The use of microgrids in rural electrification projects based on renewable energy sources are mostly associated with bringing basic services to communities. Microgrids are however also increasingly being used to power small businesses in rural areas. This article is a combined summary of several studies on rural microgrids and the productive use of energy in African installations, covering technical, business and social considerations.
Rural electrification is key for the socio-economic development of non-urban regions in Africa. While off-grid renewable electricity has been made available for uses such as lighting, access to information, comfort and entertainment, it is not sufficient by itself to trigger economic development in rural areas. Since there is a high correlation between energy access and economic growth, productive use of energy (PUE) could also be aligned in to trigger economic development through enhancement of the income generation of the local population .
PUE could be defined as agricultural, commercial and industrial activities, powered by renewable energy sources, which generate income. PUE can be employed at various levels such as by powering machines for pumps, drip irrigation, milk machines, mechanical workshops, refrigeration of food, mobile charging, IT supply for businesses, processing and storage industries, and so on.
The development and availability of RE and microgrid technology makes the viability of a system that not only provides domestic electricity but reliable and sustainable power for small industry and businesses much more achievable than in the past. There are numerous initiatives aimed at providing access to energy in Africa, but not all are focussed on PUE. One such program is the productive use of renewable energy (PURE) run by the alliance for rural electrification (ARE) . Studies show that the available technologies are able to serve the market needs by offering a competitive range of products with short break-even periods .
The provision of even basic electricity to households causes a major shift in activity which allows people to spend less time on domestic production and frees people to move into the labour or employment market , which encourages the establishment of productive enterprises. Access to modern energy sources impacts on one major microeconomic outcome of considerable interest: the ability of the poor to use their labour resources for market production. If households move towards electricity usage once infrastructure becomes available, potentially large amounts of time spent in domestic production could be diverted to other economic activities.
PUE means that local jobs on different levels of qualification are created directly, as the renewable energy equipment needs to be installed, operated and maintained, and the access to electricity favours business creation and expansion. The jobs and businesses thus created generate income, leading to an increased purchase power of the local community. A useful knock-on effect is that the increased income enhances the consumer’s capacity to pay for the energy services and invest in high-quality, reliable products.
Planning and requirements for a successful system
Demand for electricity from small industry and businesses is a key success factor for mini-and micro-grids. Without linkage to and support for these users, micro-grids are likely to struggle to increase local commercial uptake of electricity or reach the critical level of sales necessary to secure their financial viability. The revenues generated by household customers are often small because of low levels of electricity consumption. By fostering PUE, operators can increase the average electricity consumption and revenue for the micro-grid, thus improving the chances of long-term viability.
It has been found to be important to understand existing and potential demand for electricity in detail, and to consider existing energy sources and economic activities when developing solutions and exploring potential new activities. New activities should be embedded in existing market value chains, otherwise substantial support will be needed to build new markets. Key elements to be considered are the level of expected and future demand, the capacity and willingness to pay and seasonal revenue variations of the local entrepreneurs. In addition, studies show that installation of renewable energy systems without any reciprocal commitment such as payment for electricity consumption, handling the basic maintenance, etc., should be avoided as these strengthen the community “ownership” of the system and stimulate private sector involvement.
PUE presents many business model considerations for a microgrid system developer as they can increase revenues and lower costs for an appropriately designed system or an existing underused system. However, they can also present significantly different considerations than residential loads in terms of tariffs, risks, system design and other key considerations.
Customer load model
Research has found that a minority of the customers on microgrids consumed most of the electricity. The top 10% of customers (small businesses) generated five times the average revenue per user of the remaining 90% of customers and 40% of total revenue. Most customers consumed fewer than 250 Wh/day, yet they remained important as a hedge against the loss of higher use customers.
A typical business model focuses on larger anchor clients, which have large consumer loads and are responsible for a majority of electricity sales. Large anchor clients in rural areas are scarce , and models based on smaller business customers, including agricultural loads, small manufacturing loads, and commercial or retail loads, and community customers, which are mainly private households and make up a small proportion of the micro-grid’s loads, are generally more suitable for microgrids.
Payment and tariff models
There is a high penetration of mobile phones in rural Africa. Mobile phone billing and payment systems have made the adoption of microgrids and use of electricity much easier for customers. Rural customers are willing and able to pay for electricity access, if payment systems are designed to meet their needs. The studies indicate that an estimated 70% of customers are not strictly limited by income or energy consumption. One way to potentially increase energy expenditures would be to customise payment plans to meet customer needs. For example, providing weekly or monthly payment plans for certain customers. To encourage customers to join these plans, customers would need to understand the benefits, such as a lower tariff, fewer billing-related electricity cut-offs and greater convenience .
Microgrid tariffs should be set at levels that account for the ability and willingness of rural customers to pay. The tariff, with an applied subsidy if relevant, must reflect the true cost of providing power for the microgrid to be successful. Some PUE schemes are particularly sensitive to the price of electricity and can be stimulated to use more power through appropriate tariff setting. Most microgrids require customers to prepay for electricity. The more electricity customers consume, the higher the prepayments needed. Electricity usage can be monitored through load or smart meters. Prepayments are usually recorded, cashless, and paid directly by the user with a mobile money transfer.
