India’s government is crafting a plan to build such decentralized power and delivery mechanisms over the next five years — a $2.5 billion effort. While the focus there is on extending access to those rural areas without electricity, it could also be used in its industrial and manufacturing sectors.
India is an example of how microgrid technologies could be applied in the world’s growth regions. To have universal electrification by 2030, microgrid expansion would need to double, notes the Microgrid Investment Accelerator, which was founded by Microsoft and Facebook, along with Allotrope Partners. And that requires reduced barriers to entry to entice risk takers.
“Microgrid (and solar home system) solutions powered by renewables provide electricity to nearly 90 million people,” says the Microgrid Investment Calculator. “To achieve universal electricity access by 2030, the current pace of expansion will have to double. It is estimated that off-grid solutions will supply 50%-60% of the additional generation needed to achieve universal electricity access by 2030.”
About 95% of those without electricity are in sub-Saharan Africa or Asia and 80% of those are in rural areas. General Electric and Italy’s Enel are active in Africa while Schneider Electric and Chili’s Engie are investing in Southeast Asia.
The good news is that the microgrid technology market is growing by 20% a year, says Bloomberg New Energy Finance. It totaled $6.8 billion globally as of 2017, adds the Advanced Energy Economy; the Pacific island nations announced 15 different projects in the last year. Even better, the costs of both renewables and energy storage technologies — two assets central to microgrids — are falling.
The bad news is that CrossBoundary told the Clean Energy Finance Forum that the payback for microgrid systems takes 10 years, which requires developers to charge more per kilowatt-hour. That is because developed nations have dense urban areas that consume much power while developing countries have sparse populations that use much less, meaning that companies must charge more.
“Mini-grid deployment in Africa has been low,” CrossBoundary told TechMoran.com “Governments, policy makers and donors do not see mini-grids as a viable substitute to the main grid. This deters investors, who also struggle to understand the business case.” CrossBoundary leverages private capital to unlock the economic potential in the developing world.
Despite the obstacles, microgrid technologies hold promise in the developing world because of the difficulty of building centralized generation and delivery systems. It’s tantamount to those same places skipping over the traditional wireline telephone systems and going straight into using mobile cellular devices.
Consider Africa, which experienced near 6 percent economic expansion during the global recession –despite the fact that 600 million people on the continent lack access to electricity. But that deficiency is changing as multinational corporations from around the world are either actively investing in the region or they are actively discussing that possibility.
According to the International Energy Agency, sub-Saharan Africa will require $400 billion by 2035 to modernize its energy foundation. The continent’s leaders are providing incentives for businesses to locate there. Meanwhile, the United States’ Power Africa initiative will have kicked in $7 billion by year-end, with much of that going to expand transmission lines to deliver the newfound electricity. Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania are the initial beneficiaries.
“There are gaps in infrastructure today,” adds K.Y. Amoako, founder and president of the African Center for Economic Transformation. “About 30 countries (of the 54 in Africa) have serious issues. If we can solve this, we add two percentage points to our gross domestic product.”
Onsite power with localized microgrids are a powerful tool in the effort to bring about global electrification. The immediate goal is to reduce the technology’s cost, allowing it to spread and new participants to enter the market. Investors will thus take note, allowing more developing nations to experience prosperity.
The author is a Forbes contributor. The opinions expressed are those of the writer.