Optimizing rural village microgrids to provide affordable and reliable renewable electricity in developing countries

Worldwide, more than one billion people lack access to electricity. Village electrification using microgrids has the potential to provide rural households with reliable electricity that not only delivers light but also creates opportunities to use electricity for productive uses that enable economic development. Using a stochastic simulation model, we demonstrate that costs can be reduced by designing for less than 100% reliability, but the cost tradeoff is significantly impacted by the capital investment in distribution systems. Models also illustrate how active encouragement of productive use can transition microgrids from demonstration projects to `bankable' investments. Modeling indicates that load growth of 9% annually for 8 years - an achievable goal with proper information and access to capital - lowers the cost of electricity supply by greater than 25%. Growth models also illustrate that higher total growth should be coupled with diversification of both generation and loads. Our results have several important policy implications. First, rural electrification can be cost effectively achieved if integrated with rural development, and conversely, electrification without sufficient attention to development is unlikely to produce economically sustainable systems. Second, regulators should consider standards requiring that private providers of electricity have effective processes for both cost minimization & encouragement of local development.