Business model analysis and methodologies to optimize the system design of renewable energy mini-grids in developing countries

Energy is crucial for eradication of poverty and for combating climate change. Notwithstanding progress in every area of sustainable energy, energy poverty still involves a large proportion of the population living in developing countries, mainly concentrated in Sub-Saharan Africa. To seize the gap of universal access to energy set out by the Sustainable Development Goal 7 a mix of technical solutions is needed. Even if mini-grids are now considered a well-established solution, there is the urgency for involving private capital to reach a wider impact of the international action as well as to open a huge potential market. Thus, the viability of business models and their long-term technical and financial sustainability become fundamental aspects to face the main obstacles retaining private investments, which are usually identified in the financial, technological and institutional areas, accounting for high initial costs and difficulty in access to finance due to the perceived high-risks of investments, low and unpredictable demand patterns, reduced ability to pay and low tariffs, among others. To address these challenges, there is a need of (i) data-driven study on business models for decentralized RE solutions to identify success factors and viable approaches to pursue the viability and replicability of rural electrification projects as well as of (ii) effective methodologies in both the development and operating phases to optimize systems, de-risk investments and assure long-term sustainability. Thus, the objective of this research project is supporting the off-grid energy sector to deploy viable and scalable renewable energy systems through methodologies and models for the mini-grid optimization in developing countries. On the basis of a preliminary work for an in-depth understanding of the context, the core of the research project is focused on (i) a critical assessment of the techno-economic aspects of RE mini-grids and (ii) identification of innovative methodologies and business models for the system optimization and the deployment of RE mini-grids at scale. The research methodology was structured around (i) field experience in case studies, both in the feasibility studies and executions, and (ii) desk research working on literature overview, stakeholder consultation as well as data collection and analysis of mini-grids in operation. Thus, this research project actually benefits of direct experience in the practitioners’ environment and bring it into the academic environment to leverage lesson learnt, food for thought and data by using a scientific approach. The first phase of the research project was focused on understanding of the rural electrification challenge for the system optimization and the deployment of RE mini-grids at scale in order to identify aspects which actually affect the adoption of the mini-grid solution. The second phase of the research project was focused on the development of specific analysis, methods and methodologies. Leveraging the business model study carried out in the first phase, an aggregate and correlation analysis of business model indicators based on 21 RE mini-grids was developed. This work aims to critically analyze in retrospective manner what is the state of the art of the mini-grid sector in SSA so far, starting from older projects commissioned in the mid-eighties up to recent develop of new projects. Such comprehensive techno-economic analysis was integrated with the analysis of political and regulatory frameworks as well as access to financing mechanisms in order to allow for the identification of innovative business models for RE mini-grid projects. The research has highlighted that it is necessary to explore emerging business models, such as water-energy-food integrated projects. If properly designed, they can contribute both to business viability and local development and, in turn, further support the sustainability of the project, in a sort of virtuous cycle. However, innovative business models require solid assessments. With the aim to de-risk investments and increase the project sustainability, the research focused on the energy need assessment and load profiling. On one hand, a methodology to perform in-depth energy need assessment was developed and validated to provide reliable inputs for the system design and business planning. On the other hand, with the aim to give a proxy of in-depth baselines, a first hypothesis of a framework for characterization of the community’s energy needs in greenfield rural electrification project was developed. The tool intends to support the preliminary phase of mini-grid business development and/or small size projects as well as to optimize the rural electrification planning tools to establish more evidence-grounded criteria for extrapolating proxy information. In conclusion, this doctoral thesis resulted from the adoption of an original cross-cutting approach throughout the multi-dimensional nature of access to energy. It started from the practitioners’ point of view to bring the scientific research beyond the state of the art and provide results to sustain the mini-grid deployment at scale in developing countries.