solutions for sparsely populated low-demand areas). For mini-grids to be grid connected they must also be relatively close to the existing grid system. In theory mini-grids should only be the best option where the costs of infrastructure to connect to the grid system out-balance the economies of scale from large-scale centralized generation and pooling demand. Connection to the main grid system allows import and export of electricity and so enables the mini-grid to access these economies of scale and (provided the grid itself is reliable) supports higher levels of quality and reliability – however it also requires construction of connection infrastructure and compliance with grid technical standards. Grid-connected mini-grids can therefore be seen primarily as an alternative to grid extension, with the main differentiator being the ownership and/or management model. If a source of energy for generation exists in an area beyond the extent of the grid, it may provide an opportunity for a mini-grid to be developed to supply local users, and connected to the grid, more quickly than the grid itself would be extended. Management of distribution by the central grid company should provide organisational economies of scale, but in practice separate ownership or management of a local distribution system may increase organisational efficiency and allow an electricity service which is more responsive to users and their needs than that provided by the national grid company. Grid-connected mini-grids can, in theory, provide any level of electricity supply, but in most cases if the investment is made for grid connection and associated standards are met, they  provide a grid-equivalent service, meeting all household, commercial, industrial and community requirements (Tier 5). (If the grid system itself is over-stretched with inadequate generation; or insufficiently robust or poorly maintained transmission and distribution systems reliability and quality of supply may deteriorate so that while users have a physical connection, they may not in fact have reliable access to electricity (bringing the supply Tier 3 or lower). To the extent that a grid-connected mini-grid draws on electricity from the grid its construction should be coupled with development of additional centralized generation capacity to support the resulting additional demand.

Further Informaiton and Guidance

ARE. 2014. Hybrid Mini-Grids for Rural Electrification - Lessons Learned https://ruralelec.org/sites/default/files/hybrid_mini-grids_for_rural_electrification_2014.pdf Barnes, D. (2007). The Challenge of Rural Electrification: Strategies for Developing Countries. Book Chapter. https://books.google.co.uk/books?id=iOBi17Pr3fIC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false ESMAP (2005), Meeting the Challenge of Rural Electrification in Developing Nations: The Experience of Successful Programs https://static.globalinnovationexchange.org/s3fs-public/asset/document/Meeting0the0Ch10Discussion0Version0.pdf?q3Tol9Bdn4yH4J43t3P9t3hq5lh6ZipT IRENA (2016), Innovation Outlook: Renewable Mini-grids, International Renewable Energy Agency, Abu Dhabi http://www.irena.org/DocumentDownloads/Publications/IRENA_Innovation_Outlook_Minigrids_2016.pdf

Isolated Mini-Grids

Definition:

A system for generation and distribution of electricity to multiple users which is not connected to the main grid system.

Internactions wiht other NAE Categories:

	Delivery Model
	Legual Basis
	Price/Tariff Regulation
	Finance
	Non-Financial Interventions

Standalone Systems

Definition:

A system for generating and supplying electricity to a single user (separate from any distribution system).

Internactions wiht other NAE Categories:

	Delivery Model
	Legual Basis
	Price/Tariff Regulation
	Finance
	Non-Financial Interventions

Relevante Case Studies:

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