Distribution infrastructure reduces capex and boosts mini-grids IRR

New report by CrossBoundary’s Mini-Grid Innovation Lab shows that proactively installing distribution network infrastructure through Grid Densification in a mini-grid community drives down capex per connection significantly, and increases IRR of the mini-grids business case by 1.2%. 

CrossBoundary’s Innovation Lab tested two scenarios of grid densification (i) Network saturation includes installation of all overhead distribution and customer connection accessories required throughout a community, and (ii) Network expansion includes installation of all overhead distribution throughout a community.

Analysis of data from 2020 to 2023 shows that adoption of grid densification positively impacts grid economics, customer acquisition and grid utilization:

• On the average, grid economics results improve by an average of 1.2% in project IRR, from a base case of 5%
• Grid densification results in faster customer acquisition and Network saturation and expansion sites had higher community penetration, over 80% of the community connected in less than a year, compared to control sites (~51% penetration by year 1)
• More customers mean more utilization, sooner: Network saturation (27%) and expansion (27%) have the higher average utilization compared to control site (13%) after 1 year

On the significance of the Grid Densification Innovation Insight data for mini-grids:

“Based on our findings, we think grid densification should be incorporated into construction best practices. All 5 developers participating in our study have already confirmed the adoption of grid densification into their standard operations,”said Tombo Banda, CrossBoundary Managing Director and Innovation Lab Lead.

In addition, CrossBoundary’s Mini-Grid Innovation Lab is testing other technologies, including distributed mini-grids and mesh-grids, that could capture the benefits of network saturation but require less upfront capex. We are pushing mini-grid business model innovation and our target is to reach 12% IRR – thereby proving their reliability as a commercially viable solution to close the gap on more than 600 million people who still lack access to power in Africa,” concludes Banda.

Download the full Innovation Insight on CrossBoundary’s website.