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Renewable Energy in Hybrid Mini-Grids and Isolated Grids: Economic Benefits and Business Cases

Author: 
Hirak Al-Hammad, Torsten Becker, Andrea Bode, Srishti Gupta and Silvia Kreibiehl
Type of publication: 
Objective: 

Renewable power has significant potential to reduce the cost of electricity in rural and island settings across the developing world. In areas distant from main power grids, regional isolated grids – often referred to as mini-grids – are often the main source of electricity to industry and households. Power generation usually relies on diesel fuel, often imported over long distances. Yet genera­ting costs can be reduced by hybridising these mini-grids with solar photo­vol­taic (PV) or other renewable power sources. On the basis of seven case studies in as many countries, this study finds that financing costs for a hybridisation project can be a major driver of the levelised cost of electricity (LCOE). Amongst other things, financing costs largely depend on the ownership structure of the power plant. Diesel-powered grids can be hybridised using different types of system-integration tech­no­logies and renewable energy sources. This analysis compares diesel plants to a ‘100-percent-peak PV penetration’ hybrid tech­no­logy, with which existing diesel generators can be switched off during peak availability of solar radiation. The focus on this technology, however, is illustrative only, and does not imply its general advantage compared to other hybrid technologies (likewise, solar PV was selected as only one of several options for hybridisation).