IEEE Power & Energy Magazine - July/August 2014 - 74

Small-scale, off-grid systems require less
up-front capital, have shorter implementation time
frames, and can be strategically located.

water table to such a degree that water is inaccessible to peo-
ple without electricity. the ensuing water scarcity further
exacerbates the vulnerability of the poor.

Economic Sustainability
With off-grid systems, the term economic sustainability
concerns primarily the financial underpinnings of a system.
unsurprisingly, off-grid systems require an income to be
economically sustainable. even systems that are originally
gifted to beneficiaries should plan to charge for services (see
figure 4) to be able to replace components and to (poten-
tially) scale up services or at the very least build up a fund to
operate and service the system.
important activities for ensuring economic sustainability
include training, employing market surveys prior to imple-
mentation, understanding the short- and long-term system
costs, and reducing uncertainty from external conditions
as much as possible. ideally, systems can be self-financed
and self-sustaining. in some places, this hope is becoming
viable. for most, the level of subsidy needed to establish and
table 2. Market survey data and use in off-grid system
planning.
Market Survey Data

Use in Planning

Current energy use
and expenditure

Initial system sizing, pricing
model, mix of products and
services

Aspirational use

Initial system sizing, future
investment planning,
compatibility with future
electricity products and
services

Competition

Risk to future income stream

table 3. Selected results from a 2013
market survey in Kenya.

74

Average kerosene expenditure
per month

329 KES (US$3.87)

Average battery expenditure
per month

404 KES (US$4.75)

Average mobile phone recharging
expenditure per month

260 KES (US$3.06)

Average current distance to travel
to charge mobile phone

2.26 km

ieee power & energy magazine

maintain operation hinges on diversified income streams,
curbing non-project-related expenditures, and avoiding neg-
ative external influences.
basic financial management training is needed to instill
a longer-term economic outlook for the project. Developing
a transparent savings mechanism is critical in establishing
plans for reinvestment when the system's components inev-
itably fail. an nGo in malawi typically began the conver-
sation about long-term economics with the new community
rather dramatically: "this system is going to fail. how are
you going raise enough money to keep it sustainable?"
the prospects for economic sustainability can be greatly
improved if a market survey is conducted prior to the installa-
tion of equipment. Surveys provide insight into several impor-
tant areas, as seen in table 2. With reliable data, an acceptable
market price for the planned service can be estimated and used
in a forecast of future income streams. an example of collected
data for a planned project in Kenya is given in table 3.
a model of asset failure and the associated costs should
be provided for each project, along with its implications for
replacement and higher-than-expected failure rates. a typi-
cal small PV system at a school in malawi using a ten-year
window and typical component life spans (see table 1) has
associated hardware replacement costs as follows: uS$1,296
(lightbulbs) + uS$1,440 (lead-acid batteries) + uS$160
(inverter) = uS$2,896. these costs must be planned for in
both the short and long term. as projects grow into regional
deployments or minigrids, these costs will scale accordingly,
and a more substantial model is required. other costs relat-
ing to labor, security, losses associated with distribution, and
inconsistent tariff collection will put further pressure on sys-
tem finances.
financial discipline throughout the system life span can
erode; careful management and oversight of project finances
are extremely important (see figure 5). for example, in sev-
eral PV projects at off-grid schools in Gambia, income from
providing electricity services was diverted away from the
project and used instead to fund school operations, such as
purchasing classroom supplies and pupil uniforms and sup-
porting community vegetable plots. from the perspective of
the teaching committees running these systems, the expen-
ditures were reasonable since they benefited the students.
over a longer-term horizon, however, when station batteries,
inverters, and lightbulbs inevitably fail, the schools will be
unable to cope with the significant expenses of replacement
if no reserve funds have been built up.
july/august 2014



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