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.