IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v13y2020i23p6350-d454669.html
   My bibliography  Save this article

Mini-Grids for the Sustainable Electrification of Rural Areas in Sub-Saharan Africa: Assessing the Potential of KeyMaker Models

Author

Listed:
  • Andrea Cabanero

    (Department of Energy Engineering, Campus El Gouna, Technische Universität Berlin, 10623 Berlin, Germany
    Current address: INENSUS GmbH, Am Stollen 19D, 38640 Goslar, Germany.)

  • Lars Nolting

    (Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University, 52074 Aachen, Germany)

  • Aaron Praktiknjo

    (Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University, 52074 Aachen, Germany)

Abstract

Solar hybrid mini-grid systems possess the potential to substantially support electrification in sub-Saharan Africa. While their technical reliability has been proven, their financial viability is achieved only by heavy subsidization as of now. Due to the growing importance of results-based financing, we ask whether newly developed business models leveraging on the value added of electricity supply in rural areas (such as the KeyMaker Model) bare the potential to substantially reduce amount of grants required to finance the initial capital investment and thus contribute to a sustainable form of development. The principle of the KeyMaker Model is based on utilizing the locally supplied mini-grid electricity to establish a local agro-processing project, the revenues of which are an additional income stream for the mini-grid operator, while the project creates an end-market for the local farmers to sell their produce. We have developed two scenarios (without and with KeyMaker Model) for four rural villages in Nigeria as a case study to scientifically assess the potential of KeyMaker Models. We simulated and optimized the mini-grid systems using the software tool HOMER. We then assessed their financial viability. Our analysis demonstrates grant finance requirements ranging from 82% to 99% of the total investment for the base-case mini-grid projects without consideration of the KeyMaker Model. We find that a well-selected KeyMaker Model such as cocoa bean processing reduced the grant requirement by 68 percentage points, while processes based on maize, palm oil and cassava processing achieved reductions of 36, 26 and 8 percentage points, respectively. Hence, we conclude that the value added by the introduction of new local business models bares the potential to reduce grant requirements for the socially and economically necessary electrification across the Global South.

