Minigrids and Access to Electricity in SAARC

2021
ACKNOWLEDGEMENTS
This report is based on study carried out by SAARC Energy Centre (SEC), Islamabad. The study was
commissioned and supervised by Mr. Ahmad Talha (Research Fellow – Technology Transfer). The
internal review of the study was conducted by Dr. Tanvir Ahmad (Programme Leader – Technology
Transfer).
SAARC Energy Centre, Islamabad would like to thank Lead Authors of this study; IT Power Pvt. Ltd.,
India for undertaking this study in professional manner. Moreover, SEC acknowledges the valuable
contributions made by key stakeholders (government officials, utility companies, academicians,
researchers, technology providers) for their inputs and feedback on this study, including provision of
data.

Copyright © 2022 SAARC ENERGY CENTRE. All rights reserved.

Website: https://www.saarcenergy.org/

STUDY COORDINATOR
Mr. Ahmad Talha (Research Fellow – Technology Transfer)

LEAD REVIEWER
Dr. Tanvir Ahmad (Programme Leader – Technology Transfer)

RIGHTS AND PERMISSIONS

The material in this work is subject to copyright. Because the SAARC Energy Centre (SEC) encourages
dissemination of its knowledge, this work may be reproduced, in whole or in part, for non-
commercial purposes if full attribution to this work is given. Any queries on rights and licenses,
including subsidiary rights, should be addressed to e-mail: [email protected]

ATTRIBUTION
Please cite the work as follows: Minigrids and Access to Electricity in SAARC, 2022, SAARC Energy
Centre, Islamabad.

DISCLAIMER
The findings, interpretations and conclusions expressed in this work do not necessarily reflect the
views of the SAARC Energy Centre or SAARC and the governments they represent. All efforts have
been made to ensure data integrity in this report. However, SAARC Energy Centre does not,
guarantee the accuracy, completeness or usefulness of information in this report, and cannot be held
responsible for any errors, omissions, or losses, which emerge from its use.
FOREWORD
Access to modern energy, and electricity in particular, is an indispensable ingredient of socio-
economic progress and well-being. However, this is a challenging task, demanding adequate
technical, financial, social and regulatory support. Minigrids can be a key enabler for achieving almost
all the SDGs, including the eradication of poverty, health, education, clean water and combating
climate change. The SAARC Region has very diverse type of climates in different areas, hence
different sources of renewable energy generation such as wind, solar and small hydel etc., are
available, which can be combined to form a minigrid. Utilizing these renewable energy sources can
electrify many energy-poor rural communities in the SAARC Member States resulting in socio-
economic uplift of the people.

This study covers the most pressing technical and non-technical aspects and details of mini grids.
Case studies from the Member States have been detailed in the study report to show the importance
of the mini grids for energy access in the SAARC region. The policy aspects and cost competitiveness
of energy access through mini grids make an integral part of the study. Additionally, the study
comprises of realistic technological innovation based on the modern Information and
Communication Technologies (ICT).

(Dr Nawaz Ahmad)

Director
SAARC Energy Centre

i
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 Table of Contents
FOREWORD ................................................................................................................................ I
LIST OF TABLES........................................................................................................................... V
LIST OF FIGURES ......................................................................................................................... V
LIST OF ACRONYMS .................................................................................................................. VII
EXECUTIVE SUMMARY ............................................................................................................. XII
1 INTRODUCTION .................................................................................................................. 1
1.1 Background ........................................................................................................................... 2
1.2 Objective of the study ........................................................................................................... 2
1.3 Scope of the study ................................................................................................................ 3
1.4 Limitations of the study ........................................................................................................ 3
1.5 Challenges faced and ways to overcome .............................................................................. 3
1.6 Structure of the report.......................................................................................................... 4
2 OVERVIEW OF MINIGRIDS ................................................................................................... 5
2.1 Global overview of minigrid sector ....................................................................................... 6
2.2 Technical features ................................................................................................................. 7
2.3 Conventional and renewable energy technologies for minigrids ....................................... 11
2.4 Cost of minigrids ................................................................................................................. 14
2.5 Service delivery models ...................................................................................................... 18
2.6 Operation and management............................................................................................... 22
2.7 Integration of minigrid with the centralized grid................................................................ 23
2.8 Latest innovation and improvements ................................................................................. 24
2.9 Impacts of minigrid ............................................................................................................. 28
2.10 Barriers to minigrid development....................................................................................... 30
3 STATUS OF MINIGRIDS IN SAARC MEMBER STATES ............................................................ 32
3.1 Framework for assessing minigrids status .......................................................................... 33
3.2 Afghanistan ......................................................................................................................... 34
3.3 Bangladesh .......................................................................................................................... 40
3.4 Bhutan ................................................................................................................................. 45
3.5 India .................................................................................................................................... 49
3.6 Maldives .............................................................................................................................. 56
3.7 Nepal ................................................................................................................................... 60
3.8 Pakistan ............................................................................................................................... 65

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 3.9 Sri Lanka .............................................................................................................................. 69
4 CASE STUDIES ................................................................................................................... 75
4.1 Introduction ........................................................................................................................ 76
4.2 Bamiyan solar PV minigrid, Afghanistan ............................................................................. 77
4.3 Microgrids with interconnected solar home systems, Bangladesh .................................... 81
4.4 Solar PV minigrid in Bheldi, Saran District, Bihar, India ...................................................... 85
4.5 Baglung minigrid, Nepal ...................................................................................................... 89
4.6 Solar hybrid minigrid, Tokelau ............................................................................................ 92
4.7 Bambadinca PV minigrid, Guinea Bissau ............................................................................ 95
4.8 MHP project in Sar Kalay village, Khyber Pakhtunkhwa Province, Pakistan ....................... 98
4.9 Key lessons ........................................................................................................................ 101
5 CONCLUSION AND RECOMMENDATIONS......................................................................... 104
5.1 Country wise summary and recommendations ................................................................ 105
5.2 Overall recommendations ................................................................................................ 117
6 BIBLIOGRAPHY ............................................................................................................... 121
7 ANNEXURE ..................................................................................................................... 132
7.1 Annexure 1: List of stakeholders and experts consulted for the study ............................ 133
7.2 Annexure 2: Solar GHI maps of SAARC Member States.................................................... 134

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LIST OF TABLES

Table 1: Key Rationale for Selection of Case Studies .......................................................................... 76

Table 2: Summary of Prospects, Drivers and Barriers with Specific Recommendations .................. 118

LIST OF FIGURES

Figure 1: Summary of Country Specific Drivers, Barriers, and Recommendations ............................ xv

Figure 2: Regional Trends of Installed and Planned Minigrids ............................................................. 6
Figure 3: Global Best Policy Elements for scaling up minigrid .............................................................. 7
Figure 4: Technical Structure of a Minigrid........................................................................................... 7
Figure 5: Technical Features of Third Generation Minigrid .................................................................. 9
Figure 6: Technology Wise Deployment of Installed and Planned Minigrids Worldwide .................. 11
Figure 7: Basic Layout of a Solar Minigrid System .............................................................................. 12
Figure 8: Layout for a Hybrid Minigrid System ................................................................................... 14
Figure 9: Breakdown of Capital Expenditure for Minigrid .................................................................. 15
Figure 10: Cost Trends of PV Module from 2011 To 2019 .................................................................. 16
Figure 11: Result of ESMAP Analysis for LCOE Considering Different Load Factor ............................ 17
Figure 12: Unsubsidised Cost Ranges for Renewable Minigrids from 2005 To 2035 ........................ 18
Figure 13 : Simplified Community-Owned Business Model................................................................ 19
Figure 14: Private Sector Based Business Model ................................................................................ 19
Figure 15: Schematic Diagram of ABC Model ..................................................................................... 20
Figure 16: Utility Based Business Model ............................................................................................. 21
Figure 17: Hybrid Business Model ...................................................................................................... 22
Figure 18: Example of IoT Smart Metering Platform .......................................................................... 25
Figure 19: Weather Forecast Process ................................................................................................. 25
Figure 20: O&M AI Forecasting Tool ................................................................................................... 26
Figure 21: Load Management Techniques.......................................................................................... 27
Figure 22: Load Control Process ......................................................................................................... 28
Figure 23: DSM Strategies and Technologies...................................................................................... 28
Figure 24: Impact of Minigrids ............................................................................................................ 29
Figure 25: Framework for Assessment of Minigrid Status .................................................................. 33
Figure 26: 5 kW Wind Turbine in Sang-E-Nawishta Village of Kabul .................................................. 37
Figure 27: Access to Electricity in Bangladesh .................................................................................... 41
Figure 28: Evolution of Minigrid Tariff ................................................................................................ 43
Figure 29: Electricity generation sources in Bhutan ........................................................................... 46
Figure 30: Trends of Electricity Access in India ................................................................................... 50
Figure 31: Cumulative Growth of Off-Grid Power Plants in India....................................................... 50
Figure 32: Growth of Renewable Energy in Maldives ......................................................................... 56
Figure 33: Average Tariff of Different Consumers in Maldives........................................................... 58
Figure 34: Yearly Trend of Access to Electricity .................................................................................. 60
Figure 35: Coverage and Projects Under PPAF KfW HRE Program ..................................................... 65
Figure 36: Installed Capacity and Energy Generation in 2020 in Sri Lanka from different sources ... 70
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Figure 37: Location of Case Examples on World Map ........................................................................ 76
Figure 38: BREP, Mullah Ghulam Site, Bamiyan ................................................................................. 78
Figure 39: Typical SOLshare Microgrid ............................................................................................... 82
Figure 40: Plant Site in Bheldi ............................................................................................................. 86
Figure 41: 6 MHPs (circles) in Baglung connected to form minigrid (rectangle) ................................ 90
Figure 42: Installed solar PV system in Tokelau .................................................................................. 93
Figure 43: Bambadinca PV Minigrid .................................................................................................... 96
Figure 44: Water channel at MHP plant site, Sar Kalay, Buner district .............................................. 99
Figure 45: Lessons Learnt from Case Studies.................................................................................... 103

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LIST OF ACRONYMS

Abbreviation Full Form

ABC Anchor Business Community
AC Alternating Current
ACCSAP Afghanistan Climate Change Strategy and Action Plan
ADB Asian Development Bank
AEDB Alternative Energy Development Board (Pakistan)
AEPC Alternative Energy Promotion Center (Nepal)
AGM Absorbed Glass Mat
AHEC Alternate Hydro Energy Centre (India)
AI Artificial Intelligence
AKRSP Aga Khan Rural Support Programme (Pakistan)
AMDA Africa Minigrid Developers Association
ANDS Afghanistan National Development Strategy
ANN Artificial Neural Networks
ANPDF Afghanistan National Peace Development Framework
ARE Alliance for Rural Electrification
ARE Alternative and Renewable Energy Policy (Pakistan)
AREMTI Afghanistan Renewable Energy Market Transformation Initiative
AREP Afghanistan Renewable Energy Policy
AREP Alternative Renewable Energy Policy 2013 (Bhutan)
AREU Afghanistan Renewable Energy Union
ARISE Accelerating Renewable Energy Integration and Sustainable Energy (Maldives)
ASERD Afghanistan Sustainable Energy for Rural Development
ASPIRE Accelerating Sustainable Private Investment in Renewable Energy (Maldives)
B2B Business to Business
B2C Business to Consumers
BDT Bangladesh Taka
BEA Bhutan Electricity Authority
BERC Bangladesh Energy Regulatory Commission
BMC Billing, Metering, And Collection
BNEF Bloomberg New Energy Finance
BOO Build, Own, Operate
BOOT Build, Own, Operate and Transfer
BPC Bhutan Power Corporation
BREP Bamiyan Renewable Energy Program (Afghanistan)
CCI Council of Common Interests (Pakistan)
CDC Community Development Council (Afghanistan)
CEB Ceylon Electricity Board (Sri Lanka)
CESL Convergence Energy Service Limited (India)
CREDA Chhattisgarh Renewable Energy Development Agency (India)
CREF Central Renewable Energy Fund (Nepal)
CSR Corporate Social Responsibility
DABS Da Afghanistan Breshna Sherkat (Afghanistan)

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DBFOOT Design, Build, Finance, Own, Operate and Transfer
DC Direct Current
DDG Decentralized Distributed Generation
DDUGJY Deendayal Upadhyaya Gram Jyoti Yojana (India)
DESI Decentralised Energy Systems of India
DFID Department for International Development
DG Diesel Generators
DGPC Druk Green Power Corporation Limited (Bhutan)
DISCOM Distribution Company
DoRE Department of Renewable Energy (Bhutan)
DRE Decentralized Renewable Energy
DSM Demand Side Management
ECREEE ECOWAS Centre for Renewable Energy and Energy Efficiency
ECS Electricity Consumer Society (Sri Lanka)
EESL Energy Efficiency Services Limited (India)
EFA Energy for Access
EMS Energy Management System
EPC Engineering, Procurement and Construction
ESCO Energy Service Company
ESMAP Energy Assistance Management Program
ETFC Electricity Tariff Fixation Commission (Nepal)
FiT Feed in Tariff
FY Fiscal Year
GCF Green Climate Fund
GDP Gross Domestic Product
GEF Global Environment Facility
GHG Greenhouse Gas
GoB Government of Bangladesh
GOGLA Global Off- Grid Lighting Association
GoIRA Government of Islamic Republic Afghanistan
GoM Government of Maldives
GoN Government of Nepal
GoSL Government of Sri Lanka
HH Household
HOMER Hybrid Optimization of Multiple Energy Resources
HSU Humboldt State University
HRE Hydropower and Renewable Energy Project (Pakistan)
IDCOL Infrastructure Development Company Limited (Bangladesh)
IEA International Energy Agency
IFC International Finance Corporation
INDC Intended Nationally Determined Contribution
IoT Internet of Things
IPDS Integrated Power Development Scheme (India)
IPP Independent Power Project
IRENA International Renewable Energy Agency
KII Key Informant Interview

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KTOE Kilo Tonne of Oil Equivalent
kW Kilo Watt
kWh Kilo Watt Hour
LCOE Levelized Costs of Energy
LECO Lanka Electricity Company (Private) Limited (Sri Lanka)
LEDS Low Emission Development Strategy
LES Localized Energy Systems
LFI Local Financial Institutions
LTGEP Long Term Generation Expansion Plan (Sri Lanka)
MFI Microfinance Institutions
MGs Minigrids
MGEAP Minigrid Energy Access Project (Nepal)
MGP Mera Gao Power (India)
MHDF Micro Hydro Debt Fund (Nepal)
MHP Micro Hydro Power
ML Machine Learning
MNRE Ministry of New and Renewable Energy (India)
MoAF Ministry Of Agriculture and Forests (Bhutan)
MoEA Ministry Of Economic Affairs (Bhutan)
MoEWRI Ministry of Energy, Water, Resources, and Irrigation (Nepal)
MPEMR Ministry of Power, Energy and Mineral Resources (Bangladesh)
MPPT Maximum Power Point Tracking
MPRE Ministry of Power and Renewable Energy (Sri Lanka)
MRRD Ministry of Rural Rehabilitation and Development (Afghanistan)
MW Mega Watt
NABDP National Area Based Development Programme (Afghanistan)
NDC Nationally Determined Contribution
NEA Nepal Electricity Authority
NEPRA National Electric Power Regulatory Authority (Pakistan)
NEPS National Energy Policy and Strategies (Sri Lanka)
NGO Non-Governmental Organization
NIWE National institute of Wind Energy (India)
NPA Non-Performing Assets
NPP National Priority Programme (Afghanistan)
NREP Nepal Renewable Energy Programme
NRSP National Rural Support Programme (Pakistan)
NSP National Solidarity Programme (Afghanistan)
NWP Numerical Weather Prediction
NZD New Zealand Dollar
NZMFAT New Zealand Ministry of Foreign Affairs and Trade
O&M Operation and Management
P2P Peer to Peer
PAYG Pay-As-You-Go
PDD Power Development Department (Ladakh, India)
PLF Plant Load Factor
POISED Preparing Outer Islands for Sustainable Energy Development (Maldives)

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PPA Power Purchase Agreement
PPAF Pakistan Poverty Alleviation Fund
PPP Public Private Partnership
PV Photovoltaic
RAPSS Remote Area Power Supply System (Bangladesh)
RE Renewable Energy
REB Rural Electrification Board (Bangladesh)
REDF Renewable Energy Development Fund (Bhutan)
REP Rural Energy Policy 2006 (Nepal)
RER2032 Renewable Energy Roadmap for Afghanistan 2032
RERED Renewable Energy for Rural Economic Development (Sri Lanka)
RERL Renewable Energy for Rural Livelihood (Nepal)
RESCO Renewable Energy Service Companies
RET Renewable Energy Technology
RGoB Royal Government of Bhutan
ROR Run of River
RVEP Remote Village Electrification Programme (India)
SAARC South Asian Association of Regional Cooperation
SAP Strategic Action Plan (Maldives)
SASEC South Asia Sub-Regional Economic Cooperation
SDG Sustainable Development Goal
SEC SAARC Energy Centre
SECF Sustainable Energy Challenge Fund (Nepal)
SEforAll Sustainable Energy for All
SESI Sustainable Energy Systems International
SHS Solar Home System
SIDS Small Island Developing States
SME Small and Medium Enterprises
SMS SAARC Member States
SPEED Smart Power for Environmentally sound Economic Development (India)
SPI Smart Power India
SPP Small Power Producers
SREDA Sustainable And Renewable Energy Development Authority (Bangladesh)
SRSP Sarhad Rural Support Programme (Pakistan)
T&D Transmission & Distribution
TANESCO Tanzania Electric Supply Company Limited
ToU Time of Use
TPRM TP Renewable Microgrid (India)
TREP Tokelau Renewable Energy Project
UNCDF United Nations Capital Development Fund
UNDESA United Nations Department of Economic and Social Affairs
UNDP United Nations Development Programme
UNHCR United Nations High Commissioner for Refugees
UNIDO United Nations Industrial Development Organization
USAID U.S. Agency For International Development
USD United States Dollar

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UT Union Territory
VAT Value Added Tax
VDC Village Development Council
VESP Village Energy Security Programme (India)
VGF Viability Gap Funding
W Watt
WB World Bank
WBREDA West Bengal Renewable Energy Development Agency (India)
XOF West African CFA franc

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EXECUTIVE SUMMARY
SAARC Energy Centre (SEC) commenced this study “Minigrids and Access to Electricity in SAARC” to
enhance the deployment of minigrid systems in each of the SAARC Member State(s) (SMS). The study
seeks to present the up-to date information and analysis of the minigrid status, challenges and trends
in the sector and proposes recommendations to overcome the barriers.
The specific scope of the study included research and analysis on the status of minigrid systems
exploring technical, policy, financial and socio-economic aspects in each of the SAARC Member States
and identifying country-specific conditions that shall ensure sustainability of minigrid systems. The
scope also included analysis of actual case studies to depict their broad success factors.
The outcome of the study is limited to secondary sources and discussions with key stakeholders in
each SMS. The analysis and data collection are based on public sources of information such as
industry studies, journals, publications, and various research databases.
The study begins with a general overview of minigrid systems detailing the global status of minigrids;
technical and operational aspects of a minigrid system; use of conventional and renewable energy
technologies; cost trends; business models; and latest innovations in the minigrid sector. Technical
aspects detail the structure of a minigrid, technical configurations used and key steps in design of
minigrid systems. Innovations including Artificial Intelligence (AI), smart meters, Demand Side
Management (DSM) and Internet of Things (IoT) devices used to improve power management,
integration, and system efficiency of the minigrid have been discussed. The chapter also discusses
the operational issues related to minigrid projects and integration of minigrid with the centralised
national grid.
Further, assessment of the status of minigrids’ deployment in each of the SAARC Member States has
been conducted based on the multi-dimensional framework comprising of nine parameters. These
include overall status, national strategy for electrification, policies and regulations, technical aspects,
business models, minigrid tariffs, financing, opportunities, and barriers. Secondary data as well as
information collected through discussions with stakeholders in each country has been used to carry
out the assessment. The assessment provides a comparative analysis on minigrids development in
each country and provides cross-learning potential that could be exploited in the SAARC Member
States for scaling up minigrids’ deployment.
The study later discusses seven specific case studies, with a view to deep dive into several key aspects
of minigrid including key factors for minigrid development and associated barriers. Following cases
have been drawn across the SAARC Member States and globally with each showcasing a unique
feature:
1. Bamiyan solar Photovoltaic (PV) minigrid, Afghanistan: first-of-its-kind 1 MW solar PV-
diesel-battery minigrid system in Afghanistan using state of the art technologies and
concepts
2. Microgrids with interconnected Solar Home Systems (SHSs), Bangladesh: a new approach
to interconnect SHSs into smart peer to peer (P2P) microgrids, monetizing excess solar
energy with mobile money in real time

xii
 3. Solar PV minigrid set up under Smart Power for Environmentally sound Economic
Development (SPEED) project, India: a 30-kW solar PV-battery system with load limiters and
prepayment facilities used for the first-time and innovative structuring of the business model
to de-risk project proponents
4. Baglung minigrid, Nepal: Six Micro Hydro Power plants (MHPs) ranging from capacity of 9
kW to 26 kW interconnected to form minigrid to provide reliable electricity to households
5. Solar PV hybrid minigrid, Tokelau: One MW solar PV with battery storage to provide at least
90% of this pacific islands’ electricity needs in a year from solar power and reduce diesel
consumption
6. Bambadinca PV Minigrid, Guinea Bissau: A project of the size 312 kW solar PV with battery
& Diesel Generator (DG) set installed under public-community partnership model to increase
access to electricity
7. MHP minigrid, Khyber Pakhtunkhwa Province, Pakistan: A 36-kW MHP installed by Pakistan
Poverty Alleviation Fund (PPAF) with support of German Development Cooperation in a
remote and off-grid area to provide electricity to 580 people.
Above case studies highlight lessons as well as barriers for successful minigrid development. Access
to and demand for electricity is the prime driver for minigrid development while enterprise load
enables a minigrid to support its operation over time covering operating expenses. Innovations in
technical design and business models as well as active engagement of community have proved to be
instrumental in improving viability and increasing consumers adoption. Other challenges related to
minigrid sector include absence of technical and project management skills, risk perceptions among
financiers towards introduction of new technologies and low adoption rate of consumers.
Based on the outcome of the above research, the study concludes with summarising key prospects,
drivers, and barriers, with specific recommendations for accelerating deployment of minigrids in

xiii
 each SMS.

SAARC Countries Drivers/ Opportunities Barriers Recommendations

▪ Need of energy sector

▪ Net zero GHG emission by ▪ Develop energy sector
plans on hybrid RE
2030 expansion plans
▪ Limited sources of
Maldives ▪ Promotion of hybridization ▪ Promoting PPA mechanism
financing
of diesel grids with RE ▪ Conduct technical and
▪ Lack of experience and
▪ Program on hybrid projects vocational training
private sector involvement

▪ 2.12 million people lack

▪ Develop minigrid considering
electricity access ▪ Existing minigrids cater to
future loads
▪ Interest for minigrids in basic needs
▪ Measures to reduce minigrid
Nepal rural areas ▪ High minigrid tariff
tariffs
▪ Existing govt. & donor ▪ Policy for interconnection
▪ Design minigrid
programs on minigrid not clear
implementation plan
projects

▪ 45 million people without ▪ Lack of institutional ▪ Develop least cost

electricity support electrification plan
▪ Issue of load shedding ▪ Absence of minigrid ▪ Set in place minigrid
Pakistan ▪ RE policy prioritizes policies regulations
minigrid solutions ▪ Lack of private sector ▪ Replicate success stories
▪ Lower minigrid tariff investment from SMS i.e. SOLshare model
compared to grid ▪ Dearth of technical ▪ Establish financing programs
expertise

▪ Govt focus on 100% ▪ Develop policy to support

▪ Limited scope for minigrid
electrification through enterprise development using
due to govt focus on
centralized grids RE minigrids
Sri Lanka centralized grid approach
▪ Opportunities for minigrid ▪ Promote and implement RE
▪ Electricity trans. & dist.
in outer islands running on hybrid minigrids in outer
restricted to CEB only
diesel generators islands

Figure 1 below provides this summary. The study has also suggested the following specific overall
recommendations/ action plan to foster cooperation in the region to achieve the above:
1. Regional minigrid cooperation mechanism: a platform to facilitate coordination and
exchange of good practices and learnings among the SAARC Member states. The mechanism
could operate through a task force consisting of officials from each SMS and will allow
interaction and discussions on regular basis as well as provision of technical assistance.
2. Specialized course on design and operation of minigrids: short term specialized course on
minigrid design and operational aspects that can be offered to relevant stakeholders of
minigrid sector in the SMS for their capacity building. The course would build on
xiv
 contemporary thinking and technologies available and used in the minigrid sector. The
course may be offered by recognized technical institutions in the SAARC Member States.
3. Finance facilitation desk/ unit: an online e-platform to connect minigrid project developers,
services providers, and financiers/investors. The facilitation desk would support the
deployment of minigrid projects by helping project developers secure financing more
efficiently and supporting investors and lenders to build stronger project portfolios.

xv
SAARC Countries Drivers/ Opportunities Barriers Recommendations

▪ 70% population without ▪ Develop least cost

▪ No national minigrid policy
electricity electrification plan
Afghanistan ▪ Private sector growth
▪ Capacity building of key
▪ Plans to set up 25 minigrids restricted
stakeholder
▪ Strong enterprise demand ▪ Safety and security issues
▪ Creation of B2B network

▪ Minigrids for remote off- ▪ No specific minigrid policy/ ▪ Policy for minigrids in
Bangladesh grid islands strategy remote areas
▪ National target of 10% RE ▪ High minigrid tariff ▪ Upgrade, connect existing
in the mix ▪ Land availability minigrids and buy electricity

▪ Formulate minigrid policy &

▪ Mandate of 60% land as ▪ No dedicated policies for
targets
forest, discouraging minigrids
▪ Capacity building programs
transmission lines ▪ Lack of technical/ other
Bhutan ▪ Replicate success stories
▪ Increased demand for expertise
from SMS, i.e. Nepal
electricity and reliability of ▪ Private sector not active in
interconnected hydro
supply in remote areas minigrid
minigrid

▪ 5.5 million people lack

▪ Finalize draft national
access ▪ Lack of clarity on grid
minigrid policy
▪ Need for reliable & quality arrival issue
India ▪ Develop innovative business
supply in remote public ▪ Financing O&M and
models
institutions upgradation
▪ Promote grid interactive
▪ State policies driving ▪ High minigrid tariff
minigrids
private sector interest

xvi
SAARC Countries Drivers/ Opportunities Barriers Recommendations

▪ Need of energy sector

▪ Net zero GHG emission by ▪ Develop energy sector
plans on hybrid RE
2030 expansion plans
▪ Limited sources of
Maldives ▪ Promotion of hybridization ▪ Promoting PPA mechanism
financing
of diesel grids with RE ▪ Conduct technical and
▪ Lack of experience and
▪ Program on hybrid projects vocational training
private sector involvement

▪ 2.12 million people lack

▪ Develop minigrid considering
electricity access ▪ Existing minigrids cater to
future loads
▪ Interest for minigrids in basic needs
▪ Measures to reduce minigrid
Nepal rural areas ▪ High minigrid tariff
tariffs
▪ Existing govt. & donor ▪ Policy for interconnection
▪ Design minigrid
programs on minigrid not clear
implementation plan
projects

▪ 45 million people without ▪ Lack of institutional ▪ Develop least cost

electricity support electrification plan
▪ Issue of load shedding ▪ Absence of minigrid ▪ Set in place minigrid
Pakistan ▪ RE policy prioritizes policies regulations
minigrid solutions ▪ Lack of private sector ▪ Replicate success stories
▪ Lower minigrid tariff investment from SMS i.e. SOLshare model
compared to grid ▪ Dearth of technical ▪ Establish financing programs
expertise

▪ Govt focus on 100% ▪ Develop policy to support

▪ Limited scope for minigrid
electrification through enterprise development using
due to govt focus on
centralized grids RE minigrids
Sri Lanka centralized grid approach
▪ Opportunities for minigrid ▪ Promote and implement RE
▪ Electricity trans. & dist.
in outer islands running on hybrid minigrids in outer
restricted to CEB only
diesel generators islands

Figure 1: Summary of Country Specific Drivers, Barriers, and Recommendations

xvii
1 INTRODUCTION

1
1.1 Background
Access to electricity rose consistently from 71% of global population in 1990 to 83% of population in
2010 and to 90% in 2019, shrinking the number of those without electricity access from 1.5 billion in
1990 to 1.2 billion in 2010, and to 759 million in 2019. Expansion of grid infrastructure and deployment
of off-grid solar including minigrids are the key reasons for this progress (IEA, Tracking SDG7: The
energy progress report, 2021).
Minigrids are described as electric systems, consisting of power generation and distribution network,
providing electricity to households, businesses, public institutions, productive and anchor loads (such
as telecom towers) in remote settlement or in a town or city. Minigrids can be fully detached from the
main grid or connected to it with a provision to isolate themselves from the grid.
Globally, at least 19,000 minigrids are installed in 134 countries and territories, representing a total
investment of USD 28 billion, providing electricity to around 47 million people. In the South Asia
region, there are around 9,300 minigrids installed, with majority of them based in Afghanistan, India,
and Nepal (ESMAP, 2019). However, there is still a strongly felt need for last-mile energy connectivity
that is cost-effective and reliable. Often, centralised electricity supply fails to deliver reliable and
affordable electricity in the remote rural areas. This impedes energy access in under-served and
unserved areas, and hence seriously affects quality of life, livelihoods as well as health and education.
Minigrids have been found to be the cost-effective option for rural electrification when the lower
Levelized Cost of Energy (LCOE) of minigrid electricity supply outweighs the high fixed cost of
extending the national grid (ESMAP, 2017). In unserved and/or under-served rural areas, minigrids
have the potential to provide high quality energy for productive uses to communities.
Such systems score strongly on their potential to promote environment-friendly economic progress,
and contribute to realisation of Sustainable Development Goals (SDGs) by reducing poverty (SDG1),
improving access to energy (SDG7) and on social indicators such as health (SDG3) and education
(SDG4). Minigrids also provide clean electricity services for irrigation and other agricultural activities.
Although there have been success stories of minigrids globally as well as in the SAARC region in the
form of enabling policies, business models and innovative project designs, there is a need for a
systemic analysis of lessons and experiences to enable informed decision making on scaling up the
deployment of minigrids in the SAARC Member States, which has necessitated the present study.

1.2 Objective of the study

The overarching objective of the assignment is to facilitate enhanced deployment of minigrid systems
in each of the SAARC Member States. The study will assess the efficacy of a Decentralised, Renewable
Energy (DRE) based minigrid or RE combined with conventional energy generation sources to address
local social and economic goals, and contribute to realisation of the SDGs. The study will provide
stakeholders in the minigrid sector with the most up-to date information and analysis of the market
status, challenges and trends in the sector and propose recommendations to overcome the barriers.
The study will thus enable policymakers and practitioners in the SMS to be more informed on how to
regulate, structure and manage a DRE based minigrid project for providing electricity access to
unserved and under-served communities.

2
1.3 Scope of the study
The scope of study includes the following aspects:
A. Research and analysis on the status of minigrid systems and to explore their efficacy as
decentralized means of energy access, powering livelihoods, building climate resilience, and
furthering realization of SDGs.
B. Detailing the technical and operational structure of a minigrid and potential opportunities in
the SMS.
C. Establish, through a country-level analysis, the key drivers, and barriers for minigrids, i.e., social,
economic, technological, and financial etc.
D. Explore cost competitiveness and socio-economic benefits of electricity access through
minigrids.
E. Analyse various business models that are in operation in the SMS including business models
anchored by community, Renewable Energy Service Companies (RESCO) and/or a lease-to-own
asset ownership and an analysis of financial models funded by donors, government, etc.
F. Evaluate potential of minigrid projects to encourage enterprise and entrepreneurship, i.e.
enabling consumers who can utilize minigrid electricity to set up their own enterprises.
G. Identify country-specific conditions that shall ensure sustainability of minigrid systems.
H. Finally, provide insights on actual case studies to depict their broad success factors including
their role to support growth in the SAARC Member States.

1.4 Limitations of the study

This study does not attempt to provide a comprehensive account of all minigrids in the SMS, focusing
rather on elements that can be integrated in the design of minigrids, which would facilitate increased
deployment of minigrids across the SAARC Member States. The study should also not be used to
conduct detailed techno-commercial assessment of any minigrid project or structure. The study is
more of an extensive analysis rather than an intensive assessment.
The analysis and data collection are based on public sources of information such as industry studies,
journals, publications, and various research databases. The study undertaken is limited to secondary
sources and discussion with key stakeholders in each SAARC Member State.

1.5 Challenges faced and ways to overcome

One of the key challenges faced in this assignment was to identify well documented information on
operational minigrids across regions and countries with varying economic, social, financial, and
environmental circumstances. The approach taken by the team to overcome this constraint was to
identify key success factors or issues governing minigrid projects, develop a framework to analyse
their impacts. Thereafter, the team used Key Informant Interviews (KII) and consultations to gather
inputs.

3
A second challenge was in the way of engaging with stakeholders. Due to Covid-19 restrictions during
the assignment, extensive field surveys were ruled out. However, the team conducted online
engagement with stakeholders to overcome this handicap.

1.6 Structure of the report

The Study report comprises of five chapters and the executive summary, emerging as a best practices’
guidebook for minigrid development in the SMS. The Executive Summary highlights the report’s key
findings and recommendations.
Chapter 1 gives the introduction and the background for undertaking the study. It briefly describes
the rationale behind the study, importance, and benefits of minigrids. It also states the objectives for
undertaking the study, scope of work, limitations to the study and challenges faced during the study.
Chapter 2 provides an overview of minigrid systems detailing the technical and operational structure
of a minigrid system, description of various conventional and renewable energy technologies, cost
trends, business models and latest innovation in the minigrid sector. It also details the barriers
impeding the development of minigrid sector in general and various impacts of minigrids.
Chapter 3 details the status of minigrid deployment in the SMS. The chapter first introduces the
framework for assessment of minigrid status in the SAARC Member States and then highlights the
trends in policies and regulations, national strategy for electrification, technical aspects, business
models, minigrid tariffs, financing, and barriers to development of minigrids in each of the SAARC
Member State. It also discusses the opportunities for development of minigrids in each country and
their resultant benefits.
Chapter 4 highlights specific case studies, with a view to substantiate facts and analytical results
arrived at in the previous chapter. Cases are drawn across the SAARC Member States and globally such
as first of its kind minigrid project in Afghanistan, minigrid project developed under SPEED and later
Smart Power India in India, minigrid in Nepal, microgrid in Bangladesh, diesel- solar PV hybrid minigrid
in the Asia Pacific and minigrid in Africa.
Chapter 5 presents the overall summary and recommendations to overcome different barriers for
deployment of minigrids in the SMS. The chapter will yield, in the context of each SAARC Member
State, conditions to accelerate deployment of minigrids and thus finally emerge as a guidebook for
minigrid development in the SAARC Member States.

4
2 OVERVIEW OF MINIGRIDS

5
2.1 Global overview of minigrid sector
Minigrid market has grown from very few numbers of projects installed globally in 2010 to 19,000
minigrids in 2019. Most of these minigrids are hydro and diesel powered installed in 134 countries.
There are around 7,500 minigrids (mostly solar hybrid) that are planned. As seen in Figure 2, Asia has
the most minigrids installed, and Africa has the most minigrids planned. South Asia has a combined
total of 9,300 installed minigrids and 2,200 planned minigrids (ESMAP, 2019).
Approximately half of installed capacity of minigrids is from diesel and other fossil fuel powered
generators, with hydro and solar accounting for an additional 20% and 13%, respectively. Planned
minigrids are expected to utilize energy from renewable sources, with hydro and solar accounting for
46% and 40% of planned capacity, respectively. To reach universal access to electricity by 2030, more
than 210,000 minigrids need to be developed and operated globally.

