Rural Electrification Through Minigrids in Developing Countries: Initial Generation Capacity Effect on Cost-Recovery

Paper in proceeding, 2015

One billion people lack access to electricity around the world. Most of these people live in rural inaccessible areas and improving electricity access them is considered an important goal towards reaching the Millennium Development Goals. Minigrids is one way of improving electricity access for these people. Minigrids have however largely suffered from high costs and low incomes, making it a challenge for them to reach cost-recovery. In this paper we investigate the issue of cost-recovery for minigrid utilities in developing countries. We develop a system dynamics model to investigate the effects of initial capacity generation on cost-recovery, user diffusion and electricity usage. Our results show that it is essential to correctly dimension the capacity of a minigrid and that the effects on cost-recovery from an incorrectly sized minigrid can be delayed up to several years. Furthermore, our results show that in order to evaluate the performance of minigrids it is important to make a comprehensive analysis also looking at growth and absolute number of electricity users and their electricity usage. For future work it is important to endogenously describe the amount of connections the utility can perform and to further investigate the relationship between electricity provision and economic development.