Although the incorporation of PUE into a microgrid can have advantages, there exists the possibility that equipment may cause power quality problems for other users. There is a unique set of technical challenges when determining whether and how to connect productive loads to microgrids, and the requirements are far higher than for a system providing lighting and entertainment loads. There is an increasing focus on the quality of electricity service provided. It is important to define the service level provided to productive users in terms of key metrics such as peak power, power availability, and reliability. Performance monitoring, metrics, and evaluation play an important role in the development and operation of microgrids.
The following are key performance indicators that have an impact on PUE schemes:
Electricity quality is measured in terms of voltage and frequency variations. The key question is whether the power provided is of a sufficient quality to safely and effectively meet their needs. Productive equipment cannot be operated properly if the voltage or frequency deviates from its design parameters. Larger equipment, particularly motors, can drive down the voltage and disrupt supply to other customers due to the high inrush or starting currents. Frequent monitoring of the system voltages and frequencies is required to identify and solve power quality issues.
Power availability is defined by energy availability, and duration of daily service. The key questions are whether power is provided in the amount that meets expectations, and is available for the specified duration and at an appropriate time of day. Depending on the service limitations of the microgrid technology, some developers have tried to incentivise small businesses to operate during non-business hours through “time-of-day” tariffs and other methods.
A key issue is whether electricity is supplied with enough reliability to meet PUE business needs. The reliability of microgrids in sub-Saharan Africa is generally much better than that of national grids in the same region. Blackouts can significantly disrupt productive activities, leading to financial losses, the extent of which depends on the frequency and duration of the interruptions. Some users rely on costly backup generators to address this issue.
The load to be served is one of the most important considerations in the design of a microgrid, which must be designed to serve the required loads while maintaining power quality, reliability, and availability. To do this properly requires that decisions about key design requirements such as peak power, reactive power, single- or three-phase systems, and capacity utilisation are made carefully.
Single- vs. three-phase distribution networks
Single- and three-phase networks are both used for AC-based microgrids in Africa. There are technical and cost trade-offs when deciding which to use. Single-phase power is sufficient for basic loads such as lighting, small electronics, and some small motors. Three-phase power is typically needed for any large loads, especially large motors. When large motor loads are added to a microgrid system, the decision between a single- and a three-phase system becomes more critical.
Single-phase motors require more current than three-phase motors, so as motors become larger, three-phase motors become more economical to operate and less expensive to purchase. Most motors above 3 kW require a three-phase supply. Although specific residential consumers will typically only need single phase power, as microgrid systems become larger and add PUE schemes, they are increasingly more likely to need to provide three-phase power to at least some consumers.
Dispatchable backup generators
A key decision is whether to incorporate a dispatchable generator, typically diesel, or to rely on a purely renewable option that incorporates batteries and other load control options to provide consistent power from what is a variable resource. Diesel generators should be considered on a case by case basis that weighs the trade-offs between several factors.
Power factor and start-up currents
PUE loads can sometimes cause low power factors either locally or throughout the microgrid system because of their reactive power demands. The system must be designed to both supply the necessary reactive power for these loads and the correct power factor if needed. Low power factor and the need to supply large amounts of reactive power can also jeopardise the business model of microgrid operators as they are typically not compensated for reactive power or the losses associated with poor power factor which may result from the poor selection of low quality equipment by a consumer.
Large PUE loads can put additional strain on microgrid power systems, which may impact both the PUE load and other customers. Starting currents for electric motors can be three to four times their nameplate current for up to several seconds, depending on the inertia of the motor and the connected appliance.
Examples of PUE enterprises from Africa
Risks and mitigation strategies
The development of PUE projects in a microgrid involves many risks, which need to be evaluated before proceeding.
Poor estimation of expected demand from PUE
The main risk in assessing the power needs of PUE. Most developers overestimate the demand from existing or new PUE, leading to underuse of the microgrid which is likely to drive up costs. There are many reasons demand from PUs may not meet expectations. The demand assessments may be unrealistic, or the entrepreneurs may lack the necessary skills and access to finance and PU equipment. There are several potential mitigation measures that can address this risk:
Payment risk is another challenge for developers. Some customers may be unable to afford the initial connection charge or ongoing electricity bill, and PUE schemes are not immune to this problem. Most microgrid operators operating in remote rural areas require their customers, both residential and commercial, to prepay for a certain service or level of consumption. While this addresses the short-term payment risk, it cannot guarantee the long-term revenues of the microgrid and may be a barrier to entry for some energy intensive PUE schemes.
 T Dinkelman: “The effects of rural electrification on employment: New evidence from South Africa”, Population studies centre, University of Michigan, 2008.
 S Booth and D Kollanyi: “Productive use of energy in African microgrids: Technical and business considerations”, NREL, August 2018.
 D Lecoque and M Wiemann: “The productive use of renewable energy in Africa”, Alliance for rural electrification, 2015.
 D Lecoque, M Wiemann and N Ling: “Best practices for clean energy access in Africa”, Alliance for rural electrification, 2015.
 C Blodgett, et al: “Powering productivity: Early insights into mini-grid operations in rural Kenya”, Vulcan impact investing, 2016.
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