10
Number of minigrids

8
(Thousands)

6
4
Installed
2
Planned
0
Africa East Asia and OECD and South Asia Other
Pacific Central Asia
Region

Figure 2: Regional Trends of Installed and Planned Minigrids1

Recent stabilisation and lowering of capital costs for minigrid projects, and improvement in quality of
service have made minigrids an attractive option to connect un-served and under-served
communities, complementing grid extension and standalone home electricity systems to catalyse
progress towards universal access to electricity by 2030. In 2019, while the share of population with
electricity access grew to an estimated 90%, 759 million people are still without access to electricity.
The population without electricity access most likely grew in 2020 in Sub-Saharan Africa. So,
considering the current and planned policies and further affected by the Covid-19 crisis around the
globe, the 2021 Tracking SDG7 Report estimates 660 million people would still lack electricity access
in 2030 (IEA, 2021).
While the potential for minigrids is large, their deployment is rather low as discussed above. The
challenges faced by minigrid are not technical in nature but often due to uncertain or underdeveloped
policies, financing, or regulatory issues. Therefore, stable policies and favourable economic condition
are needed for growth of minigrids. Several policy elements that have been successful in creating an
enabling environment for deployment of minigrids globally are depicted in Figure 3.

1 (ESMAP, 2019)
6
 Guides public, private and
Ensures availability of donor agencies to collaborate,
expertise to design, install, and National mobilize, and direct resources
operate minigrids Capacity energy/RE
building policy
programs highlighting
role of minigrid

Provides clarity to both

Supports deployment and Financial Rural developers and rural
ensure financial viability of support for electrification
communities by demarcating
project minigrids strategy and
master plan areas for on-grid and off-grid

Interconnection
Tariff standards and
Helps in ensuring affordability regulations grid arrival Interconnection standards and
of service for consumers and rules compensation mechanisms for grid
cost-recovery for private
arrival allay associated risks, and
minigrid operators
increase attractiveness of sector

Figure 3: Global Best Policy Elements for scaling up minigrid

2.2 Technical features

The basic technical structure of a minigrid includes components that are grouped mainly under three
categories - production, distribution, and end-user (see Figure 4). Each system includes various
components, which are based on available resources, desired services, and user features (USAID,
2018).

Figure 4: Technical Structure of a Minigrid2

Production: The production system comprises of power generation technologies, inverters, charge
controller, energy management system, remote monitoring, and energy storage. The production
system determines minigrid’s overall capacity to provide electricity to end users. Power generation
technologies in a minigrid may include a single renewable or non-renewable energy source or

2 (USAID, 2018)
7
combination of energy sources (hybrid). Renewable energy sources such as solar and wind are
intermittent sources. Therefore, to provide end users with power on demand facility, minigrid must
include energy storage (such as batteries). Storage system stores energy at time of low demand and
supplies it when resources are not available, or demand is higher than the resource available. Energy
storage also adds stability to the system by storing energy for peak consumption.
Distribution: The distribution system transfers power from the production system to end users. It
includes distribution lines, transformers, may include transmission lines, and the infrastructure such
as electric poles or underground cables to support the electricity distribution network. The distribution
system can be either Alternating Current (AC), having either single- or three-phase power, or Direct
Current (DC) based network. Different components in a distribution system have different efficiencies,
and therefore, the choice of voltage, current and transformers impacts energy losses. However, there
are factors such as quality of power, size of the minigrid and user tariff, that usually dictate the option
chosen by project developers.
End User Systems: End-user systems are an interface for end users to access, use and monitor
electricity from the minigrid. It comprises of electrical connections from the distribution network,
remote monitoring component, protection systems to prevent electrical shocks and power
consumption metering. The design of end-user systems should always consider consumers’ needs and
energy uses. However, in a minigrid architecture, the narrative is more complex due to supply
constraints: minigrids power stations may not be continuously generating, as a result there is a
demand-supply mismatch that often calls for user rationing. Thus, users need to be monitored for
excess consumption. At the same time, often usage of electricity is bound to a Pay-As-You-Go (PAYG)
system, asking for prepayments. These realities often govern consumer behaviour, as well as business
and revenue models.

2.2.1 Three generation of minigrids

Minigrid systems have been classified into three generations. First generation of minigrids are those
that were installed more than 100 years ago and were later integrated into the national electric grid.
Second generation minigrids were established by local communities or private entrepreneurs to
provide electricity to communities in remote off-grid areas. These minigrids are mostly small-scale
diesel generators and hydro based and are typical installed in remote areas of emerging countries.
Third generation minigrids are technically more advance and complex than the first- and second-
generation minigrids. These minigrids include new energy technologies such as solar PV, wind and
battery energy storage and are designed to provide electricity 24/7 to the consumers (BNEF & SEforAll,
2020). The technical features of a third generation minigrid are depicted in Figure 5. The salient
features of third generation minigrids:
➢ use new and advance technologies, which are declining in cost, for different components
➢ provide superior-quality service, often above 97% up-time
➢ use remote-controlled energy management systems, monitoring platforms, and prepaid
smart meters to reduce operating costs and increase revenue collection
➢ adhere to standard designs for components and processes to reduce manufacturing,
installation, and operating costs
➢ have typically ‘grid ready’ design to interconnect with the main electric grid, to mitigate
investment risk when the main grid arrives

8
 Figure 5: Technical Features of Third Generation Minigrid3

2.2.2 Key steps in design of a minigrid system

Successful design is an iterative process, meaning in each step project developers must consider
balances in cost, Operation & Maintenance (O&M) needs, ability to provide power on demand, load
efficiency and flexibility. There are six key steps in the minigrid technical design process (Section is
based on (USAID, 2020)):

Assessment of
Sizing of the Selection of system Designing the
Site selection available energy Load assessment
system configuration distribution system
resources

Site selection: Various studies have analysed the key parameters required to select a minigrid site.
The key parameters for site selection are geographical suitability, energy resource potential, existing
economic activity and availability of target customers, population density, power demand, security
situation, as well as distance of main grid and risk of main grid arrival (IFC, 2017). The Alliance for Rural
Electrification (ARE) study has analysed 11 case studies in South and South-East Asia and reported that
two main criteria have emerged for selecting minigrid sites, which are (ARE, 2019): the local economic
activity (including the potential for productive uses); and proximity to the main grid or remoteness of
the site.
Assessment of available resources: After defining the geographic scope of the project, developers
need to assess local energy resources, including their availability, potential, cost, sustainability, and
potential conflicting uses. The choice of generation source generally depends on resource availability
and cost of technology. During the assessment process, it is essential that project developers interact

3 (ESMAP, 2019)
9
closely with local communities to understand valuable information about availability and potential
conflicting uses.
Load assessment: A minigrid’s size or capacity determines the maximum power output available from
the system to meet the consumer loads. Therefore, it is essential to correctly estimate the present
and future load requirements of the consumers before designing the systems. The present load
requirements are estimated by undertaking a survey of households, businesses, institutions in the
village to collect data from potential customers. The data on electrical devices present, their power
rating and duration of use is analysed to assess the present power demand in the region. In case, the
village does not have any kind of electrical appliances, then the power demand is determined based
on the aspirational need of the potential users.
In design and development of minigrids, the ability of the project developer to correctly estimate the
future energy demand profile of a user community (such as a village) is one of the key success factors.
Incorrect estimation may lead to oversizing of the generation system, leading to lower capacity
utilisation and weak cost recovery, making the unit less viable. On the other hand, under-sizing could
lead to users not receiving as much electricity as needed, leading to rationing of electricity, dissatisfied
customers, and a way for other providers to step in (such as a local diesel minigrid). These
developments create potential conflict issues that often destabilise operations of the unit.
Sizing of the system: Developers and planners often use tool such as Hybrid Optimization of Multiple
Energy Resources (HOMER) software to model and define system’s expected loads, available
resources, technical specification, cost to identify the most optimal size of the system. A minigrid that
can meet increased demand over time is more financially sustainable. The best size for a minigrid also
depends on whether it is likely to connect to the national grid in the future.
Selection of system configuration: Different energy generation technologies favour different
configurations. Hydropower, geothermal energy, diesel power and biomass-based power generate
AC, so they generally use AC configurations. Solar PV systems produce DC, and wind turbines can be
configured to produce either AC or DC. Cost, expected usage, type of end user loads, and plans to
eventually integrate into a larger (typically AC) network are factors that influence decision making. DC
configurations are typically used for shorter distances, lower voltages and systems generating less
power (W rather than kW). AC configurations, which transmit power more efficiently, are more
commonly used for longer distances, higher distribution voltages and systems generating more power.
DC systems are generally less expensive than AC because AC requires power conditioning equipment.
However, the choice of technology mainly depends on the availability of appliances at consumer end.
Today, vast majority of consumer appliances require AC supply and also considering minigrid
integration into the national grid with minimal system or component replacements, which would not
be possible in a DC-based network.
Designing the distribution and control system: Minigrid distribution systems are often more complex
than those of standard grids as they may have bidirectional power flows and multiple energy sources.
This operational complexity requires extra controls and software. In hybrid systems, each power
source requires separate controllers, and the minigrid must have an overall management control to
integrate the different power sources. The design of distribution systems should also comply with local
codes and standards if it is likely to be interconnected with national grid.

10
2.3 Conventional and renewable energy technologies for minigrids
Minigrids can be powered with conventional as well as renewable energy technologies or a
combination of both. They may use fossil fuel-based generation sources such as DG or Renewable
Energy Technologies (RET) such as solar, hydro, biomass, or wind. Minigrids can also be coupled with
energy storage systems such as batteries. Diesel Generators are still very popular due to their reduced
up-front costs. However, some of the RET such as wind and solar are already competitive with diesel
generators in terms of levelized costs of energy (ADB, 2017). The LCOE of solar and wind systems is
estimated to be around USD 0.057/ kWh and USD 0.039/ kWh respectively (IRENA, Renewable Power
Generation Costs in 2020, 2021). Whereas the cost of diesel systems has been found to range around
USD 0.3 to 0.5 per kWh considering subsidized diesel prices (Solano-Peralta, Moner-Girona, van Sark,
& Vallve, 2009). The technology-wise share of installed and planned minigrids worldwide is depicted
in Figure 6. The description of different power generation technologies in minigrids are discussed
below in this section.

Figure 6: Technology Wise Deployment of Installed and Planned Minigrids Worldwide4

2.3.1 Photovoltaic energy systems

Solar photovoltaic systems are one of the most widely used RET in minigrids due to decline in the cost
of the technology, its modular/ scalable deployment features and relative ease of installation and
operation. The PV systems are often installed along with a back-up option such as batteries since the
solar energy is intermittent. The atmospheric conditions such as cloudiness, dust storms, etc. at the
location determine the variability of solar radiation at the ground level. This variability leads to a range
of energy generation from the same solar PV module. Therefore, sometimes the solar energy
generation is more than the power demand, in this case solar energy is stored in the batteries and
when solar energy is low, then stored energy is utilized.

4 (James Knuckles, 2019)

11
The power output of the PV systems depends upon the number of PV cells/modules installed, which
means solar PV systems can be scaled up by adding a greater number of modules into the system.
However, it is to be noted that adequate space shall be required to scale up the systems. Solar PV
systems are thus able to match any power requirement and suitable for basic energy services to
households, such as lights, phone charging, and fans, for a limited number of hours in the day as well
as for the high-power service requirement (ADB, 2017). Figure 7 provides the basic layout of a solar
minigrid system.

Figure 7: Basic Layout of a Solar Minigrid System5

2.3.2 Wind energy systems

Wind turbines transform kinetic energy of the wind into DC or AC current and the necessary power
electronic converters transform this energy into DC or AC current at the voltage and frequency of the
RE system. The power generated by a wind turbine is proportional to the cube of the wind speed.
Therefore, it is important to get wind turbines sited in optimal locations with exposure to the strongest
winds. Average wind speed at any site varies a lot within small areas. So, cost effectiveness of this
technology is site specific. Wind turbines normally require a high level of maintenance compared to
solar PV and repairs and spare parts availability are the major challenges for the wind energy systems.
Solar wind hybrid minigrid utilizes solar PV modules and wind turbines to provide level power
generation throughout the day as wind starts blowing during late evenings and reaches its peak during
the nights and solar PV produce power only during the day.

5 (ADB, 2017)
12
2.3.3 Biomass and biogas-based systems
Organic materials, such as wood, rice husk, coconut shell, bark, etc. are used to generate electricity
from biomass-based power generation systems. Energy from biomass is reliable as it is free of
fluctuation and does not need storage to firm up the capacity or compensate for the intermittency
unlike wind or solar power . However, energy generation utilizing biomass resource is challenging
because of issues of biomass supply chain. Biomass from agriculture is available only after harvesting
period, so there is a need to procure, transport and then store required quantity of biomass within
the stipulated time. The agri-residues and other biomass stocks have alternate uses as well such as
fodder, cooking fuel, etc. and thus, there is limited availability of biomass for energy recovery, and the
prices of residues are also high. Biomass projects generate solid, liquid, and gaseous waste that, if not
controlled, can harm the environment. Thus, appropriate measures should be taken to minimize
harmful emissions and comply with environmental regulations, which include proper operational
procedures and emission control systems.
Biogas is a renewable fuel produced by the breakdown of organic matter such as food scraps and
animal waste by microorganisms in the absence of oxygen. After biogas is captured, it can produce
heat and electricity for use in engines, microturbines, and fuel cells. Stored biogas can provide a clean,
renewable, and reliable source of baseload power in place of coal or natural gas. Similar to natural
gas, biogas can also be used as a source of peak power that can be rapidly ramped up. The supply
chain issues such as poor collection, improper segregation, and transportation of waste are barriers
for utilising waste in biogas production.

2.3.4 Hydro based minigrids

Hydropower is the most established RET for electricity generation and also one of the RE power
sources for autonomous minigrids. Storage system and run of the river are two main design types for
hydro projects. Mini and micro hydropower is a proven, long lasting, and robust technology with low
levelized cost of electricity. However, design of a hydropower plant for a minigrid project uses unique
design and construction techniques requiring a considerable amount of specialist knowhow. Study of
onsite resources and geological features is important along with the flow measurement over a certain
period of time. The energy output from the run of the river hydro based minigrids is seasonal as it
depends on the river flow.

2.3.5 Diesel generator sets

Diesel generator sets are the most common electricity generation method used in remote minigrids
due to their low initial capital investment. Despite their high costs of operation, which is due to high
prices of fuel and ongoing maintenance requirements, DG sets are still essential for supplying power
to different loads, which are disconnected from the main grid. This is because DG sets are capable of
automatically regulating power output to match the demand. Diesel generators are the cheapest
power-generating option for islanded systems due to their lower initial investment cost per rated kW
(ADB, 2017).
Minigrid running 100% on diesel fuel has the advantage of being theoretically dispatchable on
demand. However, the isolated and sometimes inaccessible conditions in rural areas make the
delivery of fuel to run a system for several hours a day very difficult. Moreover, while diesel generators
can be used for lighting for a nominal daily price, they are an expensive source of electricity if used to

13
run enterprises, since diesel is taxed in the SAARC Member States. Finally, gensets are noisy and
polluting, and have severe health impacts. Each litre of diesel fuel consumption produces, on average,
2,664 g of CO2. (Aaron Zvi, n.d.).

2.3.6 Hybrid systems

Minigrids based on 100% renewable energy, except for hydropower and biomass (if continuous supply
is ensured), must rely on storage batteries to provide service to customers without any interruption.
Hydropower minigrids can provide reliable electricity throughout the day due to the continuous flow
of water.

Figure 8: Layout for a Hybrid Minigrid System6

To provide reliable quality of service, RE minigrids need to have larger generation capacity in
comparison to fossil fuel or hybrid systems, which will increase energy price. Thus, depending on the
load profile, installing diesel generators along with RE is an effective way to decrease costs, reduce
emissions and provide high-quality energy services. Renewable energy minigrids, in future, will
increasingly use hybridisation of multiple sources such as solar/wind, solar/hydro and others, which
are the least-cost long-term energy solutions capable of delivering the best services. Figure 8 provides
a typical layout of hybrid minigrid system.

2.4 Cost of minigrids

The costs of renewable minigrids, and minigrids in general, have declined steadily over the past 10
years. The costs have fallen low enough that the technology is gaining interest as an alternative to
conventional method of grid extension. Technological advancement and cost declines for solar PV and
battery energy storage have made the economics of solar hybrid minigrids highly compelling
compared to diesel-only systems (IRENA, 2016). However, costs vary greatly by region and are affected
by regulatory, transport, and operations and maintenance costs.

6 (ADB, 2017)
14
2.4.1 Capital cost of minigrid
The capital costs of minigrids include cost of project development, generation and distribution assets
and logistics. In developing countries, the total cost of installing a solar-diesel-battery hybrid minigrid
in an off-grid setup is extremely high for many rural customers. The capital cost for solar hybrid
minigrids is in the range of USD 1,420/kW to USD 22,689/kW, with the average and median costs as
USD 6,193 and USD 4,849, respectively (BNEF & SEforAll, 2020). Figure 9 provides the breakup of
capital cost for a solar-diesel-hybrid minigrid system.
The generating components of the minigrid system accounted for 54% of total capital costs. The
components with the largest share of overall cost were batteries (15%), distribution system (14%), PV
modules (11%), inverters (5–9%), powerhouses (7%), and meters (4%). The variations in taxes and
duties, wholesalers and distributors margins, and other costs incurred in setting up minigrid across
countries explains much of the variation in minigrid component costs.
The costs of key minigrid components have fallen by 62–85% between 2010 and 2018, partly because
of economies of scale outside the minigrid sector. For solar PV, the deployment of utility-scale solar
PV parks and rooftop solar home systems drove cost reductions of 85%. The cost of lithium-ion
batteries also fell by 85%, which was mainly driven by the increased use in electric vehicles and utility-
scale storage projects (ESMAP, 2019). Figure 10 provides the trends in solar PV cost from 2011 to 2019.

Figure 9: Breakdown of Capital Expenditure for Minigrid7

7 (Chris Greacen, 2019)

15
 Figure 10: Cost Trends of PV Module from 2011 To 20198

2.4.2 Operating cost of minigrid

Operating costs can be divided into two parts: fixed and variable costs. Fixed operating costs generally
includes regular operations and maintenance, insurance premiums, and equipment replacement.
Variable costs include fuel costs that can vary from time to time.
According to the Energy Sector Management Assistance Program (ESMAP) and the Rocky Mountain
Institute (RMI), operating costs account for 35–40% of the total lifetime cost of a typical minigrid (BNEF
& SEforAll, 2020). Remote monitoring, smart meters and control systems have now allowed
developers to monitor and optimize performance of minigrids from far off distance and help to reduce
operating costs.
Replacement costs of batteries form a large part in the operating cost of minigrids as battery banks
need to be replaced after 3–10 years, depending on the type of battery. The growing use of lithium-
ion batteries will help in reducing the replacement costs, as lithium-ion batteries have about twice the
number of charging cycles before failure compared to conventional lead-acid batteries. Lithium-ion
batteries are, however, more expensive storage option, when compared to lead acid batteries.

2.4.3 Levelized cost of energy of minigrid

LCOE is the go-to economic metric most often used to compare different power-producing systems.
LCOE is usually applied to determine the minimum price that must be paid for electricity generated
and sold from that plant. The LCOE combines a minigrid’s capital and operating costs over the lifetime
of the minigrid into a single cost per unit of energy.

8 (Chris Greacen, 2019)

16
 Figure 11: Result of ESMAP Analysis for LCOE Considering Different Load Factor9

ESMAP has analysed selected solar and solar hybrid minigrids in Africa and Asia to study the LCOE of
minigrid electricity under different scenarios. As per ESMAP study, the LCOE for minigrids ranges from
USD 0.55 to 0.85 per kWh. Bloomberg New Energy Finance (BNEF)/ Sustainable Energy for All (SEforAll)
study has also analysed the LCOE for various types of minigrids currently in operation across the six
case study countries. The study shows that LCOE of solar hybrid minigrid operating in isolated areas
and serving productive loads ranges from USD 0.49 – 0.68/ kWh.
LCOEs have been found to be consistently lower for minigrids that serve productive-use customers
than for those that serve residential customers. This is because productive-use customers such as
agricultural processing facilities and enterprises tend to use daytime electricity, which correlates
better with the generation profiles of PV systems, increasing the utilization rate of the minigrid and
leading to a lower LCOE. It was found that when a 40% load factor was achieved through significant
daytime consumption by local enterprises and commercial setups, the LCOE fell by 25% compared
with the base case (see Figure 11) (Chris Greacen, 2019).
Increasing productive uses of minigrid electricity creates a win-win-win-win scenario for minigrid
developers, rural entrepreneurs, communities, and national utilities over time. It reduces the LCOE,
which increases the minigrid developer’s margins and therefore financial viability. Entrepreneurs and
communities benefit from affordable minigrid electricity, creation of new jobs and increased
economic activity. Although electricity generation from renewable energy usually entails high fixed
costs and related risks, renewables can play an important role in minigrids as prices have decreased
considerably within the last few years. Figure 12 depicts the unsubsidized costs of 100% renewable
energy minigrids from 2005 to 2035. The 100% renewable energy minigrids are a cost-competitive
solution in comparison with small gasoline and diesel generators.

9 (ESMAP, 2019)
17
 Figure 12: Unsubsidised Cost Ranges for Renewable Minigrids from 2005 To 2035 10

2.5 Service delivery models

Service delivery models of minigrids vary depending on their ownership, regulatory frameworks,
financing, operation, and management. It is basically the method, by which minigrids are delivered -
who is responsible to design and install minigrids, who will finance the minigrids, own, and operate
them. The most popular and scalable delivery models are (USAID, 2018):

2.5.1 Community based model

In this model, local communities own and maintain minigrids and usually receive external help with
regard to financing, design, and installation. Usually, developer provides technical assistance and
public entity, or donor provides financial assistance. After the installation of minigrid, the community
is responsible for tariff collection and O&M. The general schematic of community-based model is
provided in Figure 13.
This business model is common in developing countries where private companies and utilities lack the
capacity or incentive to electrify remote communities. This approach of business model is more likely
to succeed alongside programs that promote productive uses of energy such as creating or growing
enterprises. This will increase communities’ demand and ability to pay, making the minigrid more
sustainable financially. The community driven model is very common in South and South-East Asia.
The West Bengal Renewable Energy Development Agency (WBREDA) in India creates local
cooperatives and beneficiary committees to serve as its partner in minigrid development. More than
23 minigrids are owned and operated by communities throughout West Bengal as of 2016 (USAID,
2018).

10 (IRENA, Innovation Outlook Renewable Mini-Grids, 2016)

18
 Figure 13 : Simplified Community-Owned Business Model11

2.5.2 Private sector model

The private energy service companies construct, operate, and maintain the minigrids, and financial
assistance often comes from private equity and commercial loans. This type of business model is most
common in countries with supportive policies and simple licensing procedures where investors can
access credit, financing and subsidies and bilateral donors and/or non-governmental agencies provide
technical assistance. Figure 14 shows the general schematic of private sector-based business model.
Regulations governing minigrids determine the type of business model for a project. Private sector
must follow rules governing technology, taxes, quality assurance and other aspects of minigrids in the
countries with minigrid regulations which can be expensive. With poorly designed regulations and
failing to enforce them, private sector may refuse to participate in minigrid market due to high
transaction cost. On the other hand, deregulated environments can cost investors more if private
companies must navigate informal regulations affecting the tariff to be paid by consumers, which is
often very high.

Figure 14: Private Sector Based Business Model11

For small scale remote projects, being usually not profitable, involving private sector in minigrid can
be challenging. However, creative approaches such as anchor load approach, community clustering
approach and private-private partnership can make minigrid investment financially attractive.

11 (Smart Power India, First Edition)

19
 i. Anchor load approach (Anchor Business Community (ABC) model)
Minigrid developer pre-identifies reliable commercial clients with predictable energy demand such as
telecommunication tower to supplement demand in beneficiary community in this approach.
Diversification of source of revenue can make risky project financially viable and investors can forecast
and plan more effectively. Prioritising anchor customer needs over community energy needs may be
risky in this approach if anchor customer goes out of business and stops purchasing the power from
minigrid. However, with careful planning, this approach can result in successful minigrid project.
Decentralised Energy Systems of India (DESI Power) used anchor load approach to develop viable
minigrid project (USAID, 2018). The schematic of ABC model is provided in Figure 15.
ii. Community clustering approach
In this approach, villages with similar needs are grouped together for a shared minigrid project. The
developer can use a single management structure either by connecting the communities together or
by clustering the communities. Community clustering approach may also facilitate financing as funding
is more readily available for larger projects. Chhattisgarh Renewable Energy Development Agency
(CREDA) in India uses this approach to operate and maintain successful minigrid projects in remote
areas (GNESD, 2014).
iii. Private – private partnerships
One or many private companies work together on a minigrid project sharing the responsibility of
generation, distribution, and others. This approach protects assets in the event of one party’s
bankruptcy. In Tanzania, many small power producers use this approach (USAID, 2018).

Figure 15: Schematic Diagram of ABC Model12

12 (ARE, 2019)
20
2.5.3 Utility based model
National utilities operate minigrids in similar manner as the national grid but on a smaller scale. The
utility sometimes contracts the local energy service companies to supply and install minigrids. In this
model, subsidies are often used to keep tariffs affordable in remote areas. Usually, tariffs are set equal
to that of national grid although cost of minigrid is higher.

Figure 16: Utility Based Business Model11

This model is efficient when government supports minigrid development as part of its national
electrification strategy. Traditional national utilities without a minigrid strategy tend to prioritize grid
extension. Figure 16 provides the schematic diagram of utility-based business model.
Da Afghanistan Breshna Sherkat (DABS) in Afghanistan has implemented a 1 MW solar-diesel minigrid
in Bamyan province that utilizes pay-for power mechanism, which could be run by local utilities (CIF,
2014).In Sri Lanka, Electricity Consumer Society (ECS) supplied electricity to rural households in villages
that had not yet been connected to the main grid of the national utility (the Ceylon Electricity Board
[CEB]). With the arrival of CEB grid, more than 100 of the isolated minigrids went out of existence,
while three ECSs converted their minigrids into main grid connected Small Power Producers (SPP)
(ESMAP, 2018).
In Bihar, a state of India, two electricity distribution companies - North Bihar Power Distribution
Company Limited (NBPDCL) & South Bihar Power Distribution Company Limited (SBPDCL) are
collectively running around 373 microgrids. The average size of each microgrid is around 10-20 kW.
The microgrids have been developed and are being maintained by L&T Construction, a private project
developer. The project has electrified around 44,000 households, spread across 240 villages. The
monthly fee for households has been kept at INR 60 (USD 0.7813) and for poor households, the monthly
fee has been reduced to INR 30 (USD 0.39) (M Ramesh, 2019).
Tanzania Electric Supply Company Limited (TANESCO) has implemented successful utility based
minigrid model that uses cross subsidization and contracts with local energy service companies.

13
1 INR = 0.013 USD as on 27th October 2021
21
TANESCO charges a uniform tariff throughout the country to subsidize minigrid operations (USAID,
2018).

2.5.4 Hybrid business model

Local community, private entity and utility collaborate to implement and manage minigrid projects in
this business model. Project developers usually use this model when one stakeholder lacks specific
expertise and form joint ventures or use contracts to share ownership, reducing the need for capacity
building. The schematic diagram of this business model is provided in Figure 17.
Although hybrid model can be an effective approach, it can be difficult to be set up due to the
involvement of multiple actors. An example of a common hybrid model can be utility building and
owning the minigrid, community managing the minigrid and private company providing technical
assistance. The WBREDA in India provides a good example of partnership between a government
agency and local communities where a state agency implements minigrid projects and local
cooperatives manage them (GNESD, 2014).

Figure 17: Hybrid Business Model11

In another hybrid model, private company generates and sells power to the utility through Power
Purchase Agreement (PPA) and the utility distributes the electricity. Utility can also generate and sell
power to local utilities for distribution to customers. Mwenga Hydro Ltd. in Tanzania generates the
power and sells it to the rural power development company which distributes the electricity (USAID,
2018).

2.6 Operation and management

Operations and management are critical components of renewable minigrids or minigrids in general,
and attributable as one of the key reasons why minigrids have failed to sustain over time. Operational
issues for minigrids can be differentiated into two components, the standard operation and
maintenance issues, which apply to minigrids as they apply to any electricity generation and
distribution asset. However, minigrids also have an important additional aspect in Billing, Metering,
and Collection (BMC) operations, which are part of the revenue collection architecture.
The second aspect of operational issues deal with management of the minigrids. This is more related
to the overall health and sustainability of the minigrid over time. Minigrids often have persistent
management issues, due to their almost-inevitable low overhead budgeting. Lower overheads imply
22
that minigrids often cannot employ quality manpower to run the operations. Remote operations,
which are innovative and IT-enabled, tend to fall short of solving interpersonal issues and any technical
issues that are beyond the scope of the IT infrastructure, necessitating physical interventions. Finally,
management of minigrids also translate to managing customer expectations in the long run, which are
always aspirational in nature. Some of the other operation and management issues for minigrids are
related to supply of fuel, which applies to diesel, biomass, and hybrid minigrids, management of
intermittent loads, and management of revenues.

2.7 Integration of minigrid with the centralized grid

The integration of minigrid with the centralised grid has been a challenge for several DRE minigrid
sites for several reasons. In certain regions, there is a lack of national standards, codes and regulations
concerning the interconnection of minigrids into the centralized grid. The integration of a minigrid also
faces technical difficulties due to discrepancies in design standards of minigrids.
Despite the above challenges, central grid and the minigrid have often coexisted as presented below:

• In-country or provincial regulations that allow minigrid to merge with central grid, has
supported the coexistence of minigrid and central grid. An excellent case in point is the minigrid
policy of Uttar Pradesh in India in which two exit routes have been identified at the advent of
central grid arrival that is, the developer can either feed power to the grid or can sell the project
to the discom after grid arrival. However, the tariff at which minigrid developers will sell power
to the grid will be determined at the time of exit/integration with the grid, but the calculation
methodology has not been specified in the policy. Therefore, the developers have opted to stay
away from this policy because of the uncertainty over commercial terms of agreement
(Priyavrat Bhati & Mandvi Singh, 2018).
• Sri Lanka has developed procedures to acquire existent minigrids and integrate them with the
national grid as last mile connectivity. As a result, majority of erstwhile minigrids are now
wheeling power to the central grid, or the asset has been fully integrated with the central grid
(ADB, Sri Lanka Energy Sector Assessment, Strategy, and Roadmap, 2019).
• In Bhutan, minigrids that have lower cost of power (compared to a threshold value of BTN 5.81
(USD 0.077)14 /kWh) are allowed to sell power to the centralised grid (IRENA, 2019)
Technical requirements for interconnecting minigrids with central grid can be of theoretical as well as
practical relevance for minigrid design and operations. While in certain instances the two can be
allowed to operate in parallel (especially in regions where the centralised grid is inexpensive but
sporadic), there needs to be precautions (such as islanding) in design of minigrid architecture
protecting the local minigrid in the event of a load shedding or brown out in the main grid. Other
options (such as in Sri Lanka) are to generate and wheel the minigrid power to the central grid and
connect the minigrid’s distribution network with the nearest sub-station or create a bus bar for local
distribution using the minigrid network.

14 1 BTN = 0.013 USD as on 27th October 2021, same exchange rate has been used to convert BTN to USD in this report
23
2.8 Latest innovation and improvements
Minigrids normally involve hybridized systems with a considerable share of renewable energy supply
for electricity generation. However, renewable energy technologies are characterised by their
intermittency that is difficult to predict. These conditions involve a challenge in terms of plant
operation and management because of the required flexibility to maintain a regular system operation
and stability. The minigrid faces further challenges in terms of rising energy demand, demand patterns
and a lack of actual data analytics for the optimised operation and management of the system.
For these reasons, the minigrid energy sector is starting to innovate new solutions that include
amongst others: Artificial Intelligence, smart grids, smart meters, and Internet of Things devices. These
solutions aim to improve power management, integration, and system efficiency of the minigrid.
Furthermore, DSM is another innovation that is being considered by minigrid developers to implement
the strategies of actively influencing electricity demand to match electricity generation.
Smart grids are developing solutions that allow, for example, to trade electricity with the consumers
in minigrid applications with the utilisation of demand-supply matching algorithms. Artificial
Intelligence or Machine Learning power controls come into play to undertake the matching process,
so that the minigrid systems are able to perform as an integrated system. Obviously, a critical point to
consider for the application of these type of innovations, especially in rural environments, are internet
connectivity constraints which may hamper the viability of such solutions.

2.8.1 Smart metering & Internet of Things

The meters are needed to measure and track electricity consumption for billing. The metering
technologies are of two types - conventional meter and smart meter. Advanced Metering
Infrastructure (AMI) combines smart meters, communication networks, and data management
allowing a bidirectional communication between operators and consumers for the billing of the
customer. This is undertaken without any manual intervention and allows at the same time to monitor
the operational status of the minigrid remotely. The real time monitoring process and analytics allow
to undertake a predictive load assessment and forecast future electricity demand. This is important
as it will allow to manage the loads more efficiently or even decide on potential future actions that
maybe required in the minigrid to ensure an optimal system operation.
However, smart meter needs to be integrated in the given energy system infrastructure and thus have
to be tailored for the specific customer metering needs. For this purpose, IoT platforms are starting to
become a preferred solution based on the data process capabilities with a variety of smart meters.
Furthermore, IoT allows to set up custom visualization dashboards, where user alerts and notifications
can be configured to communicate at the same time with other applications or platforms. Overall, the
IoT could add on further automation and intelligent operation of the minigrid.

24
 Figure 18: Example of IoT Smart Metering Platform15

2.8.2 Forecasting & Machine Learning

The electricity generated by renewable energy technologies such as solar PV and wind have one of
the major drawbacks in its variability and the fact that the weather and forecasted generation cannot
be guaranteed at any time.

Figure 19: Weather Forecast Process16

This intermittency is challenging not only from the energy dispatching point of view but also in terms
of its O&M and actual system regulation. Several techniques are currently being developed for wind
and solar forecasting that include Numerical Weather Prediction (NWP) and Machine Learning (ML)
techniques such as Artificial Neural Networks (ANNs) etc.
The NWP prediction models are normally operated by weather service companies that basically collect
measured weather data, which they utilised to predict solar irradiation, wind speeds, ambient
temperature, etc. This data allows then to estimate the power output with physical equations or

15 (SteamaCo, 2020)
16 (energymeteo, 2020)
25
statistical tools such as ANNs. Some of the power forecast providers are Meteologica S.A., Meteogrid,
Entec Solutions, and Vaisala.

2.8.3 Artificial Intelligence

Artificial intelligence is defined as the capability of a computer or robot to undertake tasks that would
normally be done by humans as human intelligence would be needed. With the help of AI, machines
can learn from experience, adapt to new changes and perform human-like tasks. The rapid
evolvement of power systems, smart meter infrastructure, communications, distributed energy
resources and storage solutions result in complex and integrated power networks with a
communication network system. These result in an enormous generation and exchange of data by the
smart components. However, conventional computational techniques do not have the capability to
manage and process these levels of information, therefore AI techniques are starting to be
implemented for such a task. In the renewable energy context, AI is starting to be utilized in the O&M
to improve the operational efficiency of the plants.

Figure 20: O&M AI Forecasting Tool17

The AI allows to assess large volumes of data from diverse real-time sensors where a prediction of the
power to be generated in a minute timeframe would be forecasted. This estimate would then be
compared against the actual power generation by the renewable energy plant. If a large discrepancy
is tracked by the AI, the system will send an alert signal to the operators to perform preventative
maintenance. This will not only avoid potential system component breakdowns but also minimize
potential underperformance losses and labour cost reduction.

