JUNE 2024 2024/135 A KNOWLEDGE NOTE SERIES FOR THE ENERGY & EXTRACTIVES GLOBAL PRACTICE Mini Grids for Underserved Main Grid Customers “Up to 2 billion people are fundamentally constrained in their ability to grow because the electricity access they have is erratic and unreliable.” —Raj Shah, President, Rockefeller Foundation (2020) The bottom line. Can mini grids help to solve the problem of poorly served main grid connected communities? A mini grid is an electricity generation and distribution network that supplies electricity to a localized group of customers. Mini grids can be isolated from or connected to the main grid. To date, most mini grids in Sub-Saharan Africa have been built in electrically isolated rural villages not connected to the main grid. Based on broad experience working with mini grid programs in more than 20 low- and middle-income countries and five detailed case studies, the authors offer observations and recommendations about mini grids in general and a new type known as “undergrid mini grids” being used in Nigeria and India to serve poorly served communities. Why do main grid customers need mini grids? fact that many households and businesses that are officially reported as connected often receive very poor service. Many households and businesses that are officially reported as connected receive poor service Poor service occurs in different ways. The most common Most discussions of scaling up electricity access in develop- shortcoming is that the electricity service is not reliable. A ing countries focus on a single number: the millions of people 2019 IFC report estimated that two billion people suffered who have no access to electricity. In 2022, it was reported annual blackouts of 100 hours or more and that one billion that worldwide 675 million people did not have any access suffered 1,000 hours or more (IFC 2019). And even when to grid-supplied electricity, with 567 million of them living the electricity is supplied as promised, the quality (the volt- in Africa. But an exclusive focus on this number ignores the age and frequency) is often below standard, burning out machines and appliances prematurely. Customers are, as the Nigerian electricity regulator (NERC) euphemistically describes, underserved. Bernard Tenenbaum is an independent energy With the growing realization that a physical connection does and regulatory consultant. not automatically lead to good service, interest has grown in so-called undergrid mini grids that would serve areas Authors Chris Greacen is a renewable energy and energy access consultant to ESMAP. Ashish Shrestha is a senior energy specialist with ESMAP. 2 Mini Grids for Underserved Main Grid Customers Figure 1. Types of mini grids and their relationship to the main grid Population has Traditional focus of no electricity service Mini grid in areas governments, World Bank, from the main grid unserved by main grid and other development organizations working with mini grids in developing O -grid mini grids countries. Types Mini grid interconnected of mini Population is to the main grid grids Wuse Market & underserved/ Toto case studies poorly served by the main grid Mini grid not interconnected to the main grid Mokoloki, Husk India, and TPRMG Source: Tenenbaum, Greacen, and Shrestha 2024. case studies Undergrid mini grids already connected to the main grid but whose customers Can undergrid mini grids provide commercially and environ- are receiving unsatisfactory service (figure 1, bottom panel). mentally sustainable electricity service for households and businesses in communities that are currently receiving poor As shown in the bottom panel of figure 1, undergrid mini grids service from a traditional government-owned or privately can take two forms: interconnected and non-interconnect- owned Disco? And if so, at what cost? These questions are ed.1 An interconnected mini grid’s connection to the local addressed in five detailed case studies of both types in Mini electricity distribution company (Disco) allows for purchases Grid Solutions for Underserved Customers: New Insights of electricity by the mini grid from the Disco and, in some from Nigeria and India (Tenenbaum, Greacen, and Shrestha cases, sales of electricity to the Disco by the mini grids. In 2024). contrast, a non-interconnected (or isolated) undergrid mini grid has no electrical connection to a Disco’s distribution Table 1 highlights case studies from Nigeria and India that system. Electrical isolation does not require geographic iso- focus on privately owned and operated undergrid mini grids lation. In India, more than 600 privately owned, non-inter- developed at sites chosen by developers without significant connected, solar hybrid mini grids are operating in villages government involvement.2 These studies concentrate on that are already being served by a Disco connected to the solar hybrid mini grids made up of combinations of solar main grid. power, batteries, diesel, and occasionally biomass. This blend of technologies is anticipated to predominate in upcoming 1. An interconnected mini grid is a type of distributed energy resource. A DER is “anything that generates, stores or manages electricity on distribution grids” (Roberts 2021). It can be a demand- or supply-side resource. DERs 2. This is not the only possible government approach to promoting mini