Countries have diverse energy goals. Mini-grids are playing an increasing role in achieving countries’ energy goals such as: supporting rural electrification, community self-reliance, local resilience, and emissions reductions. Depending on unique country circumstances, clean energy mini-grids can be less expensive than extending transmission infrastructure across long distances (i.e. for rural applications), more reliable than fuel-based technologies such as fuel-based lighting, and work well with flexible loads such as mobile phone charging. In developing countries local populations often pay high electricity prices due to various market and other circumstances. These high prices can make mini-grids an attractive option.
While attractive, mini-grids are also very high capital investments that make sense only if properly valued. Based on international experience it has become clear that mini-grids only become viable when the appropriate tariff structure is in place to balance consumers’ ability and willingness to pay, with the capital and operating costs of a mini-grid. Additionally, tariffs must incentivize private investment to make mini-grid deployment sustainable. This report analyzes cost and value of multiple tariff structures; along with how the tariff can be applied based on electricity consumption, peak capacity, and services provided. The paper also recognizes that subsidies and government outreach play a key role in mini-grid deployment. Some important considerations for designing tariffs described in the report are included below.