The Impact of Policy and Technology Parameters on the Economics of Microgrids for Rural Electrification: A Case Study of Remote Communities in Bolivia

Throughout the developing world, most remote and isolated communities are still without reliable electricity in the twenty-first century, and this is primarily due to the high cost of grid extensions. In communities that do have electricity, they usually rely on diesel generators, though these have high operating and maintenance costs, while also polluting the environment. A more sustainable approach is to deploy microgrids, however, microgrids have a high upfront cost, which is a major obstacle, especially in rural areas of developing countries. This study aims to investigate the parameters that can be influenced to make microgrids more economical for rural electrification. Through sensitivity analyses, five key policy and technology parameters were identified. They include real discount rates, diesel prices, grants, battery chemistry, and operating strategies. The system was then redesigned using scenarios formulated by varying these parameters. Results show that the parameters affect the configuration, levelized cost of energy (LCOE), renewable energy penetration (REP), and pollutant emissions. The study uses three remote communities in the Beni Department of Bolivia as case studies. MDSTool was used as a modeling framework to design the microgrids. The unique insights and lessons learned during the design process are discussed at length because these may be valuable for future microgrid designs for remote communities.