2.8.4 Demand side management

The renewable energy minigrid and energy systems are exposed to stability and reliability as a result
of the intermittent nature of the source. The approaches for solving these challenges are various such
as storage solutions, load curtailment and DSM. However, energy storage solutions tend to be costly
and load curtailment would impact the user in terms of expected energy services. The objective with
DSM is amongst others to encourage customers to alter the consumption profile. In the minigrid
context, through DSM, the option of variable tariffs would displace electricity consumption from peak

17 (MOXA, 2019)
26
demand periods that would help to reduce electricity costs. This would avoid the need of system
capacity upgrade and at the same time have a more levelled demand over the day. Other DSM option
in the minigrid context could involve charges when inefficient equipment is utilized. This would favour
the customer utilizing energy efficient equipment. The DSM load management technique can be
classified as:
i. Load levelling
It optimizes the electricity demand so that reserve capacity is minimized over periods of high demand.
This can be undertaken through following levelling methods (see Figure 21):
• Peak clipping: This basically involves the reduction of the consumption during peak demand
periods
• Valley filling: For low demand periods the “filling” with consumptions that are displaced to that
period. For example, mobile charging equipment
• Load shifting: This option involves the displacement of the loads from peak to valley times
• Load conservation: This would involve the application of efficiency measures to reduce the
customer electricity demand

Figure 21: Load Management Techniques18

ii. Load control

This compromises a system or program that allows to modify the user end loads in response to specific
events (e.g., network issues, high electricity prices, etc.). The load control in the minigrid context
would involve a retailer that would have the option to switch on or off potential customer loads.

18 IEEE FOUNDATION
27
 Mini-grid Solar PV / Wind / Battery
Electricity Tariffs Performance Signal

Demand Weather Data Signal

Monitoring
Controller

Other Signals
Information
Control signal
Consumer Load

Figure 22: Load Control Process

Usually, there is an interruptible load contract between the user and retailer with some incentives or
compensation in return. Normally the retailer does not physically interrupt the electricity supply for
the customer, instead it provides the user with an advance notice requesting the load curtailment.
Under the scenario of not complying with request this would potentially lead to penalties or even
customer load interruption. The current load control technologies do allow the switching of the loads
to be undertaken:
• Automatically: the switching responds in an automatic manner to a specific signal
• Manually: the switching is undertaken in response to a specific event or information
The switching may be undertaken locally or in a remote manner by a program triggered by a given
signal. The actual switching of the loads may involve:

• Load Cycling: the loads are switched on and off based on a timing schedule
• Load Reduction: the loads are reduced to defined pre-set values
• Load switching: basically, switching off the load

The key demand management strategies and technologies have been summarized in Figure 23 below.

DSM Strategies DSM Technologies

Use of efficient appliances Current limiters

Scheduling of commercial loads Time switch, GridShare

Managing residential consumption Load limiters, smart meters

Consumer education Prepaid meters, Advance

metering infrastructure

Figure 23: DSM Strategies and Technologies

2.9 Impacts of minigrid

The impacts of minigrid projects can be experienced across at least eight of the seventeen Sustainable
Development Goals in addition to SDG7 - access to electricity. Figure 24 depicts the various SDG levels
relevant to minigrid impacts (BNEF & SEforAll, 2020).

28
Electricity access: Around 47 million people have been provided access to electricity through 19,000
minigrids installed across 134 countries globally (ESMAP, 2019).
Reliable and quality electricity: Today, minigrid developers are designing systems that can provide
24/7 electricity. Use of remote monitoring systems, smart meters, load limiters have led to increase
in the quality and the reliability of minigrids. For example, it has been observed that the average
uptime of minigrids owned and operated by Africa Minigrid Developers Association (AMDA) members
have exceeded 97% (ESMAP, 2019).

Figure 24: Impact of Minigrids19

Economic development: Modern minigrids are designed such that the payback periods are less than
12 months for more than 30 income-generating machines and other equipment. As a result, it
improves financial viability of developers as well as create jobs and enhance livelihoods in
communities (ESMAP, 2019). As per Global Off-Grid Lighting Association (GOGLA) data, USD 4.9 billion
has been generated as additional income because of off-grid solar projects (BNEF & SEforAll, 2020). In
another example, an African minigrid project developer, RVE.Sol has set up Kudura minigrids in East
Africa to provide electricity as well as drinking water to populations whose mean per capita income is
just about USD 3 per day. The project has positively impacted 2,100 Kenyans directly. The fee-based
PAYG model has reduced energy costs in these households by almost 75%, as reported by one of the
investing entities in the company (Acumen, 2021).
Cleaner environment: A renewable energy powered minigrid avoids noise and air pollution caused by
diesel-based generators, thereby contributing to a cleaner local environment. ESMAP has estimated
by 2030, 10–15 GW of solar PV could be installed using 50–110 GWh of mostly lithium-ion batteries
and energy efficient appliances, which is expected to result in 1.5 billion tons of carbon dioxide
emissions avoided (ESMAP, 2019). However, there are hazards and pollution associated with disposing
of these batteries which needs to be addressed.
Improved health and education: Use of minigrids has resulted in improved health indicators for women
and children from the replacement of polluting energy sources such as kerosene lamps. Further, in
the current context of the Covid pandemic, minigrids energising rural health clinics has paved way for
a functional clinic capable of storing Covid vaccines and other medicines. Minigrids have also resulted

19 Figure recreated by the Consultant based on Figure 88 given in (BNEF & SEforAll, 2020)
29
in improved education indicators through access to reliable household lighting and school power
supply.
Benefit to national utilities: Modern minigrids are typically designed as grid ready as well as promote
productive uses of electricity and create local economic development. Thus, when the main grid
arrives at the site, there is already significant demand for electricity and consumers have greater
ability to pay, hence increasing the economic viability of the main grid’s extension.
Private sector participation: Private-sector participation in the minigrid market has increased as the
economics of minigrids are becoming more attractive. Several industry associations across countries
and regions have been initiated such as AMDA which comprises of 27 minigrid developers (each
operating a portfolio of commercially viable minigrids) in Sub-Saharan Africa, CLEAN network in India
is a network of 200+ members across India and is considered as the industry body for the DRE space.

2.10 Barriers to minigrid development

Decentralized systems including minigrids will make up nearly three fourth of the additional
connections to meet universal electricity access by 2030 (MGP, 2021). Most of these connections will
be from renewable energy. However, development of minigrid sector has been slow due to several
barriers for which solutions are still evolving. The barriers can be categorized into four main headings
which are:
Policy and Regulatory Barriers: It has been observed globally that when government strategy or policy
commitments for minigrids are unclear then it leads to slow development of the sector. Regulations
requiring licensing of developers for generating and distributing electricity in a country have also
hampered scaling up of minigrid. Other regulatory provisions such as cap on tariffs that can be charged
for electricity add further challenges. Most of the installed minigrids globally are not able to compete
with the national grid in terms of tariff. So, national grid will always be a threat to the minigrid sector
if there is no clear regulation about the integration of minigrids to the national grid after its arrival.
Financial Barriers: Easy access to finance to meet the upfront cost as well as operating costs is a
challenge to the minigrid industry. Financing that is available is prohibitively expensive and access to
project financing is also limited. Potential private financiers perceive a greater risk to invest in minigrid
sector as they have limited experience and exposure. The International Energy Agency (IEA) estimates
that over USD 100 billion investment is needed in minigrids sector by 2030 to achieve universal energy
access (Agenbroad, Carlin, Ernst, & Doig, 2018). Minigrids often face difficulty in recovering
investment or meeting the return expectations of private investors in a short duration of 3-4 years.
For this reason, private investors are generally not interested in minigrid projects. Therefore, minigrids
require capital subsidies upfront by the government or through other benevolent sources to make
them financially viable. As part of the CLEAN study, 49 financial institutions in India were interviewed
to understand their perspectives on financing of distributed renewable energy sector including
minigrids. Some of the respondents, around 15%, are of the view that project developers and some
financial institutions need alternative form of funding, such as philanthropic/CSR/grants/debt, for
sustaining the project during their initial years. Financial institutions have also reported that project
proposals are often not bankable enough to make investments (CLEAN & Margdarshan Advisory &
Consultancy Services, 2020).

30
Technical Barriers: Minigrids are unique and require custom installations specific to the site. There
are also limitations related to technical expertise available among the human resource to deploy
minigrid. Intermittency of the renewable resources also adds to the complexity in technical design of
RE minigrids. Minigrid system should be designed as grid ready to avoid redundancy of the project
after the arrival of the grid, but many countries have not yet issued the interconnection requirements
for connecting to main grid.
Economic Barriers: Remote areas or off grid areas have low or unpredictable demand to electricity as
well as low-income sources as many rely on agricultural activities which is seasonal. This directly
impacts their ability to pay for electricity bills and the revenue generation/ profitability of project
developers. Minigrid developers are thus increasingly promoting enterprise development in the areas,
which will lead to growth in demand of electricity and help in income generation and hence increase
customer’s willingness and ability to pay for the electricity consumed.

31
3 STATUS OF MINIGRIDS IN SAARC MEMBER STATES

32
3.1 Framework for assessing minigrids status
The section lays out the framework for assessing the status of minigrid development in each of the
eight SAARC Member States. The assessment has been carried out using a multi-dimensional
framework mapping across nine categories (i) Status of access to electricity and minigrids, (ii) National
strategy for electricity access, (iii) Policy & Regulations for minigrids, (iv) Technical aspects of minigrids
(v) Business models for minigrids, (vi) Minigrids tariff, (vii) Financing for minigrids, (viii) Opportunities
for minigrids and (ix) Barriers to minigrids (See Error! Reference source not found.). Secondary data
as well as information collected through discussions with stakeholders in each country has been used
to carry out the assessment. The assessment provides a comparative analysis on minigrid
development in each country and provide cross-learning potential that could be exploited in the
SAARC Member States for scaling up minigrid deployment.

Assessment parameters Description

Status of access to electricity As per the general trend observed globally, the closer a country comes to 100% electrification,
and minigrids there is lesser demand for minigrid projects. This section will analyse the status of access to
electricity and installed minigrids in the country.

National strategy for Government strategies often vary across countries regarding use of minigrids for enhancing
electricity access access to electricity. This section will assess the national strategy for improving access to reliable
electricity and role of minigrids in the strategy.

Policy and regulations for There may be a varying degree of policy and regulatory measures adopted across the SMS to
minigrids support MG development. This section will present the policies and regulations implemented in
each SAARC Member State.

Technical aspects of Use of innovative technologies in generation, storage, O&M, revenue collection, etc. enhances
minigrids the viability and therefore attractiveness of MG. This section will discuss the technological focus
and advancements in each SAARC Member State.

Business models for Maturity of a MG business model ensures that the project is robust in design, therefore more
minigrids resilient to market dynamics. This section will analyse the various business models that have been
implemented in each country.

Minigrids tariff In most cases, MG tariffs are higher than grid tariffs which is primarily due to power from the grid
being subsidised and not reflective of the true costs of power. This section will analyse the MG
tariffs in the country and their affordability.

Financing for minigrids Each country has different level of financing available for MG project which may be donor grant,
public loan, commercial loan, equity, and debt financing, etc. This section will discuss the financing
landscape available in each country.

Opportunities for minigrids Each of the SAARC Member States have their unique opportunities for MG projects. These range
from access to electricity, high unmet demand, etc. This section will analyse the various
opportunities for MGs in each SAARC Member State.

Barriers to minigrids Key barriers to the sector are policy-level impediments, supply and demand mismatch, low plant
load factor of MG, lack of adequate financing. This section will discuss the country level barriers
for MG development.

Figure 25: Framework for Assessment of Minigrid Status

33
3.2 Afghanistan
3.2.1 Status of access to electricity and minigrids
Afghanistan has about a third of its population connected to the electricity grid (ADB, 2020). The
country still depends heavily on imported electricity and fuels. Lack of domestic generation remains
the key challenge for energy security and energy access in Afghanistan. Energy security and access are
high development priorities for Afghanistan.
Since 2001, major efforts have been on reconstruction and expansion of the national electricity grid.
Despite these efforts, it is accepted that there are areas in the country that the national grid will not
serve in next 20-30 years. This is due to the slow progress of integration of the national grid, which
still operates as a few regional grids, which are supported by electricity imported from neighbouring
Uzbekistan, Iran, and Turkmenistan, among others.
In addition, secondary information indicates that the current electricity delivery infrastructure is
neither reliable nor economically attractive for most consumers. Frequent power outages create
discomfort and hindrances, and necessitate power options, especially for commercial and industrial
facilities. The delicate security situation in the country has often led to transmission and distribution
lines being damaged (due to arson), which have delayed and affected plans for electrification
(GardaWorld, 2021). This also implies greater need for localised networks such as minigrids. Thus, the
current energy access landscape offers promise for minigrid project development.
Historically, there were many micro hydropower units (about 40 kW or less) that were set up under
the National Solidarity Plan (NSP) between 2003 and 2013, although parts of NSP continued under the
National Area Based Development Programme (NABDP). Originally targeted for developing 5,000
villages, the NSP implemented about 2,500 village level electrification systems powered by micro
hydro units. Several solar home systems were also installed under the programme (Beath, Christia, &
Enikolopov, 2015). The management of these units were left to community level institutions called
Community Development Councils (CDCs).
However, most of these installations were not managed properly due to lack of technical resources in
CDCs, and without any operation and maintenance support, did not sustain for many years. Also, the
CDCs did not have the capacity to execute O&M for the assets. As a result, most of the NSP and NABDP
projects are in an inoperative state.
The most notable among recent initiatives in the direction of minigrid project development is the
United Nations Development Program (UNDP), Afghanistan and Ministry of Rural Rehabilitation and
Development (MRRD) supported rural energy programme. The programme is currently operational
under the title “Afghanistan Renewable Energy Market Transformation Initiative (AREMTI)” (GCF,
2020). Afghanistan Sustainable Energy for Rural Development (ASERD) (project was funded through
bilateral grant funding from Spain and South-Korea) programme laid the foundation for this current
programme by developing feasibility studies for 25 minigrid sites in 17 provinces of Afghanistan.
Recently, a hybrid solar-hydro minigrid project with a total capacity of 340-kW has been implemented
in Dar-i Noor district of Nangarhar Province. The project was commissioned under the ASERD
programme and was financially supported by the Republic of Korea and UNDP Afghanistan. This
project is expected to provide electricity to approximately 18,000 people (about 3,000 households)
and more than 80 Small and Medium Enterprises (SMEs) (UNDP, 2021). The AREMTI programme, on

34
other hand, proposes to implement three (3) solar minigrids with a combined capacity of 2.6 MW, in
the provinces of Kandahar, Parwan and Khost. In addition, the programme proposes to develop
construction designs for other 5 minigrids in Afghanistan.
There are several diesel-powered minigrids in operation in off-grid areas. While the national utility,
DABS operates diesel-powered minigrids in several provincial capitals (not connected to the grid),
private operators run diesel generators for providing lighting to rural communities using a
rudimentary mini or microgrid structure.

3.2.2 National strategy for electricity sector

At the national level, there is considerable focus on the need for rural electrification in general and
the minigrid-based delivery model in particular. Over the past decade and more, from the first
Afghanistan National Development Strategy (ANDS), 2008 – 2013, the need for decentralised,
renewable energy-based generation was given prime importance. The ANDS clearly highlighted the
need and scope for using solar PV and wind-based projects, and that “the relative benefits of this type
of energy should be recognized in policies to support their use.” More recently, the second
Afghanistan Peace and National Development Framework report (ANPDF), 2021-2025 also highlights
the need for electricity access to expand to include all Afghan provinces.
Other policy and strategy documents, such as Renewable Energy Roadmap for Afghanistan (RER2032),
also indicate the need for decentralised, renewable energy powered minigrid and microgrids (ADB &
ITP India, 2017). RER2032 allocates as much as 720 MW of additional capacity from minigrids, apart
from other standalone RE applications. The Afghanistan Climate Change Strategy and Action Plan
(ACCSAP) identifies the need to energise rural areas of the country using RE powered minigrids, as one
of the Low Emission Development Strategy (LEDS) items for the country.

3.2.3 Policy and regulations for minigrids

From a policy standpoint, it is important to bear in mind that the phase 2003 – 2016 was one of policy
action in Afghanistan, where several key national policy and strategy development documents
covering a range of sectoral and cross-sector themes were introduced in the country. The policy
landscape for minigrid development in Afghanistan is shaped by the Afghanistan Renewable Energy
Policy (AREP), 2015 (Government of Afghanistan, 2015).

Although there is no dedicated minigrid policy, as shown in section 3.2.2, the strategy documents
clearly outline a role and scope for RE powered minigrids in the country. One of the landmark
regulations in the country was the demarcation of all RE projects up to 1 MW capacity, to be set up in
rural areas within the purview of the MRRD (AREP, article 4.7). This has contributed to the creation of
a nodal ministry for decentralised RE projects that include both standalone grid tied and minigrid
applications.

The MRRD, in collaboration with the erstwhile Ministry of Energy and Water (ministry is dissolved as
of the present date), had developed a draft National Rural Renewable Energy Policy (NRREP) (2013 –
2014) (Government of Afghanistan, Afghanistan Rural Renewable Energy Policy, 2013). The policy
encourages creation of an enabling environment towards full commercial operations of rural
renewable energy services. The policy was in line with the ANDS (2008 – 2013) and the policy thrust
provided by the National Priority Programmes (NPPs) which were drafted for the country to usher in
a regime of balanced growth and development. A total of 22 NPPs were drafted in 2009 covering six
35
strategic themes (Ministry of Finance, n.d.). Among these, rural decentralised development was one
key theme – addressed under the ‘Agriculture and Rural Development’ Cluster. The cluster NPPs
highlighted the need for RE based decentralised energy access in Afghanistan.

Around 2015 – 2016, the Afghan government also developed a draft Feed-in-Tariff (FiT) Policy for
various renewable energy project categories (e.g. wind, solar, biomass), specific to each Province.
However, the policy has not yet been given final shape.

3.2.4 Technical aspects of minigrids

There are several technical aspects of minigrids in Afghanistan that act as key determinants for the
choice of a minigrid site, as well as determine growth and development of the sector. These are
outlined briefly below.
Size: Available secondary literatures suggest that RE powered, decentralised minigrid projects in
Afghanistan tend to be over 100 kW. The minimum size of 25 projects identified under a plan for
ASERD in 2017 was 300 kW (2 projects, in Bamiyan and Samangan, both hydro power), while the
largest size was 1 MW, to be implemented in the provinces of Khost, Daikundi, Kandahar and Urozgan
(mix of solar PV and hydropower) (GIZ IDEA , 2017). The existing Bamiyan solar PV-diesel hybrid unit
is also 1 MW capacity. In addition, the national electricity utility DABS runs diesel powered minigrids
in provincial capitals, these units are also in the MW scale. At the other end of the spectrum, there are
diesel powered microgrids in towns and villages that provide lighting energy to households, which are
around 5 KVA – 25 kVA in size.
Enterprise development: While there is a significant share of unmet energy demand in the country, it
is also observed that penetration of enterprises in the country is low, primarily constrained by lack of
access to electricity (input) and markets (output). The Green Climate Fund (GCF) project document for
AREMTI posits that minigrids to be set up under the project shall have strong enterprise and private
sector components, to enable the market transformation paradigm (GCF, 2020). Moreover, it is also
necessary that enterprises be identified at the design stage, through an enterprise development
survey.
Operations and maintenance: Afghanistan is marked by a lack of road and transport networks, which
is greater in the rural areas. This reduces access to the minigrid site, which is necessary for O&M and
troubleshooting of the minigrid system. The MRRD is intending to develop a minigrid handbook, which
will include design and operational guidelines.
Security: Security is a key threat that impedes the growth of minigrids. The more sensitive provinces
of the country have had little to no penetration of minigrid systems. On the other hand, the Northern
and Central Highland Provinces (Badakshan, Balkh, Baghlan, Bamiyan etc), which are /were relatively
peaceful, witnessed maximum number of minigrids being installed.

36
 Figure 26: 5 kW Wind Turbine in Sang-E-Nawishta Village of Kabul20

3.2.5 Business models for minigrids

Business models for minigrids in Afghanistan are not prevalent, as the sector is not mature. As
discussed in the opening sections, the NSP experience was built on grant-funded projects with the
CDCs entrusted with the O&M. More recently, experience with the Bamiyan project, as well as projects
proposed under AREMTI, are sought to be grant funded, with private entities operating as contractors
entrusted with the Engineering, Procurement and Construction (EPC) and O&M processes. The
approach in these recent projects is to secure viability through tariff payments that would cover for
O&M expenses at the site.
One of the key aspects of the renewable energy sector in Afghanistan is the creation of the Afghanistan
Renewable Energy Union (AREU). Set up in 2013 as a not-for-profit, AREU members have provided
inputs for RE sector growth and development as a key stakeholder, undertaking EPC and O&M
activities in projects (Afghanistan Renewable Energy Companies Union, n.d.).
In the AREMTI, the approach is framed on the basis of developing Renewable Energy Service
Companies centric projects. RESCO projects are invested in and managed by a private renewable
energy company and is a business model wherein RESCO entities shoulder bulk of the project’s risks.
In Afghanistan, RESCO projects undertaken under AREMTI could potentially involve AREU members,
who could invest in minigrid projects in RESCO mode.

3.2.6 Minigrid tariff

The Government of Islamic Republic of Afghanistan (GoIRA) had developed a draft Feed-in Tariff
policy, which provides province wise feed-in tariffs from RE projects. These tariffs can be considered
as a shadow tariff for minigrid projects. The tariffs identified under the draft policy are higher than
tariffs charged by DABS from national grid consumers in Kabul. However, there are higher tariffs that
are charged by DABS in provincial towns where power is supplied from diesel generators.

20
UNDP Afghanistan
37
The Bamiyan 1 MWp solar PV–diesel hybrid project (called Bamiyan Renewable Energy Program or
BREP), is providing electricity to consumers in Bamiyan town and the average power tariff that was
initially charged was as high as USD 1.95 per kWh. However, over time, the cost has reduced and as
of 2017 it was USD 0.25 per kWh, a significant improvement. It is also pertinent to note that consumer
demand for electricity from BREP has increased as of 2017 (USAID, 2018). This substantiates the view
that higher tariffs in minigrid projects might not be a deterrent to energy demand. It is also worth
noting that BREP introduced prepaid metering, which was also a first in the country and thus also
makes a case for successful implementation of on use of prepaid meters. Importantly, the recently
implemented solar PV–hydro hybrid project in Dara-i-Noor district of Nangarhar province has
provision for prepaid cards with smart meters, which allows the users to pay for the electricity prior
to their use and according to their energy needs (Abdul Haq Omari, 2021).

3.2.7 Financing for minigrids

To understand the financing landscape for minigrids in Afghanistan, it is important to map the key
actors financing minigrid or off grid projects in the country. The Bamiyan 1 MWp project, the recently
commissioned project in Dar-i-Noor district and under-construction projects in Khost, Kandahar and
Parwan provinces and the 5 minigrid projects in design stages are set to be grant financed, with funds
provided by development partners. The Afghan government counterpart has provided in-kind support
to the project. Other smaller minigrids installed have also adopted a similar approach. However, home
and/or farm level standalone solar and other RE projects are financed using private capital, as they
meet specific demands for the user, who usually does not have access to banks or institutional capital.
In utility scale projects, also, there are notable success in private sector financing such as the 50 MW
natural gas-based power project, which is co-financed by International Finance Corporation (IFC),
Govt. of Afghanistan and the Ghazanfar Group (an Afghan industrial house), who also owns the asset
(Power Technology, 2016). Another example is the United States Agency for International
Development (USAID) supported 10 MW Solar PV power project in Kandahar, which is co-financed by
Dynasty Oil and Gas Ltd., an Indian-origin company (Tom Kenning, 2017). Although none of the above
two projects are minigrid projects, both are supported by long-term power purchase agreements with
DABS, and therefore have revenue assurance. In the Kandahar project, USAID has provided risk
coverage due to possible non-payment by off-taker through provisions for risk coverage guarantees.
Overall, therefore, the investment in the minigrid sector has so far been wholly grant financed. Recent
efforts in the minigrid space, most notably the UNDP & MRRD supported Afghanistan Renewable
Energy Market Transformation Initiative project have engaged with private contractors for EPC and
O&M services. However, the project does not envisage private co-financing.

3.2.8 Opportunities for minigrids

As mentioned above in Sections 3.2.1 and 3.2.2, the minigrid sector is one of the areas for opportunity
in Afghanistan. Potential in the minigrid sector is high due to the following reasons:
Resource potential: Estimates indicate that there are 222 GW of solar, 66 GW of wind and 23 GW of
hydropower potential available in the country (Government of Afghanistan, 2015). The solar global
horizontal irradiance (GHI) map of Afghanistan developed by the World Bank and IFC has been
included in Annexure 2. This potential indicates that RE resource availability is not a constraint for
minigrid development. It is also pertinent to note that the resources are evenly distributed across the
country (NREL, 2010). While the southern plains and desert areas have excellent solar resources, the
38
mountains have good hydropower potential. Wind power resources are scattered across the country.
This indicates that balanced growth of the RE-powered minigrid sector is possible.
Unmet energy demand: This is primarily due to the gap between the demand and supply of electricity
in the country. As the evidence of demand for solar home systems and solar powered handheld
devices such as lanterns indicates, there is considerable unmet demand for electricity in households
and enterprises. While households demand extends to white goods such as television, heating devices,
etc., demand in enterprises includes energy for motive use such as power to drive motors, pumps, etc.
for mechanical applications. (Ajmal Haidari, 2020). Moreover, the wide use of diesel generators and
diesel minigrids in provincial capitals, rural markets and other hubs indicate that there is demand as
well as ability to pay for productive use of energy.
While the overall security situation still acts as a potential deterrent, it is expected that Afghanistan
would experience a rapid and wide proliferation of minigrid power projects in coming years, as a
response to high level of energy demand, especially in rural areas. The success of the Bamiyan case
study and other examples clearly show the impact of minigrid projects in supporting economic
development. Evidence from Bamiyan’s 1 MWp solar PV project indicates that more than 3,500
businesses and enterprises are powered by the solar-diesel hybrid minigrid (USAID, 2018). This bears
testimony to the strong enterprise demand in Afghan communities.
Specific opportunities: Within the ambit of economic development, Afghanistan specifically stands to
gain from enterprises developed using reliable and cost-effective renewable energy based minigrids.
MRRD’s target of developing 25 minigrids in 17 provinces of Afghanistan, focusing on rural areas to
provide electricity for households and enterprises, indicates a good opportunity for minigrid sector
development.

3.2.9 Barriers to minigrids

Although there is significant potential for minigrid development in Afghanistan, there are some serious
constraints that act as barriers to minigrid development. These are:
Security: The most potent barrier to minigrid development is the unstable internal security situation
in the country. This impedes movement of goods, services, and information across the country.
Airlifting is possible but tends to be very expensive, which drives up costs and prices. Finally, skilled
personnel do not feel encouraged to relocate to a minigrid site.
Human resources: There is a dearth of technical/ engineering colleges and universities in the country,
as a result there are few trained engineers. Also, the colleges and universities operate in an isolated
manner, largely due to restrictions on foreign travel inside Afghanistan (foreign tourists are largely
discouraged from leaving the capital Kabul). Thus, free movement of knowledge is also not possible.
Finally, access to internet is also limited to the major cities and towns. Thus, trained human resources
for deployment in a minigrid site is also a constraint.
Lack of financial capital: As discussed in the financing section above, there is a dearth of access to
finance for project financing in Afghanistan. Moreover, the interest rates are also high, which acts as
a deterrent for both term loans for capital expenditure as well as working capital. The specific financial
barriers are:
• The financial sector in Afghanistan does not readily provide debt financing for private entities.
Micro finance is more easily accessible, but such financing does not meet the demand for
39
 project level senior debt financing. The overall debt financing is also weak, with over a quarter
of funds lying idle with central and private banks, high proportion of gross Non-Performing
Assets (NPA) over 20% and total bank loans to non-financial sectors amounting to only 3.13%
of Gross Domestic Product (GDP) (World Bank, 2021). Bulk of loan off-take were for trading
and/or service sectors.
• There are no clear guidelines or incentives for private sector financing of minigrid projects in
Afghanistan, which acts as a deterrent to private investment.
• In addition, the cost of capital in the country is also high. Private bank lending rates of interest
are around 15%, which implies that projects would have to earn at least 17% - 18% per annum
on investment to be viable.
• Finally, the internal security situation also acts as a barrier to post-commissioning operation and
maintenance including revenue collection. Due to a lack of streamlined transportation across
the country, O&M services are more likely to be impacted.
Finally, the AREMTI project has also identified some barriers to their programme, which addresses
minigrid sector and its development (GCF, 2020). While some of these are common to the ones
identified above, they are laid down below in totality, to give a picture of key shortcomings in the
minigrid sector:
• Lack of incentives and guidelines for private sector to participate in rural electrification projects
• Lack of technical standards and guidelines for minigrid development
• Lack of coordination among institutions on long term energy planning and minigrid
development
• Lack of financial instruments that can de-risk challenges such as security, financial, currency and
defaulting risks
• Lack of awareness, exposure and experience on use and benefits of RE minigrids among
government institutions and beneficiaries
• Limited private sector capacities to design, engineer, procure, construct, and operate RE
minigrids, business opportunities in different ownership models and absent learning in pilot
minigrids
• Insufficient implemented proof-of-concept solar minigrids with successful O&M
• Lack of institutionalized knowledge center, lack of minigrid pipeline ready to install
• Lack of procurement guidelines and consideration of environmental standards in procurement
• Lack of safeguards guidelines and consideration of safeguards standards in procurement

3.3 Bangladesh
3.3.1 Status of access to electricity and minigrids
Bangladesh is one of the world’s most rapidly growing developing economies and one of the most
vulnerable countries to climate change. The overall rate of electrification in Bangladesh increased
from 14.29% in 1991 to 32% in 2000 to 55.26% in 2010 and 92.2% in 2019 (see Figure 27). In the year
2019, 97.8% of urban population has access to electricity while only 88.85% of rural population has
access (World Bank, n.d.). During the consultation with Sustainable and Renewable Energy
Development Authority (SREDA), it was learnt that the country has achieved 99% electrification as of
2021. Renewable energy, from both on grid and off grid solar, wind, hydro, biogas, and biomass, has

40
3.05% share in the total electricity generation mix (Sustainable and Renewable Energy Development
Autho, n.d.). Solar home system is the most popular form of off grid renewable energy technology in
Bangladesh with 34.28% share. SHS provides electricity for lighting, mobile charging, and fan.
However, electricity demand of the off-grid community is not limited to these basic needs.
Realizing the above, Government of Bangladesh (GoB) had identified solar minigrid as an appropriate
solution to meet the electricity need of the rural community. Twenty-Seven (27) solar minigrids with
diesel generators as backup of total capacity 5.66 MW have been installed in Bangladesh as of August
2021. One of them is operated by distribution utility and rest by private companies. Bangladesh’s first
commercial solar minigrid, PGEL Solar MiniGrid Project, of 100 kW capacity started operating on
Sandwip Upazila, Chittagong in 2010 (Sustainable and Renewable Energy Development Autho, n.d.).

Figure 27: Access to Electricity in Bangladesh21

3.3.2 National strategy for electricity sector

The current focus of the Government of Bangladesh is to reach 100% electrification of urban as well
as rural areas via national grid only, and there is less focus on minigrids. It has been projected that
Bangladesh will achieve 100% electrification by the end of 2021. It was mentioned during the
consultation with Power Cell Department that the people having access to electricity through
minigrids are not satisfied with the higher tariffs of minigrids. The rural community are demanding
electricity access through national grid as the tariffs are low and they can meet their additional
electricity demand. Grid-based electrification is promoted to provide electricity to rural communities.
Although there are some areas that are remote islands in Bangladesh where providing grid electricity
is difficult, but Government is keen to connect them through sub-marine cables and/or river crossing
towers. They are expensive options but beneficial in the long run. In the areas where it will not be
feasible or distance is too long for submarine cables, then respective distribution utilities are required
to identify appropriate solutions for electrification. In this case, the distribution utilities may install
minigrids to provide electricity, but the tariff for the electricity will be same as the national grid tariff.
On the other hand, Government of Bangladesh has taken number of initiatives to enhance penetration
of renewable energy in the electricity generation mix of the country. Renewable Energy Policy 2008
mandates at least 10% of the total generation to be generated from RE sources by year 2020. Besides

21 (World Bank, population data, n.d.)

41
utility programs, the government has initiated programs like the SHS, solar minigrid, solar rooftop,
solar irrigation, etc. with an aim to scale up the contribution of renewable energy in the country.
Government has prepared National Solar Energy Roadmap 2021-2041, which included a target of
around 10 MW of capacity to be added through solar mini/micro/nano grids during 2021–2030. The
roadmap is currently in the draft form and yet to be approved. The roadmap has also mentioned that
solar minigrids are most likely to lose financial and technological viability in the long run due to the
penetration of national grids in the off-grid areas. For this reason, it was mentioned during the
consultations with SREDA and Power Cell Department that solar minigrid target may be removed from
the final version of the roadmap (Government of Bangladesh, 2020). The Government has started to
connect all existing minigrids to the national grid. Government will buy electricity from minigrid
operators at their original tariff and provide electricity to people at grid tariff.

3.3.3 Policy and regulations for minigrids

There is no dedicated minigrid policy in Bangladesh. Infrastructure Development Company Limited
(IDCOL) acts as a regulatory as well as financing body, which follows policy guidelines from the Ministry
of Power, Energy and Mineral Resources (MPEMR). Annual report of IDCOL 2020 states that IDCOL is
pursuing the government to establish a regulatory framework to safeguard private sector investments
in solar minigrids (Infrastructure Development Company Limited , 2020).
Policy guideline for enhancement of private participation in the power sector has opened the national
grid for commercial use with an objective to introduce and regulate competition by allowing private
investment in the power sector, and to establish new commercial power plants and rehabilitate old
ones through Public Private Partnership (PPP) (Government of Bangladesh, 2020). The government
also published a guideline for Remote Area Power Supply System (RAPSS) in 2007 to facilitate
electricity access to un-served areas with private sector investment. A commercial model has been
identified under the guideline to implement the minigrid project, but that policy focused on
conventional, mainly diesel-based power generation.
Government of Bangladesh has approved Renewable Energy Policy in 2008 with an objective to
harness the potential of RE resources and encourage both public and private sector investment. The
latest addition to the policy documents concerning the development of renewable energy
technologies in Bangladesh is the Draft Eighth Five Year Plan (FY 2021 to FY 2025), which has set the
target for renewables including hydropower to supply 5% of the total electricity by the year 2025.

3.3.4 Technical aspects of minigrids

Majority of the installed minigrid in the country comprises of solar PV panels, battery banks, inverters,
and diesel backup. The capacity of solar minigrids in Bangladesh ranges from 100 kWp to 700 kWp
serving 400 to 1500 customers per grid. The energy produced is distributed through 3-phase, 4-wire
distribution system with maximum length of each feeder limited to two kilometres (ESMAP, 2017).
Solar minigrids in Bangladesh use local IDCOL batteries.
73.5% of customers are households, and the remaining 26.5% are commercial entities engaged in
different income-generating activities and other productive uses. The commercial and institutional
entities include shops, workshops (steel, furniture, carpentry), rice mills, sawmills, irrigation pumps,
ice factories, telecommunication towers, electrical vehicle charging stations, hospital/clinic, other
factories (puffed rice mill, bakery, oil pressing mills), resorts/restaurants, schools, mosque, madrasahs,
42
etc. Many enterprises have been created in these areas because of successful minigrid interventions
(Infrastructure Development Company Limited , 2020).