can take many forms: mini grids, rooftop solar, building storage, consumer grids. A new forthcoming Live Wire will discuss the pros and cons of different batteries, distributed generation, demand response, energy efficiency, ther- government approaches used in other Sub-Saharan African countries to mal storage, or electric vehicles and their batteries. encourage mini grid development. Mini Grids for Underserved Main Grid Customers 3 mini grid projects across Sub-Saharan Africa and Asia for the to negotiate with government-owned Discos. To paraphrase foreseeable future. one private developer in India: “If our main selling point is a higher level of reliability, we need to be sure that we are Nigeria has seen the recent establishment of a few intercon- operating with good quality and well-maintained distribu- nected undergrid mini grids, adding to more than 150 exist- tion facilities. Most existing local Disco distribution facilities ing non-interconnected mini grids, while India reports more do not meet that standard.” Hence, it is rational for a mini than 600 privately managed non-interconnected mini grids grid developer to build a new distribution system, but from located in main grid–connected communities in Bihar, Uttar a societal perspective, this leads to separate, overlapping Pradesh, and Jharkhand. Scale-up of interconnected mini distribution systems. grids is underway in Nigeria. The country’s new Distributed Access through Renewable Energy Scale-Up (DARES) pro- Can interconnected mini grids lower costs? gram targets $127 million in performance-based grants Interconnected mini grids offer a promising avenue funded by the World Bank for interconnected mini grids. for reducing energy costs and enhancing electricity reliability and service quality for retail customers The table reveals two significant differences between the Indian and Nigerian mini grids. First, none of the Indian mini These systems offer a symbiotic relationship in which cus- grids are interconnected to local Discos. This probably reflects tomers, Discos, and mini grid developers all stand to gain. the fact that rural mini grids in India fit into an essentially deregulated category (that is, no licenses are required and Customers can benefit from electricity supply at a signifi- tariffs are not regulated). This is a surprisingly laissez-faire cantly lower cost, as evidenced in the Wuse market in Abuja, approach, given India’s reputation for being bureaucratic. At Nigeria, where energy expenses for a first group of mini grid present it is uncertain what state or national regulatory rules customers dropped by about 65 percent once the need for would apply if a mini grid and a Disco were to interconnect. In personal backup generators was eliminated and service contrast, the regulatory regime for interconnected mini grids became more reliable. in Nigeria is spelled out in some detail in the country’s 2016 mini grid regulations (modified in 2023). Second, Indian mini Discos can reduce losses by handing off money-losing cus- grids generally do not attempt to lease the existing distribu- tomers to mini grids. A 2018 Rocky Mountain Institute report tion facilities of local Discos. This may reflect the fact that the estimated that a typical Nigerian Disco lost an average of existing facilities in rural villages are often in poor physical $0.21 per kilowatt hour because the tariffs Disco are allowed condition and also that mini grid developers find it difficult to charge are set artificially low for political reasons. Leasing Table 1. Features of the mini grids in the case studies Type of undergrid Makes bulk electricity Leases some or all existing Case study Service area Country mini grid purchases from Disco distribution facilities Mokoloki Rural town Nigeria Non-interconnected No Yes Toto Rural town Nigeria Interconnected Yes Yes Wuse Urban market Nigeria Interconnected Yes Yes Tata Rural town/ India Non-interconnected No No village Husk Rural town/ India and Non-interconnected No No village Nigeria 4 Mini Grids for Underserved Main Grid Customers their poles and wires to mini grid operators can earn rental the savings will be about half, assuming the wholesale tariff payments of $0.006 to $0.013 per kilowatt hour. Discos can is unchanged. also sell electricity to mini grid operators at bulk supply tar- iffs. The Abuja Electricity Distribution Company (AEDC), which What is the role of regulation? previously served the Wuse market, predicted that its total Regulatory processes—the formal and informal revenues from the market would increase by 70 percent procedures regulators use to make their decisions—are once it becomes a wholesale supplier to the mini grid. especially important for mini grids, which typically live on the edge of financial viability For interconnected mini grid operators, connection to the main grid can reduce operational and capital expenditures The transaction costs of complying with regulatory processes if operators can purchase electricity at rates lower than the are as important for a mini grid’s commercial viability as cost of self-generation by the mini grid, especially during the prices that the mini grid is allowed to charge. In many non-peak solar hours when it would otherwise be necessary countries the reality is that the formal framework of laws and to resort to a diesel