The Most Economical Mode of Power Supply for Remote and Less Developed Areas in China: Power Grid Extension or Micro-Grid?

There are still residents without access to electricity in some remote and less developed areas of China, which lead to low living standards and hinder sustainable development for these residents. In order to achieve the strategic targets of solving China’s energy poverty, realizing basic energy service equalization, and comprehensively building up a moderately prosperous society, several policies have been successively promulgated in recent years, which aim to solve the electricity access issue for residents living in remote and less developed areas. It is of great importance to determine the most economical mode of power supply in remote and less developed areas, which directly affects the economic efficiency of public investment projects. Therefore, this paper focuses on how to select the most economical power supply mode for rural electrification in China. Firstly, the primary modes to supply electricity for residents living in the remote and less developed areas are discussed, which include power grid extension mode and micro-grid mode. Secondly, based on the levelized cost of electricity (LCOE) technique, the life cycle economic cost accounting model for different power supply modes are built. Finally, taking a minority nationality village in Yunnan province as an example, the empirical analysis is performed, and the LCOEs of various possible modes for rural electrification are accounted. The results show that the photovoltaic (PV)-based independent micro-grid system is the most economical due to the minimum LCOE, namely 0.658 RMB/kWh. However, other power supply modes have much higher LCOEs. The LCOEs of power grid extension model, wind-based independent micro-grid system and biomass-based independent micro-grid system are 1.078 RMB/kWh, 0.704 RMB/kWh and 0.885 RMB/kWh, respectively. The proposed approach is effective and practical, which can provide reference for rural electrification in China.