3.3.5 Business models for minigrids

Solar minigrid projects in Bangladesh are mostly based on private sector model i.e., owned, operated,
and managed by the project developer. Project developers are franchised a particular area to develop
and operate solar minigrid project for 15 to 20 years through competitive bidding. Grant and
concessionary loan are provided through IDCOL. A committee comprising of members from Power
Cell, Rural Electrification Board (REB) and IDCOL and headed by Power Division official is formed to
monitor and supervise implementation of the project including distribution, O&M and setting up tariff.
Prepaid metering system has been adopted to ensure 100% revenue collection from consumers in
rural areas.
ME SOLshare Limited has installed smart peer to peer solar microgrids in Bangladesh where SHS are
connected to each other to form a microgrid. The company was operating 40 microgrids in Bangladesh
in 2020 and is expecting to operate 110 microgrids by the end of 2021. The company is targeting to
provide power to an additional 1 million through microgrids by the year 2030, including
interconnection with the national grid.

3.3.6 Minigrid tariff

IDCOL regulates the tariff of minigrid electricity to be paid by the customers through the
implementation agreement that developers sign to obtain the standard financing package from IDCOL.
Bangladesh Energy Regulatory Commission (BERC) is not responsible in tariff setting of a system
capacity of less than 5MW. The agreement establishes the tariff of all minigrids between BDT 30 and
BDT 32 (USD 0.35 and 0.38)22 per kWh for the first five years of operation and IDCOL’s approval is
required to increase the tariff. IDCOL does not allow developers to charge different tariffs in the initial
5-year period of operation. Minigrid tariff is calculated by IDCOL based on the forecasts with little
room to adjust tariffs once the project is implemented (ESMAP, 2017). The minigrid tariff of the
existing minigrids is around BDT 30 (USD 0.35) per kWh while the national grid tariff is around BDT 5–
7 (USD 0.058 – 0.082) per kWh. The evolution of minigrid tariff between 2011 and 2015 is depicted in
Figure 28.

Figure 28: Evolution of Minigrid Tariff23

22 1 BDT = 0.012 USD as on 27th October 2021, same exchange rate has been used to convert BDT to USD in this report
23 (ESMAP, Mini grids in Bangladesh: A case study of an incipient market, 2017)
43
3.3.7 Financing for minigrids
IDCOL is the largest financier of infrastructure and RE projects in Bangladesh. Almost all the solar
minigrids in Bangladesh are financed and implemented by IDCOL (Sustainable and Renewable Energy
Development Authority, 2021). IDCOL receives funds from government and donors to finance solar
minigrid systems and to offer a standard subsidy package to the developer.
Grant of 50% of the total project cost and concessional loan up to 30% is provided to minigrid
developers by IDCOL. Remaining 20% comes as developer’s equity (Infrastructure Development
Company Limited , 2020). Renewable energy equipment and related raw materials for the
development of minigrid project are exempted from 15% Value Added Tax (VAT). The banks are
allowed to provide loans in rural areas worth up to BDT 150,000 (USD 1,74924) for setting up solar
minigrids (Sustainable and Renewable Energy Development Authority, 2021).
The first and only minigrid project financed by commercial bank in Bangladesh in Angira solar minigrid,
raising 67% through commercial debt taken from Uttara Bank, with the remaining 33% through equity
investment. The 50 kWp Angira solar minigrid was set up in 2014 in the Nur Mohammed Market in
the Manikganj district. It had an initial capacity of 30 kWp but was upgraded to 50kWp due to
customer demand for electricity. While the Angira minigrid is of a smaller capacity than the IDCOL
financed solar minigrids, its success could pave the way for larger commercially financed projects
(CDKN, 2019).

3.3.8 Opportunities for minigrids

Resource potential: Bangladesh is bestowed with good potential of RE sources, of which solar energy
is the most promising one. The study conducted by SREDA & UNDP has reported a 40 GW solar
potential for Bangladesh by 2041 considering utility scale, rooftop, and distributed generation projects
(Anu Bhambhani, 2020). The solar GHI map of Bangladesh developed by the World Bank and IFC has
been included in Annexure 2. Apart from solar, the country has the potential for bioenergy, wind
energy, geothermal and limited scope for energy generation from hydro resources. In a study
conducted by MPEMR with USAID support, it was found that for wind speeds of 5.75–7.75 m/s, there
are more than 20,000 km2 of land with a gross wind potential of over 30,000 MW. The above potential
indicates a good opportunity for minigrid development in the country.
Unmet electricity demand: Even though Bangladesh will reach 100% electrification by the end of 2021,
there are remote islands which are off-grid and population concentrations are dispersed. National grid
might not be feasible or possible to reach these islands even through submarine cables. In such cases,
renewable energy based minigrid might be the best option for providing reliable and quality access to
electricity provided electricity tariff is competitive with that of national grid. Providing grid quality
electricity from RE sources in those areas will also serve the unmet demand for commercial
applications of the rural markets and small enterprises.
Specific opportunities: According to SREDA website, the Bangladesh’s total installed capacity is 25,181
MW and the renewable energy installed capacity is 766.45 MW. Bangladesh’s vulnerability to climate
change necessitates the inclusion of sustainable and renewable energy sources into the country’s
long-term development plans. Through Nationally Determined Contributions (NDC), Bangladesh has

24
1 BDT = 0.012 USD as on 27th October 2021
44
made commitments to reduce unconditional 5% of Greenhouse Gas (GHG) emissions by 2030 in the
power, transport, and industry sectors and a conditional 15% reduction in GHG emissions by 2030
(Government of Bangladesh, 2020). Bangladesh has also committed to increase its share of renewable
energy electricity generation in country plans such as Draft Eighth Five Year Plan (FY 2021 to FY 2025),
Bangladesh Delta Plan 2100, and National Solar Energy Roadmap 2021-2041. Renewable Energy Policy
2008 mandates at least 10% of the total generation to be generated from RE sources. Minigrid has the
potential to become an integral part of Bangladesh’s strategy for increasing the share of RE to meet
its NDCs.

3.3.9 Barriers to minigrids

The main barriers for minigrid development in Bangladesh are provided below:

• There is no specific policy or strategy of the Government to develop minigrid projects in

Bangladesh. As such, project developers are not interested to develop and finance minigrid
projects even though there is an opportunity for minigrid development in some off grid areas
and remote islands. Private sector companies find this challenging because of high perceived
commercial risks pertaining to grid arrival and lack of financing and government support.
• The tariff for solar minigrids is around BDT 30/kWh (USD 0.3525/ kWh), which is much higher
than the subsidized tariff paid by the grid consumer. This discourages consumers from using
more electricity than that required to meet basic needs and thus create resentment among the
consumers. This also discourages potential investors to invest in minigrid sector.
• Several solar home systems and solar minigrids have been discarded after the expansion of the
national electricity grid to those areas because people were getting grid electricity at lower
prices. Thus, highlighting the uncertainty in the operation of minigrids and risks related to arrival
of national grid.
• As evident, GoB’s priorities are focused on national grid electricity supply, and not on minigrid
development in the country as learnt during stakeholder consultations. National Solar Energy
Roadmap 2021-2041, still a draft, shows the nation’s commitment to increase the share of RE
in national energy mix, but minigrid is the least prioritized topic on the roadmap.
• Bangladesh is densely populated country with little land availability and has restrictions on use
of agricultural land. Thus, identification of land area for minigrid project development is
challenging.

3.4 Bhutan
3.4.1 Status of access to electricity and minigrids
The Royal Government of Bhutan (RGoB) is one of the smallest but fastest growing country among the
South Asian countries. The country has aggressively pursued electrification through national grid,
decentralised distributed generation (DDG) in isolated, as well as, core protected areas and solar home
systems in most remote areas. During the stakeholder consultation with Department of Renewable
Energy (DoRE) of Bhutan, it was learnt that the country has reached almost 100% electrification mostly
through national grid.

25
1 BDT = 0.012 USD as on 27th October 2021
45
Hydropower projects are the major source of electricity in Bhutan. Other than large hydropower
projects, electricity is generated from micro/mini hydro and other renewable energy technologies
such as solar, wind and bioenergy. Figure 29 showcases the major electricity generation sources in
2019. Bhutan has also installed 13 to 14 diesel generator sets throughout the country, which are used
only as backup power.

Figure 29: Electricity generation sources in Bhutan26

3.4.2 National strategy for electricity sector

Royal Government of Bhutan has planned to expand electricity access in the country through both on
grid and off grid electrification in a sustainable manner. The Alternative Renewable Energy Policy
(AREP) 2013 of Bhutan sets out a preliminary minimum target of 20 MW by 2025 through mix of RE
technologies. Specific targets include 5 MW from solar, 5 MW from wind, 5 MW from biomass. The
AREP target does not include generation from micro/mini/small hydro, which shall be developed
separately on need basis (Royal Government of Bhutan, 2013).
The country has set no specific targets for electricity generation via minigrids. However, during
consultation with DoRE officials, it was learnt that there is a strong interest of the Government to
develop minigrids in areas where transmission lines extension is uneconomical, or it leads to
deforestation. Bhutan has a mandate to maintain 60% of the country’s land under forest covers to
preserve its environment. It was also mentioned by the officials that if minigrids are proved to be more
reliable and economical then transmission lines could even be decommissioned.

3.4.3 Policy and regulations for minigrids

The energy sector of Bhutan is governed, planned, and coordinated by two ministries, Ministry of
Economic Affairs (MoEA) and Ministry of Agriculture and Forests (MoAF). Electricity Act of Bhutan was
formulated in 2001 with an objective to promote safe and reliable supply of electricity throughout the
country. The act has also highlighted promotion of rural electrification programmes through public
and private sector participation to achieve equitable regional distribution of electricity. Rural

26
(Dawa Gyelmo, 2021)
46
electrification will be achieved either by the extension of the grid or by the development of off-grid
electrification with promotion of renewable energy (Royal Government of Bhutan, 2001).
Alternative Renewable Energy Policy was formulated in 2013 with an objective to promote and
develop RE technologies in the country. AREP states that in rural areas where national grid is difficult
to reach, community-based initiatives in the form of decentralised distributed generation based on RE
sources should be given the priority (Royal Government of Bhutan, 2013).

3.4.4 Technical aspects of minigrids

The common generation technology used for minigrid in Bhutan is hydropower, as can be seen from
Figure 29. Other RE technologies such as solar, wind and bioenergy are limited to pilot projects and
small applications.
Majority of the minigrids in Bhutan are able to provide sufficient power during off peak hours, but
during peak hours, brownouts occur due to demand supply gap. To address this issue, GridShare was
developed by the team from Humboldt State University (HSU). It is an approach to alleviate brownouts
caused by peak power consumption in isolated, village-scale electrical systems through technology,
education, and village-scale collaboration. The GridShare system has been incorporated in a minigrid
project in Rukubji village, which helped in providing a more reliable electrical service to the village. A
device is installed in every household and business that is connected to the minigrid. The installed
device will give indication of the current state of the grid and an enforcement mechanism will limit
the load when the grid is overburdened.
During the consultation with DoRE, it was found that new innovative hydrokinetic technologies such
as vortex hydro turbine are being explored in Bhutan for generating electricity. Vortex hydro turbine
is capable of converting energy in a moving fluid to rotational energy using a low hydraulic head of
0.7–3 metre.

3.4.5 Business models for minigrids

Most of the minigrids in Bhutan have been developed on grant basis. AREP 2013 of Bhutan states that
all RE projects for electricity generation including minigrids shall be developed under Build, Own,
Operate (BOO) model and mini, micro, and small hydro shall be developed under Build, Own, Operate
and Transfer (BOOT) model. It also indicates that all RE projects constructed under the Government
funding as distributed power generation source shall remain as the property of the Government and
management of the plant shall be transferred to communities, wherever feasible.

3.4.6 Minigrid tariff

The electricity tariff in Bhutan is highly subsidized by the Government. Consumers only pay 50% of the
cost of electricity and 50% is paid by the government. As stated in the AREP, Bhutan Electricity
Authority (BEA) is responsible to determine the tariff of minigrid projects. During consultation with
DoRE, it was confirmed that minigrids tariff is set in consultation with regulatory authority and
communities. Minigrid tariff covers only the operation and maintenance cost including the salaries of
minigrid operators. Minigrid tariff has been found to be little lower than the national grid.
For projects constructed under Government funding, the tariff should be set such that it meets the
operation and maintenance costs only. The rural electrification projects which are not approved by

47
Department of Renewable Energy shall not be considered for tariff determination (Bhutan Electricity
Authority, 2016).

3.4.7 Financing for minigrids

Distributed generation projects have been funded by support from partner governments and
development banks. The pilot 600 kW wind project in Wangdue was funded by Asian Development
Bank (IRENA, 2019). Government also provides grant as counterpart financing to the rural
electrification loan to finance the civil and establishment expenses, but the material costs are financed
through the loan (Bhutan Power Corporation, 2020). Private sectors including foreign developers can
also invest in RE projects. However, foreign developers are not permitted in micro and mini
hydropower projects.
The Renewable Energy Development Fund (REDF) has been established under AREP to provide
financial assistance and create a favourable investment climate for RE in the country. For RE projects
that are mandated by the Government as per Five Year Plans, the budgetary support from the
Government will be utilized. The projects developed under government funding will also get back up
support in the form of financing from the government for restoration of the plant during the major
breakdown.

3.4.8 Opportunities for minigrids

Resource potential: Bhutan has significant hydro resources along with other RE resources such as solar,
wind and biomass. Hydropower is the major resource of RE in Bhutan with theoretical potential of
more than 41 GW whereas the technical potential is estimated at 26.6 GW. Likewise, the theoretical
solar potential is estimated at 6 TW and restricted technical potential at 12 GW (IRENA, 2019). The
solar GHI map of Bhutan developed by the World Bank and IFC has been included in Annexure 2. The
stakeholder consultation indicated that Royal Government of Bhutan is interested to exploit this
potential for minigrid development in the country.
Unmet energy demand: Although Bhutan has reached almost 100% electrification, reliability of
electricity supply remains an issue. Around 58% of households had faced one or more electric power
failures/ interruptions lasting at least one hour and the proportion of households that faced more
frequent power interruptions is higher in rural areas (64.3%) than in urban areas (46.6%) (IRENA,
2019). During stakeholder consultation, it was mentioned that the government is keen towards the
development of minigrid in the country to increase the reliability and quality of electricity supplied to
the consumers.
Specific opportunities: Bhutan has a constitutional mandate to maintain 60% of the country’s land
under forest covers to preserve its environment (SE4All, 2012). Grid extension to every corner of the
country may necessitate deforestation. In this case, development of minigrids for the access to
electricity can facilitate localization of generation as well as distribution. The reduced length of
transmission and distribution lines will alleviate the risk of deforestation. During consultation with
DoRE officials, it was learnt that if minigrids are proven to be more technically and economically
feasible option then transmission lines could even be decommissioned.
Also, local population in rural areas are showing interest in running enterprises at their own local level
and electricity supply via minigrids can provide reliable and quality electricity for productive uses. The
use of minigrid electricity will enhance the economic status of the consumers and increase their ability
48
and willingness to pay for the electricity consumed. Thus, government will be able to reduce the high
subsidy amount in the electricity sector.
Electricity is the most valuable commodity in Bhutan as it generates more revenue by selling electricity
to neighbouring countries. Bhutan is energy surplus economy, but as the economy of the country
continues to grow and living standards improve, energy demand and consumption are set to increase.
Minigrids can be used to produce RE electricity for local consumption thus enabling the government
to export grid electricity for revenue generation.

3.4.9 Barriers to minigrids

Bhutan has no dedicated policy and regulations regarding minigrid development in Bhutan. It is also
not clear about the effect on minigrid systems after the arrival of national grid to the area, whether
the system remains redundant, or it will be integrated into the grid. The country has set no specific
targets for electricity generation via minigrids.
The electricity tariffs in Bhutan are subsidized and public utilities like Druk Green Power Corporation
Limited (DGPC) and Bhutan Power Corporation (BPC) claim that they do not obtain a fair return on
their assets. In this scenario, private sector participants may be unwilling to make investments in the
absence of clear indication of returns to investors. Bhutan has piloted solar and wind minigrid projects
only after 2014. The government as well as the private sector lacks necessary technical and financial
expertise to develop and operate minigrid in the country.

3.5 India
3.5.1 Status of access to electricity and minigrids
India has made significant progress in last decade in providing electricity access to its population. Its
electrification rate has increased very rapidly (See Figure 30). In March 2019, the Government of India
declared full electrification of all households. However, as per IEA data27, the rate of national access
has grown from 43% in 2000 to more than 99.6% in 2019 and there are still around 5.5 million28 people
without access to electricity in India (IEA, n.d.).

27
India has dual electrification targets focusing on electrifying villages (a village is considered electrified if 10% of households
have access) and households. IEA methodology focuses on the share of the population with access to electricity in line with
the UN SDG tracking framework.
28
As per the Tracking SDG7 The Energy Progress Report 2021, the access to electricity in India has grown to 98% in 2019
with 30 million people without access to electricity. The Tracking SDG7 Report 2021 has referred to World Bank Global
Electrification Database. The World Bank Global Electrification Database derives estimates from a suite of standardized
household surveys that are conducted in most countries every two to three years, along with a multilevel nonparametric
model used to extrapolate data for the missing years. The IEA Energy Access Database sources data, where possible, from
government-reported values for household electrification (usually based on utility connections).
49
 Proportion of the population with access to electricity
99.6%
100.0%

78.9%
80.0%
67.9%
57.7%
60.0%
43.0%
40.0%

20.0%

0.0%
2000 2005 2010 2015 2019

Figure 30: Trends of Electricity Access in India29

Minigrids in India have also expanded significantly over the last decade due to increased involvement
of private players, local banks, and the government through the Ministry of New and Renewable
Energy (MNRE)’s Remote Village Electrification Programme (RVEP) and the Village Energy Security
Programme (VESP) for providing reliable and access to electricity to remote villages (Graber,
Narayanan, Alfaro, & Palit, 2019). As per the MNRE, 214 MW of off-grid power plants including
micro/minigrids had been deployed in India by March 2020 (Centre for Science and Environment,
2020). Figure 31 provides the cumulative growth of off-grid plants in India. Another data source of
ESMAP has reported around 2,800 minigrids exist in India, which are powered mostly by diesel, solar,
biomass and hydro.

Figure 31: Cumulative Growth of Off-Grid Power Plants in India30

3.5.2 National strategy for electricity sector

Currently, Government of India’s focus has been to expand access to electricity through grid-based
electrification. The government launched Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) in rural

29 (IEA, n.d.)
30 (Centre for Science and Environment, 2020)
50
areas, Saubhagya scheme for grid connectivity to last mile households and Integrated Power
Development Scheme (IPDS) in urban areas to provide electricity access. In April 2018, the
Government declared that 100 % of the villages had been electrified under DDUGJY. Later, in March
2019, all households (including 96 % in rural areas and 4 % in urban areas) except 18,734 households
have been electrified by the States under Saubhagya scheme. Several schemes to enhance energy
access of remote villages through renewable energy-based off-grid and decentralised technologies
including minigrids have also been launched. The first minigrid project was pioneered in the 1990s
when WBREDA installed 25 kWp system in Kamalpur village in Sunderban delta region of West Bengal.
WBREDA has further set up more than 20 minigrids based on solar PV with an aggregated capacity of
around 1 MWp supplying electricity to around 10,000 households in West Bengal. CREDA, another
state agency in India, has electrified around 35,000 households with low capacity (1-6kWp) solar
minigrids in Chhattisgarh. Thereafter, minigrids connected to solar PV, biomass, or small hydro, have
been implemented in various states, notably Bihar, Chhattisgarh, Lakshadweep, Madhya Pradesh,
Odisha, Uttar Pradesh, Uttarakhand, and West Bengal.

Although decentralized energy systems such as minigrids have been instrumental in providing last mile
connectivity and reliable electricity, yet the government considers them merely as a stop-gap solution
till the grid arrives. Several reports have highlighted that government programme of providing
electricity through grid electrification may not be sufficient to provide reliable electricity in remote
villages, and therefore minigrids might also continue to operate in grid connected villages having
irregular electricity supply (Bhushan, et al., 2019).

3.5.3 Policy and regulations for minigrids

Government of India has taken following key policy measures to encourage minigrid development:
• Electricity Act of 2003 removed the requirements of licenses for developers to generate and
distribute electricity in rural areas of India (Ministry of Law and Justice, 2003). Thus, giving
minigrids freedoms to operate alongside government Distribution Companies (DISCOMs)
• Ministry of Power's Tariff Policy 2016 allows DISCOMs to purchase minigrid electricity and
provides relevant guidelines (Ministry of Power, 2016). Till date very few states have adopted
these guidelines.
• MNRE issued a draft ‘National Policy for Renewable Energy based Micro and Minigrids’ in June
2016, which proposed to install 10,000 new, renewable energy-based micro/minigrid projects
of total size 500 MW by 2022 (Ministry of New and Renewable Energy, 2016). Till date, the
national policy has not been finalized.
• Several states have also adopted the above central government measures in varying forms, and
two have further implemented their own policies and regulations. For instance, the state of
Uttar Pradesh in India has introduced two policies - Mini grid Policy, 2016 and Minigrid
Renewable Energy Generation and Supply Regulations, 2016. These policies/ regulations
stipulate capital subsidy for minigrid project, interconnection with DISCOMs, terms of electricity
sale to DISCOMs, permissions for minigrids to become distribution franchisees, among others.
Similarly, Government of Bihar in India has notified Policy for New and Renewable Energy
Sources 2017. The policy has specified operating areas, interconnection with DISCOM,
electricity sale, subsidy for minigrid, among others.

51
 • Further, the Government had sent a notification in the National Tariff Policy in January 2016, to
support the concerns of minigrid developers regarding future electrical grid reaching the area
of a microgrid before the useful life of the asset. The notification states that the microgrid owner
should receive a pre-determined tariff for the rest of the useful life of the asset (Jaffer, 2016).
But this has not been made into a regulation yet.

3.5.4 Technical aspects of minigrids

The common generation technologies used for minigrids in India are diesel, solar PV, biomass gasifier,
mini/micro hydro and solar-diesel or solar-battery hybrids. Minigrid technology has advanced over the
years with the adoption of remote monitoring, load limiters and low cost, efficient technologies.
Innovation in revenue collection methods, specifically pre-paid technology, has enabled better returns
for minigrid operators. Most of the minigrids today are being designed keeping future energy demand
of rural households and businesses in mind. There is a shift from DC to AC, from just households
lighting and mobile charging to household and commercial appliances.

TP Renewable Microgrid (TPRM)31, a minigrid developer, has designed an innovative technology

“Utility-in-a-Box”, which is a pre-assembled, modular minigrid system. Similar boxes have also been
developed by other companies such as ABB, GE, etc. The system is a full turnkey system for minigrid
operators, including the complete hardware, the end-to-end installation, and a comprehensive after-
sales service package. The system can meet the demands of larger and greater number of loads. The
cost of the technology is USD 1.85 per Watt, which is significantly lower when compared to another
low-cost provider (Institute for Transformative Technologies, n.d.).

3.5.5 Business models for minigrids

A wide variety of business models have been adopted and promoted by government agencies and
private developers in India. The community-based model is the most common business model that
has been adopted by most publicly supported minigrids developed by WBREDA or CREDA. Mera Gao
Power (MGP), one of the private minigrid players, has promoted an innovative business model
providing low-cost microgrid power solutions to rural India. The emphasis of MGP is to provide service-
specific microgrids designed to meet the lighting and mobile charging requirements of rural people.
The customer base primarily includes poor households and enterprises which are billed on a pre-
payment basis.

The anchor-business-community model, widely adopted and promoted by OMC Power - a renewable
energy service company– in India, is another model which prioritises large ‘anchor’ loads such as
commercial and industrial followed by businesses and households. This model works well in villages
with considerable commercial/industrial loads. Gram Power, another private minigrid developer, has
evolved ‘pay as you go’ model to electrify remote rural villages in India using advanced technologies
where provision of electricity is made on demand.

Other set of business models include those that cater to the varying needs of the local people with
emphasis on creation of local entrepreneurship by engaging with the community and encouraging
development of local commercial activities. Smart Power India, a large-scale renewable energy

31 TPRM is a partnership between Institute for Transformative Technologies (ITT), Tata Power and the Rockefeller Foundation

to provide power through mini grids to 25 million people across 10,000 rural villages in India.
52
initiative created by the Rockefeller foundation, has been field-testing new technologies and business
models that can take decentralized renewable energy from an off-grid alternative to a mainstream
component for widespread rural electrification.

Further, operational diesel based minigrids are being converted/ hybridised into solar/ wind/ diesel
minigrids in large and densely populated islands and hilly/ remote regions of India. WBREDA is
developing a 500-kW solar-wind hybrid project in Sagar Island of Sunderbans. Central government is
promoting hybridisation of diesel gensets with renewable energy in Andaman & Nicobar and
Lakshadweep islands where majority of the power generation comes from diesel-based units.
Convergence Energy Service Limited (CESL), a newly established subsidiary of Energy Efficiency
Services Limited (EESL) is solarizing the existing diesel minigrids in Zanskar valley in Union Territory
(UT) of Ladakh, in collaboration with Power Development Department (PDD), Ladakh and Autonomous
Hill Development Council, Kargil. The proposed solar-diesel hybrid minigrid projects are driven by the
Vision-2050 for UT of Ladakh, which aims to harness the potential of renewable energy in the state
and thus becoming 1st state in India running on 100% clean energy. CESL is exploring international
carbon finance market to monetize GHG reductions from such projects.
Mlinda, another project developer, is installing scalable and replicable model of minigrids to increase
access to energy and has already installed 39 minigrids in 40 villages by March 2020. The project has
connected 4,918 families and empowered 1250 small enterprises across states of Jharkhand and West
Bengal. The minigrids are designed to meet domestic as well as agricultural needs. The consumers pay
upfront connection fees and then pay for energy usage through pre-paid meters (Mlinda, 2018).

Minigrids are being promoted to provide electricity for public institutions in health care and education
sector and for enterprise development in rural areas following the PPP approach where the Corporate
Social Responsibility (CSR) funds/ government grants/ local area development schemes are being
matched with private sector equity and community contribution to install and operate minigrids.
Hamara Grid Private Limited, a minigrid developer, has initiated a project designed on the above
model wherein the District Administration (Public), the minigrid project developer (Private), and the
Village Development Board (People) are proposing to work together to electrify 1000 villages spread
over ten districts in the Northeast. The project will integrate clean, high quality, and reliable energy
with livelihoods, agriculture, health, education, and other public infrastructure such as streetlights.
Husk Power, a minigrid developer, builds village scale minigrids using rice husk gasifiers, capacity
usually ranging between 30 and 200 kW. The firm has replicated this minigrid model in several
projects. The company works only in locations where at least 250 households agree to take
connection. DESI Power, on the other hand, has focused on productive use of power and used husk-
based systems to displace diesel-based electricity supply to micro-enterprises. It has also used anchor
loads to improve the financial viability of the business. SunMoksha, clean energy technology provider,
has developed technological solutions for microgrid and irrigation sectors. Smart Nanogrid, one such
solution, is a smart-grid and IoT/cloud-enabled microgrid solutions to dynamically manage supply and
demand, and manage billing and payment.

3.5.6 Minigrid tariff

A vast difference can be seen across the tariff structures set for both publicly supported as well as
privately implemented minigrids. This is mainly because setting up of minigrid tariffs are outside the
53
purview of the current regulatory framework and are determined through negotiations with
consumers while also taking into consideration the prevailing socio-economic aspects of a given area.
Hamara Grid, one of the project developers in India, establishes electricity tariff for their minigrid
project by consultation with district administration and local Village Development Councils (VDCs),
and based on the mutual decision and the consumers’ ability to pay, the electricity tariff is set. Most
minigrid developers today provide ‘package deals’ for a flat monthly fee instead of charging the end
user a cost per unit. This works well for the households/ domestic consumers as this is the amount
that was previously spent by them on kerosene. However, these payments are effectively 5-6 times
higher on the cost/unit side when compared to what an urban residential consumer is paying for grid
electricity. In some cases, such as in case of Hamara Grid, a differential tariff rate for daytime (lesser
tariff rate to promote usage of productive loads) and night usage (higher tariff rate as electricity flows
through storage) are negotiated.

3.5.7 Financing for minigrids

Most minigrids in India have been financed using capital subsidies provided by Government of India
through MNRE or Ministry of Power. MNRE programmes have provided subsidies to meet the capital
cost of the projects. Decentralized Distributed Generation programme of Ministry of Power has the
provision of not only providing capital subsidies for the project, but also providing some operational
costs of up to five years of project operation.
Private minigrid developers have also tapped developmental bank loans, venture capital funds, donor
grants, CSR financing and private equity financing, etc. Minigrid developers use these financing tools
in different combinations at different stages. At the inception stage, developers typically fund their
minigrids with a combination of capital subsidies, grants, and their own equity.

3.5.8 Opportunities for minigrids

Resource potential: India has a large potential for renewable energy deployment. According to
National Institute of Solar Energy (NISE), the total potential for solar power alone is estimated to be
748 GW (Ministry of New and Renewable Energy, Solar Energy: Overview, n.d.). The solar GHI map of
India developed by the World Bank and IFC has been included in Annexure 2. The estimated potential
of small/ mini hydro assessed by Alternate Hydro Energy Centre (AHEC) of IIT Roorkee is 21,135.37
MW (Ministry of New and Renewable Energy, Small Hydro Current Status, n.d.). National institute of
Wind Energy (NIWE) has estimated a potential of 302 GW for wind power in the country (Ministry of
New and Renewable Energy, Wind Current Status, n.d.). The bioenergy potential is 28 GW utilizing
agricultural residues (Ministry of New and Renewable Energy, Bio energy - Current status, n.d.).
Further, the government has introduced an ambitious target of 175 GW of RE including decentralized
generation by 2022 (Sustainable Development Goals Partnership Platform, n.d.). The huge resource
potential and RE target thus provides an opportunity for minigrid development in the country.

Unmet electricity demand: As mentioned earlier in section 3.5.1, there are still 5.5 million people in
India that lack access to electricity and most of these people live in remote rural areas. While India
generates sufficient electricity and has necessary capacity to meet demand, it struggles to distribute
this electricity efficiently and effectively to rural areas. In many places, the power reliability is limited
by transmission capacity and electricity distribution companies’ ability to perform repair and
maintenance of the network in remote areas. Even in grid connected villages there are problems of

54
reliability (hours of supply) and quality (voltage) of electricity. Despite the government's ongoing
efforts to electrify last mile households in India, there remains a clear gap between demand and
supply. RE based minigrids can provide high quality reliable electricity for lighting and other productive
loads in households and has the potential to become an integral part of India's rural electrification
strategy, providing last mile electrification.

Further, while the central Government has completed the electrification drive under the Saubhagya
scheme, the focus was mainly on households, and therefore, the public welfare institutions,
(particularly rural health centres) have been left out of this scheme. These institutions usually rely on
diesel gensets. Thus, there is an opportunity for minigrids to scale up in these areas to electrify public
institutions and support enterprise development utilizing CSR funds and other health sector related
public funds.

Specific opportunities: Minigrid policies in two states of India - Uttar Pradesh and Bihar - have been
driving private sector interest in these states to develop RE based minigrid projects for providing last
mile electrification, reliable & quality power and push socio-economic development complementing
government efforts. An increased consumers’ aspirational need for additional appliances also
indicates an opportunity for continued expansion of minigrid system capacities.

3.5.9 Barriers to minigrids

The foremost challenge to minigrid development in India is lack of clarity in policies and regulations at
the central and state level regarding future grid arrival at the place of minigrid site. This has
discouraged many companies from pursuing minigrids in remote areas as they are unsure of the
stability of their investment. Health centres, schools, streetlights, and other public good infrastructure
have remained uncovered in the state minigrid policies.

The other challenge is to make electricity from minigrids as affordable as grid power and still be able
to recover the capital and operating expenditures in a reasonable time frame for sustainable
operations. Minigrid power can be 25 times as expensive as power from the grid per kWh, because
developers try to recover their investment within only a first few years as well as due to presence of
low demand for electricity.

The third challenge for minigrid developers is the lack of a credible and reliable source of finance to
meet upfront capital costs and regular operating costs. Minigrids face challenge in financing, due to
their longer paybacks, inherently risky business structures, untimely payment by consumers, improper
billing and payment mechanism, and the lack of financing entities willing and capable of extending
low-cost financing. There is also lack of patient capital32 available to finance minigrids.

32Patient capital is an investment that does not seek to maximize financial returns to investors, but seeks to maximize social
impact and to catalyze the creation of markets to combat poverty
55
3.6 Maldives
3.6.1 Status of access to electricity and minigrids
Maldives is the first country in South Asia to achieve universal access to electricity. In 2008, the country
reached 100% access to electricity and further by 2011, 24-hour electricity supply across all islands.
Each inhabited island has its own powerhouse and distribution facility, effectively operating as single,
isolated island power grids. Almost all the country’s current power needs are met through diesel fired
generation, although there are no proven reserves of fossil fuels in Maldives. Diesel fuel is imported
and transported to the dispersed generating locations.

Figure 32: Growth of Renewable Energy in Maldives33

The island country has a total of 290MW capacity of diesel generators installed in 186 inhabited
islands, around 144 MW of additional diesel genset capacity in Resort islands and 20 MW in industrial
islands. Two electric utilities, Fenaka Corporation Ltd. (FENAKA) and State Electric Company Ltd.
(STELCO) operate 148 and 35 powerhouses respectively. A very small capacity of 21.5 MW of
renewable energy systems has been installed till now across the country. The above Error! Reference
source not found.Figure 32 shows the trends of renewable energy installations in Maldives from 2008
– 2019 (ADB, 2020).
Most of the solar installations in the country are rooftop solar PV installed under net metering.
Recently, solar PV projects in hybrid mode with existing diesel generators are being successfully
implemented in several inhabited islands under the Preparing Outer Islands for Sustainable Energy
Development (POISED) project of Asian Development Bank (ADB). The project is transforming existing
diesel-based energy minigrids into hybrid renewable energy systems in 160 inhabited islands, out of
which installations on 48 islands have been commissioned.

33 (ADB, 2020)
56
3.6.2 National strategy for electricity sector
The Government of Maldives (GoM) aspires to reach net-zero global greenhouse gas emissions by
2030 with international assistance and private investments. The key priority of the government, in this
regard, is to reduce its dependence on imported diesel fuel and invest in renewable energy projects.
Over the past 10 years, government has introduced several strategies and initiatives to scale up the
renewable energy applications in the country. Maldives has developed a Strategic Action Plan (SAP),
which includes strategies and targets for development of clean energy in the country. The plan targets
to increase the share of renewable energy by 20% as compared to 2018 and install a minimum of 10
MW of solar PV under net metering regulations by 2023. The plan also targets to reduce distribution
losses and plans to establish smart minigrids in selected clusters of islands to address this issue.

3.6.3 Policy and regulations for minigrids

Since 2008, the GoM has supported reduction in global GHG emissions in the wake of a warning that
rising sea levels could submerge the entire country. Several policies and strategies were developed
and implemented in this regard. In 2012, Maldives Scaling-Up Renewable Energy Investment Plan was
developed, which included strategies to scale-up renewable energy in the country.
At present, the policy instruments supporting hybridisation of diesel minigrids with renewable energy
technologies are the Energy Policy and Strategy 2016 and the Strategic Action Plan 2019–2023. The
Maldives Energy Policy and Strategy 2016 recommends the introduction of hybrid systems that use
renewable energy and seeks to encourage private sector renewable energy development.
As stated earlier, the National Strategic Plan also supports the development of minigrids in the
country. The plan targets to reduce distribution inefficiency by maintaining distribution loss within 7%
by 2023 through establishment of smart minigrids as one of the action items. The Ministry of
Environment and Energy is the nodal ministry responsible for policy, planning, and development of
the energy sector.

