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Norplan study: Cost competitiveness of rural electrification solutions

NORPLAN’s recent study, carried out on assignment for NORAD, compares the costs and benefits of various solutions to rural electrification. The study indicates that distributed renewable energy solutions, particularly solar PV, are increasingly more attractive than grid-based solutions.

In the developing world, and especially in Sub-Saharan regions, large areas lack access to the electrical distribution network. Low density, low electricity tariffs and long distances hinder utilities from investing in grid extension to remote rural areas. On behalf of NORAD, NORPLAN is carrying out a series of policy briefs, aimed at contributing with real time understanding of the costs and benefits of electrification, as well as the opportunities and barriers associated with a transition to renewable based mini-grids.

The benefits of electrification are many: lighting benefits, education and communication (radio/TV/internet), health and hygiene (avoided fumes from kerosene lamps and improved medical storage), environmental benefits (avoided fumes and less greenhouse gas emissions), time use, and finally productive uses (local industry and micro enterprise). The overall social economic benefit of electrification is estimated to be around US$ 1.0-1.5 per kWh (WB IEG 2008), which is quite a substantial, and often unrecognized, figure. The study compares these quantified benefits of electrification with up-to-date cost estimations for various electrification technologies.

The study demonstrates that solar PV mini-grid (and off-grid) is cost competitive with fuel generators and an economically viable alternative. The benefits of solar PV off-grid are many. The resource is abundant and locally available, and it is sustainable, clean and emission free. Additionally, there is no need for transmission lines; the energy source is free and predictable with no fluctuating fuel prices. No moving parts make it easy to operate and maintain. The system is flexible and scalable and has a short construction time. Additionally the installation costs have come down considerably over the years and they are projected to be reduced even further.

Yet, the solar PV market in the sub-Saharan region has much room for development before being commercially sustainable. There is a need for qualified personnel and project managers, investors and financial institutions, better infrastructure and a competitive market structure. Falling prices of modules and other equipment combined with a development of the African PV market can considerably reduce the cost of PV on the continent.
More information on the results of the study, including development of installation costs, identified barriers for solar off-grid and cost competiveness of various rural electrification technologies can be found in the reports.

  1. "NORPLAN Study: Cost Competitivness of Rural Electrification Solutions "
  2. "Cost-benefit analysis of rural electrification"
  3. "The potential of solar PV off-grid systems"

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