- Around 1.4 billion people across the globe do not have access to electricity, primarily in rural areas. Many of them rely on biomass or expensive, polluting fossil fuel solutions such as diesel generators.
- The IEA has estimated that, in order to achieve universal electricity access, mini-grids will have to provide more than 40% of the new capacity needed by 2030. But mini-grid development remains slow, even though low carbon mini-grid options do exist.
- Providing sustainable finance models (to enable energy access for consumers and sufficient returns for financiers) is the key challenge; the need for consideration of policy and technology issues during the development of such business models is a critical component that is often overlooked.
UNEP aims to work with key local stakeholders, particularly in developing countries, to demonstrate viable business models for mini-grid operation that enable sustainability, provide access to clean energy, and attract finance. The first installations of such projects carry risk for private investors considering the uncertainty that characterizes such an investment in an unstable market, and public funding will play a key role in offsetting the initial risks that the private sector is unwilling or unable to bear. The first step is understanding customer demand, and therefore a bottom-up approach is critical to any effective business model in this context—one which reflects local conditions. At the same time, determining future customer demands can sometimes be difficult because of limited customer understanding of potential energy supply options, and therefore efforts to raise awareness of such benefits will be needed. Future engagement of the private sector will be dependent upon a stable local environment which can only be achieved when there is buy-in from supportive groups such as technology providers, national policymakers, local government, local suppliers, technology providers, and local communities.
UNEP has identified key steps to be undertaken in its ongoing demonstration of hybrid mini-grids:
- Develop a generic business model
- Identify opportunities and country-specific challenges
- Engage local key stakeholders
- Identify the specific mini-grid project
- Adapt the business model to the specific mini-grid project
- Implement the mini-grid project
- Lessons-learned and reporting
UNEP RELATED PROJECTS
Clean energy hybrid mini-grids in remote areas: an investment opportunity
UNEP’s program is built upon the understanding that an appropriate financial model to ensure affordability is key to mini-grid deployment success, and practical demonstration of a commercially viable business model is an opportunity to do so. It is intended that this program will result in a financial model that can be adapted to differing local conditions and form the basis for future mini-grid installations in different country contexts. As more successful demonstration projects develop, the opportunities for studying and developing a business model that can be widely applicable will continue to increase. Leveraging the resources dedicated to this program—one with an already established process and measurable success—offers an attractive opportunity for supporters to contribute to the development of business models that work and that can be widely applicable in an area that can have sizable impacts on closing the energy access gap.