Volume 24: Sustainable Energy Solutions for a Post-COVID Recovery towards a Better Future: Part VII

Solar-PV-Based Mini-grids in Rural Areas of Developing Countries: An Economic Evaluation of Two Real-World Case Studies in West Africa Thomas Bruderhofer, Reinhard Madlener, Frederic Horta

Abstract

This study evaluates the sustainability of solar PV-based mini-grids for rural electrification in developing countries. A discounted cash flow method is used to compare the economic feasibility of a real-world solar-mini-grid and a diesel-fueled mini-grid located in West Africa and the subsidy needs of the two projects. It is found that both mini-grids currently need high subsidies due to demand stimulation problems and high distribution losses. Still, the results provide evidence that PV-based mini-grids are already economically feasible without subsidies if they are located in customer environments with an ability to pay (ATP) greater than 0.57 €/kWh (assuming soft loans, stimulated utilization rates as well as hardware cost decrease). The approach and findings are especially useful for mini-grid developers/operators and investors with a focus on rural electrification projects. This study further identifies cost reduction potentials by means of demand stimulation in green mini-grids.

Keywords Mini-grid, Solar PV, Diesel, Subsidization, Ability to pay, Development bank loans, West Africa