Opinion The small grid – energy security, with a little help from the Sun

But besides delivering reliable and clean power to these unserved communities, mini-grid companies are also offering a range of other services that drive rural prosperity — mobile telephony, irrigation, agro-processing, e-mobility, to name a few. They also provide sales and financing of appliances that are otherwise unavailable. In other words, these are not merely electricity utilities providing power, they are rural development accelerators. In recent times, several heads of multilateral institutions, company executives and experts (including both co-authors of this article) have noted that while access to clean energy directly provides high-quality energy services, it can also enable other livelihood activities — they also provide opportunities in the healthcare and agriculture sector.

Decentralised energy systems like solar mini-grids are also emerging as an important answer to climate shocks like drought, heat stress and flooding. This adaptation and resilience capability of mini-grids is critical for farming-dependent rural Africa and Asia, which are the world’s most climate-vulnerable regions.

In the unlikely event that centralised grid infrastructure reaches these communities, mini-grids also offer an important complement. Cambodia is a prime example. Through the 1990s, hundreds of diesel-powered mini-grids were built and operated by local entrepreneurs. Eventually, they were connected to the main grid as local distributors. Today, more than 250 formerly isolated mini-grids are part of the national grid, helping serve more than 1 million consumers.

In India, about 700 solar mini-grids are owned and operated by a handful of private companies that, unlike state-run mini-grids, are unsubsidised and commercially viable purely based on customer payment. These grids are largely in the states of UP, Bihar and Jharkhand, which have seen significant progress on a number of sustainable development goals based on the success of these mini-grids. UP and Bihar have introduced regulations to enable private-sector entrepreneurs to set up mini-grids and to provide a mechanism for private-sector investors to look at this application favourably.

Solar is the cheapest form of energy generation in most countries, and its climate, energy and economic benefits are increasingly apparent. However, the current level of global solar investments represents only 10 per cent of the required amount to achieve net-zero emissions. Notably, developing countries, which are home to over 50 per cent of the global population, received a mere 15 per cent of renewable energy investments in 2022. In Sub-Saharan Africa, per capita investment in renewable energy saw a concerning 44 per cent drop between 2015 and 2021. To put this into perspective, investments in North America are 41 times higher, and, in Europe, they are 57 times greater.

This glaring disparity, compounded by a bias towards large-scale solar projects, underscores a significant imbalance in the types of investments being made. To unlock the potential of smaller-scale solutions like solar mini-grids, it’s imperative to implement guarantees and introduce innovative financial mechanisms complemented by robust risk underwriting that can catalyse private sector investment. The International Solar Alliance (ISA) is actively spearheading such an initiative through its Global Solar Facility (GSF). Geared towards catalysing investments in solar projects, the GSF places special emphasis on underserved regions in Africa. With a fund of $100 million, it aims to enable $10 billion in investments, providing clean energy access for 35–40 million African households by 2030. This fund, fortified by payment guarantees, insurance, and investment vehicles, will mitigate risks and bolster investor confidence in decentralised solar applications in Africa, thus rectifying the skewed investment pattern in solar.

Solar energy presents a financially viable path to energy independence, bolstering security and reducing reliance on fossil fuels. Moreover, the cost of solar PV energy is now highly competitive, standing at $24/MWh, lower than both coal and natural gas — this is, of course, contingent on sunlight availability. The substantial drop in solar module costs over the past decade underscores the holistic benefits of investing in solar energy.

Creating a diverse energy mix, with adequate centralised and distributed renewable generation, is the future of energy, and is suitable especially in underserved markets where the cost of grid extension to rural, off-grid areas is prohibitive. Efficiently planned and well-run solar mini-grids rapidly provide strong and dependable grid-level electricity, surpassing the reliability and cost-effectiveness of alternative electrification methods. India’s successful initiative to offer electricity through both large centralised grids and decentralised renewable energy sources is serving as an exemplar for clean energy adoption. It demonstrates how collaboration between private and public sectors can drive innovation, enabling developing economies to achieve a trajectory of robust energy supply with minimal carbon emissions.

Private mini-grids — combining solar with battery storage — are an affordable, technically mature, easily deployed, bankable solution that needs more support at a time when urgent energy access and climate action are required.

Mathur is the director general of International Solar Alliance; Mattson is chairman of Husk Power and board member of the Africa Mini-grid Developers Association