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Three good reasons for off-grid energy - and what are the main barriers

Historically, access to electricity in most countries has been achieved by extending a grid that is connected to centralised, large-scale thermal power plants. In developing countries – where energy poverty is a major constraint to development – governments continue to focus on high-cost and time-intensive projects that prioritise grid extension.

But off-grid renewable electricity, especially solar, provides the most viable way to ensure that everyone has access to electricity in rural areas (contributing to Sustainable Development Goal (SDG) 7), according to the International Energy Agency (2017). It offers a bottom-up and demand-led approach that can complement a top-down planning approach based on the grid.

Drawing on five case studies from the Democratic Republic of the Congo (DRC), Nepal, Nigeria, Myanmar and Tanzania, these country examples show that off-grid renewable electricity can also contribute to the transformation of lives by improving health (SDG 3), education (SDG 4), gender equality (SDG 5), income generation (SDG 8) and environmental sustainability (SDG 13). There are many challenges that prevent the growth of off-grid renewable electricity and getting electricity into the hands of those who need it most, and this report makes recommendations to overcome these barriers in the policy environment.

 

Three reasons for off-grid energy 

1. A faster delivery of energy

Off-grid renewable electricity provides access faster than extending the grid to rural areas.

The grid has a role to play in bringing electricity, especially in urban areas. However, it mostly serves wealthier households and progress is too slow. Investments in grid extension take too long, whereas people can set up solar lamps and SHSs in just a few days or weeks, rather than waiting years or even decades for the grid to be extended.

Despite this, research has found that large-scale grid development and extension is still the main focus for governments to increase access to electricity in these five countries, and many others in Africa and Asia. In addition, government subsidies can support traditional alternatives, such as kerosene and diesel, that are dangerous, unhealthy and expensive.

 

2. A more reliable source of energy

Household solar, mini-grids and small hydropower can offer alternative, more reliable and secure supplies of electricity, compared to unreliable grid connections or diesel generators in regions experiencing intermittent fuel supply.

For example, electricity production in Nepal is almost entirely from hydropower but the country’s electricity system is unreliable and a quarter of power is lost in transmission. Power cuts in rural Nepal can last nine hours, putting health clinic patients’ lives at risk from an absence of lighting or the failure of oxygen machines. Whereas, health care has improved in health clinics that are powered by solar, as they are no longer forced to rely on diesel generators.

 

3. A catalyst to transform lives

Off-grid electricity like solar and small-scale hydropower often provides people with electricity for the first time. It can improve health, air quality, women’s empowerment, safety, education, and open up opportunities for new sources of income, savings and setting up small enterprises. It can also be used in humanitarian and conflict situations. 

 

Barriers

Despite these benefits, many governments, donors and international finance institutions are not yet convinced of the critical role that off-grid renewable electricity can play in the energy sector. Many countries have been electrified through a grid and most national energy policies have been built around this approach in the past. Overall, the governments of the five case study countries in this report – DRC, Nigeria, Tanzania, Myanmar and Nepal – continue to focus on the role of centralised and grid-connected energy in energy sector development. However, energy policies have not kept pace with rapid developments in new energy technology, and countries are missing opportunities to achieve electrification.

There are many challenges that prevent the growth of decentralised renewables. Research in these five countries found barriers in the enabling environment for decentralised renewables, including:

  • Inadequate policies and a lack of policy coherence – such as the lack of a clear framework and bureaucracy for developing mini-grids – can be particularly challenging for private investment. And government officials’ limited expertise in off-grid renewable electricity hampers their ability to design effective policies and ensure implementation. Mini-grids require effective national governance frameworks. In Nigeria, local governance frameworks were developed by Plateau State in the absence of effective national frameworks, which can be led by the government or community.
  • A lack of access to finance affects the ability to invest in off-grid renewable electricity. For example, in Nigeria, stringent banking regulations affect competition and the development of mobile banking. In Nepal, complex procedures and high interest rates reduce lending to lower-income households and small-and medium-sized enterprises (SMEs).
  • Fiscal barriers, for example, high tariffs for off-grid solar products or components, such as solar batteries in Nigeria, are a constraint on imports which reduces the cost-competitiveness of solar systems, and different tariffs for renewable energy components create confusion for customs officers.
  • Subsidies: a high level of public subsidy for on-grid electricity and off-grid fossil fuels discourages private investment in renewables and does not provide a level playing field for off-grid electricity. This is evidenced in the case of Myanmar and Nepal, for example.
  • Low-quality solar products and a lack of quality standards in most of the five countries results in a poor reputation for solar energy, which hampers the retention of solar customers and growth in solar markets.
  • Low levels of consumer awareness of solar power prevent the expansion of solar markets in most of the five countries.

 

 

Excerpt from: Pioneering Power. Transforming lives through off-grid renewable electricity in Africa and Asia, edited by Tearfund and Overseas Development Institute, 2018.

 

Download the full report here.