Monday, July 18, 2016 4:05 PM / PwC
Faster progress is needed and we believe it can be achieved if national energy policies adopt a more comprehensive approach to energy access, embracing the new starting points for energy provided by standalone renewable technology and mini-grids.
We expect a broad transformation in the electricity sector in the coming years, due to these technological advances and the falling price of technology, both for grid-connected and beyond-the-grid customers. This will have a major impact on the future sustainability of incumbent generation, transmission and distribution utilities and these companies will need to adapt their business models accordingly.
For the millions of people who don’t currently have access to electricity, the old assumption that they will have to wait for grid extensions is being turned on its head by new technological possibilities. Mobile payment infrastructure, customer-driven affordable payment systems and new entrant business models are all playing a part in a new bottom-up energy access that can complement the traditional top-down planning of national grid extensions.
In this report, we discuss these developments and look at what it will take for them to mushroom and fill the gaps in grid infrastructure. We look at the types of initiatives that are taking root, their strengths and weaknesses and the support they need to receive from national energy policies if they are to continue to flourish. We conclude by suggesting that a more integrated approach to energy policy could accelerate progress towards electricity for all.
Other technological advances are set to also play an important role. Battery storage technology is fast evolving to the point where it is now playing a significant role in smaller-scale off-grid solutions and is beginning to feature in utility scale solar storage. Finally, technologies such as fuel cells are also beginning to come of age. Fuel cells are now becoming widespread as a source of power for telecoms towers in areas with uncertain grid reliability and are also beginning to penetrate consumer electronics.
An end to all or nothing
Most national energy policies have been built around the assumption that large-scale generation and centralised grid systems are the principal means for developing access to electricity. The result has been a tendency towards an ‘all or nothing’ approach. People within reach of the grid get electricity, subject to system reliability. Those out of reach are relatively neglected, with the exception of the piecemeal development of local mini-grids. The result is that 1.2 billion people in the world remain without electricity, 95% of them in sub-Saharan Africa and developing countries in Asia. But ‘all or nothing’ approaches are increasingly out of step with what is now possible in power technology.
The advent of ‘entry level’ power
Technological change is turning the ‘all or nothing’ assumption on its head. ‘Entry level technology’ and service bundles have come into the world of electricity, in a way not dissimilar to other areas of technology such as mobile devices or computing. The advent of standalone solar systems, in particular, has introduced new choices for those without access to grid electricity.
Standalone household systems are providing ‘first rung of the energy ladder’ access for an increasing number of people in many parts of Africa and Asia. And their growth is being driven by commercial business models that fit with household circumstances rather than the slower-moving progress of ‘one size fits all’ national energy policies.
In Kenya and Tanzania, for example, low income customers are able to use mobile payment systems to obtain ‘plug and play’ solar and technology for very basic home electrification, with the potential option to scale up as income and/or technological development allows.
The new energy ladder
Standalone solar home systems are providing a bottom rung that was previously not easily accessible on the energy access ladder. They are able to provide a very basic level of power that is affordable for many and enhances quality of life significantly in key respects.
Before, the lowest rung was usually some form of mini-grid system, typically based on diesel generation. But up-front capital costs, running costs and the need for project governance frameworks meant this wasn’t an option for many people.
Now the mini-grid rung is also becoming potentially more accessible with lower-cost renewable technologies enabling the development of hybrid (diesel and renewable) or renewable-only mini-grids, both of which bring down running costs. As we discuss later, mini-grid development remains difficult and hindered by policy and regulatory obstacles. But, if these can be overcome, then mini-grids have a logical role to play in providing electricity access that is a step up from the ‘entry level’ access provided by standalone systems.
Modern energy frameworks to stimulate modern energy access
The time has come for national energy policies to broaden out and fully embrace off-grid solutions with better specific policies that can stimulate their further growth. Policies have traditionally depended on the single pillar of large-scale generation linked to the central grid. Now, three options are available for modern energy access – standalone systems, mini-grids and traditional extension of centralised grid systems. But off-grid solutions remain neglected in policy frameworks.
We look at the success factors that have helped new energy access as well as the difficulties that need to be overcome and consider ways in which national energy policies in developing countries can be modified to accelerate electrification. We conclude by suggesting that a more integrated approach to energy policy could accelerate progress towards electricity for all.
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