By Steven Minnihan

Lux Research

Lux Research recently spoke at the Power Gen Africa 2012 conference in

Rob Stephen of the South African utility Eskom offered detailed analysis of the risks and the options, explaining that his company electrified four million households since the early '90s, and plans to continue electrifying exceedingly remote areas.

Favorable for utilities, Eskom has demonstrated that electricity demand and revenue increase sharply in the months after electrification. Initially, a rural customer will demand approximately 80 kWh/month. However, soon after electrification, demand grows by as much as 300%. Furthermore, electrification directly leads to immigration, with village populations increasing by 100% or 200% in the six months after electrification. In total, a village's power and electricity demand is likely to grow 10 times in the year after grid connection.

Challenges are many

However, this market does face high hurdles. Specifically, it is difficult to gather information around demographics and locations of dwellings, driving Eskom to rely on satellite imaging to locate potential customers. Additionally, road and infrastructure conditions are exceedingly poor, making it challenging and costly to provide necessary maintenance and support.

Rob was perfectly clear on Eskom's preference among the various solutions for rural electrification. Eskom highly prefers electrifying regions by extending the distribution grid, since this option offers the lowest cost in most scenarios and the utility already manages a robust national grid with far superior reliability when compared to neighboring nations. In areas where it is not economical to extend the distribution network, Eskom opts for a village microgrid that utilizes either diesel generators, solar in combination with battery storage, or micro-hydro generation.

Rob explained that each of these solutions have significant drawbacks; generators require refueling every six months, while hydro generators are prone to wash away during the rainy season. Rob's final assertion is that distributed rooftop solar and storage offer the worst option for Eskom to bring electricity to the rural market, due to the low power output (50W) and high costs ($60-$300 per home).

In summary, utilities offer the best hope for rural electrification in developing nations. Unfortunately, the majority of utilities throughout the developing world have underwhelming plans for expanding electrification coupled with feeble electric grids, leaving the population to accept relatively high-cost residential power systems from companies such as SRE Solutions, Simpa Networks or Egg Energy.

Steven Minnihan is a Senior Analyst for Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.

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