We are in the midst of a rapid evolution in electrification strategies within developing markets around the world. Many are asking whether the future of energy in developing countries lies with off-grid solar systems tied to storage, or with large interconnected grids.
In a recent piece published by GTM, Daniel Tomlinson quoted several solar home system companies who put forward their argument that African consumers don’t need as much power as consumers in developed countries -- so the optimal solution for these consumers should be small solar home systems rather than the centralized grid or microgrid.
Decentralization is a nice idea, but it ignores the facts. It will take much more to electrify the world.
Lithium-ion batteries currently cost about $350 per kilowatt-hour. Costs are expected to come down to $150 per kilowatt-hour in the coming years, so let's work with that assumption. To disconnect the average American household from the grid, it would cost $150 per kilowatt hour x 30 kilowatt-hours per day x two days "autonomy factor" to provide the necessary storage. This amounts to $9,000.
The average European household would require roughly one-third as much storage, or $3,000 of battery capital cost. Remember that the lifetime of this battery will be finite, and will need to be replaced every five to 10 years.
Let’s say in the future, due to improvements in appliance efficiency, that the average global home (American, European, African or otherwise) needs only 4 kilowatt-hours per day of energy. That's 40 percent of current European demand and 13 percent of current American demand. At a battery cost of $150 per kilowatt-hour, this future household would require $150 per kilowatt-hour x 4 kilowatt-hours per day x two days "autonomy factor" to sustain their energy needs without a grid. This amounts to $1,200 per household.
We can link a significant percentage of households in Africa to a power grid with a budget of $1,200 per connection. And that grid will give them freedom that a battery-only system cannot handle.
Productive loads like welders, pumps and grain millers are enabled by this centralized infrastructure in a way that small solar home systems cannot achieve. There are over 500 million people in Africa without access to electricity. So let’s pursue the cheapest path to bringing them power.
Proponents of an off-grid solar approach would likely argue that the 4 kilowatt-hours per day of energy assumed above is too much for the average African home. Of course, if we reduce assumed consumption, then the cost of batteries drops and the competitiveness of autonomous systems improves.
I would challenge this assumption. If you try living for a few months on the amount of energy that consumers receive through a typical solar home system, or 0.05 to 0.5 kilowatt-hours per day, here are some of the things you can be prepared to live without:
- Your refrigerator (one that's large enough to preserve a family’s food for a week)
- Your freezer
- Your TV (larger than 20”)
- Your hot water for showers
- Your washing machine
- Your electric kettle or toaster
- Your microwave
- Your clothes iron
That generation number is referring to standalone solar home systems sold by companies like M-Kopa, Off-Grid Electric, d.light, BBOXX, Mobisol, and others in developing markets.
Can solar home systems get bigger? Yes, absolutely. That's what we're seeing with solar-plus-storage plays in the U.S. (which, importantly, are almost always banking on some upstream monetization of their storage so they require a grid connection to work).
Off-grid solar is a great solution for low energy consumers. But if we think the global home deserves more than 0.5 kilowatt-hours per day in the long term, we need to either believe in battery costs dropping below $50 per kilowatt-hour, or we should just invest in grids.
Most people in Africa are closer to grids than some think. According to Catherine Wolfram, 70 percent of off-grid homes in Kenya are within 1.2 kilometers of a power line. So once you start getting up to $500+ per customer in capital cost for solar home systems, the case for the grid extension becomes very strong.
I'm very much in favor of distributed solar generation and distributed storage. The message here isn't to revert to only centralized generation and massive transmission and distribution expansion. Distributed should be our goal -- but discrete (i.e., non-interconnected, autonomous energy islands) should not be.
Until there are advocates of a grid-less future who are willing to live on less than 1 kilowatt-hour per day, every day, I am skeptical of any arguments that the energy provided by a non-grid model is sufficient to be considered “real” in any fair sense of the word.
I am deeply respectful of the incredible achievement that off-grid companies have made in bringing light and power to hundreds of thousands of people for the first time. However, this success shouldn’t lead us to stop short of providing the poor with truly productive power that we take for granted.
It’s true that delivering this productive power will require dealing with more complex implementation, regulatory and technical challenges. But these challenges are solvable, and the grid solution is cheaper in the long term. Let’s take a long-term view. Let’s not settle for the easier option -- subsistence energy -- because it is "good enough" for the energy poor.
Sam Slaughter is the CEO of PowerGen Renewable Energy, a Nairobi-based renewable energy company and leader in micro-grid development and operation in East Africa.