Using Software to Make a Compelling Business Case for Mini-grid Deployment

By: John Glassmire, Director of Energy Engineering at HOMER Energy 

One of the greatest challenges facing those who want smarter, cheaper, cleaner energy is the large number of options and technologies available to provide power. Advocates for particular technologies all insist they have the only solution to our looming global energy crises. The sheer number of hybrid solutions can frighten even the most well-informed decision makers.

This is the problem that modeling software such as HOMER® was engineered to answer: How do I design a system that provides clean, reliable, affordable power?

When the HOMER Energy founder set out to help people make smart, sensible energy decisions while at the National Renewable Energy Laboratory over 20 years ago, he was at the forefront of a huge opportunity in the energy sector. In those days PV was expensive, diesel was cheap (although volatile), and storage was really expensive. Today, however, we are finally able to harvest the fruits of research and development in these technologies. PV is now cheap, diesel is expensive (and still volatile!), and storage is finally becoming affordable.

These core technologies, bolstered by new control approaches and smart planning tools, are enabling a democratization of the electrical sector unimaginable only a decade ago.

Mini-grids—sometimes referred to as micro-grids—are now being deployed all over the world, supporting energy access for communities, bringing reliable power to businesses, and reducing fuel costs and emissions for everyone. It is no longer necessary to rely on centralized systems for power; technological innovation has finally enabled end users to assert control of their energy supply. Mini-grids will enable us to realize Goal 7 of the Sustainable Development Goals (SDGs), “affordable, reliable, sustainable and modern energy for all.”  Energy is rightly viewed as a requirement for humans to achieve their potential and is a cornerstone of the transition from the last 15 years’ Millennium Development Goals to the next 15 years’ SDGs.

Understanding how to best combine traditionally generated and renewable power, storage, and load management for the optimal site-specific installation, at the lowest cost, is the key for deploying efficient mini-grid solutions. The HOMER (Hybrid Optimization of Multiple Energy Resources) model seeks to optimize mini-grid design.

One of the key challenges of distributed technologies is that the resources available are as varied as the communities they serve. Remote villages in Alaska may have access to a strong, consistent wind, but lack adequate solar. Communities in Africa may have ubiquitous solar but lack wind resource or a nearby stream for hydro. This is where modeling software is valuable: It can account for a wide range of applications and the uncertainty that comes from developing smaller projects where obtaining data is difficult. Standard software packages like HOMER provide a common framework that allows financiers to fairly compare multiple proposals and make smart investment decisions. In other words, mini-grid modeling software turns a challenging “it depends” assessment into a convincing business case that demonstrates the benefits of a particular design.

Below are a few case studies that demonstrate how HOMER software has been used to enable smart decisions based on sound insights into mini-grid technology options.

Case Study 1: Mini-grids for Indonesia’s Outer Wilayahs

In 2012, HOMER Energy conducted a hands-on workshop for over 60 regional planners and engineers from the Indonesian national utility, PLN, to engage with, understand, and plan the options for improving energy access throughout the outer islands of Indonesia. This was during the beginning of the 1000 Island Electrification Program, an initiative launched by the Indonesian Government as a means of improving electricity access in its outer islands through renewable energy sources – a project that continues today. Indonesia currently spends more than 2% of its national GDP (>18.5 billion USD) on energy subsidies, while at the same time seeking to bring modern energy services to the remaining 20% of the population currently unserved.

Figure 1: HOMER trainers and workshop attendees at the World Bank and KfW-financed 1000 Island workshop in 2012

Figure 1: HOMER trainers and workshop attendees at the World Bank and KfW-financed 1000 Island workshop in 2012

The workshop attendees created scoping studies for small energy systems throughout the remote regions of Indonesia, such as Nusa Tenggara Timur. These studies identified projects to reduce diesel consumption while improving energy access, enabling PLN to proceed on a targeted and sensible procurement process. The models showed that the diesel price and the reliability of the electrical supply were key factors in selecting a low-cost design. The power supplies envisioned under this process balanced the desire to limit diesel deliveries with the needs for reliable power, leveraging the relatively low-cost energy potential of solar photovoltaics with the storage potential of batteries.

As a result of this training, PLN was able to rapidly and cost-effectively develop preliminary feasibility studies of 94 potential mini-grids. PLN used these feasibility studies to inform their tendering process, and they have the opportunity to refine the studies further as the mini-grid construction process continues, including enhancements and retrofits as technology options and community needs evolve.

Modeling software helps decision makers better understand the on-the-ground technical and economic trade-offs of different system designs. The use of HOMER in the design of the mini-grids in the outer areas of Indonesia enabled faster, smarter, more targeted planning, while bringing understanding of the benefits and challenges to the practitioners in the region.

Case Study 2: Bottom-up Capacity Building with Energy Practitioners in Africa

Mini-grids are a key component of rural electrification strategies in Africa. They are being pursued as part of regional, national, and local efforts, with support from international funding sources. The strategy requires local energy practitioners who understand mini-grids to support their deployment across the continent. HOMER Energy works with these practitioners to develop well-designed mini-grids that properly integrate renewable generation, traditional generation, and storage.

