123Fab #41

1 topic, 2 key figures, 3 startups to draw inspiration from

In 2020, in addition to $650 million in private investment in Africa’s mini-grid sector, the African Development Bank announced a $7 million grant to help this African industry. Mini-grids can be defined as sets of electricity generators (10 kW to 10MW) – and possibly energy storage systems – interconnected to a distribution network that supplies electricity to a localized group of customers.

Different technologies can power mini-grids. The most common types are solar mini-grids, hydro mini-grids, and hybrid mini-grids that couple renewable energy with non-renewable sources, such as solar-diesel or solar-biomass systems. Mini-grids can be connected to the national electricity network, but they can also operate autonomously without being connected to a centralized grid. In the first case, the mini-grid is designed to interconnect with the central grid, which means that it operates under normal conditions, disconnecting only in case of a central grid failure or demand peak. In the other case, the mini-grid is designed to operate autonomously in a remote location with the option to connect to a central grid when grid extension occurs. Thus, mini-grids address a wide range of uses, from access to energy in remote and off-grid areas in emerging countries to electricity generation in eco-districts in more developed regions. The three main use cases are the following:

• Remote areas where households lack access to electricity (40%): The State of the global mini-grid market Report of 2020 estimated that 238 million households could be connected to mini-grids in Sub-Saharan Africa, Asia and island nations by 2030. As a result, large corporations and startups are addressing this surging market. In Africa, ENGIE inaugurated its first PowerCorner mini-grid in Zambia in April 2019 and aims to develop 2,000 mini-grids by 2025. In Asia, India’s Tata Power has a similar project in its home country. Startups are also addressing this market. A great example is Nuru, a mini-grid owner and operator using solar-hybrid systems in DRC, in a country where the national electrification rate is only 7%.
• Remote commercial and industrial sites (16%): For off-grid and hybrid power plants, where connection to the national grid is more expensive, hybrid mini-grids can be installed. This is what eLUM does, providing solar-diesel solutions to factories and power plants, such as for a food processing factory in Ghana.
• Eco-district and city for better energy efficiency (10%): The city of Feldheim, Germany, owns and operates a local renewable mini-grid system consisting of solar, wind, and biomass power generation sources, as well as a battery storage system. It has managed to reduce the cost of electricity for residents by 30%.

Mini-grids are a strong trend, that should be embraced rather than questioned. Indeed, up to one-third of the losses associated with distributed energy resources could be recovered if utilities tapped into the mini-grid opportunity. The integration and development of mini-grids are made possible by several technology innovations:

1. Plug-and-play energy management systems using artificial intelligence: Thanks to the developments in optimization model software, connection to the main grid can be efficiently done and AI can be used to forecast demand and energy generation from renewable sources, to accurately match supply with demand. For instance, research institutes CSIRO (Australia) and NREL (USA) are working together to simplify the integration of renewable mini-grid systems by creating a plug-and-play controller that can maximize the use of solar energy.
2. Low-cost battery storage technology: Battery storage systems are crucial in balancing the variability of PV and wind and in shifting the electricity generated at times when supply exceeds demand, to times when demand exceeds supply. While historically renewable mini-grid systems have used lead-acid batteries due to their lower cost, technological advances and large-scale manufacturing of lithium-ion batteries now make them a competitive solution.
3. Advanced metering infrastructure: Smart meters can enable remote monitoring of consumption and support the implementation of various pricing schemes, such as time-of-use tariffs. In the case of off-grid systems, renewable mini-grid operators can implement prepaid or pay-as-you-go models using mobile payment systems and smart meters – to remotely switch on and off customers’ electricity supply.

All of these innovations have not only enabled mini-grids to become a relevant source of electricity supply, but they have also helped generate undeniable economic, ecological, and social impacts. First, mini-grids are often the only economically viable option for electrifying rural communities. Hybrid mini-grids also increase the reliability of the electricity supply. When it comes to their carbon emissions, they are limited as they often incorporate 75%-99% renewable supply. Finally, the implementation of mini-grids has proven to have a positive social impact by fostering and improving the local governance structure through community involvement.

Despite these benefits and market attractiveness, mini-grid penetration remains low in most developing countries due to technical difficulties and economic challenges. The main technical issue is lack of maintenance or use of poor-quality technology, which could be due to a lack of sufficient funding or a shortage of local skills for maintenance. Then, the major economic challenges are the need for regulations to protect mini-grid asset cash flows (e.g., protecting isolated mini-grids if the main grid arrives), and the need to solve customers’ ability to pay, as their irregular income streams pose significant risks to revenue collection.

To conclude, mini-grids have a strong future with short-term uncertainties. While the mini-grid market is estimated to grow at least at a double-digit rate over the next six years, the growth is limited by technical and financial issues. New component technologies (e.g., batteries) and new integration models appear to be the main drivers to solve these issues today (e.g., AI, smart meters).

2 Key Figures

389 mini-grid startups

registered by Tracxn

The mini-grid market expected to reach $30 Bn by 2025

The global mini-grid market was estimated at $11.4 Bn in 2019 and is expected to reach $30 Bn by 2025, at a CAGR of 14.75%.

3 startups to draw inspiration from

This week, we identified three startups that we can draw inspiration from: SolarKiosk, Kemiwatt, and SOLshare.

SolarKiosk

SolarKiosk is a German start-up that provides clean and sustainable energy services intended to help resource-scarce and off-grid areas gain easy access to electricity through energy hubs. The company designs, manufactures, implements and operates solar mini-grids which can be deployed in the most remote areas.

KemiWatt

Kemiwatt is a French start-up that develops innovative redox flow battery technology for stationary energy storage. A typical application is the storage of renewable energy (solar, wind), either off-grid for micro grid, or mini-grid services (load-shifting, peak-shaving,…).

SOLshare

SOLshare is a Bangladi stat-up that is the developer of an electricity trading platform designed to manage local electricity for households and small businesses in densely populated off-grid villages. The company’s peer-to-peer platform enables users to monetize excess solar energy, and create a network by sharing electricity.