generator. Purchasing electricity from regulations printed in a government gazette may often not the main grid also allows for a reduction in the investment be implemented as written (Foster and Rana 2020). needed for equipment like batteries and generators, further driving down the levelized cost of electricity and making the Regulation of interconnected mini grids venture more sustainable and cost-effective in the long run. Table 2 shows the key commercial building blocks for inter- The cost reductions will be greatest if the Disco is able to connected and non-interconnected mini grids. An inter- commit to a firm power supply. PowerGen estimates that the connected mini grid will be affected by the regulatory rules availability of six hours of robust grid supply purchased from that are specific to its interconnection as well as other reg- AEDC for its Toto mini grid will help lower its initial capital ulatory rules that apply to all mini grids. In the “Commercial costs by an estimated 15–20 percent by enabling it to reduce element” column, the threshold question for regulators of the amount of battery capacity it must install. If a Disco is interconnected mini grids is: Which of these commercial ele- only able to provide a non-firm power supply commitment, ments need to be regulated? The regulatory issues specific to interconnected mini grids are shown in bold in the table. Table 2. Commercial elements of undergrid mini grids that could potentially be regulated Type of undergrid mini grid Commercial element Interconnected Non-interconnected Licensing/permitting 3 3 Tariffs for retail sales 3 3 Cost recovery of costs to promote productive and household uses of electricity 3 3 Compensation when the main grid arrives n.a. 3 Length of the agreement 3 3 Tariffs for bulk purchases by the mini grid 3 n.a. Tariffs for bulk sales by the mini grid 3 n.a. Leasing of an existing distribution system 3 Sometimes Compensation for energy not supplied by the Disco 3 n.a. Compensation if the Disco takes back a subconcession 3 Sometimes Note: Regulatory issues specific to interconnected mini grids are shown in bold. n.a. = Not applicable. Mini Grids for Underserved Main Grid Customers 5 New regulators tend to overregulate because they are afraid incurred costs may not be efficient costs. The fact that a cost that they will be criticized by ministers and members of appears in an invoice is no guarantee that it is an efficient parliament for not doing enough to protect retail consum- cost. Second, project-by-project cost-of-service reviews are ers. But the problem with this micro-regulatory approach not administratively practical in countries like Nigeria that is that it can become a major impediment to the launch hope to create hundreds or thousands of mini grids. of a mini grid project. A separate review by the regulator of each major element of a tripartite interconnected mini grid Once a country goes beyond 20–30 operating mini grids, agreement will be complex and time consuming. Changes it would make sense for a regulator to switch to a bench- mandated by the regulator to one or more elements of a marking approach. Benchmarking requires comparing either negotiated agreement can affect the balance of interests in costs or prices across a group of comparable mini grids and the agreement. This could cause the Disco, or the mini grid typically involves setting a price cap based on this empirical developer, to walk away. data. We have heard that staff members of some regulatory agencies informally benchmark even when presented with a A light-handed regulatory approach that lets Discos and cost-of-service filing that would seem to justify a higher tariff. mini grid developers arrive at their own commercial arrange- ments for individual contractual elements is generally pref- erable. Rather than separately judging each element of the A light-handed regulatory approach that lets interconnection agreement on a stand-alone basis, the reg- ulator should judge the overall project based on the answers Discos and mini grid developers arrive at their to two questions: Will the interconnection agreement lead to own commercial arrangements for individual lower end-use tariffs for retail customers relative to non-in- terconnected mini grids? Will technical and safety require- contractual elements is generally preferable. ments be met? If a regulatory agency decides to formally adopt a bench- Blanket tariff approvals for portfolios of similar mini grids marking system, the agency will need to make a second In Nigeria, retail tariffs of all mini grids with more than 100 decision: should the benchmark be a hard or soft bench- kilowatts of installed generating capacity must be approved mark? A hard benchmark means that the benchmark price by NERC. Until recently, NERC conducted a separate tariff sets the maximum price that the mini grid will be allowed to review for each proposed mini grid project, based on a pre- charge: no exceptions. A soft benchmark is different. If the specified, online cost-of-service methodology. A tariff-set- regulatory agency adopts a soft benchmarking system, it is ting system based on a project-by-project cost-of-service saying as follows, in words compiled from the comments of calculation imposes considerable transactions costs on both several interviewees: the regulator and developers. In 