1. Mini-grids and the Arrival of the National Grid
United Nations Foundation
How some off-grid renewable energy projects have adapted to grid arrival
Most mini-grids start off as small isolated electrical systems. Over time, the national grid extends and reaches many villages that were previously supplied by isolated mini-grids.
This raises the question: what should happen to the mini-grid when the national grid arrives? As someone that works on regulatory frameworks and program designs to support mini grids, the risk of main grid arrival is a theme that I hear over and over again, especially from developers. Developers are concerned that the arrival of a subsidized national grid will take away their customers and leave them unable to meet debt payments. This concern is well-warranted; when I have observed mini grid projects abandoned the primary reason is because the grid arrived.
If you’re a policy maker or work with a regulatory authority, or if you are a rural electricity consumer this issue of interest because lowering barriers to mini grid investment means that more rural citizens can get high quality electricity more quickly, with less investment of scarce public funds. Mini grids can be built in considerably less than a year whereas extending the main grid can take decades. And if done right, there can be a smooth transition from mini grid to the main grid when or if it arrives.
I’m going to try to help provide a foundation for discussion in this webinar by giving an overview of several different interconnection options. None of these is a magic bullet, but I believe if well-implemented can offer some relief, reduce wasted investment, and help balance the interests of mini grid developers, utilities, and electricity consumers – especially if mini grid developers take them into consideration in early stages of mini grid planning.
Chris Greacen
18 July, 2018

2. Mini grid options after arrival of the main grid
Small Power Distributor (SPD)
Small Power Producer (SPP)
Both SPD and SPP
Separate systems in the same village
Buyout by utility
Assets abandoned
We’ve observed six different possibilities for mini grids when the main grid arrives.
Conversion to become a “small power distributor” or SPD, conversion to a small power producer, or SPP; a combination of SPD and SPP, continue operating as separate systems in the same village, buyout of assets by the utility, and last (and least) assets abandoned.

3. Arrival of the main grid
Before the arrival of the main grid, we have separate systems – the main grid powered by centralized power plants, and an isolated mini grid with its own power source, supplying customers over a localized distribution system.

4. Arrival of the main grid
When the main grid expands into the proximity of the mini grid…

5. Small Power Distributor (SPD)
One option is to become a small power distributor (SPD) in which the mini grid abandons its generation assets, but stays in the distribution business – keeping its retail customers and selling electricity it purchases in bulk from the national grid.

6. Cambodia: from isolated mini-grid to SPD
>250 mini-grids became SPDs
Electricity Authority of Cambodia (EAC) put in place a comprehensive program:
Long-term distribution licenses required… To acquire one a mini-grid must:
Invest in utility-quality distribution network
Extend network thru service territory
Grants and loans
Retail tariffs standardized and cross-subsidized for distribution franchisees.
Cambodia is the biggest example of this. In Cambodia as the main grid expanded and reached mini-grid areas, 250 mini-grids became SPDs. They abandoned their diesel generators and purchased electricity (for lower cost than they could generate themselves) from the national utility, for resale to their old customers. The SPD model works particularly well for diesel generators where generation costs are high and the diesel generators themselves aren’t worth very much.
The Electricity Authority of Cambodia, the country’s regulator, played a key role by putting in place a comprehensive program to support conversion to SPDs. It did two things. First, it required licenses. To acquire a license, mini-grids had to invest in upgrading the quality of their distribution networks and extend networks throughout service territories that the EAC assigned to them. Grants and loans from a rural electricity fund make the process easier. Retail tariffs for these distribution franchisees are standardized, and the difference between this tariff and a project-specific cost-reflective tariff calculated by EAC were paid out of a Rural Electrification Fund capitalized by the main utility.
SPDs are also found in Nepal, Bangladesh, and Burkina Faso.

7. Small Power Producer (SPP)
A second option is becoming a Small Power Producer – in which the mini grid abandons the distribution network, but keeps its generation and sells electricity to the national grid at wholesale. This works particularly well for hydropower which has zero fuel cost and can generate 24/7.

8. Sri Lanka: from isolated mini-grid to SPP (sometimes)
>250 isolated community-owned hydropower built with financial support from GoSL, GEF and World Bank
With arrival of national grid >100 mini-grids abandoned
Three projects: 12 to 45 kW converted to SPPs
Five more in pipeline
No longer provide retail sales to village
In Sri Lanka, over 250 micro-hydropower mini-grids were built with support from the government of Sri Lanka, the GEF, and the World Bank. With arrival of the main grid, more than 100 have been abandoned. But three projects have successfully converted to become SPPs. Fifteen more are possibilities. These SPPs now only sell electricity to the national grid, and the national grid exclusively services households in the villages.

9. Both SPP and SPD
Or projects can tie onto the grid but keep both generation and their distribution networks. They generate electricity, distribute to local customers and sell excess to the national grid. And if they don’t have enough, they purchase it from the national grid.

10. Indonesia: SPD + SPP
Of 200 community-owned mini-grids where national grid has arrived…
150 abandoned, PLN takes over.
9 have become SPPs/SPDs.
Sell all or some electricity to national grid
In Indonesia, of 200 community-owned mini-grids where national grid has arrived, so far 9 have become SPPs, selling all or some of their electricity to national grid.

11. Co-existence
A fairly common model might be termed “co-existence” in which the mini grid continues to operate its lines and power plant even after the main grid arrives. The electrical systems operate side by side, but never electrically connect.
In Indonesia, villages mini-grids co-exist selling retail electricity but electrically isolated from the national grid.
In Uttar Pradesh, India mini grids that co-exist next to the national utility are fairly common because though the grid lines are extended to rural villages, the electricity supply in India is very erratic. In some cases developers have built mini grids in already electrified villages.

12. Buyout
Regulations that are now on the books in Tanzania and Nigeria and under development, I believe, in Sierra Leone and Rwanda that provide for mini grids to be compensated when the main grid arrives. In Tanzania it is only depreciated distribution assets that are built to sufficient standards. In Nigeria it is everything (depreciated generation and distribution assets), plus a years’ worth of revenues. I should note that as far as I know, compensation has not yet happened – these are fairly new regulations.

13. Assets abandoned
Unfortunately, the most common case we’re observing is that the assets are abandoned. Some solar mini grid developers are guarding against this by building their equipment into shipping containers that can easily be picked up and brought to another, more remote village, when the main grid arrives.

14. Lessons
Viable examples of formerly isolated village mini-grids connecting to main-grid exist…
Hydropower able to remain financially viable selling wholesale to utility (Sri Lanka & Indonesia)
Mini-grids with utility-grade distribution networks transitioning to small power distributors (Cambodia)
… but are rare
Most mini-grids abandoned when utility arrives
Cost of interconnection depends on business model
e.g. SPP interconnection more costly than SPD

15. ESMAP Global Facility on Mini Grids
These issues are covered in depth in three free publications I’ve helped write. The first is a technical guide on grid-interconnection of generation under 200 kW written published by the US Lawrence Berkeley Laboratories. The second is World Bank book “From the Bottom Up” available in English and French from the World Bank’s ESMAP Global Facility on Mini Grids. And third, a small book, co-written with Bernard Tenenbaum and my fellow panelist Dipti Vaghela, focuses explicitly on the experiences of developing countries that have been pioneers in integrating mini grids with the expanding national grid.
These publications draw a lot on experiences, particularly working with the World Bank’s ESMAP in countries in Africa and Asia to scale up deployment of mini grids through helping governments create regulatory frameworks.
tiny.cc/MG_interconnect
tiny.cc/BottomUp
tiny.cc/gridarrival

16. Thank you