According to the International Energy Association, approximately 1.2 billion people currently live without access to electricity. That is a staggering figure! Imagine if 1 out of every 8 people you know didn’t have lights after dark or even on demand hot water. That means no Netflix, no Facebook and no Twitter. Of the 6.2 billion people who do have access to electricity, though, what about those who experience unreliable or prohibitively expensive energy?
Design research company Paper Giant recently came across such a case on a recent research project in Ainggyi village, in rural Myanmar.
Ainggyi has around 4,500 inhabitants in almost 1,000 households. A decade ago the wealthiest in the community banded together to build a diesel microgrid to which all households could connect to. Energy users paid a monthly fee to the project financiers to access the service. The diesel grid ran for 4.5 hours in the evening, providing critical light and cell phone charging.
Around three months ago, an NGO visited Ainggyi and offered the villagers individual solar and battery systems, financed through a loan-hire scheme. An appealing proposition, many opted in to the program. And whilst there are supply issues during periods of low solar production, they have chosen to disconnect from the community microgrid. The wealthier families have individual generators to make up the supply gap and some just work around the limitations of the technology.
Sounds like a win for the community, right? Unfortunately, there was a catch…
With a high proportion of villagers disconnecting from the microgrid, those who have remained have to bear the remaining costs, which are higher than before as there are less people sharing the financial burden. This has resulted in some families being unable to afford either the loan-hire scheme for the solar systems, nor the increased monthly fee for the microgrid. At the same time community assets like the local school don’t have electricity to power fans and other important appliances.
As much as this is a challenge for the local community in Aingyyi, we are seeing this play out in many more mature energy markets, including in Australia.
Whilst your neighbour’s rooftop solar installation is saving them money on grid energy, you are left with a more expensive grid. As those who can install solar, do, those who cannot have to pay more for their energy. Over time, this could lead to what has been dubbed the ‘utility death spiral,’ whereby as more people go ‘off-grid’, the cost of maintaining the networks is borne by fewer people, raising electricity prices and making going off-grid even more economically attractive. Thus a downward spiral is set into play.
Going off-grid would need thousands of little generators to keep the lights on when the solar and batteries draw down, and is not very efficient, nor sustainable in a macro sense.
Whilst I don’t think we’ll get to that point in the extreme case, this is a real and present issue. Last year Reneweconomy wrote about a €100 billion loss for Europe’s major energy utilities.
This has been driven by reduced demand from energy efficiency measures and distributed generation. The corollary to such massive financial losses is the need to charge more for the energy they sell!
So how can we avoid this? If we can incentivise utilities to support solar and battery owners in sharing their renewable energy with others, this makes using the grid a good economic decision — keeping individuals on-grid.
We are, of course, a little biased but an energy market where solar and battery owners could trade their excess energy with consumers in their community would increase cost competitiveness and keep prices down.
Importantly, by keeping utility companies engaged, the grid would become cheaper, more resilient, and more reliable. As an added bonus, rather than using energy generated from burning ancient petrified plants far off in the horizon, you would get to buy renewable energy which was generated locally.
While we’re aware of some retailers, networks and utilities that are thinking about this new energy ecosystem, movement is slow. The recent decision to delay 5 minute settlements in the National Electricity Market is testament to this.
With the mass of incumbent assets we have in mature energy markets, the villagers of Ainggyi might just get affordable, clean, community energy before you do!