BNEF: Mini-Grids Are Crucial for Tackling Climate Change and Boosting Sustainable Development

Climate change is a thorny issue with no easy solutions. Every level of society will feel the impacts. Some, in fact, already do. The communities that are bearing the brunt of climate change are now, for the most part, also those with the fewest resources to address the impacts. In the U.S., communities of color and low-income communities are mostly likely to suffer from climate change the most.

The lower costs of mini-grids could help tackle climate change worldwide

But in developing countries, where institutional, economic and political issues may increase the pressure on low-income communities, especially in the face of climate change, there are solutions that could both address global warming while providing other direct benefits to the people living in those communities.

A new study by BloombergNEF (BNEF) and Sustainable Energy for All (SEforALL), State of Global Mini-Grids Market Report 2020, highlights a technology that has the potential to be a game-changer for rural communities in particular.

A mini-grid is an energy system that is not connected to a centralized grid and produces between 10 kilowatts to 10 megawatts of energy, enough to power a home, a business or even a small community. According to the study, mini-grids could power about 111 million households in sub-Saharan Africa and Asia, about half of those lacking electricity, by 2030.

Due to rapidly decreasing costs of solar power and battery technology, mini-grids have become more affordable in recent years. Last year, a study by the World Bank found that mini-grid capital costs in Africa have declined by more than 50 percent since 2010. Due in large part to lower costs and increased investment, 19,000 mini-grids have been installed in 134 countries, providing electricity for 47 million people.

Mini-grids could boost rural electrification in Uganda

The BNEF and SEforALL report looked at mini-grids in six case studies in Africa and Asia. Uganda, one of the case studies, is an interesting look at how mini-grids could be integrated into communities. Only a quarter of Ugandas have access to reliable electricity, and in rural areas, only 10 percent have access. All of this is further compounded by the effects climate change is having on the country.

Sometimes called the “Pearl of Africa” for its lush landscapes, Uganda is seeing prolonged dry seasons and more intense rainfall and heat. The increased dry and hot periods are taking their toll on people with HIV/AIDS, about 6 percent of the population, who suffer more fevers and coughs, and on women who have endured a spike in domestic violence. Further, droughts threaten Uganda’s most important industry: coffee. One in five Ugandans rely on coffee production for their income, and according to the government, climate change could cut the country’s coffee production in half by 2050, at a loss of $1.2 billion.

Electrification, especially rural electrification, offers many benefits, such as raising household income and increasing access to education opportunities. But in places like Uganda, it could also help lead economic transformation, such as off-season farming and value-added agro-processing. Centralized, utility-scale electricity has long been a challenge in areas of sub-Saharan Africa, and decentralizing electricity is an opportunity to leapfrog those antiquated energy technologies and bring the source directly to the consumers, much like cell phone technology enabled business development in previous decades.

Further, solar power is a clean technology, both in terms of air quality and water. Ninety-four percent of Uganda’s energy consumption is biomass, posing some risks to indoor air quality if burned indoors, which is sometimes the case in rural areas. Diesel generators are common, but they are also toxic: There are about 40 contaminants in the typical exhaust of a generator, not to mention the environmental impacts of diesel.

Mini-grids could use generators as a back-up technology, but a shift to solar could literally be a breath of fresh air, especially as battery storage improves and continues to drop in cost. Solar uses negligible amounts of water — which, when thinking of more traditional ways to electrify rural communities, could enable scarce water during dry seasons to be used for other essential needs.

Investment is crucial for mini-grids to scale up

The biggest obstacle to deploying mini-grid technology to Uganda and other countries is financing. The study found that the 14 funders of the Mini-Grids Funders Group had approved $2.1 billion by March 2020, but only 13 percent of that has been disbursed. Pure commercial financing is also limited because mini-grids by nature lack the scale that a lot of investors seek. Developers’ project track records are so far relatively slim because there are so few examples to draw from. Further, some developing countries lack the appropriate regulation, reforms or political stability to make investors comfortable.

But the benefits are clear. In addition to helping combat climate change with clean energy technology, providing social and economic benefits — including training local people to install and maintain equipment — should be a consideration. Some experts suggest that a combined public-private investment of $100 billion could provide electricity for 500 million people across Africa. Lifting people out of energy poverty and giving them some control over the economies in their own communities can have far-reaching positive effects.

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