2023, NERC modified its regulations to allow a mini grid permit holder “to file a sin- Based on our review of many mini grid projects, here is the gle tariff application for all sites under a portfolio of isolated price cap we believe will cover your costs and allow you to mini-grids or a portfolio of interconnected mini-grids” (NERC earn a reasonable profit if you build and operate with average 2023). efficiency. If you request approval for a tariff that is equal to or below the price cap, the approval will be fast-tracked and Cost-of-service versus benchmarking approved within a short period of time. But the soft bench- Most African regulators currently regulate proposed mini mark does not prevent you from asking for a higher tariff. If you grids on a cost-of-service basis. This is the traditional think that your project’s circumstances are unique because approach to regulating large utilities, so it is not surprising you have higher costs that are beyond your control, feel free to that it was chosen as the tariff-setting method for new mini request a higher tariff. However, you should recognize that the grids. But cost-of-service regulation has two weaknesses; one review process will take longer. is substantive and the other administrative. First, a mini grid’s 6 Mini Grids for Underserved Main Grid Customers What lessons can we draw? Undergrid mini grids have come into existence because these modeling assumptions are not realistic in the electric- Our experience in preparing the five case studies and ity sectors of many developing countries. working with mini grid programs in more than 20 low- and middle-income countries, including Nigeria and Privately owned and operated undergrid mini grids India, has taught us much perform several key functions better than govern- Most currently used least-cost planning models do not ment-owned Discos and some privately owned ones. project any role for undergrid mini grids for urban and Preliminary anecdotal evidence from the five case studies peri-urban locations. The typical least-cost planning in Nigeria and India and elsewhere suggests that privately models usually conclude that incumbent Discos are best owned and operated mini grids generally excel in (1) accu- positioned to provide expanded service to their existing rately metering usage, billing, and collecting payments from customers and to reach new customers through densifica- customers through prepaid metering and billing systems; tion and line extension to nearby unserved areas. But these (2) providing a more reliable supply of electricity with fewer conclusions are based on assumptions that are often not harmful variations in voltage and frequency; and (3) increas- satisfied in many developing countries. ing growth in customer demand through financing options for appliances and machinery. These assumptions are (1) that Discos will be motivated and efficient operators; (2) that an adequate upstream supply of Incentives matter. Discos and mini grid operators have electricity is available, and Discos have the money to pay for different incentives to increase rural sales. A Disco manager it; (3) that the upstream transmission grid needed to deliver may have been ordered by a ministry (often backed by electricity to a downstream Disco is working well; (4) that the donor financing) to connect new communities. However, if Disco will be allowed to charge cost-recovering retail tariffs; the Disco is limited to charging non-cost-recovering tariffs— and (5) that it does not matter if the generation connected to which is the norm in many developing countries—a rational the main grid is fossil fueled and the generation connected Disco manager will say privately: “Why should I encourage to the mini grid is from renewable sources. my staff to increase sales in rural areas if I know that I will lose money on every additional kilowatt hour I sell there?” In contrast, a manager of a privately owned mini grid will say: “As a privately owned company, I may get an initial “Light bulbs dim like tired, resentful candles. capital grant, but unlike the Disco I don’t have the cushion Robust fans slow to a sluggish limp. Air- of continuing government subsidies after I start operations. So, unless I increase sales to achieve profitability, I won’t conditioners bleat and groan and make survive.” Most new privately owned and operated mini grids sounds they were not made to make, their in India and Nigeria have active, on-the-ground programs to increase the electricity consumption of their commercial, halfhearted cooling leaving the air clammy. agricultural, and residential customers. In contrast, very few In this assault of low voltage, the compressor Discos in either country have similar programs to increase consumption. of an air-conditioner suffers—the compressor is its heart, and it is an expensive heart to Some mini grid companies are already achieving signifi- cant cost reductions from economies of scale and stan- replace.” —Chimamanda Ngozi Adichie, New York Times, dardization. Data from the African Mini Grid Developers January 31, 2015. Association shows that established mini grid companies in Africa tend to have lower average costs than newer ones. In India, developers like Husk Power and TPRMG have accomplished cost reductions by grouping together small, Mini Grids for Underserved Main Grid