3.6.4 Technical aspects of minigrids

The diesel minigrids combined with solar PV systems have been the main mode of hybridisation in the
country till date, although the country has potential for other forms of renewable energy. Under ADB
POISED project, solar PV systems are connected to the diesel power plants through an Energy
Management System (EMS) for improved management of electricity supply. This hybrid configuration
offers short pay back times when compared to current prices of electricity produced by diesel
generation sets (ADB, 2020).
A unique, 40 kW grid-connected solar photovoltaic system was installed on Dhiffushi island in
November 2016 coupled with the ice-making machine which uses seawater to produce around 1
tonne of flake ice per day. In the daytime when solar energy is more than the demand, the icemaking
machine stores excess solar energy by producing ice. The system provides a simple yet sustainable
way for local fishermen to preserve fish and save costs (GSEP, 2017).

3.6.5 Business models for minigrids

Under World Bank-supported Accelerating Renewable Energy Integration and Sustainable Energy
(ARISE) project, hybridisation of fourteen island grids is being done under public private partnership
project framework which was earlier developed by World Bank.
57
The first project, 1.5 MW PV, was completed in March 2018 under this framework. Additional two sub
projects, which include 5 MW PV installations (currently in the construction phase) and a 21 MW
project (in tender stage) have been the result of continued efforts of this working model. The projects
are being developed on Design, Build, Finance, Own, Operate and Transfer (DBFOOT) model. The
project developer enters into a long-term PPA with the existing electricity service provider at a fixed
tariff (Duggal, 2021).
The hybrid solar projects under ADB POISED project are being installed in outer islands as grant/ loan
model with financing provided from ADB and European Investment Bank. The projects will be owned
by public utilities such as STELCO and FENAKA (ADB, 2020).

3.6.6 Minigrid tariff

The cost of electricity production using diesel fuel in Maldives is quite high, with energy cost ranging
from USD 0.097/kWh to USD 0.45/kWh, depending on the size and efficiency of the electricity system
(CIF, 2019). This is mainly because diesel fuel is imported and transported to the dispersed generating
locations in Maldives, which adds to the cost of generation. For domestic consumers, government
provides fuel surcharge subsidy and usage subsidy which covers over 50% of the cost of electricity
(ADB, 2020). Figure 33 depicts the average electricity tariff in 2013 compared with the generation
costs using diesel and solar PV. It supports the fact that investing in solar PV will be beneficial for both
the government and the consumers (Ministry of Environment and Energy, 2013).
The solar PV bids in the Greater Malé area under the World Bank-funded Accelerating Sustainable
Private Investment in Renewable Energy (ASPIRE) project has demonstrated solar PV tariffs as low as
US cents 10.9 per kWh. The introduction of solar photovoltaic technology into a diesel minigrid
environment means that the diesel generation provides a back-up as more and more solar PV
penetration occurs, thus reducing the cost of generation for the hybrid system. PV tariffs are also
expected to continue falling as the market continues to mature, the scale of projects increase, and
investor confidence grows.

Figure 33: Average Tariff of Different Consumers in Maldives34

34 (Ministry of Environment and Energy, 2013)

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3.6.7 Financing for minigrids
Most of the renewable energy projects have been developed under grant or loan component provided
from multilateral development banks, donor agencies. The funding for typical infrastructure projects/
programs in Maldives tends to be small grants or loans given the country’s size, macro-economic
conditions and borrowing constraints. The POISED program has been able to mobilize nearly USD 129
million through grants and loans and has made a sound case for larger funding in Maldives (CIF, 2019).
The ASPIRE project of World Bank has resulted in the mobilization of USD 9.3 million since it began in
2014. The private sector investment in the RE sector is in its nascent stage and private developers and
lenders are still reluctant to invest in the sector (ADB, 2020).

3.6.8 Opportunities for minigrids

Resource potential: The Maldives has abundant renewable energy resources including solar, wind and
ocean power. Solar radiation is in the order of 1,200 kWh/m2/year, which is considered good for any
solar PV project. The solar GHI map of Maldives developed by the World Bank and IFC has been
included in Annexure 2. Wind resources are not equally distributed across the country with northern
half being relatively richer in wind resource than its southern part. The resource assessment of tidal
and in-stream energy has estimated the potential in the range of 28 MW to 106 MW. Among the three,
solar PV energy has the most immediate exploitation possibilities in Maldives. The Strategic Action
Plan of Maldives targets to increase the share of renewable energy by 20% as compared to 2018
focusing on hybrid solar plants and rooftop solar (ADB, 2020).
Unmet energy demand: Maldives has achieved 100% electrification in each of its islands, providing 24-
hour supply mainly through diesel based minigrids. However, the demand of electricity is increasing,
and the country does not have any fossil fuel reserves and has to import diesel fuel which has several
challenges associated with logistics, as well as with greenhouse gas emissions. The GoM has
recognized these challenges and is working to transform its energy sector through utilization of
country’s renewable energy potential. Government has also set a target to achieve net zero emissions
by 2030 through applications of renewable energy technologies.
Specific opportunities: The current cost of electricity in the country is among the highest in South Asia.
Annual subsidies to the electricity sector amount to USD 65 million at the end of 2019 (ADB, 2020).
Energy sector studies reveal that the cost of energy generation based on renewable energy and fossil
fuel hybrids would be significantly lower compared to existing options (ADB, 2014). The transition to
renewable energy-based systems has thus sound economic rationale. The hybrid renewable energy
systems can also displace a large quantity of the imported diesel fuels which will help in reducing the
GHG emissions and thus contributing to the government’s target of achieving net zero by 2030. Resort
islands running on diesel systems can have the inherent benefits of eco-friendly branding by adopting
renewable energy systems in hybrid mode. Outer inhabited islands have less power demand in general
but during vacation period, the power demand increases. Incorporating renewable energy-based
systems in conjunction with existing diesel minigrids can be used to power the additional demand as
well as reduce the consumption of diesel in other days.

3.6.9 Barriers to minigrids

There are several challenges to deploy renewable energy-based hybrid minigrids in Maldives namely,

59
Lack of concrete energy sector plans: There is a need to develop robust energy sector plans focusing
on hybrid renewable energy projects to meet the increasing electricity demand in the country, lower
electricity cost and reduce the import of diesel.
Lack of financing: The investments in renewable energy projects in the country have been driven
primarily by grants and loans from multilateral agencies. Due to its relatively small banking system,
Government of Maldives is facing liquidity crunch to fund these projects. Commercial bank financing
or private sector financing is in its nascent stage since they are still reluctant to accept the risks
associated with renewable energy technologies and invest in the sector. Private sector participation
is crucial for development of RE minigrids in the country.
Limited expertise and experience in RE technologies: Utility companies in Maldives have mainly
implemented conventional energy projects since the beginning of the country’s industrialization.
Therefore, there is limited knowledge and experience regarding renewable energy technologies, their
installation and operation and maintenance.

3.7 Nepal
3.7.1 Status of access to electricity and minigrids
Nepal was facing severe electricity shortage and the country was facing load shedding (power cuts)
up to 16 hours per day in households till early 2017 as well as in industries till early 2018 (Sushil Sah,
2019). Economic Survey of Nepal 2020/21 states that the overall rate of electrification has reached
93% (Ministry of Finance, 2021). The yearly trend of access to electricity is provided in Figure 34. The
major source of electricity in Nepal is grid connected large hydropower projects. However, Nepal has
difficult topography and scattered settlements, particularly in hills, thus extension of national
electricity grid for electrification of rural areas would be expensive. Hence, Nepal has been promoting
micro hydro for rural electrification since 1980s (Alternative Energy Promotion Centre , 2016).

Access to Electricity
100
% of population

80
60
40
20
0

Fiscal Year

Figure 34: Yearly Trend of Access to Electricity35

35
(Ministry of Finance, Economic Survey 2077/78, 2021)
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The solar minigrid in Nepal was piloted by Nepal Electricity Authority (NEA) with support of France in
1989 (Renewable Energy for Rural Livelihood, 2020). After 2011, Government of Nepal (GoN) has been
allocating budget and installing solar and solar-wind hybrid minigrids in each fiscal year (Santosh Rai,
2019). Alternative Energy Promotion Centre (AEPC) has different programs for the promotion of
renewable energy including minigrid sector focusing on rural electrification in Nepal. AEPC has
installed 11 solar-wind hybrid minigrid projects of total capacity 384 kW and 14 solar minigrid projects
of total capacity 711 kW until 2020 (includes working, under construction as well as planned projects).
AEPC has also developed 1,816 numbers of mini/micro run of the river hydro projects of total capacity
32,778.39 kW in off-grid areas under different programs (Santosh Rai, 2019).
During the stakeholder consultation, it was learnt that since last couple of years less than 50% of
mini/micro hydro minigrids have sustained due to different reasons including high tariff, operation
and maintenance issues, and natural disasters. Almost 274 mini/micro hydro were damaged by 2015
earthquake in Nepal. Out of 274, 116 projects are under rehabilitation with support from Renewable
Energy for Rural Livelihood (RERL) program, Department for International Development (DFID) and
GoN fund and 97 projects are rehabilitated and maintained by community themselves (Santosh Rai,
2019).

3.7.2 National strategy for electricity sector

Budget has been allocated to electrify 50,000 households (HH) in off grid areas and 90% subsidy will
be provided for solar and mini hydro implementation by local government and community institution,
as per the Nepal’s government budget for FY 2021/22. Further, the government is also focusing on
electrifying remotely located mountain communities and upper hills by implementing Solar Minigrid
program (Ministry of Finance, 2021).
GoN has been promoting renewable energy since mid-1970s by provisioning credit facility to install
micro hydro and in mid 1980s, mini/micro hydro up to 100 kW has been delicensed and subsidy has
been provisioned for electricity generation and distribution. The Fifteenth Plan (Fiscal Year 2019/20 –
2023/24) aspires for a 12% contribution of renewable energy in the total energy consumption and has
target of 100% electrification by 2023/24. Similarly, the plan aims to provide access to electricity to
the additional 5% of the total populations with 13 MW of micro/mini hydropower, 127 MW of solar
and 10 MW of wind energy.

3.7.3 Policy and regulations for minigrids

AEPC is the focal organization for developing and promoting renewable energy technologies including
minigrids in Nepal since 1996. Electricity Act 1992 opened the doors for private sector investment in
hydropower including mini and small hydro in Nepal. Hydropower plants from 100kW to 1MW did not
require license for generation and in off grid areas, the distributor could fix the tariff and charges
independent of the Electricity Tariff Fixation Commission (ETFC). The Act also allowed developers to
sell electricity to the national grid.
Rural Energy Policy 2006 (REP 2006) is the first policy approved by AEPC, which focuses on increasing
access to clean and cost-effective energy in the rural area, thereby increasing the living standards of
rural population by creating employment and productivity. RE Subsidy Policy and Subsidy Delivery
Mechanism 2016 indicates that the subsidy amount in the renewable energy technology needs to be
reduced and readjusted to gradually shift from subsidy to credit model. Subsidy should be based on

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electricity consumption. The policy has the provision of additional financial support to targeted
beneficiaries including households headed by women and marginalized community. The white paper
of Ministry of Energy, Water Resource, and Irrigation (2018) has provisioned the policy to establish
the challenge fund to develop the 100 kW to 500 kW solar energy technologies at each local level.
Minigrid Special Program Operation Rules has been formulated in the year 2019 to facilitate
mountainous and upper hills solar minigrid program and Ujyalo Nepal Program. MHP Operation and
Management Guidelines provide details on sustainable operation including institutional strengthening
for smooth operation of the plants and promotion of productive electricity uses after the installation
of micro hydro. Technical standard for grid interconnection 2014 was approved by NEA to buy
electricity from an MHP when the national grid passes through its service area. This has opened
opportunity for the interconnection of micro hydro to the national grid (Renewable Energy for Rural
Livelihood, 2020).

3.7.4 Technical aspects of minigrids

Nepal has minigrid systems generating electricity from hydro, solar and wind resources. Plants with
capacity of up to 1 MW have been developed as hydropower minigrids in the country and solar as well
as solar-wind hybrid minigrid has capacity range of 8 kW to 150 kW.
The solar and solar-wind hybrid minigrids have battery backup. Most of the minigrid end-user has a
prepaid energy meter. South Asia Sub-Regional Economic Cooperation (SASEC) projects of ADB are
the first minigrids in Nepal to use prepaid meters (Renewable Energy for Rural Livelihood, 2020).
During stakeholder consultation, it was learnt that after the SASEC project, prepaid energy meters are
mandatory for all minigrid systems. The solar minigrid installed by Gham Power, Nepal (private sector)
also has remote monitoring and control system. The minigrid projects of ADB in Nepal have grid
compatible distribution system. Some of the minigrid projects are successfully connected to the
national grid.

3.7.5 Business models for minigrids

Nepal Electricity Authority, a government utility actively constructed and managed mini and small
hydro plants for many decades but this is slowly phasing out. Hydropower policy of Nepal encourages
community, cooperatives, and local bodies to be active in developing smaller hydro projects. Many of
the early minigrid systems such as Salleri Chialsa mini hydro and Namche mini hydro in Solukhumbu
district were built with support from the communities and they are responsible for operation and
management of the system.
AEPC/RERL program aims to demonstrate success of public private partnership model for
development of minigrid projects. All RERL supported projects are owned by the community and
managed either by cooperatives or as public limited companies.
The World Bank has launched a program “Minigrid Energy Access Project (MGEAP)” which has the
objective to increase electricity generation capacity from renewable energy minigrids in selected areas
by mobilizing RESCOs. 29kW Simli Khola MHP, Rukum is the community owned privately managed
minigrid system. The plant is managed and operated by the single person, and he pays to the
community as per the lease agreement (Renewable Energy for Rural Livelihood, 2019).

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Dubung Solar microgrid is the first in Nepal built in partnership between the community (user
community of Dubung), private sector (Saral Urja Nepal Pvt. Ltd.) and the government of Nepal. The
project developer company is jointly owned by user community of Dubung and Saral Urja. Private
sector involvement has helped in providing reliable electricity supply (Saral Urja Nepal, 2021).

3.7.6 Minigrid tariff

According to Minigrid Special Program Operation Rules 2019, minigrid tariff should be set in
accordance with prevailing tariff rate of NEA; minigrid tariff should not be more than the grid tariff
(Alternative Energy Promotion Centre , 2019). Minigrid tariff in Nepal is set in consultation with the
community, considering the site of the project and technology of the minigrid. Micro hydro developers
set up flat tariff rate in Nepal on the monthly basis without considering the amount of energy usage.
During the stakeholder consultation, it was mentioned that average tariff rate of solar minigrid
electricity for household (around NPR 15 per kWh (USD 0.1236 per kWh) is less than that of the
enterprise around NPR 20 per kWh (USD 0.17 per kWh). As per the consultation, Electricity Regulatory
Commission of Nepal is trying to bring uniformity in tariff rates of grid and off grid electricity.
Dubung solar microgrid project, discussed previously in Section 3.7.5, is charging high tariffs to the
consumers as compared to the national grid tariff even after receiving high upfront subsidy for the
project. However, the beneficiaries who are able to now utilize electricity for income generating
activities are paying their bills on time (Renewable Energy for Rural Livelihood, 2020).

3.7.7 Financing for minigrids

Minigrid financing in Nepal hinges on grants/subsidies from the government and community
contribution. Very few projects are privately financed. Agriculture Development Bank of Nepal was
the sole financial institution in early 1980's for MHP financing. AEPC in 2011 created Micro Hydro Debt
Fund (MHDF) to promote MHPs with credit facility. MHDF enables the communities to repay the high
upfront costs over a long period of time and encourages commercial banks to finance micro hydro
projects in rural Nepal. Private banks provided credit for 26 MHPs in 12 districts through project
financing modality with 50% loan guarantee scheme from AEPC/MHDF. However, due to the
discouraging loan recovery performance from those MHPs, AEPC has also been mobilizing Local
Financial Institutions (LFIs) like cooperatives and Microfinance Institutions (MFIs) to promote MHPs
for rural electrification (Alternative Energy Promotion Centre , 2017).
Central Renewable Energy Fund (CREF) has been established as the financial management mechanism
for the RE by AEPC which functions as the core financial mechanism responsible for the effective
delivery of subsidies and credits to the RE sector in Nepal. CREF also intends to promote vendor
financing mechanism which targets to facilitate the installation of at least 600 renewable energy
systems through vendor financing model (Central Renewable Energy Fund , 2017). Vendor Finance
Challenge Fund (VFCF) is financed by UNCDF, UNDP-RERL and CREF to support development and
growth of the RE market by mobilizing commercial credit, attracting private sector/entrepreneurs and
reducing their investments risks.

36 1 NPR = 0.0083 USD as on 27th October 2021, same exchange rate has been used to convert NPR to USD in this report
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Sustainable Energy Challenge Fund (SECF) is being implemented under AEPC’s CREF to provide Viability
Gap Funding (VGF) to make marginally feasible distributed RE projects bankable. SECF supports
technical, managerial and financial management to new and existing RE minigrid projects.
To attract the private sector in operation and management of minigrids, the RE subsidy policy 2016
has provisioned upfront kilowatt-based capital subsidy and the subsidy for energy consumed to cover
part of the operational expenditures. However, the new provision has not attracted the investors due
to the perceived risk in investing in community owned minigrids.

3.7.8 Opportunities for minigrids

Resource potential: Among different forms of RE resources, hydropower has the largest potential to
provide energy in Nepal. The theoretical potential is 84 GW of which 43 GW is estimated to be
economically viable (Alisha Pinto, Yoo, Portale, & Rysankova, 2019). According to the AEPC report, the
commercial potential of solar power is 2.1 GW (Water and Energy Commission Secretariat, 2013). The
solar GHI map of Nepal developed by the World Bank and IFC has been included in Annexure 2. Hydro,
solar and wind based minigrids have typically been developed in Nepal till date. The Government of
Nepal is moving towards the universal access to electricity with on grid and off grid electrification
projects and has annual plans for development of minigrids based on RE resources. This indicate that
resource potential is not a constraint for development of minigrid in the country.
Unmet energy demand: Nepal has to provide electricity access to 7% of its population, mainly on
mountainous and upper hilly regions for achieving 100% electrification in the country. Expansion of
national grid to those areas is cost intensive as well as time consuming. RE based minigrids, which are
able to provide reliable access to electricity at affordable cost have good opportunity for development
in these unserved areas of Nepal.
Specific opportunities: The fifteenth plan of GoN aspires for a 12% contribution of RE in total energy
consumption by the year 2024. The country has also targeted solar minigrid projects in mountains and
upper hills region as mentioned in section 3.7.2 (Alternative Energy Promotion Center, 2019). These
specific minigrid programs such as mountainous and upper hills solar minigrid program and Ujyalo
Nepal Program offer good opportunities for minigrids in Nepal. GoN has allocated budget for detailed
feasibility study of minigrid programs around the country and national minigrid plans for Ujyalo Nepal
Program. Subsidy and debt will be provisioned for RE systems under national minigrid program
(Ministry of Energy, Water Resources and Irrigation, 2021).
Nepal Renewable Energy Program (NREP) is dedicated to increase private sector investment in DRE
and increase universal energy access. To date, NREP has been preparing for the launch of SECF to
catalyze the DRE market in Nepal by providing needs-based awards. It has developed a pipeline of
over 70 DRE projects.

3.7.9 Barriers to minigrids

Minigrids have been designed mainly for basic needs without the consideration of future energy
demand of households and productive loads. Also, minigrid power is expensive compared to power
from the grid because of developers’ interest to recover their investment within first few years. The
areas served by the minigrid may soon be reached by national grid and due to higher tariff rate of
minigrid electricity; customers will keenly connect to the national grid.

64
Despite the successful interconnection of several MHPs and solar PV projects to the national grid, the
policy for grid connection of minigrids is still ambiguous. CREF, although has been operational for some
years, it has not been able to attract private investment in minigrid projects. Project developers
continue to struggle to achieve financial closure on time as subsidy and their equity are not enough to
cover the total project cost and bank financing is difficult to access, if available the cost of financing is
very high as the financing institutions perceive high risk to invest in rural communities.

3.8 Pakistan
3.8.1 Status of access to electricity and minigrids
The electrification rate in the country has improved from 55.7% in 2005 to 79.2% in 2019. However,
there are still around 45 million37 people without access to electricity with majority falling in the rural
areas (IEA, n.d.). The installed power capacity as on June 2020 stands at 38,719 MW, which was more
than sufficient to meet the total demand in the country in FY 2019-20. Despite having surplus power
generation capacity, long hours of load shedding persist in several areas of the country (National
Electric Power Regulatory Authority, 2020) . The power cuts are more pronounced in the rural areas
compared to urban centres (Wheeldon, 2017).

Figure 35: Coverage and Projects Under PPAF KfW HRE Program38

The distributed solar industry in Pakistan evolved during the early 2010s at the time of growing power
shortages (ADB Institute, 2018). Pakistan Poverty Alleviation Fund has implemented more than 3,800
RE projects of 13.78 MW which include mini & micro hydropower projects, minigrid systems, solar
water pumping systems, wind energy projects, solar-wind hybrid, and biogas plants (Nafees Ahmad
Khan, 2021). Currently, PPAF is implementing Hydropower and Renewable Energy (HRE) project,

37
The access to electricity in Pakistan has grown to 74% in 2019 and there are 56 million people without access to electricity
as per the Tracking SDG7 The Energy Progress Report 2021. The Tracking SDG7 Report 2021 has referred to World Bank
Global Electrification Database. The World Bank Global Electrification Database derives estimates from a suite of
standardized household surveys that are conducted in most countries every two to three years, along with a multilevel
nonparametric model used to extrapolate data for the missing years. The IEA Energy Access Database sources data, where
possible, from government-reported values for household electrification (usually based on utility connections).
38 (Pakistan Poverty Alleviation Fund , 2021)

65
initiated in 2013, with funding from German Development Bank (KfW). Five mini/ micro hydro power
plants with total installed capacity of 803 kW have been implemented in Chitral, Upper Dir and Buner
Districts of Khyber Pakhtunkhwa. A total of 68 solar minigrid systems with installed capacity of 500
kW has been installed in remote and off-grid locations of Karak, Swabi and Lakki Marwat districts of
Khyber Pakhtunkhwa (Pakistan Poverty Alleviation Fund , 2021). The coverage and projects under HRE
program are shown in Error! Reference source not found.Figure 35.
Aga Khan Rural Support Programme (AKRSP) and Sarhad Rural Support Programme (SRSP), two
prominent Non-Governmental Organizations (NGOs) in Pakistan have implemented several micro
hydropower projects in some regions of Northern Pakistan since their inception (Energypedia, n.d.).
Private sector is also active in Pakistan and has developed several off-grid projects in rural Pakistan
and has helped electrified households through solar systems.

3.8.2 National strategy for electricity sector

The Government of Pakistan has largely been focusing on electrifying the country through national
grid, which mainly centred around urban areas as there is increased demand for power. The emphasis
on rural electrification at the national level has remained overlooked in the country because of high
distribution costs, very low electricity demand and lower capacity to pay as opposed to their urban
counterparts. Hence, these factors make rural areas uneconomical and thus not a priority for
distribution companies. Utilities and distribution companies are reluctant to roll out the grid since the
“revenues from tariffs would never be able to provide the returns needed to recover the investment”
(Energypedia, n.d.). Moreover, for those rural set-ups connected to the grid, insufficient energy access
is widened due to inter-province electricity distribution and rural-urban divide (Reon Energy, n.d.).
Though the renewable energy policy of 2006 required the relevant authorities to enact measures for
the promotion of off-grid RE including minigrids, not much progress has been made so far (IRENA,
Renewables Readiness Assessment: Pakistan, 2018). Alternative Energy Development Board (AEDB)
initiated a rural electrification programme in 2005 to provide over 7000 villages in Sindh and
Baluchistan with electricity by deploying solar home systems. The project was implemented through
a grant from the Government of Pakistan. It suffered a shortfall in funding and could not achieve its
targets. The provincial governments have undertaken several rural electrification initiatives based on
renewables, using their own resources as well as support from development partners (IRENA,
Renewables Readiness Assessment: Pakistan, 2018).

3.8.3 Policy and regulations for minigrids

The Alternative and Renewable Energy (ARE) Policy 2019 provides a comprehensive framework for
deploying renewable energy technologies in the country. The policy was approved in-principle by
Council of Common Interests (CCI) on 6th August 2020 as per official notification available on AEDB
website (Alternative Energy Development Board , 2019) .
The policy has set the target of at least 20% RE generation by capacity by the year 2025 and at least
30% by 2030 in the national grid. The policy has prioritised mini/microgrid, off-grid, Localized Energy
Systems (LESs) and Business to Business (B2B) solutions for combating power scarcity realizing their
potential in the country(Alternative Energy Development Board , 2019) . AEDB is currently developing
the strategy and action plan for implementing the ARE Policy 2019. The private sector companies are
allowed to set up power generation plants in the country, however, they are not allowed to set up a

66
distribution system or sell electricity without a prior approval and license from both the national
energy regulatory authority and respective distribution company (Saleh, 2019).

3.8.4 Technical aspects of minigrids

Hydropower has traditionally been the most prominent source of renewable energy in Pakistan. Other
renewables have only recently come into the mix after the country introduced a set of support
mechanisms to foster renewable energy deployment in the mid-2000s. There are numerous off-grid
micro-hydropower installations in Khyber Pakhtunkhwa and Gilgit-Baltistan. The solar minigrid
systems installed under PPAF HRE project were small scale ranging from 2 kW to 51 kW to meet not
only the lighting requirements of the community, but also supporting the village level businesses and
local enterprises (Pakistan Poverty Alleviation Fund , 2021).

3.8.5 Business models for minigrids

Minigrid projects, developed by PPAF, AKRSP and SRSP, in the country have followed community-
based model for development, operated and managed by the community members. In minigrid
projects implemented by PPAF, the operations, and maintenance fall under the purview of
committees comprised of members drawn from local communities. Plant operators and technicians
are selected from within the local community and are paid through the tariff collected from
consumers. Plant operators are also trained on minigrid operation and management.
During the consultations with PPAF officials, it was learned that there has been satisfactory experience
working with NGOs/ communities for minigrid operation. SRSP has also deployed similar model for
managing micro hydro schemes, which ensures continuous maintenance of all parts and structure of
MHPs and regular monitoring of micro catchment area for sustained water flow (Ashden, n.d.).
Nizam Bijli, a subsidiary of Nizam Energy, has rolled out PAYG model using mobile money in off-grid
areas to provide affordable solar home solutions. The customers have the option of purchasing
systems upfront or on a 12-month, 18-month or 36-month payment plans (all plans include health
insurance). The cheapest plan allows customers to buy electricity at a price of USD 0.5 per day
(Business Call to Action, n.d.). Another energy provider in rural Sindh, EcoEnergy, is providing Pay-As-
You-Go solar solutions, allowing individuals to pay only for what they need and can afford. Monthly
payments are typically comparable to what villagers spend on energy. A typical household spends an
average of 14% of their monthly income on energy. The solar kit is remotely disconnected when credit
expires (IGC, 2019).

3.8.6 Minigrid tariff

National Electric Power Regulatory Authority (NEPRA), as the sole power market regulator, has been
determining tariffs for electricity in the country since 1998. The cost of electricity for end-consumers
has been on the rise owing to various reasons like high Transmission & Distribution (T&D) losses, low
recovery, fuel cost, under-utilization of efficient power plants etc. (National Electric Power Regulatory
Authority, 2020). The average tariff for electricity currently stands at PKR 16.69 (USD 0.09539) per unit
after a recent tariff determination (Bhutta, 2021). For large residential consumers, Time of Use (ToU)
billing is also available.

39 1 PKR = 0.0057 USD as on 27th October 2021, same exchange rate has been used to convert PKR to USD in this report
67
On the contrary, the minigrids developed by PPAF or other initiatives under donor grant have shown
lower cost of electricity for domestic consumers, around PKR 6 (USD 0.034) per unit (found during
consultations with PPAF). These tariffs are determined considering the cost of operation and
maintenance of the systems as well as consumers’ ability to pay. Communities are actively involved in
setting electricity tariffs for domestic and commercial consumers. In minigrid projects developed
under SRSP programme, a one-time connection cost from domestic and commercial users were
collected and set aside in designated bank accounts for any unforeseen rehabilitation work. Adoption
of this approach has led to ensuring sustainable operation of the units in the long run (Ashden, n.d.).

3.8.7 Financing for minigrids

Almost all minigrid projects in the country have been developed under grant/ loan component
received from international donor agencies. These funding for minigrids mostly covers the upfront
capital cost and sometimes the ongoing cost.
Pakistan Poverty Alleviation Fund has implemented several community micro-hydropower projects
and solar minigrid projects using donor grant as well as microfinance schemes. The current HRE project
is being implemented with grant funding from the KfW. The whole project has two phases, with total
financial outlay amounting to EUR 22.5 million (USD 26 million40) (Pakistan Poverty Alleviation Fund ,
2021).
State Bank of Pakistan has rolled out financing scheme for renewable energy in 2009, which was
revised in 2016 to make it more attractive to both project developers and financing institutions.
Private banks in Pakistan can use these funds to finance renewable energy projects ranging from 4 kW
to 50 MW capacity (IRENA, 2018).

3.8.8 Opportunities for minigrids

There are many opportunities for development of minigrids in the country on account of following
aspects.
Resource potential: Pakistan has abundant renewable energy sources, yet the share of renewable
energy in the power mix is remarkably low: only 5.5% of installed capacity (National Electric Power
Regulatory Authority , 2020). Hydropower is the most promising and cheapest sources of power
generation in Pakistan. The economically and technically viable potential of hydro power in the
country is estimated to be 60 GW for all scales and types. Pakistan has good solar energy potential as
well. The annual global horizontal irradiance ranges from 1,500 kWh/m2 - 2,300 kWh per m2 per year,
with the southern and southwestern parts recording greater irradiation levels than the north. The
solar GHI map of Pakistan developed by the World Bank and IFC has been included in Annexure 2. The
theoretical potential for wind power, without considering technical and economic constraints, is
estimated to be 340 GW (IRENA, 2018). In this regard, the Government has set a target of installing at
least 20% RE capacity by 2025 and 30% by 2030 in the national grid, prioritizing mini/microgrid
solutions as key intervention to accomplish the targets.
Unmet energy demand: There are around 45 million people in the country without access to electricity
and majority of those connected to grid face long hours of load shedding. RE minigrids can effectively

40
1 EUR = 1.16 USD as on 27th October 2021
68
plug the gap in electricity access in unserved areas by providing electricity at an affordable cost and
also provide reliable electricity in underserved areas of the country.
Specific opportunities: Pakistan has very hard-to-reach geographic locations without access to
electricity where grid-connected electricity will not reach soon. The demand for electricity in these
rural regions is also low as compared to urban areas. Providing on-grid transmission to these villages
for low loads will prove to be expensive. Noticeably, these communities are also geographically
positioned in the highest solar insolation zones and/ or hydro resources. Decentralized generation
such as solar/ solar hybrid minigrids near the load centres offer promising solutions for providing basic
electrification and may also be scaled up to provide higher levels of services efficiently (Saleh, 2019).

3.8.9 Barriers to minigrids

One of the main challenges in the development of minigrids in the country is the lack of institutional
support at the national level for rural electrification and distributed renewable energy projects. The
focus of government is primarily on utility-scale projects in areas already served by the national grid
and electrification of urban areas through national grid as there is increased demand for power.
Comprehensive electrification planning consisting of national grid extension, minigrids and others
have proved to be successful in electrifying remaining population rapidly.
There are also no policies and regulations covering issues like permit and licensing, tariff setting,
financial incentives, and regulations for minigrid in the event of grid arrival. These regulations are
necessary to build private sector interest and confidence.
The lack of access to finance also hinders the growth and deployment of minigrid systems in the
country. Private-sector investment in rural areas is also constrained due to several challenges, such
as: higher perceived commercial risks, high investment costs, lack of funding available and
government support.
Lack of technical expertise is another limiting factor on the deployment of minigrids for rural
electrification. Limited capacity to design, install, operate, and maintain energy services based on
renewables and lack of standardisation, has resulted in the poor performance of these projects and
lowered end-user confidence (IRENA, 2018).

3.9 Sri Lanka

3.9.1 Status of access to electricity and minigrids
The supply of primary sources of energy in Sri Lanka is dominated by coal, oil, and biomass. As of 2018,
the International Energy Agency estimated that 5,010 KTOE (or Kilo Tonne of Oil Equivalent) of energy
was supplied by liquid fuels, followed by biomass at 4,628 KTOE, coal at 1,459 KTOE and hydropower
at 550 KTOE. The total contribution from all sources for the year was 11,647 KTOE (IEA, n.d.).

69
 Figure 36: Installed Capacity and Energy Generation in 2020 in Sri Lanka from different sources41

Total installed generation capacity in Sri Lanka in 2020 was 4,265 MW, up from 4,217 MW in the
previous year. The installed capacities and the corresponding energy generation data of different
sources in Sri Lanka are provided in the Error! Reference source not found.Figure 36. As one can
observe, bulk of the electricity supply in the country is met by thermal energy (coal and oil), followed
by hydropower. Also, within the renewable energy sources, mini and micro hydro have a larger share
in generation (Ceylon Electricity Board, 2021).
Reports indicate that Sri Lanka has managed to achieve near-complete electrification by 2017, and
policy documents indicate that the country is fully electrified as of the present date (Ministry of Power,
Energy and Business Development, 2019). The country has also committed, as part of its Intended
Nationally Determined Contributions (INDCs), to reduce intensity of GHG emissions from energy
sector by 20% till 2030 (Ministry of Mahaweli Development and Environment, 2016). This is a
challenging task, due to Sri Lanka’s dependence on fossil fuels (coal and oil) as shown above.
As far as the minigrid sector is concerned, there were over 250 community-level minigrids, primarily
driven by micro hydropower, which were installed between 1997 and 2012. However, with changes
in legal and regulatory provisions and the expansion of the national grid in isolated villages of Sri Lanka
by the Ceylon Electricity Board, more than 100 of these minigrids went out of existence because
households closer to the grid became customers of the CEB which was offering lower tariffs and more
hours of supply. Only a handful of these minigrids were converted into small power producers that
sell electricity to CEB (ESMAP, 2018).
The country has recently put up a plan to set up minigrids to power its outlying islands, about ten (10)
of which are inhabited. Previously, these islands were supplied with electricity from the diesel
generator sets owned by CEB and through a distribution network that covers only few consumers in
each island (ADB, 2016). Sri Lanka’s first hybrid minigrid was installed in Eluvathivu Island of Jaffna in
2016. The old diesel generator sets in the island were converted into solar-wind-diesel hybrid by the
Ceylon Electricity Board with the help of financing received from ADB.

41
(Ceylon Electricity Board, 2021)
70
Currently, Ceylon Electricity Board along with ADB is working to set up hybrid renewable energy-based
power systems in three small, isolated islands, Analaitivu, Delft and Nainativu (part of the Jaffna
Peninsula), under component 1 of ‘Supporting Electricity Supply Reliability Improvement’ project. The
project will promote and strengthen energy-based livelihoods through access to electrical appliances
and technologies, and Ministry of Power and Renewable Energy (MPRE) will be the executing agency.
The three islands are presently served by CEB-owned diesel generating plants through a distribution
network that covers parts of each island. The implementation work on these hybrid projects have not
started yet, although the contractor has already been selected in February 2021. Additionally, under
the same ADB project ‘Supporting Electricity Supply Reliability Improvement’, Lanka Electricity
Company (Private) Limited (LECO), an electric utility in the region, has proposed to implement a
microgrid as a pilot subproject within its franchised area.
More recently in the year 2021, the CEB, supported by ADB, has commissioned a utility scale, self-
contained RE powered project in the island of Mannar. The project includes a 100 MW capacity of
wind power system. This is the largest island-based wind powered RE grid in Sri Lanka (ADB, 2021).

