Mini-grids may be the best way to illuminate the “bottom billion”.

Mini-grids may be the best way to illuminate the “bottom billion”.

ELECTRICITY powers growth, boosts education and improves lives. Yet about 1.1bn mostly rural dwellers in Asia and Africa remain stuck in the dark. They have no electric light, rely on kerosene and diesel for power, and struggle to irrigate their crops. The good news is that people can be connected to clean, reliable power faster than ever before. But to realise the potential, governments need to rethink the role of utilities.

Typically, countries connect citizens with vast grid-extension programmes. Big grids make perfect sense for populous places. They can cheaply supply power generated far away to millions and, as they incorporate more wind and solar energy, they are becoming greener. But in remote places, the economic case for grids becomes hard to make.

Many utilities are short of cash, if not bankrupt. The cost of taking power to those least able to afford it adds to their debts. China and Thailand took 20 years to improve electrification rates from about 30-40% to 85-90%. Reaching the remaining sliver took a further 20 years; China managed it only in 2015. And universal electrification, a slogan beloved of politicians, is frequently less than it seems. In April India celebrated the electrification of its last village, yet about 240m people remain without power and connections are often unreliable.

Enter mini-grids, which can operate independently of national grids, and are a way for private companies to offer services more quickly and reliably than frequently state-owned incumbents. Mini-grids are banks of batteries often charged by solar arrays. Unlike “rooftop” solar systems, which are increasingly common in parts of Africa but provide little juice, mini-grids provide round-the-clock electricity capable of powering machinery, irrigation systems and freezers, as well as lighting. Although they are expensive, mini-grids are likely to become cheaper as they grow more common. In the interim, providers are using specialists in rural development and microfinance to teach people how to set up businesses that benefit from a lot of power (see Finance section). They find that if people learn how to make money from electricity, they willingly pay for it.

Network effects

The International Energy Agency, a forecaster, reckons mini-grids could account for $300bn of investment by 2030, making them the most important means of achieving universal access. Yet for that to happen, governments must embrace them. Officials are often loth to decentralise the power supply for fear of losing political control. For their part, mini-grid providers fear being left in the lurch if the main grid suddenly arrives in one of their markets.

Both problems can be solved if governments see mini-grids not as autarkic outposts, but as part of a master plan. Mini-grids and rooftop solar systems can one day be hooked up to the main grid; they should not compete as paths to rural electrification. The more strategic planning of this sort there is, the less risk that mini-grids will end up as “stranded assets”. Governments could reallocate the subsidies available for extending grids to lower the cost of expanding mini-grids. They would be able to promote mini-grids across neighbouring villages, improving the economies of scale for developers. Countries like Nigeria are already pioneering such initiatives. Call it enlightened thinking.

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