Investing in distributed energy can be commercially viable for both communities and project developers with proper structuring and preparation. However, assessing the financial viability for solar developers and the potential positive impact on energy access requires thorough analysis.
Effective upfront preparation is crucial for successful outcomes in distributed energy projects:
- Feasibility Studies: These are critical and should include geospatial analysis, customer and community surveys, and techno-economic analysis. The data collected provides insights into economic viability and energy output, aiding renewable energy companies in selecting optimal locations and designs, and guiding financiers in making informed investment decisions.
- Community Engagement: This involves direct collaboration with the community to demonstrate the educational, economic, and social benefits of energy access. Engaging with communities, especially those previously without electricity, is imperative. Consider a community that has never had electricity access; its members may not be aware of the potential improvements it could bring to their lives. Educating them about the advantages of electrical appliances and tools, and gaining their support and understanding of the project, is key to its success.
In this case study we explore these two key elements—feasibility studies and community engagement—in two mini-grid projects, EM-ONE in Nigeria and Power for All’s Utilities 2.0 Pilot Project in Uganda to demonstrate their importance in achieving success.
The Initial Feasibility Study
To demonstrate the process of creating an economically viable project, we can examine EM-ONE's initiative to provide reliable electricity to 150 health centers across Nigeria through a sustainable business model. The goal is to build self-sustaining solar installations, requiring an understanding of both energy demand and willingness to pay for electricity. EM-ONE, working with Odyssey Energy Solutions, was able to choose suitable locations for 150 health centers out of 1,200 originally identified.
Geo-spatial analysis
Fraym carried out the geospatial analysis to identify 300 potential locations from 1,200 healthcare centers that were previously selected by USAID's Integrated Health Program. Using survey data and satellite imagery, Farym identified 300 sites most likely to be viable for electrification via the sustainable business model.
Customer and community surveys
After the geospatial analysis, site assessments were conducted to gather information from stakeholders, including community members, health centers, and potential commercial electricity customers. Odyssey worked with a local assessment team to evaluate the available capacity, equipment, community energy demand, and potential consumers’ willingness to pay for the service. The collected data was used to create 24-hour load profiles on the Odyssey platform, forecasting electricity consumption for each site.
Techno-economic analysis
During the project, Odyssey incorporated EM-ONE’s component costing into the Odyssey platform to determine the right size for the hybrid-PV system. This was achieved by Odyssey’s integration with HOMER, a tool specializing in mini-grid design and power optimization. Using EM-ONE system component lifetimes, costs, excess electricity, and other factors, Odyssey’s platform generated the most cost-effective system design. Additionally, Odyssey used its proprietary distribution design application to estimate the cost of the distribution network and incorporated any remaining costs provided by EM-ONE.
Using HOMER-calculated LCOE values to find optimal tariff rates for each future client, Odyssey integrated tariff assumptions to generate a complete revenue model for the project's lifetime based on forecasted demand and system constraints. After gathering all the relevant data, Odyssey’s platform created a financial model generating key performance indicators like IRR, payback period, project CAPEX, and more.
All this data enabled Odyssey and EM-ONE to identify the sites with the best economic potential, showcasing a sustainable model for powering health facilities in Nigeria, as well as set EM-ONE up for success for conversations with financers.
Community preparation and engagement
For mini-grid projects, securing community support is crucial. A customer-centric approach guides strategies for community preparation and engagement, aiming to maximize user adoption and highlight the economic and educational benefits of electricity.
For instance, the Utilities 2.0 pilot in Kiwumu, Uganda serves as an excellent example of effective community engagement. It was an integrated energy initiative testing collaboration across energy market actors to achieve universal energy connections faster and cheaper than a grid-only approach. The pilot organized by Power For All featured key partners including Equatorial Power, a mini-grid developer; UMEME, a utility company; East African Power, specializing in agricultural milling and drying containerized solutions; and EnerGrow, an appliance financing company.
Equatorial Power led community engagement in Kiwumu, first identifying local community leaders known as Local Chairmen. They introduced the Utilities 2.0 pilot and rebranded it as “TWAAKE” meaning “light up” in the local dialect. Local leader’s support was essential as they provided trust and approval for the project.
The engagement involved multiple interactive sessions with Local Chairmen and the broader community, that covered topics such as energy limitations, timeliness, safety, and more. Equatorial Power also shared detailed information about the 40 kWp solar hybrid mini-grid system and the target to serve 370 users, including 78 businesses.
Visual aids like posters and diagrams were used, and the community’s questions were preemptively addressed. After community surveys, summary booklets were provided in English and the local dialect, detailing the project and its potential.
Equatorial Power continued engagement on topics such as connection fees, tariffs, customer requirements, and payment options. They also utilized Kiwumu’s weekly announcement system and hired local technical staff for continuous communication.
By deciding to source all construction materials locally and hosting raffle draws, Equatorial Power continued to create trust and engagement in the community. Though initial customer sign-ups may be slow, patience and a customer-centric approach can yield success, as illustrated by the thoughtful engagement in Kiwumu. Community support, especially starting with local leaders, is integral to any energy project, regardless of size or scale.
Results
The Utilities 2.0 pilot in Kiwumu successfully achieved interconnection to the main grid, a milestone attributed to the project's customer-centric community engagement. This success spurred the growth of over 20 new businesses, including cinema halls, bars, and hair salons, within just over a year of operation. Additionally, schools in the area were able to extend hours and add boarding sections, and a pharmacy along with four clinics extended their working hours until 23:00.
The graph below vividly demonstrates the importance of community engagement by comparing the connection rates over time between two grid utilities and Kiwumu. The substantial green bar representing the connections in Kiwumu serves as a strong testament to the effectiveness of engaging with the community.
Conclusion
Providing electricity to new areas involves more than just supplying the power. Merely building infrastructure and enabling connections doesn’t automatically lead to the multitude of benefits electricity access can deliver. For a project to succeed, it is essential to understand the financial prospects before starting and to work closely with the community. Educating community members on how to access and utilize electricity and engaging them in the process are key components to the success of any electrification project.