Can Time-of-Use Tariffs Increase the Financial Viability of Mini-Grids?

Abstract

Declining solar and battery costs and increased operational efficiency have helped expand community-scale mini-grids, especially in sub-Saharan Africa and South Asia, where they now meet the power needs of over 47 million people. However, mini-grid system economics must continue to improve to be a reliable power solution for a significant share of the nearly 800 million people still lacking access. For rural, low-income communities with generally small power loads and significant demand variations, it can be challenging to align supply and demand while maintaining affordable rates and recovering investment costs. Time-of-use (ToU) tariffs—a rate structure where the tariff varies by the time of day that electricity is consumed—could represent one piece of the solution. This policy brief develops a model to estimate the effects of a ToU tariff on average costs and revenues using data from Energicity, a solar mini-grid operator in Sierra Leone.