Workshops are a critical component of engaging with HOMER users globally to facilitate smart mini-grid planning. In Africa, HOMER has conducted two recent workshops: One was held in Hargeisa, Somaliland, as part of the Somali Renewable Energy Forum, and the other was the Upscaling Mini Grids for Least Cost and Timely Access to Electricity Services workshop in Nairobi, Kenya, coordinated by the Climate Investment Funds (CIF), the Energy Sector Management Assistance Program (ESMAP) of the World Bank, and the UK DFID-supported Global Mini Grids Facility. These capacity building efforts are leading to greater interest in mini-grids by providing a hands-on introduction into how to plan, design, and ensure adequate operations.  HOMER Energy engages with local energy practitioners to create a bridge between the international expertise and experience with mini-grids and the local knowledge of the needs and culture in a community.

Energy practitioners who are trained in the HOMER approach use the global standard for mini-grid analysis to clarify and outline their business plans. This enables smarter mini-grids that match the needs of the communities they serve, and helps to unlock financing and investment in the mini-grid business plans that come out of the analyses. For example, during the workshops, HOMER software users can quickly develop a model that ranks potential mini-grid designs by cost. This lets designers quickly understand the benefits and trade-offs between different architectures. Figure 2 illustrates a sample ranking of system configurations for a hypothetical community mini-grid in Nigeria.

Figure 2: Sample mini-grid design optimization ranking output from the HOMER Pro software for a hypothetical community mini-grid in Nigeria

Figure 2: Sample mini-grid design optimization ranking output from the HOMER Pro software for a hypothetical community mini-grid in Nigeria

Figure 3 plots the relationship between the renewable fraction and the cost of energy for a range of potential architectures that could be designed for the same hypothetical Nigerian community mini-grid. The figure also includes a red line that shows the implied Pareto frontier, which represents the systems with the lowest cost of energy at each renewable fraction.

Figure 3: Optimization plot comparing renewable fraction and cost of energy for a range of potential mini-grid designs to serve a hypothetical community in Nigeria

Energy costs at this Nigerian mini-grid can be reduced by using renewable energy technologies, but once the fraction of electricity provided by renewables rises above about 30-40%, the cost of energy increases. As the fraction of electricity provided by renewables increases further, around 60-70%, the costs begin to increase sharply. This graph provides decision makers guidance on the cost savings potential for renewable energy, or the cost premium for pursuing more ambitious amounts of renewable energy. The basic shape of this plot is representative of many mini-grids, although the low cost point and the renewable fraction at which the cost spikes will vary significantly among communities.

The mini-grid sector is growing quickly in Africa. Almost all multilaterals and government overseas investment agencies include mini-grids as a necessary approach for bringing electricity to communities that have been failed by traditional electrification strategies. Utilizing an optimization modeling software such as HOMER provides an evaluation framework for these agencies to work with on-the-ground developers to prioritize and fund mini-grids that can have the highest impact on electrification and the greatest likelihood of success.

Closing Thoughts

The traditionally conservative energy sector is undergoing a transition. New technologies and improvements to existing technologies are enabling mini-grids to provide clean, reliable, affordable electricity.

From our experience, we have learned how to overcome the challenges of using renewable energy to electrify communities. The technology to successfully deploy these hybrid renewable power systems exists today and has been proven in projects that have used our software to develop them—including more than 35 successful wind-diesel hybrid grids in Alaska, renewable mini-grids across Latin America, India, Southeast Asia, Australia, island utilities all over the world, and the growing number of renewable mini-grids in Africa.

Mini-grids are a decentralized technology. Utility planners may leverage their benefits as an alternative to grid extension, or as a way to bolster distribution systems that cannot deliver the electricity demands of the customers. They also provide an option for communities and the private sector to electrify areas independently. Both options provide a pathway for communities to have cleaner, more reliable electricity.

About HOMER Energy

HOMER Energy LLC is a Boulder, Colorado, based company incorporated in 2009 to commercialize the HOMER® Hybrid Optimization of Multiple Energy Resources (HOMER) model, which was developed by the National Renewable Energy Laboratory, a division of the U.S. Department of Energy.

The HOMER software is the industry standard for rapid assessment of least-cost solutions for clean, reliable distributed power. It has been used for over two decades by over 160,000 energy practitioners in 193 countries to gain insight into the costs and economic, environmental, and reliability benefits of mini-grids for energy access. HOMER Energy helps decision makers understand how to bring resiliency to grid-connected customers, how to cost-effectively bring cleaner power to isolated areas, and how to reduce the need for expensive, dirty diesel in remote islanded grids.

While HOMER Energy does not deploy mini-grids, we inform and enable energy practitioners and developers to gain insights necessary to make sensible energy decisions both before and after construction. The core of HOMER Energy’s business is our software, but we have a broad support platform that also includes consulting, training, and market access for our industry partners. Our tools and expertise enable system planners, community activists, utilities, governments, engineers, economists and investors to select the best mix of assets for their needs, and we are proud of our role in helping to bring about a future based on distributed, clean, renewable-based electricity.