Microgrids and High - Quality Central Grid Alternatives: Challenges and Imperatives Elucidated by Case Studies and Simulation

Central grid extension is the predominant policy taken by governments in developing countries towards increasing access to electricity. While the levels of consumption afforded by access to the central grid have the potential to greatly enhance human development, actual consumption is subject to the reliability of the central grid. Further, due to the institutional complexities of extending the central grid, a policy towards grid extension may not result in actual construction for many years. Many developing countries have low levels of grid reliability, especially in rural areas, which results in dependence on low quality lighting fuels like kerosene as a back-up to the grid, and their continued use while waiting for a grid extension to arrive. High quality alternatives for lighting, such as solar lamps, solar home systems and microgrids have the potential to be deployed more quickly than central grids and may have higher levels of reliability. Using demand curves for lighting in five African countries derived from the Lighting Africa Market Assessment, we model consumer surplus for lighting provided by low quality fuels, high quality grid alternatives and the central grid. We derive a functional form for the willingness to pay for high quality grid alternatives at empirical rates of central grid outage, and a functional form for a consumer’s maximum acceptable central grid outage rate. Our analysis demonstrates that electric lighting saves consumers on the order of 1 to 5 USD per month, and increases consumer surplus by 2 to 18 USD per month. We find that high quality lighting alternatives are preferable to central grids that have an average system unavailability index (ASUI) of 13% to 40%. Unless countries take a parallel path approach to electrification,