Mini-grid based electrification in Bangladesh: Technical configuration and business analysis

This paper presents a local level study of a village off-grid system in Bangladesh. It applies an integrated methodology that identifies the demand in the off-grid village context using alternative scenarios. The techno-economic analysis of the optimal off-grid system architecture is then presented using HOMER software. Three energy resources are considered, namely solar energy, wind and diesel fuel. The optimal configuration suggested for the scenarios consists of diesel generators for the basic level of demand and PV-diesel hybrid for higher demand and reliable supply scenarios. The cost of electricity per kWh remains high for the basic level of supply and decreases as the system size increases. However, the capital and asset replacement costs increased considerably for bigger systems. The business case is then analysed for each scenario and it was found that it is practically impossible to reach grid price parity even with full capital cost subsidy, indicating significant amount of operating cost subsidy requirement that makes the larger systems financially unsustainable. Moreover, the small mini-grid system for the basic level of supply emerges as a cheaper option than providing the consumers with solar home systems. But the monthly electricity bill will become unaffordable for most consumers when demand restrictions are removed. Accordingly, the paper suggests a mini-grid based electricity supply to provide the basic level of provision alongside productive energy use during off-peak hours as the starting point. If the business develops and the demand improves, the system can be expanded subsequently using appropriate technology combinations.