Private sector-owned mini-grids and rural electrification

A case study of wind-power in Kenya's tea industry

Caren Herbert (Corresponding Author), Euan Phimister

Research output: Contribution to journalArticle

Abstract

We use a discounted cash flow model to explore the impact of electricity pricing and cost sharing rules on the economics of a small wind-powered mini-grid project in Kenya, designed around local tea factories as a demand anchor and connected to the national grid. The results show that including rural domestic and small business consumers in the project increases the overall economic benefit, illustrating the potential gains from using the tea factories as a demand anchor. However, the results also demonstrate that how costs are allocated to different consumer types impacts on participation and on whether the full benefits could be attained. If all consumers must pay towards the infrastructure they use according to their consumption, domestic consumers with low energy demands would not join the mini-grid. Cost sharing rules can be designed where tea factories, small businesses and domestic consumers all individually benefit and would therefore have incentives to participate. However, when the mini-grid is owned by the tea factories there are also possible outcomes where they might prefer to exclude domestic consumers. The results emphasise the need for policy makers to consider appropriate mini-grid tariffing regulation and how these tariffs interact with any existing national electricity pricing systems.
Original languageEnglish
Pages (from-to)1288-1297
Number of pages10
JournalEnergy Policy
Volume132
Early online date17 Jul 2019
DOIs
Publication statusPublished - Sep 2019

Fingerprint

rural electrification
wind power
tea
private sector
Wind power
Industrial plants
industry
anchor
Costs
Industry
electricity
Anchors
cost
Electricity
economics
Economics
incentive
infrastructure
Tea
project

Keywords

  • Renewable energy
  • mini-grids
  • Kenyan tea
  • electricity pricing
  • cost sharing
  • demand anchor
  • Mini-grids
  • Demand anchor
  • Cost sharing
  • Electricity pricing

Cite this

Private sector-owned mini-grids and rural electrification : A case study of wind-power in Kenya's tea industry. / Herbert, Caren (Corresponding Author); Phimister, Euan.

In: Energy Policy, Vol. 132, 09.2019, p. 1288-1297.

Research output: Contribution to journalArticle

@article{7f1c053250cc4275b2c99b654359f750,
title = "Private sector-owned mini-grids and rural electrification: A case study of wind-power in Kenya's tea industry",
abstract = "We use a discounted cash flow model to explore the impact of electricity pricing and cost sharing rules on the economics of a small wind-powered mini-grid project in Kenya, designed around local tea factories as a demand anchor and connected to the national grid. The results show that including rural domestic and small business consumers in the project increases the overall economic benefit, illustrating the potential gains from using the tea factories as a demand anchor. However, the results also demonstrate that how costs are allocated to different consumer types impacts on participation and on whether the full benefits could be attained. If all consumers must pay towards the infrastructure they use according to their consumption, domestic consumers with low energy demands would not join the mini-grid. Cost sharing rules can be designed where tea factories, small businesses and domestic consumers all individually benefit and would therefore have incentives to participate. However, when the mini-grid is owned by the tea factories there are also possible outcomes where they might prefer to exclude domestic consumers. The results emphasise the need for policy makers to consider appropriate mini-grid tariffing regulation and how these tariffs interact with any existing national electricity pricing systems.",
keywords = "Renewable energy, mini-grids, Kenyan tea, electricity pricing, cost sharing, demand anchor, Mini-grids, Demand anchor, Cost sharing, Electricity pricing",
author = "Caren Herbert and Euan Phimister",
note = "Acknowledgements We would like to thank the two anonymous referees for their helpful comments. All usual caveats apply.",
year = "2019",
month = "9",
doi = "10.1016/j.enpol.2019.06.031",
language = "English",
volume = "132",
pages = "1288--1297",
journal = "Energy Policy",
issn = "0301-4215",
publisher = "Elsevier BV",

}

TY - JOUR

T1 - Private sector-owned mini-grids and rural electrification

T2 - A case study of wind-power in Kenya's tea industry

AU - Herbert, Caren

AU - Phimister, Euan

N1 - Acknowledgements We would like to thank the two anonymous referees for their helpful comments. All usual caveats apply.

PY - 2019/9

Y1 - 2019/9

N2 - We use a discounted cash flow model to explore the impact of electricity pricing and cost sharing rules on the economics of a small wind-powered mini-grid project in Kenya, designed around local tea factories as a demand anchor and connected to the national grid. The results show that including rural domestic and small business consumers in the project increases the overall economic benefit, illustrating the potential gains from using the tea factories as a demand anchor. However, the results also demonstrate that how costs are allocated to different consumer types impacts on participation and on whether the full benefits could be attained. If all consumers must pay towards the infrastructure they use according to their consumption, domestic consumers with low energy demands would not join the mini-grid. Cost sharing rules can be designed where tea factories, small businesses and domestic consumers all individually benefit and would therefore have incentives to participate. However, when the mini-grid is owned by the tea factories there are also possible outcomes where they might prefer to exclude domestic consumers. The results emphasise the need for policy makers to consider appropriate mini-grid tariffing regulation and how these tariffs interact with any existing national electricity pricing systems.

AB - We use a discounted cash flow model to explore the impact of electricity pricing and cost sharing rules on the economics of a small wind-powered mini-grid project in Kenya, designed around local tea factories as a demand anchor and connected to the national grid. The results show that including rural domestic and small business consumers in the project increases the overall economic benefit, illustrating the potential gains from using the tea factories as a demand anchor. However, the results also demonstrate that how costs are allocated to different consumer types impacts on participation and on whether the full benefits could be attained. If all consumers must pay towards the infrastructure they use according to their consumption, domestic consumers with low energy demands would not join the mini-grid. Cost sharing rules can be designed where tea factories, small businesses and domestic consumers all individually benefit and would therefore have incentives to participate. However, when the mini-grid is owned by the tea factories there are also possible outcomes where they might prefer to exclude domestic consumers. The results emphasise the need for policy makers to consider appropriate mini-grid tariffing regulation and how these tariffs interact with any existing national electricity pricing systems.

KW - Renewable energy

KW - mini-grids

KW - Kenyan tea

KW - electricity pricing

KW - cost sharing

KW - demand anchor

KW - Mini-grids

KW - Demand anchor

KW - Cost sharing

KW - Electricity pricing

UR - http://www.mendeley.com/research/private-sectorowned-minigrids-rural-electrification-case-study-windpower-kenyas-tea-industry

U2 - 10.1016/j.enpol.2019.06.031

DO - 10.1016/j.enpol.2019.06.031

M3 - Article

VL - 132

SP - 1288

EP - 1297

JO - Energy Policy

JF - Energy Policy

SN - 0301-4215

ER -