3.9.2 National strategy for electricity sector

The roadmap for electricity sector in Sri Lanka is governed by the National Energy Policy and Strategies
(NEPS), 2019 and the Long-Term Generation Expansion Plan (LTGEP), 2020 – 2039 produced by Ceylon
Electricity Board. The NEPS 2019 identifies a vision of Sri Lanka to achieve carbon neutrality and
“complete transition of all the energy value chains” by 2050, without explicitly stating whether
generation would solely be RE based (Ministry of Power, Energy and Business Development, 2019).
The LTGEP is a technical document that provides reference scenarios (based on business-as-usual) and
a base case scenario (with RE investments) to show that generation from RE sources could assume a
strong share of around 70% of all generating capacity as of 2039. In contrast, the reference scenario
has a higher share of thermal power sources (coal, oil, and natural gas), amounting to over 70% of
planned capacity additions (Transmission and Generation Planning Branch, 2019).
In summary, it appears that the strategy of Government of Sri Lanka (GoSL) is to replace current
generation mix that is strongly in favour of liquid fuels and coal, to increased share of RE resources,
such as wind, solar and hydropower, and augmented generation capacity of natural gas-based projects
owing to their strong cost advantage.

3.9.3 Policy and regulations for minigrids

The energy policies for Sri Lanka are contained in the National Energy Policy and Strategies 2008, duly
revised vide Sri Lanka Government Gazette Notification dated August 9, 2019; and the Energy Sector
Development Plan for a Knowledge-based Economy 2015 – 2025.
The revised NEPS 2019, anchored by the Ministry of Power, Energy and Business Development, states
that the overall objective of NEPS 2008, viz. to achieve complete electrification, has been attained. For
NEPS 2019, the key objective is to ‘ensure convenient and affordable energy services are available for
equitable development of Sri Lanka using clean, safe, sustainable, reliable and economically feasible
energy supply’.
The Sri Lanka Electricity Act was formulated in 2009 and amended in 2013. The Act granted rights for
power generation, transmission, and distribution primarily to the national utility, CEB. There is a
provision for private investments, in the form of IPPs, by obtaining a generation license, to generate
71
electricity over and above the threshold of 25 MW. Such an entity either have to be a local authority,
or a company where the government of Sri Lanka holds more than 50% of the shares or is a subsidiary
of such a company (Article 9 (1)(c)). This clause is preceded by Article 7(1), which prohibits any
individual / entity from generating and transmitting electricity, and allows distribution of electricity
only under certain provisions, and further requiring that the entity possess a license.
In summary, the policy and strategy for development of RE resources in Sri Lanka is well contained in
the NEPS 2019 and other relevant acts. However, with restrictions on entities who can generate,
transmit or distribute electricity, the scope of development of minigrid projects has been restricted,
unless there are revisions to the Electricity Act.
For the RE sector, the GoSL has created the Sri Lanka Sustainable Energy Authority, which acts as the
nodal agency for renewable energy development in the country. The agency has developed
Renewable Energy Resource Development Plan 2021 – 2026, a comprehensive document that outlines
major RE resources to be developed in the country over the next five years (Sri Lanka Sustainable
Energy Authority, 2020).

3.9.4 Technical aspects of minigrids

As mentioned in Section 3.9.1 above, there were roughly 250 minigrids developed with support from
the World Bank (the flagship Renewable Energy for Rural Economic Development (RERED) project)
and Government of Sri Lanka. These were mostly micro hydro powered minigrid projects, with the
median size of 27 customers and an average installed capacity of 7.5 kW. At the centre of these
minigrids was the Electricity Consumer Societies, which were created to set up, commission, operate
and maintain these minigrids. Available literature on the subject indicates that the micro hydro based
minigrids did not have access to quality plant and equipment, especially for distribution infrastructure.
The distribution network, made of ordinary cables strung on bamboo poles, often needed repairs that
added to maintenance costs and higher downtimes (ESMAP, 2018).
However, recent RE hybrid projects in outer islands as well as utility scale projects have used modern
concepts and quality equipment in both generation and distribution systems. The system
configuration of the hybrid system installed in Eluvathivu Island includes a 46kWp PV array, six 3.5kW
wind turbines, twelve 8kW inverters and a 100kWh lithium-ion battery storage. Similarly, the
proposed RE based hybrid systems for three small islands in Jaffna peninsula will utilize state of the
art solar and wind technologies.

3.9.5 Business models for minigrids

As per the guidelines of the Electricity Act, the regulatory provisions do not support development of
minigrid projects. As a result, there are no business models in operation in this sector.
Prior to introduction of the provisions, over a period of fifteen years (1997 – 2012), there were several
minigrid projects in operation with programmatic support from GoSL and World Bank. The programme
created Electricity Consumer Societies who were community level bodies that would own and operate
the minigrids. The programme further incentivised private sector entities to identify strong sites, that
would lead to the minigrids remaining operational for a certain period of time. The revenues to the
private entities were tied to successful operation of the minigrid beyond that specified period. The
programme had connected 10,000 rural households, who would make monthly payments to the ECS
as tariffs. Proceeds from tariff revenues would be used to sustain operations of the minigrids.
72
3.9.6 Minigrid tariff
Information on tariffs for the micro hydro based minigrids installed under the RERED project is not
available. Secondary literature also does not indicate tariffs to be a barrier for the minigrids’
operations. This indicates that tariffs were possibly at par with the expectations of the consumers.
The tariff for grid-tied renewables for a year in that period – 2011 – indicates that average feed-in
tariff for grid-tied RE projects varied between a very competitive LKR 6.64 (USD 0.03342) for waste heat
recovery to power to LKR 22.02 (USD 0.11) for waste to energy projects. As of the present date, CEB’s
consumer tariff varies between LKR 5.9 (USD 0.029) and LKR 23.5 (USD 0.12), which is comparable
(Ceylon Electricity Board, n.d.).

3.9.7 Financing for minigrids

The 250-odd minigrids implemented under the World Bank’s RERED project were grant financed by
RERED and GoSL. Subsequently, Electricity Consumer Societies were required to manage operational
costs and keep the project operational.
As the minigrid sector is phased out, it is being replaced by a strong and emergent private sector
developing Independent Power Projects (IPPs). As of 2020, the share of IPPs in installed capacity was
almost 1,300 MW, covering RE generation (especially mini hydro, wind, and gradually emerging solar
PV).
The financing model for replacing diesel minigrids by RE powered minigrids in the Sri Lankan islands is
to offset higher operating costs of running diesel generator sets (diesel is imported) with high capital
expenditure RE assets (such as wind and solar), which are procured with the help of low-cost sovereign
debt and grants from ADB and other development partners.

3.9.8 Opportunities for minigrids

From a brief assessment of the minigrid sector in Sri Lanka that existed roughly between 1992 and
2012, one can conclude that there were significant opportunities for minigrid development in
unserved and underserved areas of the country. As of the present day, however, there is full
electrification in the country and therefore the focus has shifted from tail-end and distributed
generation, and more towards engineering a transition to cleaner sources of energy.
Resource potential for minigrids: There are available solar PV, hydropower, and wind power resources
in Sri Lanka for RE project development. Secondary reports estimate over 20,000 MW in wind power
alone, while there is over 3,000 GW of potential solar power (ADB, 2017) The solar GHI map of Sri
Lanka developed by the World Bank and IFC has been included in Annexure 2.
Unmet energy demand: There are small outlying islands in the country where population still rely on
diesel powered grids which are only able to meet few of their energy needs. There is also high
potential for rural enterprise development in Sri Lanka. However, the role and scope of minigrids is
not expected to be significant.

42 1LKR = 0.005 USD as on 27th October 2021, same exchange rate has been used to convert LKR to USD in this report
73
3.9.9 Barriers to minigrids
Despite the presence of specific opportunities for minigrids in outer islands and availability of human
resources and use of latest technologies both in hybrid projects and utility scale projects, the minigrid
development in the country is mainly discouraged by the policy and regulations in power sector. As
mentioned in section 3.9.3 above, the regulatory provisions in NEPS 2019 does not allow for any
individual or entity to generate, transmit or distribute power. This prohibits setting up of minigrid
projects. Further, the country has achieved full electrification by 2019, as per their national policy
(NEPS 2019). As a result, there is no additional need or push from the government to set up minigrid
projects.

74
4 CASE STUDIES

75
4.1 Introduction
Building upon the discussion on technologies, policies, barriers, drivers, and opportunities for
minigrids in the SAARC Member States, this section deep dives into key aspects such as technological
innovation, business models, and community involvement through various case studies to analyse the
success factors and barriers for minigrid. Case studies have been chosen from the SAARC Member
States as well as globally. Figure 37 below presents the location of each case study on a world map.
The selected case studies have been discussed including technical features, financial aspects, business
model, tariff mechanism, project outcomes and challenges. Table 1 below provides the key highlights
of selected case studies.

Bambadinca PV minigrid, Guinea Bissau Bamiyan solar PV minigrid, Afghanistan Baglung minigrid, Nepal

Solar hybrid minigrid,

Tokelau

MHP project in Sar Kalay, Pakistan Solar PV minigrid in Bheldi, Bihar, India Microgrids with interconnected SHS,
Bangladesh

Figure 37: Location of Case Examples on World Map

Table 1: Key Rationale for Selection of Case Studies

S. No. Case study title Key highlights

Innovative tariff structures –adding more customers across
1. Bamiyan solar PV minigrid,
differentiated tariff segments improved revenue realisation, lowered
Afghanistan
tariff in long run and helped achieve viability
Microgrids with
2. Role of innovative technologies in connecting solar PV rooftop users in a
interconnected SHS,
cluster (such as a village)
Bangladesh
3. Solar PV minigrid in Bheldi, Smart design and management allowing for a project to operate at
India optimal levels
4. Aggregation of small micro hydro power (MHP) units to form a reliable
Baglung minigrid, Nepal
minigrid that can be later connected to national grid
76
 S. No. Case study title Key highlights
5. Solar hybrid minigrid, Leveraging diesel use in baseline to create a lower-cost model for green
Tokelau electricity access
6. Bambadinca PV minigrid,
Poor energy access supports minigrids due to high demand for electricity
Guinea Bissau
Active involvement of community supports development of minigrid by
7. MHP project in Sar Kalay,
overcoming challenges related to installation, consumer adoption, tariff
Pakistan
setting

4.2 Bamiyan solar PV minigrid, Afghanistan

Innovative, first-of-its-kind MW scale minigrid in Afghanistan
4.2.1 Introduction
Bamiyan province is located in the Central Highlands Region of Afghanistan, and its capital is Bamiyan
town. The people of Bamiyan town depended upon kerosene lamps, candles, diesel generators and a
few had small solar panels on rooftop (mainly for lighting) to deliver their energy needs. A diesel
generator, operated by DABS, was in place to supply power to the market area in Bamiyan town.
Previous efforts by Ministry of Rural Rehabilitation and Development, Government of Afghanistan to
set up a diesel-powered minigrid in the town area did not sustain, apparently due to lack of on-site
repair and maintenance of the power plant. In 2013, the New Zealand Ministry of Foreign Affairs and
Trade (NZMFAT) supported the installation of a 1 MW solar PV-diesel hybrid project in Bamiyan under
the Bamiyan Renewable Energy Programme. After completion of the project in October 2013, it was
handed over to DABS for operation and maintenance. The specific details on following sections of the
case study have been extracted from several references43.

4.2.2 Technical features

The solar PV system was installed at four different sites in Bamiyan, and the total capacity comprises
of 1,050 kW. The individual capacities of each site included 400 kW at Bamiyan New City, 300 kW at
Hyderabad, 300 kW at Mullah-Gholam and 50 kW at Folaadi valley. Figure 38depicts the solar PV
systems installed at Mullah-Gollam. Each unit has a solar power plant and a back-up diesel power
plant. The solar PV and diesel generator feeds into battery banks, from which 24x7 power is supplied.
Each of the three larger sites are each equipped with a 275 KVA diesel generator set. The batteries
used in the project are flooded lead acid batteries of a total cumulative capacity of 3,750 ampere-
hours.
Interestingly, the four sites are independent and there is no interconnection. The three larger sites
connect to a 20 kV transmission and a 0.4 kV distribution line, while the smaller Folaadi valley site
connects directly to a 0.4 kV distribution line. A series of step-down transformers extend power to the
households, and each user connection is fitted with a digital prepaid meter. The project was designed

43(USAID, n.d.);(Foster, Woods, & Hoffbeck, 2015); (IRENA, Renewable Power Generation Costs in 2019, 2020); (Chris
Greacen, 2019); (100% Renewable Energy Atlas , 2019)

77
to generate high quality, assured AC power (230V, 50 Hz) supply. At the time of construction, the
project was the largest off-grid solar PV installation in Afghanistan.
A study was undertaken by the lead contractor in the project, Sustainable Energy Systems
International (SESI), to ascertain average demand from households and other users, i.e., market,
public offices, and others. An assessment of factors influencing operations and management was also
conducted.

Figure 38: BREP, Mullah Ghulam Site, Bamiyan44

Based on the findings collected from the study, an average load of 200 watts was earmarked for each
household, with an average daily allocation of 1.5 kWh. This was estimated keeping in mind future
demand growth amongst households, as reliable power was made available. An assessment of factors
influencing operations and management was also conducted.

4.2.3 Financial aspects

The total cost of 1 MW Bamiyan project installed in 2013, including T&D infrastructure, was USD 14.1
million. The project cost appears higher compared to the World Bank cost trends for 2013 which shows
the average cost of 1 MW minigrid project in 2013 to be around USD 6.2 million per MW45.
The above cost of the Bamiyan project is higher, partly due to overall approach of project planners to
install state-of-the-art plant and equipment, to avoid higher operation and maintenance costs and
possible disruptions in service. Other major reason for higher costs is due to higher costs of importing
and transporting personnel and materials to the site in Bamiyan. Finally, there was investment in
batteries and diesel generator sets, which again translated to higher outlay on generation assets. This
led the design team to opt for solar and AC bus equipment from SMA Solar Technology AG, (Germany),

44
(Foster, Woods, & Hoffbeck, 2015)
45As per World Bank Cost trends, average median cost for mini grid project in 2013 was USD 6,200 per kW. Although there
could be variance between per kW and per MW costs, the per kW costs can be considered as a rough approximation. As
per IRENA, the global average cost of mini grid project is around USD 1 million per MW in 2019 (IRENA, Renewable Power
Generation Costs in 2019, 2020).
78
while the batteries were supplied by Crown Batteries, UK, who are specialists in providing storage
support to RE projects.
The entire financing was provided by NZMFAT. The approach for financing was to grant the capital
expenditure, while the operating expenditure was expected to be met from tariff revenues. The
overall business strategy to sustain the project is discussed in the following section on business model.

4.2.4 Business model

As mentioned above, the project capital cost was funded by the NZMFAT. The project is being
maintained and operated by DABS, Afghanistan’s national electricity authority. In addition, the
following two key entities were involved in the overall project design, development, and
commissioning processes:
i. Sustainable Energy Services International: a New Zealand based energy solutions company with
operations in Afghanistan, anchored the project development process including community
level surveys, feasibility, design, and turnkey installation of the generation assets.
ii. NetCon: a New Zealand based electrical distribution network installation company, was
responsible for erecting the distribution network for the BREP.
The consortium installed the project and operated the project for one year. The overall approach to
ensuring project viability was built on the following premises:
• State of the art plant and equipment was installed to minimize post-installation O&M concerns
• For the operating expenditure, a cost-plus tariff structure was put in place, which would reduce
over time as more and more users were added to the network
• In addition, the strategy adopted in the BREP was to ensure delivery of quality power 24x7,
which gave faith and confidence to the users, who in turn were willing to pay more; and finally
• An innovative pre-paid metering system was attempted for the first time in BREP, which assured
revenues from all users.
• Finally, SESI-NetCon remained at the site for one year, providing hands-on support and capacity
development to DABS team for seamless transition and trouble-free O&M.

4.2.5 Tariff Mechanism

The project engaged a variable, cost-plus tariff that would cover O&M expenses. As a result, the tariff
was very high in the initial stages, because of which there was resistance, especially from non-
commercial users. This was because of two main reasons:
• Prior to BREP, there was no electricity meter in Bamiyan. As a result, users paid a daily charge
(like AFN 5 per light per day, about USD 0.05546) or a periodic charge based on their appliances
etc. As a result, users were not aware of how a daily rate would reflect in a per-kWh tariff.
• The per kWh rate at the start was close to AFN 50-100 (USD 0.55 – 1.10) per kWh. These rates
were high for non-commercial users, and even for some commercial users who complained
about prices being same as diesel.
However, as the project expanded user base between 2014 and 2016, the tariff reduced to around
AFN 16 (USD 0.18) per kWh in 2017 for households, which was more competitive. For commercial

46 1 AFN = 0.011 USD as on 27th October 2021, same rate has been used to convert AFN to USD
79
users, the tariff was around AFN 45 (USD 0.5) per kWh. This could also be the result of DABS charging
a lower tariff to improve user acceptance and raise capacity utilisation. By 2016/17, the plant was
operating at optimal PV capacity.
It is notable to bear in mind that for the first time in this project, prepaid meters were introduced in
Afghanistan. These meters required users to deposit cash, as per their planned electricity demand,
into the local bank account of the utility, DABS. Once the cash was credited, the user’s entitlement
increases automatically.

4.2.6 Project outcomes

BREP was the first and most successful minigrid set up and operated in Afghanistan. It also was the
largest minigrid in the country at that time. In addition, the project gave access to stable and reliable
power, with quality systems that required minimum after-sales maintenance. This is vital in a country
like Afghanistan, where internal security situation remains volatile. This is also a key lesson learnt for
future systems, especially minigrids, to be installed in the country.
One of the key contributions of the project was the introduction of prepaid, digital meters. Not only
the project was a first-of-its-kind in Afghanistan, but also a significant measure to reduce operating
expenses, as well as human interface in billing, metering, and collection operations.
Further, the entire network is web-accessible and can be monitored remotely for error codes, power
output, voltage, amperage, battery conditions and others. This acts as a basis for acting on snags,
troubleshooting and other O&M requirements.

4.2.7 Challenges
The biggest challenge in the project was to overcome the initial reluctance of the community to pay
what appeared to them as high tariff. As a result, capacity utilisation of the BREP was low in the first
year of operation.
Another key challenge is to successfully maintain the project over time, including but not limited to
recovering periodic costs of operation and maintenance of the asset, including recurrent expenses on
diesel and the distribution network. As mentioned below in this section, security constraints also
restrict movement of people and resources, which acts as a key constraint.
The project could only be completed by airlifting critical pieces of equipment, after facing delays in
import and transit through Wardak province, which was dangerous due to high insurgency in the
region. Due to relative inaccessibility of Bamiyan (the province is in the highlands and navigation
during winter is not possible due to snowfall), operation and maintenance was and remains a key
challenge. Finally, even though Bamiyan is politically amongst the most secure and peaceful provinces
in the country, political instability was and remains a threat to the long-term sustainability of the
system.

4.2.8 Key highlights

The biggest contribution of the project was to demonstrate that in a country with a delicate security
situation, it is possible to set up a state-of-the-art, RE powered minigrid of 1 MW capacity, which can
be serviced and maintained over time. The project acted as a strong impetus and can be termed as a
worthy predecessor to other minigrid initiatives such as the Afghanistan Sustainable Energy for Rural
Development by MRRD.
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Another key highlight of the project is the fact that households and enterprises in the catchment were
satisfied with the power quality and reliability, which indicates that communities are willing to pay
more for quality service delivery. It may be mentioned that businesses and enterprises were keen to
adopt the power from BREP, while households joined subsequently.

4.3 Microgrids with interconnected solar home systems, Bangladesh

Uber of the off-grid world!

Share electricity and create opportunities
4.3.1 Introduction
Solar home systems are becoming popular day by day in Bangladesh. Bangladesh has already installed
more than 6 million (6,023,632) SHS of total capacity 262.753 MWp till date and about 13 million
beneficiaries are getting solar electricity (Sustainable and Renewable Energy Development Authority,
2021). Under IDCOL program to ensure access to clean electricity for the energy starved off grid rural
areas of Bangladesh, more than 65,000 SHSs are now being installed every month with average year
to year installation growth of 58%. This program is one of the largest and fastest growing off grid
renewable energy program in the world (Sustainable and Renewable Energy Development Authority,
2021).
Approximately one-third of the electricity generated by the SHS goes to waste in Bangladesh totalling
to 1 billion USD, as people’s usage pattern varies day to day and season to season. SOLshare47 has
created a revolutionary new approach to interconnect SHS into smart peer to peer microgrids,
monetizing excess solar energy with mobile money in real time and empowering SHS owners to earn
a direct income from the sun. The schematic of microgrid developed by SOLshare is depicted in Figure
39. The specific details on following sections of the case study have been extracted from several
references48.

47SOLshare, founded in 2014, is an international social enterprise with operations in Bangladesh and India. It has created a
revolutionary new approach to bring affordable solar electricity to everyone in Bangladesh and beyond. It has built the
world’s first ICT enabled solar P2P electricity trading network for some of the most demanding and dynamic markets in the
world.
48
(SOLshare, n.d.); (Efficiency for Access Coalition, 2021); (SOLshare, n.d.); (The Business Standard, 2021); (Burger &
Weinmann, 2020); (Ashden, 2020); (Nelis Global, 2020)

81
 Figure 39: Typical SOLshare Microgrid49

4.3.2 Technical features

To bring affordable solar electricity in remote areas of Bangladesh, SOLshare installed the world’s first
smart peer to peer solar sharing grid. Households (those with the SHS and those without SHS) and
other entities are connected to each other to form a microgrid and beneficiaries can be producers,
consumers, and prosumers. SHS is the electricity generator for the interconnected households and
battery stores excess electricity that can be sold to other consumers.
SOLshare has developed an IoT driven energy trading platform called SOLbazaar. SHS users sell their
excess energy to non SHS user in SOLbazaar. SOLbazaar consists of three components: the SOLbox,
the SOLapp and the SOLweb.
SOLbox is a bi-directional smart DC electricity meter that enables the creation of DC smart grid
integrating SHSs or battery. It is a low voltage DC box. SOLbox enables peer to peer electricity trading,
smart grid management, remote monitoring, mobile money payment and data analytics. The
minimum of 10 households or businesses which have SOLboxes are interconnected to each other to
form a microgrid. SOLboxes communicate with the Wi-Fi towers installed in the villages and electricity
generation, consumption and trade can be monitored easily. The SOLapp takes user information and
payment details and manages customer portfolios. The information from SOLbox and SOLapp are then
passed onto the SOLweb, where all the information is gathered and analyzed to understand system
patterns and irregularities.
SOLshare microgrid can be connected with the national grid as the SOLshare network grows. It can
operate in island mode when the grid is unavailable and microgrid can draw power from the grid when
it is available. As of today, the total PV capacity of 48 kWp has been connected to the SOLshare
network. SOLshare was operating 40 microgrids in Bangladesh by the end of 2020. The company is
expecting to operate 110 microgrids in the country by the end of 2021.

4.3.3 Financial aspects

The first microgrid was built by SOLshare in Shariatpur, Bangladesh in 2015 with the help of grant
money received from GIZ office in Bangladesh. The total capital expenditure for the SOLshare project

49 (SOLshare, n.d.)
82
is limited to cost of the cables required to form a microgrid and the installation of the SOLbox.
SOLshare has a hybrid form of financing. The microgrid projects are basically financed by Venture
Capital Funding and Social impact investors. SOLshare has been financing its projects through
monetary award prizes, grants and equity and has been receiving financing from international
organizations such as United Nations Department of Economic and Social Affairs (UNDESA) together
with Grameen Shakti, United Nations High Commissioner for Refugees (UNHCR) in the Rohingya
camps, SBK Foundation, the ADB and the KfW/DEG among many others.

4.3.4 Business model and tariff mechanism

SOLshare is well known as the ‘Uber’ of the off-grid world. The business model includes both Business
to Business as well as Business to Consumers (B2C) elements.
Energy for Access (EFA) in its report “Business Model Innovations” identifies the SOLshare’s business
model as Circular use business model. In this business model, SOLshare allows households with solar
panels to sell excess energy, which would otherwise be wasted for those who have deficit of energy
needs. This model optimizes already existing infrastructures and creates new customer, producer, and
prosumers. The microgrid electricity can be utilized to run appliances such as large TV for village
cinemas, hair trimmers for barbers, printers, photocopy machines and internet access for computer
shops, fridge for pharmacies, motors for sewing machines The operational risks associated with
circular use business model are difficult to assess.
SOLshare’s direct customers are the microfinance institutions or NGOs that provide loans and
distribute the solar systems; including Grameen Shakti (1.8 million solar systems distributed).
SOLshare establishes B2B partnerships with partner organisations who have experience with financing
and distributing SHS. They also provide technical training and after sales service to its customers.
SOLshare uses the existing infrastructure of POs and installs SOLbox as an additional component to
the conventional solar home systems. SOLshare collects its revenue in three forms: sale of the SOLbox,
fee for every transaction and fee for managing the grid. POs decide about the charge for managing
the grid which they will collect from the customers.
To consider the excess energy generated that cannot wholly be consumed within the community,
buffer systems like micro utility is established in the villages. Water pump, corn shellers, rice cutters,
solar rickshaw charging stations are then connected to the buffer system.
Payment is automated in the mobile phone through a mobile application. Whenever a household is a
net consumer, balance decrease and whenever HH is a net producer, the balance increases. The
balance in the mobile is in the form of money not in kilowatt hours, so it can be used for payments of
all sorts, not just energy.

4.3.5 Project outcomes

• Almost 84% of end users connected to microgrid live on less than USD 5 per day and around
40% of customers are using electricity for the first time.
• United Nations Framework Convention on Climate Change (UNFCCC) estimates that SOLshare
systems enable communities to reduce their annual cost of energy by 25%. By the end of 2020,
SOLshare microgrid prevented use of 1,756 liters of diesel and abated the emissions of 4,970 kg
of CO2 on an annual basis.

83
 • The household with SHS that sells 50% of its generated energy earns approximately USD 10 per
month. A producer (installs SHS just to sell energy) breaks even within two years, with a simple
return on investment of 173% after three years.
• With SOLshare, rural communities go from being solar power users to smart entrepreneurs,
who can sell surplus solar power in return for money. The existence of trading network acts as
a driver against pollution since communities are now more than willing to turn towards solar
energy generation.
• Currently, 4 million households are powered by SOLshare and an additional 1 million are
expected to be powered by the year 2030, including interconnecting them to the national grid
through a single point of common coupling.
• SOLgrids impact on ecosystem is lower as PV systems are constructed on rooftops of already
existing buildings, thereby avoiding potential land use change.
• 40% of the end users are women and children. Many women have started their own home-
grown businesses through access to energy, which has increased safety and allows women to
work and children to study after dark.

4.3.6 Challenges
Access to finance has been a major challenge for the SOLshare’s microgrid projects because of various
risk perceptions related to the company being a start-up with presence only in Bangladesh and India,
new technological concept, acceptance among consumers, financial viability, etc. Another challenge
was the geography of the project area. Most of the microgrids are in very remote areas and reaching
those communities is a humongous task.
Other major challenge for the expansion of SOLshare projects is the aggressive approach of
Bangladesh towards grid extension. SOLshare has built a grid box technology, which can connect the
microgrid to the national grid (when it arrives to that area) through the interconnection point. The
technology can control the entire network connected to it. However, this technology is currently in
research and development stage.

4.3.7 Key highlights

SOLshare turns the purchase of a solar home system into an investment with return. The cost of
electricity from SOLshare grid is 25% lower than that of an SHS system of capacity 20Wp. The SOLshare
microgrids are dynamic; new households can be added to the grid and microgrids can also be
interconnected among themselves, growing in the bottom-up manner such as the national grid.
SOLshare microgrid model provides reliable electricity and are replicable where unreliability of grid
electricity is an issue, not only in Bangladesh but also in other countries like Bhutan. Many countries
such as Bhutan and Nepal have difficult terrain and have adopted solar home systems for electricity
access. So those SHS can be interconnected to form a microgrid with SOLshare model. In a study
conducted by SOLshare, they found the dissatisfaction of the national grid customers due to the
unreliable electricity supply in Bangladesh. During 6 pm to 10 pm, the national grid often suffered
from load shedding in the rural areas. So, even national grid customers, with their experiences, know
that they need a backup or even a complementary system, which can be provided via microgrids of
SOLshare.

84
4.4 Solar PV minigrid in Bheldi, Saran District, Bihar, India
Smart planning, design, and management of minigrid systems
4.4.1 Introduction
The Bheldi minigrid50, set up in 2014-15, operates under the aegis of Smart Power India, which
supports decentralised, renewable energy powered minigrids in India. SPI has engaged with Tata
Power, one of the largest private sector players in the power sector in India, to realise a vision to
energise 10,000 minigrid projects in India. These projects will empower productive applications, as
well as support social infrastructure (e.g., health and education). The Bheldi project was initially
supported under Rockefeller Foundation’s Smart Power for Environmentally sound Economic
Development project. Rockefeller Foundation remains a supporter of the SPI-Tata Power programme
of activities. The site is located in Saran district (Parsa Block) of the state of Bihar in Eastern India.
Prior to the minigrid project, the site had no grid electricity connection. There were a handful of diesel
generator operators, who provided electricity to the Bheldi market, and to a few households in the
evening, by operating ~5 kVA diesel generator sets. The bill payment was calculated as a daily charge.
Some households who could afford had their captive DG sets.
In 2014, the project team conducted an initial survey of the project site in Bheldi and identified the
potential for a 40-kW solar PV unit to energise the Bheldi market, agricultural pumps, and other
residential and commercial loads. The team also carried out community level consultations to
ascertain the following:

• Operations of commercial and enterprise loads in the site, potential for adding new enterprises
• Community-level interest to adopt to solar power from their existing energy use practices
• Availability of land to set up the power station
• Willingness to pay for all consumer groups
As the SPEED programme advocated a market-based approach, attaining viability for a project was a
key consideration. As such, time and effort were devoted in ascertaining the 24-hour demand profile
at the site, which would determine sizing not only of the solar PV plant, but also of the battery bank.
Moreover, the viability of post commissioning operation and maintenance was assessed in detail51.

4.4.2 Technical features

The minigrid was powered by a 30-kW solar PV unit with a battery bank, a Maximum Power Point
Tracking (MPPT) Charge Controller and inverter for conversion to 230 V (AC) supply. Figure 40 shows
the minigrid site at Bheldi.
The system had total of 120 solar PV panels of 250 W each. The battery bank capacity was 1,200 Ah,
48V advanced lead acid batteries (Absorbed glass mat or AGM), having superior performance in the
event of frequent start-stop applications. The power output was coupled to three (3) inverters in
series, each with capacity of 6.5 kW, while the MPPT charge controllers had a cumulative capacity of

50
Specific details on this case study, mentioned here, are based on the information available with one of the authors
51 Developed under the aegis of Rockefeller Foundation’s SPEED project, not much information is publicly available. The
article throws some light on the project and its social impacts:
https://www.rockefellerfoundation.org/wp-content/uploads/SmartPower-Connect-May-2017.pdf
85
28 kW. Configuration of the inverters was done such to synchronise with the varying load profile of
the site. The distribution network was set up using reinforced wooden poles, which carried 4-core and
3.5-core cables of varying dimensions. Households were connected via single phase. Each household
was fitted with load limiters, an innovative element to manage power consumption of households.

Figure 40: Plant Site in Bheldi52

The solar PV capacity was augmented to 40 kW as demand from the community increased and so were
the inverter and charge controller capacities to enhance the delivery capacity. Subsequently, smart
prepaid meters were also installed in the consumer premises.

4.4.3 Financial aspects

The total indicative capital cost of the project, including transmission & distribution infrastructure,
was INR 7 million (USD 93,29253). These costs do not include a priori site development and community
engagement costs that were incurred. The broad components of the project costs are indicated as
follows:
# Cost component Value (INR lakhs) Value (USD)*
1 Solar PV panels, inverter, and battery bank 52 USD 69,302
2 Power distribution including smart meters 12 USD 15,993
3 Civil work and other peripherals 6 USD 7,996
*: numbers might not add up due to rounding off

The project cost appears higher, due to higher component costs, especially solar PV, as this project
was designed and executed in FY 2014-15. The financing of the project was made by a Special Purpose
Vehicle called TARA Urja, which acted as a Renewable Energy Service Company and invested in the
decentralised minigrid project, and then recovered the investment over time.

52
Source: SmartPower Connect
53 1 INR = 0.013 USD as on 27th October 2021, same exchange rate has been used to convert INR to USD in this report
86
4.4.4 Business model
As indicated above, the project is supported by Rockefeller Foundation through the RESCO named
TARA Urja. The salient features of the business model are:

• To better mirror the minigrid business, TARA Urja created a (wholly owned) subsidiary, TARA
Micro Utility Business (TARA MUB). TARA Urja, as the owner of the generation asset, sold bulk
power generated from the minigrid at a fixed rate to TARA MUB. This ensured that the
generation unit had a fixed revenue that was partially de-risked, due to TARA MUB making a
payment on a per kWh basis at the site
• For TARA MUB, its role was that of a distribution utility, with the focus to generate revenues
from each type of consumer over and above the amount that it had to pay to TARA Urja (the
generation utility). The difference between what TARA MUB would receive from consumers,
and in turn pay to TARA Urja, would cover for TARA MUB’s own expenses of operation and
maintenance of the distribution network, salary of staffs at the site and other overhead
expenses, and ensure that it could earn a profit on the investment as well
• As a result, TARA MUB introduced several innovations and modernizations in the distribution
architecture. One of the key aspects was the load limiter, a device that would let the consumer
use only as much current (amperes) as his entitlement. The load limiters were calibrated to
allow a fixed quantum of current (amperes) per period (say a week), which was determined
according to the bundle of the consumer. Upon expiry of the time, or of the consumer’s quota,
the consumer is required to make a prepayment (as per his bundle) to the site office, against
which he would receive a message on his registered mobile, as well as an enhancement of his
entitlement. This reduced the costs of revenue collection, and the officer in the site office
operated a cloud-based application whereby the entitlements of each consumer was
automatically tracked and updated on a real time basis. This further streamlined the revenue
collection process.

4.4.5 Tariff mechanism

The project proposed a differential tariff based on the category of consumer. For instance, residential
users with fans were charged a bundled tariff, which covered a fixed quantity of power that they could
consume over a period, say seven (7) days.
Commercial consumers with only single-phase loads were also charged a bundled tariff like residential
consumers. Consumers who operated enterprises, and other bulk consumers such as telecom towers
and irrigation pumps, were charged a per kWh tariff with a standard meter. One of the key innovations
in the project was that payment of the tariff, for all consumer types, was on a prepaid basis. Over time,
as demand expanded, the capacity of the site was expanded, and the load limiters were replaced with
smart meters that were connected to internet and provided the same functionality with added
features. As one of the first examples of a fully automated minigrid operational in FY 2014 - 15, the
Bheldi minigrid project set up a precedent of a low-overhead, low-maintenance decentralised minigrid
that would deliver reliable and cost-effective power to a cross section of consumers.

4.4.6 Project outcomes

The project is among several DRE minigrids implemented under the SPI programme in the Indian states
of Uttar Pradesh and Bihar where quality power was delivered to a range of consumers, with a focused
87
approach towards energising enterprises. This project led to strong economic impact in the village,
where several new enterprises and commercial activities were introduced. These enterprises included
tailoring shops, welding shops, a general market complex and sweet shops (which were used to be
powered by diesel generators before the project), among others. At the same time, social aspects such
as health and education have also benefited significantly from electricity access.
Moreover, the project had a focused approach towards cost recovery. As a result, several of the plants
are maintained, and are in working condition even as of the present date, although they have needed
renovation and modernisation as technologies have advanced. Finally, the quality of power supplied
has withstood competition from the national grid, which is present in Bheldi as of the present day.
However, users have still retained the project connections, especially for enterprise demand.

