The Potential for Mini-Grids in Myanmar

The full report and the presentation can be downloaded here.

Myanmar is one of the least electrified countries in the world. More than two-thirds of its 55 million people lack access to reliable electricity. Over 30,000 rural villages are not connected to the national grid. Even if the expansion of the grid goes according to plan, many would still remain un-electrified for many years to come. Decentralized solutions, such as mini-grids, therefore have a major role to play in bringing reliable energy into villages and thereby accelerating economic productivity and related development gains.

The government as well as the private sector are now beginning to build the decentralized energy sector – the former mostly via subsidies, the latter through direct investment. In order for that financial commitment to grow and be deployed efficiently, developers, investors, policy-makers and communities need good quality information on energy demand. This allows them to make appropriate, evidence-based decisions. Beyond anecdotal evidence from various early projects, very little is currently known about the trends in energy use from mini-grids in rural Myanmar. That makes it hard for business modelers to plan for potential future demand. This gap is especially severe for productive uses tied to commercial and agricultural machines in villages. 

In an attempt to bridge this gap and to provide insights into current and potential future energy uses and related demand and supply side challenges, Pact Myanmar commissioned TFE Consulting in October 2017 to conduct a survey of 50 villages in Myanmar’s Dry Zone (44 of them non-grid connected, NGC). The work encompassed an assessment of current energy demand, and the outlining of scenarios of future energy use. Some key points from this research include: 

1. Need for demand-side interventions and investment - Our findings point to a need and opportunity to support the demand-side of rural energy. Most financing currently goes towards the construction of mini-grids, but only very little goes to consumer support and demand-side interventions such as the building up of energy-dependent commercial activities. Without increased investment, load levels may lag, potentially leading to underutilization of current and future mini-grids and a reduced business viability for mini-grids operators. 
2. Village geography shapes energy demand and use types - Geographic characteristics such as access to water and road connectivity are important factors that can drive larger and more diverse energy loads. Wetland villages with access to water tend to have higher demand and more productive loads compared to dry villages. Road connectivity is an even stronger driver, pushing dry villages to the same level of demand and productive use as wetland villages that are not well connected. 
3. There is diverse use of electricity in non-grid connected villages - 87% of the population in non-grid connected villages surveyed already has some form of electricity access. Crucially though, 62% has access through solar home systems (SHS) and solar lighting products, suitable only for basic lighting and mobile charging. Only 25% of the surveyed population has electricity access from diesel or petrol generators that can support larger loads like appliances and machinery. 
4. Productive loads, such as agricultural machinery, drive village electricity demand -Average per capita load across all the NGC villages surveyed is 4.6 kWh per month. 75% of this or 3.43 kWh per capita is productive load. 35 out of 44 villages have productive load tied to the use of machinery for welding, carpentry, rice milling, water pumping, grinding of pulses or beans, and oil milling. Only a quarter of the load is consumptive, tied to the use of LED bulbs and appliances like TVs, refrigerators, radios, and rice cookers amongst others. 
5. Welding and carpentry are two productive uses found to be suitable for mini-grids - Welding and carpentry are the two non-agricultural productive uses most commonly found. Together, they make up 27% of productive load. Machines used for these activities have a high power rating of 15-40 kW, making them a good source of demand for mini-grids. Moreover, because such use is decoupled from agricultural seasonality, it can provide reliable annual loads with base-load like characteristics and potentially attractive commercial terms. 
6. Villages with high total demand are not always the most attractive - It is important to consider the per capita consumption or ‘density’ of load in a village when evaluating investment attractiveness. High load density – meaning high concentration of load within a given population – is preferable to a more dispersed scenario, as a denser village will require less distribution infrastructure, reducing mini-grid costs. This can make some smaller villages more attractive than larger ones.
7. Telecom towers are an anchor load opportunity, if close enough - Telecom towers are useful in supporting a mini-grid business case only, if they are relatively close to the community. For telecom towers that are too far away, the cost of transmitting electricity outweighs the benefits. Of the 44 surveyed NGC villages, only three have a telecom tower within a 1 km radius, close enough to be a viable anchor load for a mini-grid. 
8. Non-grid connected villages spend more on less electricity - Surveyed NGC villages on average spend more than MMK 7,500 (USD 6) per household per month or 5% of total monthly income on energy (excluding for cooking). Although this is twice as much as electricity spend in grid-connected villages, it buys NGC villages only 5% of the amount of energy that is consumed in grid-connected villages. 
9. Diesel or petrol generators supply the bulk of current productive energy demand - Enterprises rely heavily on generators for productive loads. They spend 96% of their energy expenditure on such generators. Since productive loads are the bulk of energy use, spend on generators is nearly equal to the total energy spend for villages as a whole. That relationship is consistent across village types and sizes. 
10. Demand for consumptive load could increase around 1.6x in NGC villages - we project a 1.6x increase in consumptive load over three to five years, if NGC villages are electrified by mini-grids at the current estimated cost of electricity, which is over 14x higher than current subsidized grid rates. This is “Scenario 1” in our report. With a 37% subsidy, demand could rise 3.6x (“Scenario 2”) and at a mini-grid tariff subsidized to match current grid rates, we can expect a 24x growth in demand matching that in current grid connected villages (“Scenario 3”). 
11. Productive load could also increase 1.6x in NGC villages - at current mini-grid electricity rates, NGC villages could see a productive load demand increase of 1.6x, mirroring current demand in grid connected villages. Even though businesses in grid-connected villages have access to subsidized electricity, they are currently forced to use generators due to the low quality of grid power supply, putting them in a similar position as NGC villages. If mini-grids can compete in NGC villages, they will see a demand trajectory similar to demand trends in grid-connected villages. 

The full report and the presentation can be downloaded here. The research was conducted with support from Pact Myanmar, Development Resources International, Smart Power Myanmar, Rockefeller Foundation, Engie and PIDG.