Lack of access to electricity is primarily a rural problem. In sub-Saharan Africa, for example, while the electrification rate in urban areas is 63 percent, it is only 19 percent in rural regions where the settings and locations are too small, remote or widely dispersed for grid connection to be technically or economically feasible. In such situations, minigrids offer an intermediate solution - sitting between a conventional grid connection and stand-alone systems.
Minigrids are power sources with typical capacities that range from a few kWs to a number of MWs. They supply electricity to consumers in remote locations via a local distribution grid. The size of this grid depends on the population size in question. The power source may be a diesel-powered generator, a renewable energy power plant or a hybrid power plant.
Some locations, such as remote islands, are often omitted from government electrification initiatives. In these cases, minigrids represent the only option. But properly designed minigrid solutions have a clear advantage over individual stand-alone home energy systems in terms of service quality and supply.
Minigrids have been used for the electrification of remote areas for at least two decades. But they remain a marginal option. Investments in minigrid projects are still limited compared to those in grid extension projects. However, the International Energy Agency (IEA) estimates that minigrids will be the most economical way of delivering more than 40 percent of the installed capacity required en route to achieving universal access to electricity by 2030 (almost 400TWh).
How we make a difference
The private sector has an important role to play in helping to scale-up minigrid projects. However, the initial installations of such projects - often in remote villages with low per-capita income - carry risks that the private sector may not be willing to accept. OPEC Fund co-operated with the Alliance for Rural Electrification (ARE) - an international not-for-profit association representing the decentralized energy sector - to support the deployment of private sector-financed minigrids to increase access to modern and affordable energy in developing countries. Four ARE members received grants from OPEC Fund providing a de-risking mechanism for business ventures through cost-sharing.