Customers 7 standardized mini grid projects located near one another. subsidies at all? Under what circumstances, should capital Husk has reported levelized costs of electricity (LCOE) of cost subsidies be keyed to the number of connections or to a $0.25 per kilowatt hour at its newer sites in India and has set certain percentage of capital costs? What are the milestones a target of $0.17 by 2030. In January 2023, Husk announced for disbursements? Should the grantor wait for the customer that with these cost reductions it had achieved operating to be fully connected and enjoying demonstrably reliable cost profitability in India and Nigeria, an intermediate mile- service? If so, for how long? What about partial disbursement stone to full cost recovery.3 To date, it appears that these cost for intermediate milestones such as delivery of equipment to reductions have been limited to older, more-experienced the mini grid site to reduce developers’ need for construction foreign firms that can readily scale up and employ stan- finance? dardized modular systems. This creates political problems for national governments that want to promote domestic mini Interconnected mini grids can serve different target mar- grid companies. kets. Target markets for interconnected mini grids include rural and peri-urban towns and villages, large urban market Interconnection can reduce the LCOE of a mini grid. A cost centers, C&I installations, and universities and hospitals. The analysis of six proposed interconnected mini grids in Nigeria five case studies were limited to the first two. The other tar- projects that the lower operating and capital expenses of get markets raise different implementation and regulatory the mini grids can yield LCOE savings of up to 20 percent issues. In countries like Nigeria, where utility power is intermit- compared with a non-interconnected mini grid. The actual tent or nonexistent, the solar C&I market—whether served by savings will depend on the cost of wholesale electricity from interconnected mini grids or other models of interconnected the Disco, the cost of diesel fuel, the hours per day that the distributed energy sources (DERs)—is in the early stages of Disco can provide electricity, and whether the Disco is willing rapid growth.5 This growth is taking place on a commercial to be contractually obligated to provide firm electricity at basis, with few if any subsidies. the same time every day. The cost savings will be lower if the Disco is only willing or able to supply electricity to the interconnected mini grid on an “as available” basis. Mini grids, whether interconnected or isolated, Subsidies for mini grids (usually delivered as capital are not a silver bullet. They are a good “point grants) are a work in progress. Subsidies are needed for of entry,” but they should not be viewed as the most rural communities because there is a viability gap between what it costs to serve these communities and what “end point” in power sector reforms. many rural households can afford to pay. But even if one accepts that subsidies will be needed, as has always been the case for traditional main grid extensions into rural com- Mini grids, whether interconnected or isolated, are not a munities, this still leaves many implementation questions silver bullet. Modern day mini grids in Sub-Saharan Africa open.4 Should interconnected mini grids receive the same and India typically use a single technology combination level of subsidies as isolated mini grids? Do mini grids built consisting of solar panels, batteries, and diesel generators. to serve commercial and industrial (C&I) customers need But it is naïve to believe that this single technology mix will 3. The reported profitability was on an EBITDA basis—that is, earnings before 5. As the number and types of DERs expand, one challenge will be to effi- interest, taxes, depreciation, and amortization. ciently and safely integrate DERs into existing Disco systems that currently 4. A Duke University study of seven countries that expanded electricity operate within an existing, top-down bulk power system. One recent pro- access through main grid expansion found that the governments provided posal is to encourage Discos to become neutral distribution system oper- average subsidies of $1,500 per connection (Phillips, Plutshack, and Yeasel ators that interact with a higher level independent system operator at the 2020). In Nigeria, the current subsidy per connection under the World Bank’s transmission and distribution interface between the two. This is described as NEP 1 program is $450 disbursed to developers in dollars. a layered bulk power system architecture (Roberts 2024). 