There are currently around 1.5 billion people in the world without access to electricity. This report summarises lessons learned from hybrid mini-grid projects implemented by members of the Alliance for Rural Development (ARE) and provides insights on the key issues that must be considered when devising sustainable, replicable models of hybrid mini-grids. It examines the complex technical, financial and organisational issues which must address the end-users and their needs.The paper starts by tackling technical issues and highlights the following lessons learned.

To reach the real long-term generation costs, there should be no compromise on the quality of system components.
Fully diesel-fuelled mini-grids are more expensive on a lifetime basis than hybrid ones, such as micro-hydro, solar photovoltaic and small wind power technology grids.
Management measures, like training of local operators, need to be built into the system to protect critical components from severe damage.
Field studies and demand analysis are a basic prerequisite for any mini-grid project, regardless of the technology selected.

On financial and sustainability issues, the paper reports the following lessons.

Sustainable financial and technical solutions for operations, maintenance and management are key to system success when integrated into the project business planning right from the inception in order to foresee a cash flow sufficient to cover the costs.
Successful rural electrification programs have to rely on functioning networks of local companies and financial intermediaries.
Financial instruments and targeted capacity building actions through access to information and training are extremely important.
The private sector should be given incentives, including appropriate tariffs and subsidies to play a bigger role in investing, implementing and operating hybrid systems.

Reporting on organisational issues, the paper states that the development of sustainable mini-grid projects can use any of the following business models.

The community-based model, which involves the people and the determination of tariffs in advance.
The business approach, which is based on a private operator whose participation depends on the profitability of the project and requires aid and long-term concession to be developed; in rural areas it requires training on technical and business issues.
The utility-based model, which brings more experience, financial resources and technical capabilities to carry out rural electrification projects.