Suggested Citation

  • Andrea Cabanero & Lars Nolting & Aaron Praktiknjo, 2020. "Mini-Grids for the Sustainable Electrification of Rural Areas in Sub-Saharan Africa: Assessing the Potential of KeyMaker Models," Energies, MDPI, vol. 13(23), pages 1-31, December.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:23:p:6350-:d:454669
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/13/23/6350/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/13/23/6350/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tao, Jacqueline Yujia & Finenko, Anton, 2016. "Moving beyond LCOE: impact of various financing methods on PV profitability for SIDS," Energy Policy, Elsevier, vol. 98(C), pages 749-758.
    2. O. Schmidt & A. Hawkes & A. Gambhir & I. Staffell, 2017. "The future cost of electrical energy storage based on experience rates," Nature Energy, Nature, vol. 2(8), pages 1-8, August.
    3. Olatomiwa, Lanre & Mekhilef, Saad & Huda, A.S.N. & Ohunakin, Olayinka S., 2015. "Economic evaluation of hybrid energy systems for rural electrification in six geo-political zones of Nigeria," Renewable Energy, Elsevier, vol. 83(C), pages 435-446.
    4. Kayode Olaniyan & Benjamin C. McLellan & Seiichi Ogata & Tetsuo Tezuka, 2018. "Estimating Residential Electricity Consumption in Nigeria to Support Energy Transitions," Sustainability, MDPI, vol. 10(5), pages 1-22, May.
    5. Fan Yang & Ming Yang, 2018. "Rural electrification in sub-Saharan Africa with innovative energy policy and new financing models," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(6), pages 933-952, August.
    6. Malhotra, Abhishek & Schmidt, Tobias S. & Haelg, Leonore & Waissbein, Oliver, 2017. "Scaling up finance for off-grid renewable energy: The role of aggregation and spatial diversification in derisking investments in mini-grids for rural electrification in India," Energy Policy, Elsevier, vol. 108(C), pages 657-672.
    7. Trimble,Christopher Philip & Kojima,Masami & Perez Arroyo,Ines & Mohammadzadeh,Farah, 2016. "Financial viability of electricity sectors in Sub-Saharan Africa : quasi-fiscal deficits and hidden costs," Policy Research Working Paper Series 7788, The World Bank.
    8. Bhattacharyya, Subhes C., 2015. "Mini-grid based electrification in Bangladesh: Technical configuration and business analysis," Renewable Energy, Elsevier, vol. 75(C), pages 745-761.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sheridan, Steve & Sunderland, Keith & Courtney, Jane, 2023. "Swarm electrification: A comprehensive literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 175(C).
    2. Gbalimene Richard Ileberi & Pu Li, 2023. "Integrating Hydrokinetic Energy into Hybrid Renewable Energy System: Optimal Design and Comparative Analysis," Energies, MDPI, vol. 16(8), pages 1-28, April.
    3. Prevedello, Giulio & Werth, Annette, 2021. "The benefits of sharing in off-grid microgrids: A case study in the Philippines," Applied Energy, Elsevier, vol. 303(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ugwoke, B. & Gershon, O. & Becchio, C. & Corgnati, S.P. & Leone, P., 2020. "A review of Nigerian energy access studies: The story told so far," Renewable and Sustainable Energy Reviews, Elsevier, vol. 120(C).
    2. Molyneaux, Lynette & Wagner, Liam & Foster, John, 2016. "Rural electrification in India: Galilee Basin coal versus decentralised renewable energy micro grids," Renewable Energy, Elsevier, vol. 89(C), pages 422-436.
    3. Yilmaz, Saban & Dincer, Furkan, 2017. "Optimal design of hybrid PV-Diesel-Battery systems for isolated lands: A case study for Kilis, Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 344-352.
    4. Hartvigsson, Elias & Stadler, Michael & Cardoso, Gonçalo, 2018. "Rural electrification and capacity expansion with an integrated modeling approach," Renewable Energy, Elsevier, vol. 115(C), pages 509-520.
    5. Lim, Kai Zhuo & Lim, Kang Hui & Wee, Xian Bin & Li, Yinan & Wang, Xiaonan, 2020. "Optimal allocation of energy storage and solar photovoltaic systems with residential demand scheduling," Applied Energy, Elsevier, vol. 269(C).
    6. Bertheau, Paul & Blechinger, Philipp, 2018. "Resilient solar energy island supply to support SDG7 on the Philippines: Techno-economic optimized electrification strategy for small islands," Utilities Policy, Elsevier, vol. 54(C), pages 55-77.
    7. Bertheau, Paul & Cader, Catherina, 2019. "Electricity sector planning for the Philippine islands: Considering centralized and decentralized supply options," Applied Energy, Elsevier, vol. 251(C), pages 1-1.
    8. Amutha, W. Margaret & Rajini, V., 2016. "Cost benefit and technical analysis of rural electrification alternatives in southern India using HOMER," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 236-246.
    9. Shahzad, M. Kashif & Zahid, Adeem & ur Rashid, Tanzeel & Rehan, Mirza Abdullah & Ali, Muzaffar & Ahmad, Mueen, 2017. "Techno-economic feasibility analysis of a solar-biomass off grid system for the electrification of remote rural areas in Pakistan using HOMER software," Renewable Energy, Elsevier, vol. 106(C), pages 264-273.
    10. Oyewo, Ayobami Solomon & Solomon, A.A. & Bogdanov, Dmitrii & Aghahosseini, Arman & Mensah, Theophilus Nii Odai & Ram, Manish & Breyer, Christian, 2021. "Just transition towards defossilised energy systems for developing economies: A case study of Ethiopia," Renewable Energy, Elsevier, vol. 176(C), pages 346-365.
    11. Brahma, Antara & Saikia, Kangkana & Hiloidhari, Moonmoon & Baruah, D.C., 2016. "GIS based planning of a biomethanation power plant in Assam, India," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 596-608.
    12. Lane, Blake & Kinnon, Michael Mac & Shaffer, Brendan & Samuelsen, Scott, 2022. "Deployment planning tool for environmentally sensitive heavy-duty vehicles and fueling infrastructure," Energy Policy, Elsevier, vol. 171(C).
    13. Bhatt, Ankit & Sharma, M.P. & Saini, R.P., 2016. "Feasibility and sensitivity analysis of an off-grid micro hydro–photovoltaic–biomass and biogas–diesel–battery hybrid energy system for a remote area in Uttarakhand state, India," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 53-69.
    14. Dugoua, Eugenie & Dumas, Marion, 2024. "Coordination dynamics between fuel cell and battery technologies in the transition to clean cars," LSE Research Online Documents on Economics 124029, London School of Economics and Political Science, LSE Library.
    15. Caldera, Upeksha & Breyer, Christian, 2020. "Strengthening the global water supply through a decarbonised global desalination sector and improved irrigation systems," Energy, Elsevier, vol. 200(C).
    16. Monyei, Chukwuka G. & Akpeji, Kingsley O. & Oladeji, Olamide & Babatunde, Olubayo M. & Aholu, Okechukwu C. & Adegoke, Damilola & Imafidon, Justus O., 2022. "Regional cooperation for mitigating energy poverty in Sub-Saharan Africa: A context-based approach through the tripartite lenses of access, sufficiency, and mobility," Renewable and Sustainable Energy Reviews, Elsevier, vol. 159(C).
    17. Serguey A. Maximov & Gareth P. Harrison & Daniel Friedrich, 2019. "Long Term Impact of Grid Level Energy Storage on Renewable Energy Penetration and Emissions in the Chilean Electric System," Energies, MDPI, vol. 12(6), pages 1-19, March.
    18. Michael O. Ukoba & Ogheneruona E. Diemuodeke & Mohammed Alghassab & Henry I. Njoku & Muhammad Imran & Zafar A. Khan, 2020. "Composite Multi-Criteria Decision Analysis for Optimization of Hybrid Renewable Energy Systems for Geopolitical Zones in Nigeria," Sustainability, MDPI, vol. 12(14), pages 1-27, July.
    19. Salmon, Claire & Tanguy, Jeremy, 2016. "Rural Electrification and Household Labor Supply: Evidence from Nigeria," World Development, Elsevier, vol. 82(C), pages 48-68.
    20. Mengzhu Xiao & Manuel Wetzel & Thomas Pregger & Sonja Simon & Yvonne Scholz, 2020. "Modeling the Supply of Renewable Electricity to Metropolitan Regions in China," Energies, MDPI, vol. 13(12), pages 1-31, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:13:y:2020:i:23:p:6350-:d:454669. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.