8 Mini Grids for Underserved Main Grid Customers be the best solution for all potential customers in a commu- What recommendations can you offer? nity. For example, isolated or meshed solar home systems Our recommendations fall into four categories: will be a more affordable solution for poorer households or regulatory frameworks, tariff regulation, support for households in more isolated or sparsely settled areas of a developers and Discos, and pilot programs community. Regulatory framework and licensing Regulatory rules should be designed to give mini grid oper- Regulators should approve licenses and tariffs for portfo- ators the flexibility to offer different technology solutions lios of mini grids. Regulators should issue blanket licenses or to a single community, either on their own or through joint permits for portfolios of mini grid projects with similar char- ventures with others. The regulatory system should also be acteristics to streamline the approval process. This approach designed to allow successful mini grids the possibility to should include long-term licenses or permits to support proj- become small Discos or other forms of DERs through joint ect financing, combined with clear criteria for license trans- ventures, subfranchising, or other commercial arrangements. fers. It is crucial that safety and technical standards should The regulatory system should allow for these transformations be part of these frameworks. without necessitating complicated and costly work-arounds (for example, building two separate generating systems to Interconnections should be voluntary. The interconnection stay under a mini grid size limit). Mini grids are a good “point of mini grids with existing distribution networks should be a of entry,” but they should not be viewed as the “end point” in voluntary process that benefits all parties involved: the end- power sector reforms. use customers, Discos, and the mini grids themselves. This will ensure that Discos see the value in these connections through direct commercial benefits and improved customer Privately owned, interconnected solar hybrid service. The Discos should not feel coerced into signing mini grids will be commercially, technically, agreements that may not be in their best interest. If a Disco is unconvinced that an interconnection with a mini grid will and politically viable only if they create a win- benefit itself and its customers, it can easily use subtle and win-win economic outcome for the mini grid difficult-to-detect means (such as complicated interconnec- tion processes) to undermine policy or regulatory mandates owner-operator, the Disco, and the customers that it finds objectionable. served by the mini grid. Incentives for Discos. Regulators should consider new reg- ulatory frameworks to incentivize Discos to interconnect to Interconnections will not be made unless there is a win- mini grids. If the Discos are currently regulated on a cost- win-win solution for the three players directly affected of-service basis, the regulator could introduce elements of by interconnection. Privately owned, interconnected solar performance-based regulation into the regulatory system to hybrid mini grids will be commercially, technically, and incentivize Disco connections to mini grids and other forms politically viable only if they create a win-win-win economic of DERs. This approach is being tested in the United States outcome for the mini grid owner-operator, the Disco, and and the United Kingdom, among other countries. Elements the customers served by the mini grid. It is not enough for of Nigeria’s regulatory framework, such as a requirement an interconnected mini grid to be commercially viable for that 10 percent of electricity distributed by Discos come from its private developer alone. It must also provide commercial distributed sources, is encouraging grid-connected solar benefits for the Disco to which the mini grid proposes to con- DERs in the country. Ideally, regulatory mandates should nect. The customers already served by the Disco must also also be accompanied by financial incentives. The goal is to see some benefit in switching over to become customers of encourage Discos to collaborate with, rather than oppose, a mini grid. mini grids and other types of DERs. Mini Grids for Underserved Main Grid Customers 9 Tariff regulation and customer protection Recommendations on technical and commercial support Avoid micro regulation. Regulating each element of the Technical assistance should be given to both developers commercial agreements (see table 2) between Discos and and Discos. To date most technical assistance has gone interconnected mini grids is likely to be time consuming and to mini grid developers promoting isolated and non-inter- counterproductive. Regulators should adopt a light-handed connected projects. For emerging interconnected mini grid approach that lets Discos and mini grid developers arrive projects, Discos will need support, too, as they often lack at a balancing of the different elements of their commer- experience negotiating with nonaffiliated suppliers. They cial arrangements if this leads to lower end-use tariffs for also may not fully understand the financial and technical the mini grid’s customers and satisfies technical and safety benefits that interconnection can bring to their operations. requirements for reliable operation of the main and mini Hence, governments and donor organizations should offer grids. Unlike households, C&I customers are often sophis- technical assistance to Discos, as well as to developers. The ticated and knowledgeable electricity consumers. With a support should include advice on operating protocols for growing number of companies offering to build mini grid or interconnection, transfer of power between the two, and DER installations for such customers, it is not obvious that likely financial impacts. Neutral facilitation by technical and those customers need a regulator to protect to protect their economic