Key issues in Mini Grid Regulation Chris Greacen 4th ESMAP/CIF Action Learning Event on Upscaling Mini Grids for Low Cost and Timely Access to Electricity Abuja, Nigeria December 6. 2017 Dr. Chris Greacen Distinguished guests, ladies and gentlemen – it is an honor to be here. I work on regulatory aspects of mini-grids as a consultant to the World Bank, including working with Anastas Mbawala, seated on this panel, to draft Tanzania’s small power producer and mini-grid regulations. Prior to our session on workable mini-grid regulations I going to give an overview and some background on key mini-grid regulatory issues that energy regulatory agencies encounter internationally with regards to mini grids. 1

Key issues in mini-grid regulation Jurisdiction of electricity regulatory authority Licensing and registration Tariff setting Safety & quality of service Rules that address what happens if the main grid reaches the mini-grid Jurisdiction of other regulators Environmental permitting Import and customs Business registration Land and resource rights Based on the composition of our panel I think we’re going to mostly focus on issues that are under the jurisdiction of energy regulators. This issues can be categorized into four key categories: licensing and registration, … Yesterday in the panel discussion focusing on mini grid regulations in Nigeria, a bunch of other topics came up that are the jurisdiction of other kinds of regulatory bodies – especially environmental permitting, import and customs, the process of registering a business, and so forth. These are important, but not in the hands of energy regulators to do much about.

Licensing and registration Licensing: a government-granted right to conduct a business Form of consumer protection Protects legitimate developers However… administrative burden both for the regulator and for developers. Registration: simply informing regulator of existence Starting with licensing and registration… A license is a government-granted right to conduct a business, based on a determination that the licensed entity has the technical and financial capacity to carry out the business. It’s a form of consumer protection, providing due-diligence to prevent customers from being locked in to poor services at high costs. Licenses also protect legitimate developers from competitors who don’t play by the rules. However, when we get to the level of hundreds or thousands of mini-grids, licensing can imposes a significant administrative burden both for the regulator and for developers. A light-handed alternative to licensing is simply “registration” – just letting the regulatory authority know that you are there.

Licensing and registration Should small projects be exempt from licensing? What is “small”? Should there be provisional licenses to allow developers to secure site to conduct studies? Should small projects be exempt from licensing, and be allowed to simply register instead? If so, how do we define “small”? Should there be provisional licenses or some kind other exclusivity document allow developers to secure site to conduct studies and other project development activities?

Retail tariffs Costs for mini-grid power… are generally higher than urban main grid power vary widely depending on the technology, scale and location Should regulators fix retail tariffs? Or should they be determined by mutual agreement with communities? Should mini-grids charge national uniform tariffs? Mini-grid tariffs have been a big issue, and people here at this conference have very different ideas for what they should be. I think one thing we can all agree on is that in most cases, the cost for mini-grid power is higher than main grid power in urban areas. And at the same time, energy services from minigrids are much cheaper than conventional sources like kerosene for lighting. They also vary widely depending on the technology, scale and location. Should regulators fix mini-grid retail tariffs? Or should they be based on mutual agreement between mini grid operators and their customers? Should mini-grids charge tariffs national uniform tariffs? If so, where is the money going to come from to cover the subsidy needed to make a mini-grid viable for developers and investors? Should small projects be exempt from licensing? What is “small”? Should there be provisional licenses or some kind other exclusivity document allow developers to secure site to conduct studies and other project development activities?

Safety & Quality of service Safety: what is the appropriate balance between protecting consumers on the one hand, and avoiding imposing restrictions that limit innovation on the other? Quality / reliability: What is the trade-off between cost and power quality? With quality assurance and safety regulation, it is a balancing act between protecting consumers on the one hand, and keeping red tape and restrictions to innovation to a minimum. Minimum technical standards for mini-girds help ensure that they will not electrocute people or start fires, and address reliability through specifying standards for specific minigrid components such as poles, conductors, electrical connections. A voluntary Quality Assurance (QA) framework helps address the issue of power quality and availability through defining different levels of service; and a common set of protocols for measuring power reliability and quality. The framework has been developed by the Global Lighting and Energy Access Partnership (Global LEAP) initiative of the Clean Energy Ministerial and the U.S. Department of Energy.

Arrival of the main grid What happens to a mini-grid when the big grid arrives is an issue often raised by developers

Small Power Distributor (SPD)

Small Power Producer (SPP)

Both SPP and SPD

Buyout Should Mini Grid operators be compensated when the main grid arrives? If so, what portion of their investment should be compensated? Should it be just the distribution assets – poles and wires – or should it include generation? How to calculate?

Co-existence

Assets abandoned

Hardcopy here at conference Thank you! Hardcopy here at conference http://hdl.handle.net/10986/16571