Smarter Mini-grid systems and associated business models

Presented on OTTI Photovoltaic Hybrid & Mini-Grid Conference April 26-27th 2012
Fabrice Poulin, Managing Director Infinergia Consulting 155-157 Cours Berriat F-38028 Grenoble Cedex 1

1. Introduction Purpose of this document is to illustrate global benefits of transforming mini-grids into smarter mini-grids. This evolution could be a major boost to mini-grid market as it brings economical benefits and helps consolidating more solid business plans by securing revenues. A Total Cost of Ownership (TCO) analysis including CAPEX (capital) plus OPEX (operational) expenditures will be used to support our reasoning. Well also illustrate this approach by concrete initiatives and examples. 2. Environment analysis Observation #1: If we analyze globally the chain of electricity generation up the distribution at end user level, we find out many sources of inefficiency (25% or above T&D losses and inadequate production versus needs1) that impact the economical equation. Outages, cable and power theft, meter tempering, cash management and recovery cost are important externalities in several countries that are hardly taken into account or even measurable. We also know that the cost spent on implementing (CAPEX) large distance electricity transport infrastructure and maintaining them (OPEX) is hardly making economical sense, particularly in rural areas or low population density areas.

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Observation #2: Like mobile telephony allowed developing countries to skip costly wire line developments, mini-grids and renewable energies allow usage of latest and most efficient technologies, which rival quite well with aging infrastructure technologies in countries where they have been deployed since tens of years. Coupled with communication technologies, new business models can emerge and be applied to energy production, distribution, purchasing and consuming. 3. Concept development Today technologies allowing intelligent load (usage) and resource (energies including renewable and fossil with priority settings) management are already applied into smart-grid implementations. Smart-grid approach on mini-grids is a disruptive approach allowing fully optimized power generation and delivery while guaranteeing steady revenues and keeping operating costs (OPEX) at the lowest level. In parallel these savings would compensate the extra system cost (CAPEX) spent on smart-grid systems. Main benefit of smart-grid technology is to address the externalities we mentioned previously. Smart metering systems have already proven their efficiency with regards to electricity theft and other losses (e.g. in Italy2).

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On the revenue recovery aspect, pre-payment business model is obviously proving its efficiency. It originated in the 50s in U.K. and is being used in over 50 countries all over the world. In South Africa alone, therere over 4 Million of pre-paid meters installed. Equipped with keyboards, pre-paid meters can be activated via various means: from simple scratch card to modern mobile phone-based e-payment, which allows instantaneous activation. In terms of financial balance, all costs can be impacted on the pre-payment: not only variable cost like electricity consumption but also fixed fees to cover meter cost and its installation. Another advantage is how they are being impacted to the consumer: they can be leveled over usage and time (equivalent to handset subsidies by mobile operators!). Such deployments can be seen in Mali (Somelec case study3 / STS system4) and other developing countries. A big advantage in developing countries is that mini-grid projects are simpler technically because demand of electricity is simple: it aims at providing electricity for domestic usage and less for industries. With simpler system typologies, a smart grid approach should be simpler and cheaper to implement, to the contrary of what we can notice in advanced countries! So extra CAPEX expenses should be limited due to this reasonable level of complexity. As such, developing countries are the best candidate for early adoption of smarter mini-grids. Today, technologies are available but complete product offerings are barely visible and easily replicable pilot projects and associated economical analysis are too rare. The scalability of the system is already demonstrated: Oryx project from mobile operator Orange 5 which allows Telecom Base Station Transceivers main power to also charge nearby villagers mobile phone batteries via a peripheral system The Smart Mini Grid (SMG) project from TERI in Gurgaon6 in India involving multiple renewable energies The CEMAR project by Zigor et. al. in Ilha Grande" island, Maranho State, Brazil.7

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4. Conclusion The next step is the larger diffusion of this smart mini-grid concept beyond R&D projects, involving more utilities and into more countries. The sweet spot remains in our opinion in developing countries (Brazil, India, China in particular).

5. References
In India, in 2004, at least 25% (and up to 50% in some utilities!) of electricity is lost in transmission & distribution : http://www.powermin.nic.in/distribution/apdrp/projects/pdf/Presentation_on_AT&C_Losses.ppt Enel Telegestore project & associated savings www.aneel.gov.br/Arquivos/PDF/ENEL-Fabio_Borghese.pdf Pre-payment scheme of the Somelec via STS system described by RIAED (in French) http://www.riaed.net/IMG/pdf/RIAED_Initiation_au_prepaiement_draft_06.07.07.pdf Standard Transfer Specification for prepayment systems: http://www.sts.org.za/ Oryx telecom base stations (in French) : http://www.silicon.fr/les-innovations-au-coeur-de-la-strategie-dorange-en-afrique-42850.html The Energy & Resources Institute (TERI) Smart Mini-Grid project in Gurgaon, India, inaugurated July st 1 2011. http://www.teriin.org/index.php?option=com_ongoing&task=about_project&sid=80 Zigor Mini-Grid system with metering approach on Brazilian Island: http://www.zigor.com/eu/index.php?option=com_content&view=category&layout=blog&id=12&Itemid= 31&lang=en
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