consultants can speed up the negotiation process interests. The interconnected C&I market could be a good and ensure balanced and beneficial agreements. candidate for tariff deregulation, but with continued techni- cal and safety standards. Recommendations on pilot programs and evaluation Governments and donors should support interconnected Move from calculating mini grid tariffs on a proj- mini grid pilots in other market segments. The five case ect-by-project cost-of-service basis to price caps. Once studies focus on mini grids in rural and peri-urban communi- a national regulator has obtained detailed cost information ties and large urban marketplaces. However, interconnected on 20–30 mini grids, the regulator should adopt price caps mini grids and other distributed energy options are also fea- in place of individually calculated tariffs for each mini grid sible for C&I customers, public institutions such as universities project. The price caps should be soft rather than hard. If and hospitals, and urban residential communities.6 a mini grid developer believes that the costs of operating a particular mini grid justify a higher tariff, the developer Perform follow-ups to the case studies of interconnected should be allowed to make a request to the regulator for a mini grids studied to learn whether they have achieved higher tariff. commercially viability. It would be useful to perform updates on the Toto, Wuse, and Mokoloki interconnected mini grids Encourage tariff differentiation based on time of usage after they have been in operation for at least a year. What and level of reliability. Mini grid operators should be worked? What didn’t? This will provide insights into factors encouraged to provide customers with tariffs based on time that will affect their long-term performance and success. of use and contracted reliability levels. This simply reflects the fact that a mini grid’s costs will vary according to when Evaluate whether mini grids have improved economic the electricity is produced and with what promised level of and social development in communities where they oper- reliability. ate. It has been stated that “(e)nergy access is the ‘golden thread’ that weaves together economic growth, human Facilitate automatic tariff adjustments. If tariffs are regulated, implement timely automatic tariff adjustments 6. RMI (formerly the Rocky Mountain Institute) and Daystar Power have to account for general cost changes, such as inflation and recently issued a report that examines the potential for creating and oper- currency fluctuations that are beyond the control of the mini ating interconnected mini grids/DERs for C&I facilities in Nigeria, creating a grid operator. win-win-win arrangement for customers, the Disco, and developers (Meng et al. 2023). With more than 170,000 C&I enterprises in Nigeria, this is a big DER market in early stages of takeoff. If the market potential is realized, it could lead to major reductions in CO2 emissions. 10 Mini Grids for Underserved Main Grid Customers development, and environmental sustainability” (IEA 2017). We owe a large debt of gratitude to our case study informants Can this be documented in communities that are served by and reviewers who showed much patience in answering our many mini grids? Business activity in the Mokoloki and Toto com- questions. World Bank colleagues—including Jon Exel, Clemencia munities has reportedly increased significantly since the mini Torres de Mästle, and Tatiana Lemondzhava—provided strong grid was commissioned (RMI 2024). This raises several ques- encouragement and continuous support throughout the research tions: Is this true in other new privately owned and operated and writing process. This note would not have been possible mini grids? Is the increase in business activity an increase in without the generous funding of the Energy Sector Management existing businesses in the community or simply a movement Assistance Program (ESMAP). of businesses from other nearby communities with a less reli- able electricity supply, or both? How does this compare with communities that are newly connected to the main grid? References and sources Chikumbo, Maxine, Ridwan Zubair, Zihe Meng and Sascha RMI. 2024. “Sharing the Power: Nigerian Community Takes Flesch. 2024. 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The Case of Rural Electrification in Bangladesh,” Developing Countries: Recent World Bank Support for SCADA/ by Hussain Samad and Elisa Portale. EMS and SCADA/DMS Systems,” by Varun Nangia, Samuel Oguah, and Kwawu Gaba. Live Wire 2019/98. “Ensuring that Regulations Evolve as Mini- Grids Mature,” by the Global Facility on Mini Grids. Live Wire 2015/51. “Scaling Up Access to Electricity: Emerging Best Practices for Mini-Grid Regulation,” by Chris Greacen, Live Wire 2019/97. “Investing in Mini-Grids Now, Integrating Stephanie Nsom, and Dana Rysankova. with the Main Grid Later: A Menu of Good Policy and Regulatory Options,” by the Global Facility on Mini Grids. Live Wire 2015/34. “Scaling Up Access to Electricity: Pay- as-You-Go Plans in Off-Grid Energy Services,” by Alejandro Live Wire 2017/73. “Forecasting Electricity Demand: An Aid Moreno and Asta Bareisaite. for Practitioners,” by Jevgenijs Steinbuks, Joeri de Wit, Artur Kochnakyan, and Vivien Foster. 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