4.4.7 Challenges
Initial adoption of consumers was slow, due to the use of bundled tariff and tariff packages, which
was not familiar to the community and, despite community consultations that were done, prospective
users were not ready to adopt.
One of the key operational challenges was for the micro-utility business to remain viable. A minimum
level of capacity utilisation together with timely payments was required for the distribution utility to
generate enough revenue, to cover all maintenance expenses and make payment back to the
generation utility. This was a recurrent challenge in the initial months of project operation. The other
challenge in the project was to manage expectations of the consumers. As power was provided to
them, users’ demand tended to rise, beyond their rated demand. Demand for new gadgets and
appliances also grew in the site.

4.4.8 Key highlights

The project had introduced technological innovation through use of load limiters. For the specific
application, load limiters were tied to the current flow (amperes) rather than power (kilowatts). This
made the load limiters tamper proof at the same allowed the consumer to consume the power as
entitled to them. Moreover, prepayment of entitlement, and acknowledgement through a cloud-
based system were new to the Bheldi community, though the adoption was slow in the beginning.
However, over the long run it gave more freedom to the user, and reduced conflict over non-payment.
The second highlight of the project was the structuring of the business model, which de-risked project
proponents by separating the generation utility from the distribution utility. With fixed monthly tariff
payments, the generator was assured of its return on investment, subject to proper maintenance of
the asset. At the same time, the distribution utility used load limiters, prepayment, and other means
to create a system of revenue assurance and thereby partially de-risked itself.

88
4.5 Baglung minigrid, Nepal

Interconnecting MHPs to form minigrid for reliable electricity

4.5.1 Introduction
In Nepal, there are many micro hydro plants providing access to electricity in off grid areas, but it has
been observed that, with the arrival of national grid to those areas, the MHPs are being abandoned in
many cases. Baglung minigrid was thus developed to avoid this kind of situation in the future. The
concept of this project was to aggregate the power output of small sized MHPs so that sizeable power
output may be available in the locally formed minigrid. Also, with the new aggregated capacity, there
is a strong possibility that the national utility might agree to connect this minigrid to the national grid
network once it reaches there. The specific details on following sections of the case study have been
extracted from several references54.

4.5.2 Technical features

In 2012, six MHPs ranging from capacity of 9 kW to 26 kW, previously running in isolation mode were
interconnected to each other and 107 kW capacity minigrid was formed. The 6 micro hydro plants
include Upper Kalung Khola (12 kW), Kalung Khola (22 kW), Urja Khola I (26 kW), Urja Khola II (9kW),
Urjakhola IV (14 kW) and Theulakhola MHP (24 kW). All these MHPs are producing power from the
same source of stream, Kalung Khola. Figure 41 shows locations of the six MHPs on the map of Nepal.
The minigrid system serves 1178 households through an 8 km long 11 kV transmission line and
associated distribution lines. The core technology used in this pilot project was microprocessor-based
grid synchronize electronic load controller to regulate frequency of the system.
Each of the MHP units generates power at distribution voltage of 400 V. Power stations constitutes
turbine generator sets, frequency controlling unit, voltage regulating unit, synchronizing unit,
measurement unit, switchgear and protection unit, bus bar arrangement & 11 kV line connecting
0.4/11 kV transformer unit. The interconnection of MHP with other generator is facilitated by
synchronizing unit in both automatic and manual mode. Three phase 11 kV single circuit transmission
line was constructed such that the total length of the line can be broken into three different sections
by means of two sets of series drop out fuses to make the fault-finding process easy, minimize the
fault clearance time and to operate the minigrid in partial breakdown mode in case of longer duration
problems.

54 (Bhupendra Shakya, 2012); (Engineering Consultancy for Constructive Development Efforts, 2013); (Priti Kumar, 2015)

89
 Figure 41: 6 MHPs (circles) in Baglung connected to form minigrid (rectangle)55

4.5.3 Financial aspects

The Baglung Minigrid Project was developed through the support of UNDP/AEPC and the active
involvement of the community. 90% of the cost of the project was funded by UNDP/AEPC and
remaining was contributed by the village community. The total project cost was around 176,000 USD.
86% of the total project cost was of electromechanical equipment. The project used the already
operating MHPs as the generating plants. Thus, cost of generating plants in the Baglung minigrid did
not have to be considered.

4.5.4 Business model and tariff mechanism

The Baglung minigrid was developed as Community based IPP cooperative model. Minigrid is operated
and managed by local community named Urja Upatyaka Minigrid Cooperative. The cooperative was
formed constituting the representatives of each micro hydro connected to the minigrid. The
cooperative is responsible for operating and maintaining the minigrid, distribution of electricity and
providing consumer services such as tariff collection. Individual MHP group is responsible solely for
power generation. The cooperative has the decisive power related to operation, maintenance,
expansion of transmission and distribution lines, fixing power purchase agreement rate, tariff
structure, office management, hiring the staffs and all other related issues. The cooperative buys
electricity from respective MHPs at a fixed PPA rate and sells it to consumers that were previously
supplied by individual MHP. New consumers were also added by expanding distribution system.
The buying rate of electricity from individual MHPs was set at NPR 4.5 per unit (USD 0.03756 per unit).
Tariff of electricity provided by the minigrid was fixed after discussion with the consumers and each
MHP group. Each consumer has installed energy meter and tariff is paid based on the energy
consumption. The monthly tariff rate was set at NPR 75 (USD 0.62) up to 12 units and NPR 7 (USD
0.058) for each additional unit. The profit from the tariff collection is used to operate the Urja
Upatyaka Cooperative. Consumers failing to pay on time are fined at a certain rate. For three phase
consumers, tariff is set on monthly basis, which is different for each consumer.

55 (N.P. Chaudhary, S. Baral, & B. Adhikary, 2020)

56
1 NPR = 0.0083 USD as on 27th October 2021
90
4.5.5 Project outcomes
• After the connection of 6 MHPs to form a minigrid, the consumers have observed improvement
in quality, reliability, and availability of electricity.
• Community is involved in power generation, transmission as well as distribution and their
outlook towards mini hydro has changed in a positive manner.
• There has been an increase in income generated by these MHPs through sale of energy. 3 MHPs
of capacity greater than 15 kW have seen an increase of around NPR 50,000 - 70,000 (USD 417
– 58357) in their annual income while the increase in income of remaining 3 MHP of capacity
less than 15 kW is around NPR 15,000 - 30,000 (USD 125 – 250) per annum.
• The income of entrepreneurs has increased from 5% to 40% after the electricity access through
minigrid. The minigrid created more than 55 job opportunities for local people through the
establishment of agro processing mills, poultry farming, computer institute, photo studio,
electronic shop, etc.
• Nepal Electricity Authority, as a general practice, is connecting power plants of capacity more
than 100 kW whenever the national grid reaches that area. So, the Baglung minigrid network
can also be connected to the national grid after arrival of the national grid.

4.5.6 Challenges
The development cost of minigrid with interconnection of MHPs was relatively high and analysis shows
that even for an optimistic scenario of Plant Load Factor (PLF) doubling after the formation of the
minigrid, minigrids are not financially viable. Furthermore, the capital expenditure of a minigrid is
entirely site specific. So, minigrids should be assessed on a site-by-site basis for economic viability.
After the installation of minigrid, management of the grid with multiple MHPs connected was a
complex task. This required continuous support in technical and managerial aspect for an extended
period. The centralized load management system is not available in Baglung minigrid, and the load
management is being done with mutual understanding among the MHPs.
The MHPs are run of river projects, therefore, during dry season it was difficult to meet the increased
electricity demand. During wet season, because of no storage available, 70% of energy generated was
wasted. In the Baglung minigrid system, Feed in Tariffs are set at the same level for all MHPs in a
minigrid and do not consider the fact that operational cost for each MHP differs according to its size.
Thus, minigrid should ensure that operational cost of MHPs is met before setting tariff for the purchase
of power.

4.5.7 Key highlights

The experience from the Baglung minigrid demonstrates that minigrids are technically viable and
supply reliable electricity to consumers. When few MHPs have power deficit and others with surplus
power, minigrid can serve the demand better than single standalone MHP.
Baglung minigrid has energy-based tariff structure, unlike the earlier power-based tariff structure.
Consumers now are self-motivated to save electricity after knowing the per unit price of electricity.
Baglung minigrid has become a topic of research and has built confidence to replicate minigrid projects
in other parts of the country.

57
1 NPR = 0.0083 USD as on 27th October 2021
91
4.6 Solar hybrid minigrid, Tokelau

Reducing diesel cost with 90+% contribution from solar minigrids

4.6.1 Introduction
Tokelau, an island nation in the South Pacific, is made up of three small atolls, Atafu, Nukunonu and
Fakaofo, and is populated by 1,411 citizens. All three atolls were provided with diesel generator sets
for their power needs. The dependency on imported fuel presented huge financial and logistical
challenges to the island nation.
In 2012, as part of the Tokelau Renewable Energy Project (TREP), three hybrid solar PV systems were
commissioned in three atolls of Tokelau - Nukunonu, Fakaofo and Atafu - to provide at least 90% of
the islands’ electricity needs over the course of a year from solar power.
The specific details on following sections of the case study have been extracted from several
references58.

4.6.2 Technical features

To ensure reliable and sustainable design of the systems, the hybrid solar PV systems were designed
in line with New Zealand Ministry of Foreign Affairs and Trade (NZMFAT) Renewable Energy Minigrid
Common Design Principles which has developed based on decades of in-field experience with off-grid
PV systems in remote communities. The hybrid system consisted of 240 - 400kW capacity of solar PV
in each atoll (combined capacity of 1 MW) and 1.4-1.9 MWh of lead acid battery storage. Figure
42depicts the installed solar PV system in Tokelau. The system was composed of identical clusters,
which made it easier for the operators/ technicians to troubleshoot problems, as the same solution
can be applied across all systems as well order and stock spare parts.
The batteries were sized to provide storage up to 1.5 – 2 days in case of no solar output and before
the backup generator is turned on. The diesel generators which were the only source of electricity
earlier, are now used as back-up for the solar PV-battery system. The generator only ran at its
optimum load factor, or did not run at all. This improved the fuel efficiency of the generator and
reduces maintenance costs. The system is remotely monitored using the SMA Sunny Portal to ensure
system performance is maintained and to help with any fault diagnosis.

58(Power Technology, 2013); (Collaboration on Energy and Environmental Markets, n.d.); (New Zealand Ministry of Foreign
Affairs and Trade , 2013); (ITP Australia, n.d.); (EU-GIZ ACSE , 2016); (ITP Australia, 2013)

92
 Figure 42: Installed solar PV system in Tokelau59

4.6.3 Financial aspects

The cost of the entire PV – battery system, including the civil works required for PV array & the battery
building, and local labour, was NZD 8.45 million (USD 6.04 million60). These costs are based on quotes
provided in 2011 and if the systems were to be built today (2021), the cost would be 25-30% lower
because of lower prices of solar PV modules and batteries. The capital cost of the project was entirely
funded by the Government of New Zealand, as a four-year advance in the aid money given to Tokelau.
Installation work and operation & maintenance are funded by the Government of Tokelau.
Before the hybrid PV systems were installed, the diesel cost for providing electricity was around NZD
1 million per year (USD 0.72 million per year). After the installation of solar PV, it was estimated that
the total cost savings from avoided diesel use would be approximately NZD 900,000 per year (USD
643,563 per year), which is 90% of the fuel cost before installation of PV systems. The total cost savings
is expected to increase with increasing diesel fuel prices. Considering a 3% increase in fuel prices per
year for the 25-year period, the annual savings would have been NZD 2 million (USD 1.43 million).

4.6.4 Business model and tariff mechanism

The solar PV systems were designed, procured, and installed by Powersmart Solar NZ Ltd, with support
from IT Power (Australia) Pvt Ltd. The solar PV systems were handed over to the Government of
Tokelau after commissioning and are being operated by local technicians and operators. These
technicians were trained on regular operation and maintenance of the PV system components, and
on troubleshooting procedures. The electricity tariff of the consumers was set at NZD 0.50 (USD 0.3661)
per kWh.
Electricity is sold using pre-pay meters that are installed and maintained by the Tokelau Energy
Department. The typical equipment being used on the island include refrigerators, freezers,
fluorescent lighting, fans, microwaves and washing machines. Equipment such as electric ovens, water
heaters and air-conditioners are banned on the atolls The village councils collect the electricity bills

59
(ITP Australia, n.d.)
60 1 NZD = 0.72 USD as on 27th October 2021, same exchange rate has been used to convert NZD to USD in this report
61
1 NZD = 0.72 USD as on 27th October 2021
93
from consumers, which is used for purchasing the diesel fuel and salary payment of technicians and
operators.

4.6.5 Project outcomes

• The expenditure on diesel fuel has reduced considerably, by 84% from the pre-solar days. It has
been found that if there are seven hours of bright sunlight, then the solar PV-battery system is
capable to provide the electricity needs and there is no need for back-up generation.
• The overall quality of life has improved in the atolls because of 24/7 availability of electricity
and has also allowed the use of most modern services.
• Awareness campaigns were organized to educate consumers on how to save electricity and to
encourage them to purchase energy efficient lighting and equipment. These programmes have
brought about reduction in energy consumption.

4.6.6 Challenges
Since the solar PV systems were to be installed in an island set up with high temperatures and
humidity, it posed a challenge on both the design and installation of the system. The solar cables were
routed in an aluminium channel and UV stabilised conduit, and each equipment was manufactured
from either 316 stainless steel or anodised aluminium to avoid corrosion. Additionally, care was taken
to ensure that the battery and inverter rooms were well ventilated with passive heat controls.
During the project technical and financial review undertaken by ITP Australia in 2013, it was found
that the current tariff of NZD 0.50 (USD 0.36) per kWh is not sufficient to generate the revenue
required to fully finance the O&M including replacement of equipment. The study recommended that
a tariff of around NZD 0.77 (USD 0.55) per kWh is required for the same. However, during discussions
with stakeholders, it was discovered that the current tariff is already a burden on the consumers who
expected a lower tariff from the solar power system. Also, share of the household income spent on
electricity needs is higher than for the average New Zealand household, whereas the actual
consumption in Tokelau is significantly lower.
In the recent years, electricity demand from the community has increased, which has led to increased
diesel fuel consumption. In this regard, the Government of Tokelau has added 30kW of PV on each
island in 2016 and will be installing a further 210 kW of PV and almost 2 MWh of battery capacity to
meet the rising demand and restore the contribution of renewable energy to 90+%.

4.6.7 Key highlights

Actual performance of the solar hybrid systems has exceeded the designed parameters and Tokelau
is the first country to have almost all its electricity needs met by solar power systems. The solar
fraction for Atafu, Nukunonu and Fakaofo atolls were designed to be 89%, 91% and 86% respectively.
During the technical review by ITP Australia in 2013, the solar fractions were found to be more than
90% on Atafu and Nukunonu and around 89% on Fakaofo, more than the designed parameters.
The project is a good example for other small island nations and/ or communities which are aiming to
reduce expenditure on diesel fuel required for electricity production and thus enhance their energy
security and environment by implementing renewable energy minigrid projects. The project has been
a major success and has received major recognition from reputed institutions. The island nation of
Tokelau received the 2014 Energy Efficiency and Conservation Authority (EECA) Renewable Energy

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Award for switching from diesel-generated electricity to clean, renewable solar energy and providing
almost 90% of Tokelau’s electricity needs. The project developers have received two awards -
Sustainable Electricity Association New Zealand (SEANZ) ‘Best Solar PV Implementation Off-Shore’
award and New Zealand Innovators Award for the Tokelau Renewable Energy Project in the year 2012.

4.7 Bambadinca PV minigrid, Guinea Bissau

Public - Community model to increase access to electricity

4.7.1 Introduction
Bambadinca, one of the rural communities in Guinea Bissau with over 1,000 households in 2011, had
96% of the households depended on candles and batteries and only 60 households with access to
electricity through a diesel generator working 5 hours/day and charging 10 EUR (USD
11.662)/month/per light bulb. The main economic activities in Bambadinca included agriculture and
trade. There are around 70% of the population lying below the poverty line (< USD 2/ day). Households
spent almost 24% of monthly income on traditional energy solutions. To improve access to electricity
and poverty in Bambadinca, a hybrid PV minigrid project was implemented based on public-
community model. The specific details on following sections of the case study have been extracted
from several references63.

4.7.2 Technical features

The minigrid project development in Bambadinca started in 2012 and was commissioned in 2015. The
technical features included a hybrid Solar PV - Diesel – Battery system. The hybrid system consisted of
312kWp solar PV array, 135kVA inverter with a 1.1MWh battery bank and 240kVA diesel genset. Figure
43 shows the minigrid system installed in Bambadinca. The system was sized to meet the energy
demands during non-daylight hours or cloudy days as well to guarantee electrical demands over the
day. The distribution line distance is of 13.3 km and supplies a total of 1,421 customers. The
consumption during the night period is met by batteries and generators (if necessary). The system
ensures 24/7 electricity supply in to Bambadinca, achieving a low use of diesel generators.

62 1 EUR = 1.16 USD as on 27th October 2021, same exchange rate has been used to convert EUR to USD in this report
63 (Wame,2014); (Xenakis, n.d.); (ARE & UNIDO ITPO, 2021); (ESMAP, 2017); (Xenakis, 2017); (UNIDO, 2017); (Ecowas Centre
for Renewable Energy and Energy Efficiency, 2020)

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 Figure 43: Bambadinca PV Minigrid64

4.7.3 Financial aspects

The total capital expenditure of the project was USD 3,262,754. The financing was provided by the
European Union, Global Environment Facility (GEF), United Nations Industrial Development
Organization (UNIDO), ECOWAS Centre for Renewable Energy and Energy Efficiency (ECREEE) and
Portuguese Cooperation. The project was implemented by TESE - Development Association in
association with Community Association for the Development of Bambadinca (ACDB). The Guinean
Association for the Study and Release of Appropriate Technologies supported the project through
micro-credits for households to finance the connection costs and for supporting 300 households to
develop income generating activities.

4.7.4 Business model

The selected management model was a tripartite Public-Community Partnership among Community
Association for the Development of Bambadinca (ACDB)/ Community Energy Service of Bambadinca
(SCEB) as one party, General Directorate of Energy (DGE) / Regional Energy Office of Bafatá (DREB) as
the national/ regional authority (second party) and the local community leaders as the third party. The
management model was chosen to ensure economic and social sustainability of the project.
The minigrid is being operated by SCEB with support from ACDB. The community leaders provide
support in awareness activities, conflict resolution ad monitoring illegal connections. The local
community has been involved in the project since the beginning, both for the development of the
management model and for the definition of the tariffs and invoicing models.

4.7.5 Tariff mechanism

A tariff determination study was undertaken before the project implementation considering recovery
of all the operation and maintenance costs over the project lifetime of 20 years. To have a balance
between the ability to pay and the long-term financial sustainability of the project, the project
proposed a prepayment, cost-reflective tariff model, which included time-of-use with a power
limitation and cross subsidies to favour lower income customers. The main objective was to have
tariffs that guarantee a full recovery of costs within a 20-year period.

64 (Xenakis, n.d.)
96
The tariffs were presented, published, and later adopted by the DGE in December 2014. The lowest
tariffs of 250 XOF/ kWh (0.44 USD65/ kWh) apply between 9 am and 6 pm, medium tariffs during the
evening hours (6 pm and 11:59 pm) at 320 XOF/kWh (0.57 USD/kWh) and highest during the night
between 12 am and 9 am, at 500 XOF/kWh (0.88 USD/kWh). To ensure the sustainability of the project,
awareness campaigns were organized on energy efficiency, electricity safety and importance of tariff
payments.

4.7.6 Project outcomes

• The main outcome of project implementation was the increase in access to electricity from 5%
to over 85%, to number of households, enterprises, and institutions.
• Project has provided electricity to 8,000 households, 5 schools, 9 religious’ institutions, Local
Health Centre, Local municipality, ACDB, DGE, 110 small enterprises, 333 micro credit
beneficiaries.
• Project created 12 permanent jobs for operation and management of the minigrid. The
responsibilities included financial & commercial management, system O&M, monitoring &
security, and prevention & conflict resolution.
• Greenhouse gas emissions reduction from the project were estimated to be 409 tonnes CO2
equivalent per year and 8,180 tonnes CO2 equivalent over its 20 years lifetime.
• Capacity building of SCEB on operation & maintenance of solar PV, installation practices and
O&M of low and medium voltage grids.
• Awareness raising campaign for the community to understand, support and accept the solar
minigrid project.
• The monthly expenditure on energy was reduced from 24% of the consumer income to only
10%.

4.7.7 Challenges
• Tariff determination process was challenging since there was high local expectations, subsidies
were absent and there was price variety between the urban and rural.
• Limited financial management capacity led to payment problems for the replacement of spare
parts
• Political instability (coup of 2012) impacted the suppliers risk perception and hence the
project´s timeline
• Due to capacity limitations of the hybrid system, parts of the population have been left out.

4.7.8 Key highlights

Key success factor of this project was the participatory approach in the project implementation, which
involved the community from the inception. The community was involved in identifying the
technology to be used, willingness to pay/ ability to pay of consumers, tariff setting, environmental
conditions, etc. This resulted in fast adoption of electricity from the project, connecting over 250
customers within 6 months of which 80% were households.
Community is also involved in collection of payments, which has led to high rate of payment from the
beneficiaries. Local training and awareness campaigns further endorsed the acceptability and support

65 1 XOF = 0.0018 USD as on 27th October 2021, same exchange rate has been used to convert XOF to USD in this report
97
for the project. The project also demonstrated a replicable model that can be implemented in areas
of Guinea-Bissau, where national grid will not reach in the near future. One such replication project
was Bissora minigrid, which is operating since 2015 and has an installed electric capacity of 312 kWp.

4.8 MHP project in Sar Kalay village, Khyber Pakhtunkhwa Province, Pakistan

Sustainable electricity access for remote and inaccessible village in Pakistan

4.8.1 Introduction
The Sar Kalay village, a remote and off-grid area, is located in the district of Buner of Khyber
Pakhtunkhwa province of Pakistan. PPAF with the support of KfW has financed the implementation of
a micro hydropower plant in the village. The project66 site is about 200 km from the national capital,
Islamabad and located close to the Swat valley. The project implementation was initiated in the year
2014 and finally commissioned in 2017.
Prior to the project, the site had no grid electricity connection. There are around 60 households in the
village making up for a population of around 600 inhabitants. The village is endowed with natural
resources but was deprived of basic access to electricity, one of the key requisites for quality life.
Sources of lighting were limited to kerosene oil lanterns or firewood. Majority of inhabitants of village
are poor so they could not afford to buy solar lights or home systems and had to rely on kerosene
lamps and firewood as only options. Without electricity, there was no access to motive energy (such
as motor drives, pumps and so on), and agriculture was largely dependent on the rains.

4.8.2 Technical features

The total capacity of the MHP unit is 36 kW and the unit is powered by a single turbine/ generator of
the same size. The site has an average flow rate of 0.21 m3/s, and the total head available is 27.57
metres for the site, which is located in the mountains as shown in Figure 44.
The power distribution network includes a 6-km long reticulation system consisting of ABC cables with
accessories such as conductors. The lines are supported using tubular poles, while connections are in
the form of single-phase energy meters connected to individual households and other loads such as
schools and shops, together with meter boxes. The total feasible annual generation from the site is
around 315,000 kWh (assuming 100% generation), but the effective generation is expected around
200,000 kWh per annum, which yields a capacity utilisation factor of close to 70% from the site.

66
Specific details on this case study are based on the information provided by PPAF team
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 Figure 44: Water channel at MHP plant site, Sar Kalay, Buner district

4.8.3 Financial aspects

The total capital cost of the project was PKR 30 million (USD 171,00067). The break-down of this cost
is provided as below:
Item Cost (PKR) Cost (USD)
Civil works 19 million 108,300
Distribution network 8.5 million 48,450
Plant & Machinery 2.5 million 14,250
Totals 30 million 171,000
From above, it can be seen that the civil works were a significant cost component due to the
mountainous terrain. Financing of the project was primarily done through grants provided by the KfW
Development Bank. The community has also contributed towards the cost of project amounting to
PKR 2.5 million (USD 14,250) in addition to provision of land for the project, which was not priced.
The annual operation and maintenance cost for the project is estimated to be around PKR 200,000
(USD 1,14068). This amount primarily includes salaries and emoluments of operators at the site. MHP
does not have high operating expenses. While determining the sizing of the MHP unit, viability of the
project was assessed covering post commissioning operation and maintenance and found to be viable.

4.8.4 Business model and tariff mechanism

National Rural Support Programme (NRSP)69, a leading partner organization of PPAF, has implemented
the project with active participation of the community. To effectively manage the day-to-day
operations and maintain long term sustainability of the project, the community formed an Operation
and Maintenance committee comprising of active members from the community. The O&M
committee has taken over the complete responsibility of plant operation and hired services of trained

67
1 PKR = 0.0057 USD as on 27th October 2021
68
1 PKR = 0.0057 USD as on 27th October 2021
69 https://nrsp.org.pk

99
operators to run the plant. These operators were provided with hands-on training during installation
of systems as part of the project.
Apart from this, the O&M committee, in consultation with the beneficiary community, has set up a
tariff collection mechanism. Each household has an energy meter installed and based on their actual
consumption, electricity bill is collected and deposited in community bank account. The salaries of
plant operators and other operational expenses are paid out of this amount. The O&M expenses are
afforded by the users, who used to spend as much as PKR 5,000 (USD 28.5) per month on kerosene,
which is replaced by electricity from MHP whose monthly bill comes to around PKR 1,200 (USD 6.84)
per month.
The business model for the project hinges on user pays principle. The tariff is set at PKR 15 (USD 0.086)
per kWh for domestic and commercial users alike to recover all operating expenses. In addition, users
pay PKR 200 (about USD 1.14) as fixed charges for the electricity connection. Thus, the monthly bills
carry a fixed line charge and a variable charge per kWh of consumption.

4.8.5 Project outcomes

The project was among a number of DRE minigrids implemented by the PPAF, in collaboration with
NRSP across several sites in Pakistan, where quality power was delivered to a range of consumers,
with a focused approach towards empowering communities with electricity access. As discussed
above, the project has led to reduced monthly expenditure on energy use.
The project has also led to strong socio-economic impact in the village, where a number of new
enterprises and commercial activities were introduced. Prominently, this included tailoring,
embroidery and use of tooling equipment such as lathe machines that run on electricity. Submersible
pumps at homestead and/or agricultural fields have also mechanised agriculture on one hand, while
lending access to groundwater for household consumption on the other. At the same time, social
aspects such as health and education has also benefited significantly from electricity access.

4.8.6 Challenges
The construction of MHP was a very challenging task for local community as well as NRSP team. The
site of powerhouse and water channel is located in a deep trench surrounded by high mountains,
where transportation of machinery and construction material was only possible through donkeys or
on human shoulders. In this regard, the role of the community proved to be a key success factor. The
community was keen and proactive and collaborated with the PPAF /NRSP team throughout the
project development cycle.
The price of MHP electricity is kept at PKR 15 (USD 0.08670) per kWh, which was higher than the
average tariff charged by utilities under guidance from NEPRA during 2017 in Pakistan. This was a
challenge to overcome due to higher-than-normal electricity prices.

4.8.7 Key highlights

The project has been instrumental in providing sustainable and affordable energy access to a
previously disconnected and remote location. The strong economics of the project and active
involvement of community from the start of project implementation has ensured sustainability of the

70
1 PKR = 0.0057 USD as on 27th October 2021
100
plant. The project has laid strong emphasis on empowerment of women, both in terms of quality of
life and for enterprise development. Other key highlights which were reported through consumers of
MHP are:

• The availability of electricity provided more free time to women, which they now utilize for
stitching of cloths and doing embroidery work, using tools and/or machines run on electricity.
Thus, supporting economic empowerment of women in Sar Kalay village

• Shops are now open till late in the evening (even up to 11 PM), and as a result of this daily
income has increased by 20% because people could buy grocery items from shop after sunset.
• Construction of MHP has also produced new opportunities for employment in the village. The
MHP plant operator is earning equal to that of a teacher. The project has provided a gateway
for other developmental activities in the village through Government and non-government
organizations.

4.9 Key lessons

The lessons from the above case studies have been discussed in this section with respect to two
parameters –factors supporting minigrid development and barriers for minigrid. Same has been
presented in the Figure 45.
Key factors supporting minigrid development in SAARC region

• Access to and demand for electricity is the prime driver across minigrids in the SMS or globally. As
the case studies from Sar Kalay (Pakistan), Bambadinca (Guinea Bissau) demonstrate, consumers
are even willing to pay higher tariff for reliable electricity access

• Role of enterprises as productive loads evolves as one of the key factors supporting minigrid
development. Examples from Bamiyan (Afghanistan), Bheldi (India) and Sar Kalay (Pakistan) show
that enterprises enable a minigrid to charge full tariffs from industrial, commercial consumers,
while using these proceeds to subsidize domestic users (especially seen in Bamiyan). This enables
the minigrid to support its operations over time, covering key O&M expenses such as battery
replacement.

• Innovations in technical design and business models have proven to be instrumental in lowering
costs, overcoming operational barriers, and streamlining operations. Among the case studies,
SOLshare (Bangladesh), Bheldi (India), Bamiyan (Afghanistan) and Baglung (Nepal) are clear
examples where innovative design aspects were used to make projects more sustainable and
viable.
• Community engagement and involvement is a critical step, not only in early adoption of customers
for a minigrid project but also to ensure that communities (consumers) are able to upgrade to
operate smarter and lower-cost enterprises. As shown in the Tokelau as well as in Bamiyan
(Afghanistan), consumers replacing diesel with solar PV power benefitted in the long run from
better delivery. As in the case of Bambadinca (Guinea Bissau), the active involvement of
community from the start for the tariff setting and later, for the management and operation of
minigrid ensured success and sustainability.

101
Key barriers for minigrids
• It can be observed from the case studies that the cost of capital and O&M expenses for the project
are not fully offset by revenues from tariffs. One of the reasons could be that the unelectrified
areas are usually rural and the consumers not economically affluent, as a result their ability to pay
is also limited. One relevant example is the SOLshare model: even in presence of an innovative
financing mechanism and requiring minimal capital cost support, the project needed financial
inputs to sustain itself. While the site in Bamiyan, Afghanistan has demonstrated a way out
through higher tariffs from commercial and enterprise loads to cover for higher O&M outgo, the
site has faced constraints by way of limited ability to pay from consumers in the absence of
commercial and enterprise loads.

• The case studies have highlighted the barrier related to absence of advance project management
and technical skills among the operators of minigrid. These skills are essential for efficient
operation of minigrids using complex designs. For example, in SOLshare model (Bangladesh) and
Baglung minigrid (Nepal), advance technical skills and project management skills for managing
several sites at a time is an essential requirement for efficient operation.

• Introduction of any new technical concept or technologies in minigrid often trigger risk
perceptions related to its viability, consumer acceptance, among others and thus they require
additional financial support and risk coverage for financial viability. As in the case of SOLshare
model, the access to finance was an issue due to risk perception related to new technological
concept.
• Adoption of minigrid by consumers in remote areas usually builds up over a time and therefore
the capacity utilization factor of the minigrid project is lower at the beginning. In case of Bamiyan
case study, the adoption of consumers was very low at the start because prospective consumers
were not ready to adapt.

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Key factors supporting minigrid development Key barriers for minigrid
sector

Access to and demand for electricity Costs of capital and O&M

is prime driver, with consumers expenses are not fully offset by
willing to pay high tariff for reliability revenues from tariffs

Presence of productive loads enables Advance project management

full tariff from these consumers, and Lessons and technical skills required for
subsidizing domestic consumers learnt efficient operation of minigrid

Innovations in technical design and Introduction of new technologies

business models improves viability of require financial support and risk
minigrids coverage

Community involvement in tariff Capacity utilization of minigrid

setting and management of minigrid builds over a time i.e. initial
ensures success & sustainability adoption by consumers are low

Figure 45: Lessons Learnt from Case Studies

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5 CONCLUSION AND RECOMMENDATIONS

104
5.1 Country wise summary and recommendations
The access to electricity in the SAARC Member States has improved considerably over the last few
years. Countries such as Maldives, Sri Lanka, Bangladesh, Bhutan, and India have either achieved or
are close to achieving 100% electrification of their population. Nepal and Pakistan still have a set of
large population without access to electricity whereas, Afghanistan has almost two third of its
population not connected to the main electric grid. While enhancing electricity access and achieving
100% electrification are the key drivers for promoting minigrids, the study shows that the drivers for
minigrids in the SAARC Member States also include increasing the renewable energy share in the
national energy mix; reducing diesel fuel consumption; adhering to environment related
commitments such as mandatory level of forest cover and net- zero transition; and increasing the
export of surplus electricity to neighbours.
The key prospects and drivers, barriers, and recommendations for minigrid sector in each of the SAARC
Member States have been discussed below in detail. The Table 2 provides the summarized version for
each country.

