Innovation Lab

5 defining factors of the power grid of the future

5 defining factors of the power grid of the future

Written by Tombo Banda, Faisal Olanipekun, Yemi Gafaar

At the recent Sustainable Energy for All (SEforALL) | #SEforALLForum held in Kigali, Rwanda, CrossBoundary’s Mini-Grid Innovation Lab teamed up with Power for All, Kenya Power, Umeme Ltd, and RMI Africa to discuss transitioning to the grid of the future.

From left to right: The CrossBoundary Energy Access and Innovation Lab teams at the #SE4AllForum held in Kigali, Rwanda; Sustainable Development Goal 7: Affordable and Clean Energy; and panelists Suleiman Babamanu, Nigeria Program Director, RMI Africa; Florence Nsubuga, Chief Operating Officer, Umeme; and Tombo Banda, Innovation Lab Lead, CrossBoundary, facilitated by Kristina Skierka, CEO, Power for All.
The key takeaway from the #SEforAllForum panel — the future grid is already here.

Two years ago, the Innovation Lab team heralded the evolving dynamics of the power grid as we know it, noting “If the centralized grid of the 20th century was the cable TV of electrification, then mini-grids and smart inverters are YouTube. Just as YouTube distributed the production and consumption of video content, mini-grids and smart inverters will distribute the production and consumption of energy.”

Today, we see the future grid in operation and development across the continent, growing and adapting as is required to close the gap on more than 600 million people who still lack access to electricity. This decentralized grid of the future is a network balancing millions of nodes of generation, storage, and consumption across utilities, public-private partnerships, and consumers. A highly functional power grid will require collaboration, cooperation, and learning across all these stakeholders.

The Mini-Grid Innovation Lab, established by CrossBoundary Advisory and The Rockefeller Foundation in 2018, works with mini-grid developers and utilities to test innovations that reduce cost, increase consumption per customer and develop a smarter, more integrated grid.

We believe there are five defining factors shaping the future power grid today.

1. Consumer-centric
Future utility and mini-grid customers are expected to be largely rural and low consuming, while urban and commercial customers are increasingly expected to participate in production and distribution of power themselves. Serving these customers successfully requires a customer-centric approach –expanding diversity within and beyond electricity sales and updating customer offerings, infrastructure, and administrative capabilities in line with what the customers want.

This approach means both utilities and mini-grid developers need to further cultivate their customer relationships and forge new partnerships and collaborations to meet these changing needs.

2. Economically viable

Insufficient demand affects the economic viability of both mini-grids and the main grid. Almost 80% of demand on a mini-grid is driven by 20% of customers. Similarly, KPLC’s customer base is dominated by ~6 million domestic lifeline customers, however, large power customers account for only ~7,000 but are responsible for more than 50% of total consumption. This imbalance means the majority of customers on a grid or mini-grid do not generate revenues sufficient to cover their cost of service, resulting in low economic viability.

Demand stimulating innovations, such as appliance financing, have been used in rural electrification since the 1930s. Mini-grid developers across the continent have explored appliance financing programs to boost their revenues, an approach the Mini-Grid Innovation Lab studies closely and is currently scaling across the continent. Utilities across the continent have taken notice, and KPLC and UMEME are just two examples of utilities incorporating appliance financing into their business model drive revenues and finance operations.

Innovations that drive down cost such as bulk procurement are also being explored. While bulk procurement is common practice across utilities, but mini-grids developers are only beginning to see the potential opportunities of this approach.

3. Robust
The Lab’s recent article on reliability highlighted how unreliable power acts as a brake on African enterprise, stifling economic growth. Most countries in Sub-Saharan Africa do not receive reliable power through the main grid — across 34 countries, 25% of respondents got power less than half the time through their main grid connection on average[1].

DRE, smart inverters and storage solutions will play an increasingly large role in increasing the resiliency of the future power grid. Utilizing this technology is often cheaper alternative than extending the main grid or using diesel back-up, and it improves reliability. Data from 66 solar and battery mini-grids across rural Africa shows that customers experience ‘normal’ stable supply, between 220V and 240V, 92% of the time.

4. Flexible
Technologies including smart inverters and mobile battery rental solutions allow developers to combine the benefits of a decentralized system — greater reach, reduced upfront capital expenditure — with the advantages of aggregating loads and capacity that come with a centralized system.

As demand grows, separate generating systems with smart inverters can be installed to share the load across all connected systems. Mobile battery rental solutions provide further flexibility allowing power to be taken where it is needed. This interconnectedness and flexibility ensures excess energy is used instead of wasted, and energy is supplied to serve customers where there would otherwise be a deficit.

5. Interconnected
Utilities have been interconnecting main grids across borders and regions for decades. As more mini-grids look to become integrated with utilities, best practices seen in regional interconnection and power-sharing models between utilities could prove beneficial.

New regulations will be needed to manage this integration, but innovative approaches which could be borne from it will provide reliable generation, distribution, and investment.

Partners for the Grid of the Future, featured at the Sustainable Energy for All Forum 2022
Tell us what you think: what are the key components needed to build the grid of the future?

[1] Customers do not get reliable connection from the grid in most countries in Sub-Saharan Africa. Source: Afrobarometer Dispatch №334