5.1.1 Afghanistan

i. Prospects and drivers

a. Only one-third of the country’s population has access to electricity through national grid.
There are several provinces in the country that are yet to be connected. In other
provinces, electricity access is limited to the capital and major towns. This leaves ample
opportunity for renewable energy based decentralised minigrids. Currently this market is
occupied by captive diesel generators, standalone solar PV based home systems and
lanterns, as well as diesel powered minigrids.
b. The renewable energy policy of Afghanistan has entrusted Ministry of Rural Rehabilitation
and Development for development of minigrid projects, up to the capacity of 1 MW. This
gives a clear mandate for development of RE powered decentralised minigrids. Under
MRRD’s guidance, there are ongoing efforts to set up 25 minigrids in an integrated manner
across provinces in Afghanistan.
c. There is considerable traction in the field of minigrid development, with Green Climate
Fund supporting the development of minigrids in the country through Afghanistan
Renewable Energy Market Transformation Initiative project. The project will implement
three solar minigrids and develop construction designs for other 5 minigrids as well as
develop minigrid handbook, regulations, and conduct capacity building and trainings.
d. There is a strong enterprise demand in several provinces, creating sustained demand for
electricity. Moreover, due to use of diesel and kerosene for meeting energy needs in the
present situation, there is likelihood of RE projects being viable due to high avoided
expenses on fossil fuels.
e. The presence of a strong renewable energy industry union ensures the interest of local
enterprises for expanding this sector. The mandate is to act as a lobbying union to
establish renewable energy as a permanent pillar of Afghanistan’s national energy
industry. There are over 100 companies representing project developers, energy service

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 providers, equipment manufacturers and suppliers, among others that are members of
the union.
ii. Barriers
a. There is no specific minigrid policy in Afghanistan, which will stimulate this market. While
the institutional framework is clear, with MRRD designated for all project development
under 1 MW, there is a need for more clarity on technical and operational aspects of
minigrids.
b. Although the private sector is actively participating in renewable energy projects, the
enabling environment for private sector growth and development is weak. Ancillary
services such as insurance, access to working capital and enforcement of contracts are not
well developed.
c. Further, governance and security situation also act as deterrents to private sector
development. Especially, there are safety and security concerns associated with
movement of goods and services across provinces in Afghanistan. Further, several
provinces are not recommended for investment, whether by private sector or through
PPP modes on account of security related concerns. As a result, the overall outlook for
private sector remains weak, especially with reference to the RE sector.
d. There is a dearth of technical expertise/ support for operation and maintenance of
minigrids. This includes lack of availability of spares, as well as non-availability of human
capital for carrying out O&M of a minigrid project and thus raising the operating costs of
a project.
iii. Recommendations
a. Although there is no specific policy and/or regulatory guidelines for minigrid deployment,
under the AREMTI, MRRD is intending to commission studies to develop best practices
handbook and other knowledge products. These are expected to form the mainstay for
future minigrid projects in Afghanistan. It is recommended that such products be
mainstreamed and widely disseminated as support documents for entrepreneurs and
other stakeholders in the sector. Such developments (as mentioned above) shall also
provide confidence to the private sector and other stakeholders for setting up, operation
and maintenance of minigrid projects.
Importantly, MRRD has a clear mandate to develop minigrid projects up to capacity of 1
MW per site.
In view of this, it is recommended that the national electricity utility DABS, and MRRD may
jointly develop and introduce a least cost electrification Master Plan for Afghanistan,
ensuring minigrids and grid extension initiatives complement each other in achieving
universal electricity access.
b. Capacities to be enhanced across key institutions and personnel for design, development,
and O&M of minigrids; especially on technical support that should be extended to minigrid
projects on the ground.
c. A mechanism for Business-to-Business network could be created to facilitate AREU
members in exploring collaborations and accessing technical know-how from other
countries in the region.
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5.1.2 Bangladesh

i. Prospects and drivers

a. Bangladesh has achieved almost 99% electrification as of 2021 and has targeted for
universal access by the end of this year. The current focus of the Government of
Bangladesh is to reach 100% electrification of urban as well as rural areas via national grid
only and hence, there is not much focus on minigrids except for a few remote island
locations.
b. There are remote islands/ areas in Bangladesh, which are off-grid and population
concentrations are dispersed and national grid might not be feasible or possible to reach
even through submarine cables. In such cases, renewable energy based minigrid might be
the best option for providing reliable and quality access to electricity which will also serve
the commercial needs of the rural markets and small enterprises.
c. ME SOLshare Limited which has installed smart peer to peer solar microgrids in
Bangladesh by connecting solar home systems, is targeting to provide power to an
additional 1 million households through microgrids by the year 2030, including
interconnection with the national grid.
d. Through Nationally Determined Contributions, Bangladesh has made commitments to
reduce unconditional 5% of GHG emissions by 2030 in the power, transport, and industry
sectors and a conditional 15% reduction in GHG emissions by 2030. The government has
also set a target to generate 10% of electricity from renewable sources. The current
installed capacity of renewable energy is only 3% of the total power generation capacity.
While these targets are expected to be largely met by MW scale solar parks and roof-top
solar projects, distributed projects such as solar pumps and minigrids will also contribute,
albeit in a limited manner.
ii. Barriers
a. There is no specific policy or strategy of the Government to develop minigrid projects in
Bangladesh. As such, project developers are not interested to develop and finance
minigrid projects even though there is an opportunity for minigrid development in some
off grid areas and remote islands. Private sector companies find this challenging because
of high perceived commercial risks pertaining to grid arrival and lack of financing and
government support.
b. The tariff for solar minigrids is much higher than the subsidized tariff paid by the national
grid consumers. This discourages consumers from using more electricity than that
required to meet basic needs and thus create resentment among the consumers.
However, the Government has made a policy decision to purchase the minigrid electricity
at higher tariffs from their operators and sell it to the consumers at subsidized tariff, which
is same as the grid tariff.
c. Several solar home systems and solar minigrids have been made redundant after the
expansion of the national electricity grid to these areas as people prefer to use grid
electricity at lower prices. Thus, highlighting the uncertainty in the operation of minigrids
and risks related to arrival of national grid.

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 d. Bangladesh is densely populated country with little land availability and has restrictions
on use of agricultural land. Thus, identification of land area for minigrid project
development is challenging.
iii. Recommendations
a. There are off-grid areas in remote islands of Bangladesh where population concentrations
are dispersed. Distribution utilities are responsible to provide electricity to those areas,
however, connecting them to national grid would be costly and time consuming.
Renewable energy based minigrid would be the least-cost option for providing reliable
access to electricity. MPEMR with the support of IDCOL or SREDA may formulate and
introduce a special policy for development of minigrids in remote areas covering tariff
regulations, financial support, grid arrival rules, among others.
b. Government is planning to connect the existing minigrids in Bangladesh to the national
grid within months. Existing minigrids need to be upgraded to match the requirements of
national grid and connect them to the national grid. MPEMR would need to formulate the
guidelines for the grid interconnection of minigrid infrastructure. In the meanwhile,
distribution utilities should continue to purchase the electricity from the minigrids that
are being connected to national grid at minigrid tariff and sell it to the consumers at
subsidized tariff.
c. SREDA may prioritize minigrid projects in the roadmap for providing electricity access to
remote areas where national grid would take longer time to reach and would not be cost
effective.

5.1.3 Bhutan

i. Prospects and drivers

a. Bhutan has achieved almost 100% access to electricity; however, reliability of electricity
supply remains an issue. Around 58% of households had faced one or more electric power
failures/interruptions lasting at least one hour and the proportion of households that
faced more frequent power interruptions is higher in rural areas (64.3%) than in urban
areas (46.6%) (IRENA, 2019). Minigrids could enhance the electricity supply if installed in
grid connected mode.
b. Local population in rural areas are showing interest in running enterprises. They are keen
to stay in their own locality if they are provided with reliable electricity via minigrids. This
creates an opportunity to develop local solutions such as minigrids to provide reliable
electricity for running enterprises.
c. There is a strong interest of the Royal Government of Bhutan to develop minigrids in areas
where transmission lines extension is uneconomical or has to pass through protected
areas & national parks or lead to deforestation. Bhutan has a mandate to maintain 60%
of the country’s land under forest covers to preserve its environment. If minigrids are
proved to be more technically and economically viable, then the construction of new T&D
lines could be avoided as well as those underutilized transmission lines could even be
decommissioned.

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 d. The country sells surplus electricity generated to the neighboring countries for generating
revenue for the country. There is an interest from the Government to produce RE
electricity locally to increase foreign revenue generation.
ii. Barriers
a. There is no dedicated policy and regulations regarding minigrid development in Bhutan.
There are no clear guidelines regarding arrival of national grid at the minigrid site, whether
the minigrid will be connected to the grid or how developers will be compensated. The
country has set no specific targets for electricity generation via minigrids.
b. The electricity tariffs in Bhutan are subsidized and public utilities like DGPC and BPC claim
that they do not obtain a fair return on their assets. In this scenario, private sector
participants may be unwilling to make investments in the absence of clear indication of
returns to investors.
c. Bhutan has piloted solar and wind minigrid projects only after 2014. The government as
well as the private sector lacks necessary technical and financial expertise to develop and
operate minigrid in the country.
iii. Recommendations
a. Department of renewable energy may formulate a national minigrid policy or regulation
to facilitate development of minigrid sector in the country. The policy/ regulation should
clearly mention the rules related to future of minigrid in the event of arrival of national
grid. It should also include measures for de-risking minigrid business models in the form
of financing schemes, tariff regulations, payment guarantees, etc.
b. Royal Government of Bhutan could set up national target for minigrid projects in the
country in terms of capacity or numbers and identify target community for project
development. This will show intent of the Government for development of minigrids in
the country and thus create private sector interest in the sector.
c. Bhutan Electricity Authority may formulate tariff regulation for minigrid sector and ensure
fair return on investment so that private sector participation in the sector will increase.
Private sector participation enhances development of the minigrid sector and helps to
meet customers’ demand of reliable electricity.
d. Capacity building trainings and vocational programs on renewable energy minigrid design
and operation should be developed engaging with development partners and local
educational institutions to ensure enough properly trained professionals are available in
the country to support private sector investment.
e. The geography of Bhutan is similar to that of Nepal. The study recommends that Bhutan
should replicate the lessons learnt from case studies in Nepal (discussed in section 4.4)
where MHPs operating in the country could be interconnected to form a minigrid for
reliable supply of electricity to the consumers.

5.1.4 India

i. Prospects and drivers

a. There are still 5.5 million people in India that lack access to electricity despite achieving
100% electrification of households due to non-availability of last mile connectivity in
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 remote areas. Also, there are issues related to reliability (hours of supply) and quality of
electricity in rural areas connected to the national grid. Minigrids can fill this gap in supply
of electricity.
b. Minigrid policies (in two states of India - Uttar Pradesh and Bihar) have been driving
private sector interest in these states to develop minigrid projects for providing last mile
electrification, reliable & quality power and push socio-economic development. Central
ministry on new and renewable energy has issued a draft ‘National Policy for Renewable
Energy based Micro and Minigrids’ in June 2016, which is yet to be approved.
c. Private sector is at the fore front of expanding minigrid market in India for providing
electricity services for a multitude of applications. Smart Power India (an initiative of
Rockefeller Foundation) together with Tata Power Limited (One of India’s leading power
companies) has set a target to install 10,000 minigrids in India in the next few years. Also,
ESMAP study on ‘Mini-Grids for Half a Billion People’ has reported around 1,905 minigrids
that are planned to be installed in India in coming years.
d. Minigrids are also being promoted to provide electricity for public institutions in health
care and education sector and for enterprise development in rural areas following the PPP
(Public-Private-Partnership) approach where the CSR funds/ government grants/ local
area development schemes are being matched with private sector equity and community
contribution to install and operate minigrids. Hamara Grid Private Limited, is working with
District Administration and Village Development Board in Northeast India to electrify 1000
villages spread over ten districts. Mlinda has a target to install minigrids in 50 villages.
e. Operational diesel based minigrids are being converted/ hybridised into solar/ wind/
diesel minigrids in large and densely populated islands (such as Sagar island in Sunderbans
where state government is developing 500 kW solar-wind hybrid; Andaman & Nicobar and
Lakshadweep islands where majority of the power generation comes from diesel based
units) and hilly/ remote regions (such as Zanskar valley in UT of Ladakh where CESL- a
newly established subsidiary of EESL- state-owned Super ESCO is exploring international
carbon finance market to monetize GHG reductions from such projects).
ii. Barriers
a. Lack of clarity in policies regarding future grid arrival at the place of minigrid site has
restricted developers in pursuing minigrids in remote areas. Health centres, schools,
streetlights, and other public good infrastructure have remained uncovered in the state
minigrid policies.
b. Grid arrival is a reality as almost all villages are connected to the national grid. However,
the quality of supply from the grid is often not reliable. There is a need to design and
implement innovative business models to promote minigrid in these areas.
c. Minigrid power is expensive compared to power from the grid because developers try to
recover their investment within only a first few years as well as due to presence of low
demand for electricity in remote areas.
d. Constraints in availability of funds to minigrid developers to finance the operational
expenses including replacement of equipment, arising because of untimely payment by
consumers, improper billing, and payment mechanism, etc. There is also lack of patient

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 capital71 available to finance minigrids. Minigrids usually take 12 to 18 months to build
power demand and attain a good capacity utilization. The financing mechanisms should
thus structure the investments accordingly.
iii. Recommendations
a. The draft national minigrid policy which has specified the guidelines for future arrival of
grid at minigrid site, financial incentives, tariff setting, etc. should be approved by the
MNRE. Considering the success of minigrid policies of two states (UP and Bihar) of India,
the study recommends other states to also develop specific minigrid policies to drive
private sector interest and scale up minigrid development.
b. Business models for minigrids need to be built around unreliable, poor-quality supply and
inability to operate livelihoods-based machinery on the national grid. Grid interactive
minigrid projects should be promoted to provide the last-mile-connectivity and support
the growth of local economies and livelihoods. Grid interactive minigrid can integrate with
grid where or when it is available. It will allow the system to export surplus power
generated and import when needed.
c. Project developers in India have started to engage with the community from the
beginning during the minigrid development which has helped them to increase the uptake
of productive appliances and thus improve the demand in these areas. This practice
should be adopted in future projects to increase the productive demand and thus reduce
the cost of electricity. Also, efforts to effect behavioral change at consumer end should
also be made a part of the minigrid establishment process. This will result in demand side
management through increased user awareness about the pattern of energy usage.
d. Design and implementation of innovative payment collection mechanism such as taking
3-6 months of payment as advance security deposit from rural customers to ensure
revenue visibility, combination of pre-paid metering and institutional Power Purchase
Agreements with an anchor client will improve the fund availability. A clarity in policy will
also give confidence to financiers and investors on returns from minigrid projects.

5.1.5 Maldives

i. Prospects and drivers

a. Maldives has achieved 100% electrification in each of its islands, providing 24/7 supply
mainly through diesel based minigrids. However, the Government is facing challenges to
reduce the cost of electricity since diesel fuel is imported and transported to the dispersed
generating locations, which adds to the cost of generation. Government is thus providing
subsidies to domestic consumers, which was around USD 65 million in 2019.
b. Government is promoting hybridization of diesel minigrids with renewable energy to
reduce dependency on diesel fuel and reduce overall electricity cost as the cost of solar
PV electricity is falling.

71Patient capital is an investment that does not seek to maximize financial returns to investors, but seeks to maximize social
impact and to catalyze the creation of markets to combat poverty
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 c. Government of Maldives has also set a target to reach net-zero global GHG emissions by
2030 with international assistance and private investments. The key priority of the
government, in this regard, is to reduce its dependence on imported diesel fuel and invest
in renewable energy projects.
d. Under World Bank financed Accelerating Renewable Energy Integration and Sustainable
Energy project, hybridisation of fourteen island grids is being done. Three projects under
earlier WB program have been implemented or are in construction stage.
e. Preparing Outer Islands for Sustainable Energy Development project of ADB is
transforming existing diesel-based energy minigrids into hybrid renewable energy
systems in 160 inhabited islands, out of which installations on 48 islands have been
commissioned.
ii. Barriers
a. There is a need to develop robust energy sector plans focusing on hybrid renewable
energy projects to meet the increasing electricity demand in the country, lower electricity
cost and reduce the import of diesel.
b. Investments in renewable energy projects in the country have been driven primarily by
grants and loans from multilateral agencies. GoM faces a substantial foreign debt burden,
which limits opportunities for direct public financing of renewable energy expansion.
Commercial bank financing or private sector financing is in its nascent stage since they are
still reluctant to accept the risks associated with renewable energy technologies and
invest in the sector.
c. Utility companies in Maldives have been implementing only conventional energy projects
and only in last few years renewable energy projects have started to come up. Therefore,
there is limited experience and expertise available locally regarding renewable energy
technologies, their design, installation, and operation.
iii. Recommendations
a. Ministry of Environment and Energy with the support of Maldives Energy Authority and
Electric Utility Companies (FENAKA and STELCO) may develop national level energy plans
looking into the future energy demand and supply aspects, and identify potential sites and
targets for the deployment of renewable energy hybrid projects in the country.
b. To mobilize private interest and investment in the sector, de-risking mechanisms such as
power purchasing agreement arrangement should be developed and implemented in
future projects. A PPA guarantees a price for electricity to be sold and the private sector
earns a guaranteed return on its long-term investment. Also, coordination with
development finance institutions to source concessional financing should remain
important in the near-term.
c. Technical and vocational training on renewable energy technologies and projects should
be developed and delivered to utility companies, government departments, financing
institutions, project developers and professionals with the help of development partners
and local educational institutions, to ensure enough properly trained professionals to
support private sector investment.

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5.1.6 Nepal

i. Prospects and drivers

a. There is still 7% of the population in Nepal that lacks access to electricity. Government of
Nepal has been providing electricity through both on-grid as well as off-grid decentralized
generation. Off-grid electricity generation is provided mainly through micro/mini hydro
and other renewable energy based minigrids. Nepal has implemented subsidy grant
program to scale up investment in isolated minigrids as part of a national rural
electrification strategy. There has been strong and increasing interest for minigrid
development from rural communities as well as local governments of Nepal after
witnessing the success of previously implemented projects.
b. The fifteenth plan of GoN aspires for 12% contribution of RE in total energy generation by
2024. The country is also targeting to install solar minigrid projects in mountains and
upper hills region. Government of Nepal has allocated budget for detailed feasibility study
of minigrid projects around the country. Ujyalo Nepal program is providing 90% upfront
subsidy from the Federal Government and 10% matching fund from the local level for
minigrid projects. The proposed minigrid in the country is expected to provide Tier-3 level
of electricity access to the rural households.
c. The private sector companies in Nepal are either involved in design, supply, and
installation of minigrids or equity financing of minigrids as RESCOs. The World Bank
“Private Sector-Led Mini-Grid Energy Access Project” aims to mobilize RESCOs to increase
capacity of RE minigrids. The program will provide credit facility to the private sector to
support renewable minigrid sub-projects as well as technical assistance to RESCOs and
partner banks to ensure smooth and sustainable implementation and operation.
d. Minigrids in Nepal are being developed as grid compatible power generation and
distribution system so that they could be connected to the national grid upon its arrival.
The implementation cycle of minigrids (especially solar minigrid) is short, in general 6 to
8 months only. The private sector in Nepal has good know-how of the technical aspects in
the entire value chain of the solar minigrids. This reflects confidence towards quality
supply, design, installation, and operation of minigrids in Nepal.
ii. Barriers
a. Minigrids have been designed mainly for basic needs without the consideration of future
energy demand of households and productive loads. After the installation of minigrid, it
is often observed that the aspirational demand of the consumers increases leading to
unmet demand as minigrids are designed without considering the growth in energy
demand.
b. Minigrid power is expensive compared to power from the grid because developers are
interested to recover their investment within first few years. Therefore, consumers prefer
to get connected to the national grid.
c. Despite the successful interconnection of several MHPs and minigrid projects to the
national grid, the policy for grid connection of minigrids is still ambiguous.

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 d. Project developers continue to struggle to achieve financial closure on time as subsidy and
their equity are not enough to cover the total project cost and bank financing is difficult
to access.
iii. Recommendations
a. Future minigrid projects should be designed and developed considering anchor loads such
as irrigation, local energy-based enterprises, health, school, etc. and future demand of
electricity in households for running modern appliances. Minigrid planning process should
include the community from the beginning to understand the productive uses that can be
connected at the end-user level to increase the uptake of productive appliances.
b. Electricity Regulatory Commission of Nepal may develop measures to reduce minigrid-
based electricity tariffs and bring them at a rate comparable to grid-based tariffs. This will
encourage minigrid consumers to use electricity as per their demand and not limit their
consumption due to high tariff. AEPC should encourage commercial bank financiers to
invest in minigrid projects and promote business models that are beneficial to the
investors as well.
c. AEPC may develop guidelines for minigrid implementation including design, tendering,
construction, and operation of future minigrids, tailored to Nepal based on data collected
from existing minigrids. The guideline should also clearly explain the interconnection of
minigrid to the national grid after its arrival.
d. Future minigrids should incorporate learnings from the existing successful minigrid
projects on technical, financial, and operational aspects.

5.1.7 Pakistan

i. Prospects and drivers

a. The electrification rate in the country has improved from 55.7% in 2005 to 79.2% in 2019.
However, there are still around 45 million people without access to electricity with
majority falling in the rural areas. Despite having surplus power generation capacity, long
hours of load shedding persist in several areas of the country
b. Alternative Energy Development Board has issued Alternative and Renewable Energy
Policy 2019 which has set a target of at least 20% and 30% RE generation by capacity by
the year 2025 and 2030 respectively in the country. The current share of renewable
energy in the power mix is only 5.5% of installed capacity. The Policy has included
mini/microgrid solutions in its scope and envisages that minigrids based electricity
services systems will be one of the key interventions to accomplish the targets set forth
therein.
c. Minigrids tariffs have shown lower cost of electricity for domestic consumers, compared
to grid electricity tariff. The cost of grid electricity for end-consumers has been on the rise
owing to various reasons such as high T&D losses, low recovery, fuel cost, under-utilization
of efficient power plants etc.
d. Private sector companies and not-for-profit companies are active in developing off-grid
projects including minigrids supported by donors. Pakistan Poverty Alleviation Fund has
implemented several community micro-hydropower projects and solar minigrid projects
using donor grant as well as microfinance schemes. Private companies such as Nizam Bijli,
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 EcoEnergy have implemented PAYG projects in off-grid areas to provide affordable solar
home solutions.
ii. Barriers
a. Lack of institutional support at the national level for rural electrification and distributed
renewable energy projects is a barrier. Government has been primarily focusing on utility-
scale renewable energy projects and electrification of urban areas through national grid
as there is increased demand for power.
b. Policies and regulations covering issues like permitting and licensing, tariff setting,
financial incentives, and regulations for minigrid in the event of grid arrival are not
available. These are necessary to build private sector interest and confidence.
c. Financing for minigrids in the country has been driven primarily by grants and loans from
multilateral agencies. Commercial bank and private-sector financing for minigrids in rural
areas is challenging because of high perceived commercial risks, high investment costs,
and lack of government support.
d. Absence of standardization in minigrid design & installation has also resulted in poor
performance of these projects and lowered end-user confidence. Lack of technical
expertise to design, install, operate, and maintain minigrids is another limiting factor.
iii. Recommendations
a. The study recommends that NEPRA should develop a least-cost rural electrification plan
outlining the potential sites for minigrids, national grid extension and others. GIS based
spatial least cost planning tools for rural electrification may be used to optimize electricity
supply options following techno-economic or multisector approach.
b. AEDB may develop policies/ regulations covering permitting & licensing requirements,
“grid arrival” rules, procedures & guidelines for interconnecting with the grid, tariff
setting, among others for minigrids in the country. Grid arrival rules should include the
interconnection and/or compensation mechanisms to allay risks associated with main grid
arrival. To facilitate minigrid licensing and other regulatory requirements, a single-window
clearance facility may be established.
c. Financing programmes or financial support schemes utilizing government or donor
funding available in the country should be established to scale up minigrids. Dedicated
rural electrification funds can be created that pool together public and donor finances and
make available to private developers for minigrid project financing.
d. For providing access to electricity in remote and hard to reach locations, the country can
replicate the SOLshare model, discussed in section 4.2, allowing the residents to install
and interconnect rooftop solar systems into smart peer to peer microgrids and thus
facilitating buy and sell of electricity with each other.
e. Technical standards for the equipment deployed in minigrid power plants should be
developed and enforced with clear regulations. Technical codes for interconnection with
the national grid should be notified. Capacity building programs in the areas of design,
installation, and O&M of minigrids for government departments, financing institutions
and project developers should be designed and implemented with the technical and
financial support from multilateral/ bilateral institutions.

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5.1.8 Sri Lanka

i. Prospects and drivers

a. The country is fully electrified and is serviced by a single entity in the form of Ceylon
Electricity Board, which acts as the sole transmission and distribution utility in the country.
The strategy of Government of Sri Lanka is to transition the current generation mix to
increased share of RE resources. The potential for minigrid development is relatively
muted.
b. There is potential for energizing outlying islands, about ten (10) of whom are inhabited.
The Sri Lankan government seeks to replace diesel minigrids by RE based minigrids. These
are being driven by the Ceylon Electricity Board. Prominent among them are the
Analaitivu, Delft and Nainativu islands, in addition to Eluvaithivu island, which was one of
the first to be converted from diesel to RE.
c. The plan for energizing these outlying islands, with support from Asian Development
Bank, stand out as an example of inter-agency cooperation. Although the minigrids are
anchored and owned by CEB, other agencies have taken responsibilities of specific
subcomponents such as promotion of RE based enterprises (Ministry of Power and
Renewable Energy), water related interventions (National Water Supply and Drainage
Board), skill-based training and education (Sri Lanka Sustainable Energy Authority) and
Renewable Energy based Microgrid Pilot Project (Lanka Electricity Company (Private)
Limited).
ii. Barriers
a. Due to 100% electrification achieved in Sri Lanka, and its focus on centralized grid-based
delivery supplemented by Independent Power Projects in the wind and other RE that are
also connected to the main grid, there is limited scope for development of minigrids in Sri
Lanka.
b. The existing electricity regulatory provision, the National Energy Policy and Strategies
(revised 2019) restricts electricity transmission and distribution functions to CEB, thereby
negating any role of private sector owned minigrids. There is also no specific minigrid
policy in Sri Lanka. However, in the past, prior to achieving national grid-based universal
access to electricity, with World Bank and GEF support, over 200 micro-hydro minigrids
were developed and provided electricity services to about 10,000 households. As these
were developed under the cooperative model where electricity use was deemed self-
consumption by the cooperative members, it was permitted by the Electricity Act (Harsha
Wickramasinghe, 2014). Several of these isolated micro-hydro generators have now been
connected to the grid and continue to be operate and sell electricity to the CEB under the
Standardized Power Purchase Agreement (Kapila Subasinghe, 2017).
iii. Recommendations
a. Policy advocacy to Sri Lankan government to support tail end generation and enterprise
development using RE powered minigrids could significantly alter prospects of minigrids
in the country.

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 b. Within the purview of this regulatory limitation, the grids installed in the islands and
proposed replacement of diesel grids by RE powered grids stand out as potential areas
where RE hybrid grid architecture can be used to support local economic development
based on securing sustainable livelihoods and an improved quality of life. The RE hybrid
minigrids can provide electricity at least cost compared to diesel-powered minigrids. This
niche application for minigrids should be explored further.

5.2 Overall recommendations

Besides country level efforts to accelerate the minigrid development, there is much to be gained for
each SAARC Member State through cooperation and collaboration at regional level. The study has
suggested following specific recommendation/ action plan to foster cooperation in the region to
achieve the above:
1. Regional Minigrid cooperation mechanism: a platform to facilitate coordination and
exchange of good practices and learnings among Member states. The mechanism could
operate through a task force consisting of officials from relevant ministry, renewable energy
department, public distribution utilities, regulatory authority of each SAARC Member State.
The mechanism will allow representatives of Member States to interact and discuss on regular
basis as well as take assistance from other Member States on development of policies and
regulations, technical standards, among others. Member States of SAARC have signed SAARC
framework agreement on Energy Cooperation in November 2014 to enhance cooperation in
the energy sector by facilitating energy trade, development of efficient conventional and
renewable energy projects as well as enable knowledge sharing and joint research. The
cooperation mechanism can be built around this framework agreement to support minigrid
projects in Member States.
2. Specialized course on design and operation of minigrids: short term specialized course on
minigrid design and operational aspects that can be offered to government officials, private
sector players and renewable energy service companies in the SAARC Member States for their
capacity building. The course would build on contemporary thinking and technologies
available and used in minigrid sector. The course may be offered by recognized technical
institutions in the SAARC Member States. The course should provide flexibility to tailor
content where possible to the requirements of the SMS.
3. Finance facilitation desk/ unit: an online e-platform to connect minigrid project developers,
services providers, and financiers/investors. The facilitation desk would support the deployment
of minigrid projects by helping project developers secure financing more efficiently and
supporting investors and lenders to build stronger project portfolios. Multilateral, bilateral, and
local financial institutions, project developers, service providers from the region may be registered
themselves as partner of the platform based on some key criteria. The project developers will
submit their project ideas and proposals to obtain support for project development and/or access
to finance. Where feasible, the facilitation desk/ unit may support the project developers in
meeting investors and lenders requirements, facilitating access to suitable financing and/or risk
mitigation instruments, and other activities.

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 Table 2: Summary of Prospects, Drivers and Barriers with Specific Recommendations

Parameters
Prospects and drivers Barriers Recommendations
/ Countries
• Only one-third of population with electricity access • National electricity utility DABS, and MRRD to jointly
• Clear mandate given to MRRD by RE policy for development • No specific minigrid policy to stimulate the market develop and introduce a least cost electrification
of minigrids; Ongoing efforts to set up 25 minigrids in the • Weak enabling environment for private sector growth master plan
country by MRRD • Safety and security concerns associated with • Capacity building of key stakeholders and project
Afghanistan
• GCF supporting the development of 8 minigrids as well as movement of goods and services developers on minigrid design and O&M
capacity building and development of regulatory documents • Lack of technical expertise/ support for operation and • Creation of Business-to-Business network to facilitate
• Strong enterprise demand in several provinces and presence maintenance of minigrids AREU members in exploring collaborations and
of a strong renewable energy industry union accessing technical know-how
• No specific policy or strategy of the Government to • Formulate and introduce a special policy for
• Government’s focus to reach 100% electrification via develop minigrid projects development of minigrids in remote areas
expansion of national grid; opportunities for minigrids in • High minigrid tariff compared to tariff paid by the grid • Upgrade existing minigrids and connect them to
Bangladesh
remote off-grid islands only consumers national grid; Government to purchase electricity from
• Target to generate 10% of electricity from RE sources • Land availability and restrictions on use of agricultural future minigrids and sell to consumers at grid tariff
land • Prioritize minigrid projects in the roadmap
• Formulate minigrid policy or regulation with clear
• Reliability issue in electricity supply despite 100%
guidelines on future arrival of national grid and
electrification
• No dedicated policies or targets for electricity measures for de-risking minigrid business
• Government’s mandate to maintain 60% of the country’s
generation via minigrids • Set up national target for minigrid projects in the
land under forest covers, thus offering preference to
• Public electric utilities unable to generate fair returns country in terms of capacity or numbers
decentralized generation over expansion of T&D lines
Bhutan on their assets, resulting in private sector’s • Formulate tariff regulation for minigrid sector to
• Increased demand for reliable electricity for rural
unwillingness to enter the sector ensure fair return on investment
enterprises
• Lack of technical and financial expertise to develop • Capacity building trainings and vocational programs
• Interest of Government to produce RE electricity for local
and operate minigrid on minigrid
consumption, to enable more export of grid electricity for
• Replicate the lessons learnt from success stories from
revenue generation
Nepal since the geographies are same
• 5.5 million people still lack access to electricity despite • Lack of clarity in policies regarding future grid arrival • Draft national minigrid policy should be approved;
achieving 100% electrification; reliability and quality of at the place of minigrid site other states to also develop specific minigrid policies
electricity remains an issue in rural areas • Electrification of public infrastructures not included in • Develop business models around unreliable, poor-
• Minigrid policies in two states driving private sector the state minigrid policies quality supply and inability to operate enterprise loads
interest; minigrids being promoted to provide electricity for • Need to design and implement innovative business on the national grid
India
public institutions and enterprise development in rural models to promote minigrid • Engage with community from the beginning of the
areas • Minigrid power expensive compared to power from project to increase uptake of productive uses
• Diesel based minigrids being converted/ hybridized into RE the grid • Promote grid interactive minigrid projects
minigrids in large and densely populated islands and hilly • Lack of funds to finance the operational expenses as • Design and implementation of innovative payment
areas well as lack of patient capital to finance minigrids collection mechanism
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Parameters
Prospects and drivers Barriers Recommendations
/ Countries
• According to ESMAP, around 1,905 minigrids are planned

• Government promoting hybridization of diesel minigrids • Need to develop robust energy sector plans focusing
• Develop concrete energy expansion plans for the
with RE to reduce dependency on diesel fuel and reduce on hybrid renewable energy projects
deployment of additional renewable energy hybrid
overall electricity cost • Limited opportunities for direct public financing.
projects
• Target to reach net zero GHG emissions in the country by Commercial bank financing or private financing in its
Maldives • Implementation of PPA arrangement in future
2030 nascent stage
projects to mobilize private investment
• Hybridization of 14 island grids being done under WB-ARISE • Private sector companies reluctant to accept the risks
• Provide technical and vocational training on
project and installation of RE hybrid minigrid in 160 associated with renewable energy technologies
renewable energy technologies and projects
inhabited islands under ADB - POISED project • Limited experience and expertise available locally
• Most of the minigrids implemented cater to basic
• 7% of the population lack access to electricity • Develop future minigrid projects considering anchor
lighting and fan only, with less focus on future energy
• Strong interest for minigrid development from rural loads and future demand of electricity in households
demand and productive loads
communities as well as local governments • Minigrid planning process to include community from
• Minigrid power expensive compared to power from
• Target of 12% RE generation in total energy mix by 2024 the beginning to increase uptake of productive uses
the grid
Nepal • Government targeting to install solar minigrid projects in • Develop measures to reduce minigrid-based electricity
• Policy for grid connection of minigrids still ambiguous
mountains and upper hill regions tariffs at a rate comparable to grid-based tariffs
despite successful interconnection of several MHPs
• WB program to mobilize RESCOs for minigrid development • Develop guidelines for minigrid implementation
and minigrids
• Improved know-how of minigrid design and operation in the including design, tendering, construction, and
• Project developers continue to struggle to achieve
country operation
financial closure on time
• Develop a least-cost approach for rural electrification
• Around 45 million people without access to electricity; long • Lack of institutional support at the national level for
outlining potential sites for minigrid
hours of load shedding in several grid connected areas rural electrification and distributed renewable energy
• Set in place legislation/regulations covering permitting
• Target of at least 20% and 30% RE generation capacity by projects
& licensing requirements, grid arrival rules, among
2025 and 2030 respectively • Lack of policies and regulations for minigrid sector,
others
• RE policy prioritizing mini/microgrid solutions as key necessary to build private sector interest
Pakistan • Establish financing programs or schemes utilizing
intervention to accomplish the targets • Dearth of private-sector investment in rural areas
government or donor funding available in the country
• Minigrids tariffs lower for domestic consumers, compared • Lack of standardization in minigrid design &
• Replicate the SOLshare model for providing access to
to grid electricity tariff installation
electricity in remote and hard to reach locations
• Private sector companies and not-for-profit companies’ • Lack of technical expertise available for O&M of
• Develop technical standards and grid connection
interest to develop off-grid projects minigrids
codes; Implement capacity building programs

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Parameters
Prospects and drivers Barriers Recommendations
/ Countries
• Achieved 100% electrification and current focus on
• Limited scope for development of minigrids due to • Develop policy to support tail end generation and
centralized grid-based delivery supplemented by utility scale
government’s focus on centralized grid-based delivery enterprise development using RE minigrids
RE projects
Sri Lanka • Existing electricity regulatory provision restricts • Promote and implement RE hybrid minigrids to
• Potential and interest of government to energize outer
electricity transmission and distribution functions to provide electricity at least cost compared to diesel-
islands running on diesel generators through RE hybrid
CEB only powered minigrids to outer islands
minigrids

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7 ANNEXURE

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7.1 Annexure 1: List of stakeholders and experts consulted for the study

Name of the organization Name of the person Designation of the person

Mohammad Ajmal Shinwari Project Manager

Ministry of Rural Rehabilitation and
Development (MRRD), Afghanistan
Ahmad Hussain Rasooli Senior Technical Specialist

Q. A. Sharhan Sadique Deputy Director

Power Cell, Ministry of Power,
Bangladesh
Mohammad Shakil Khan Assistant Director

Sustainable and Renewable Energy

Development Authority (SREDA), Engr. Md. Rashedul Alam Assistant Director, RE (Solar)
Bangladesh

Alternate Energy Division, Passang Chief Engineer

Department of Renewable Energy,
Bhutan Choten Duba Executive Engineer

Hamara Grid Private Limited, India Vijay Bhaskar Managing Director

GIZ, Nepal Khem Raj Bhandari Technical Advisor

Energy Consultancy, Maldives Ahmed Inaan Director and Engineering Consultant

Nafees Ahmad Khan Sr. General Manager

Pakistan Poverty Alleviation Fund,
Pakistan
Iqbal Ahmed Memon Senior Manager

Former Lead Energy Specialist, The

Sri Lanka Anil Cabraal
World Bank

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7.2 Annexure 2: Solar GHI maps of SAARC Member States
The World Bank and the International Finance Corporation, collectively The World Bank Group, have
developed solar atlas for countries. The World Bank Group has used Solargis solar data and related
solar energy assessment services. The solar GHI maps of countries can be downloaded from
https://globalsolaratlas.info/map. This section provides the solar GHI maps of SAARC Member States.

AFGHANISTAN

134
BANGLADESH

135
BHUTAN

136
INDIA

137
MALDIVES

138
NEPAL

139
PAKISTAN

140
SRI LANKA

141
142