November 2017 | Conference Edition A REPROSPECTIVE ANALYSIS OF THE ROLE OF ISOLATED AND MINI GRIDS IN POWER SYSTEM DEVELOPMENT ESMAP Mission The Energy Sector Management Assistance Program (ESMAP) is a global knowledge and technical assistance program administered by the World Bank. It provides analytical and advisory services to low- and middle-income countries to increase their know-how and institutional capacity to achieve environmentally sustainable energy solutions for poverty reduction and economic growth. ESMAP is funded by Australia, Austria, Denmark, the European Commission, Finland, France, Germany, Iceland, Italy, Japan, Lithuania, Luxemburg, the Netherlands, Norway, The Rockefeller Foundation, Sweden, Switzerland, and the United Kingdom, as well as the World Bank. Copyright © November 2017 The International Bank for Reconstruction and Development / THE WORLD BANK GROUP 1818 H Street, NW | Washington DC 20433 | USA Written by: Castalia Cover Photo: © Sunita Chikkatur Dubey. Permission required for reuse Energy Sector Management Assistance Program (ESMAP) reports are published to communicate the results of ESMAP’s work to the development community. Some sources cited in this report may be informal documents not readily available. The findings, interpretations, and conclusions expressed in this report are entirely those of the author(s) and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its board of executive directors for the countries they represent, or to ESMAP. The World Bank and ESMAP do not guarantee the accuracy of the data included in this publication and accept no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement of acceptance of such boundaries. The text of this publication may be reproduced in whole or in part and in any form for educational or nonprofit uses, without special permission provided acknowledgement of the source is made. Requests for permission to reproduce portions for resale or commercial purposes should be sent to the ESMAP Manager at the address below. ESMAP encourages dissemination of its work and normally gives permission promptly. The ESMAP Manager would appreciate receiving a copy of the publication that uses this publication for its source sent in care of the address above. All images remain the sole property of their source and may not be used for any purpose without written permission from the source. [i] ACKNOWLEDGEMENTS This study was enriched by email exchanges and personal interaction with key professionals in the energy field, from academia, the public and the private sector. We would like to sincerely thank Mr. Jon Exel (The World Bank) for the opportunity to conduct this work. His guidance was essential throughout. A number of excellent reviews were received from: Mr. Dan Waddle (NRECA), Mr. Chris Greacen (Independent Consultant), Mrs. Liliana Vivanco (The World Bank), Professor Mark O'Malley (University College Dublin), Mr. Michael A. Toman (The World Bank), Mr. James Knuckles (Independent Consultant), Dr. Constantinos Taliotis (Kungliga Tekniska högskolan), Ms. Gabriela Peña Balderrama (Kungliga Tekniska högskolan & Universidad Mayor de San Simón) and Mr. Ioannis Pappis (Kungliga Tekniska högskolan). This study would not have been possible without their generous and insightful cooperation. None of these individuals, should be held responsible for any erroneous facts or interpretations. Any remaining errors are solely the responsibility of the authors. [ii] GLOSSARY AC: Alternating Current MV: Medium Voltage ARECA: Alaska Rural Electric Cooperative MW: Mega Watt Association NRECA: National Rural Electric Cooperative AVEC: Alaska Village Electric Cooperative Association BOOT: Built – Own – Operate – Transfer PGCIL: Power Grid Corporation of India Limited BPA: Bonneville Power Administration PPA: Purchase Power Agreement CEB: Central Electricity Board REA: Rural Electrification Administration Co-op: Cooperative RVEP: Remote Village Electrification Program DC: Direct Current SA: Systemas Aislados (Island Systems in Bolivia) EDC: Electricité Du Cambodge (Electricity of SDG: Sustainable Development Goal Cambodia) ENDE: Empresa Nacional de Electricidad SEB: State Electricity Boards (National Electricity Company in Bolivia) SIN: Sistema Interconectado National (National GW: Giga Watt Interconnected System in Bolivia) HV: High Voltage SPD: Small Power Distributors IEA: International Energy Agency TVA: Tennessee Valley Authority kW: kilo Watt MV: Medium Voltage kWh: kilo-watt-hour MW: Mega Watt NRECA: National Rural Electric Cooperative LV: Low Voltage Association [iii] KEY TERMINOLOGY Centralized generation: Refers to the large-scale generation of electricity at centralized facilities, located usually away from end-users and connected to a network of high-voltage transmission lines (US EPA 2017a). Distributed generation: Refers to a variety of technologies that generate and distribute electricity at or near where it will be used. It may serve selected loads in the vicinity or it may be part of a greater system (regional and/or national grid)(US EPA 2017b; Pepermans et al. 2005). On-grid electricity systems: Systems (either centralized or distributed) that are connected to the main national power grid (IEA and The World Bank 2015). Off-grid electricity systems: Systems that are not tied to the national grid, operate autonomously on island mode, and can satisfy electricity demand through local power generation and distribution (IRENA 2015; Mandelli et al. 2016). Under this perspective and for the purposes of this paper we define the following: Mini-Grids: Isolated power generation-distribution systems that are used to provide electricity to local communities (power output ranging from kilowatts to multiple megawatts) covering domestic, commercial and/or industrial demand. Mini-grids can exist in one of three states: � Isolated (off-grid): The mini-grid, consisting of one or more generators, serves a local population and is not connected to a larger grid system. � Grid-Connected (or on-grid): The mini-grid has its own generation facility, serves local needs but is also connected to a large grid. It can feed excess energy into the grid or can take energy from the grid when needed. � Integrated: A mini-grid that previously operated in state 1 or 2 but which has now become integrated into the grid system both technically and operationally. It may or may not continue to have operational generation facilities. [iv] TABLE OF CONTENTS Acknowledgements........................................................................................................................................ i Glossary ........................................................................................................................................................ iii Key terminology ........................................................................................................................................... iv Table of Contents .......................................................................................................................................... v Introduction .................................................................................................................................................. 1 Historical approach to power systems development ................................................................................... 2 Country case studies ..................................................................................................................................... 6 USA ............................................................................................................................................................ 6 a. Historical context .......................................................................................................................... 6 b. Reflections................................................................................................................................... 14 UK ............................................................................................................................................................ 15 a. Historical context ........................................................................................................................ 15 b. Reflections................................................................................................................................... 18 Sweden.................................................................................................................................................... 20 a. Historical context ........................................................................................................................ 20 b. Reflections................................................................................................................................... 22 China ....................................................................................................................................................... 23 a. Historical context ........................................................................................................................ 23 b. Reflections................................................................................................................................... 25 Case briefs ................................................................................................................................................... 26 Ireland ..................................................................................................................................................... 26 India ........................................................................................................................................................ 26 Bolivia ...................................................................................................................................................... 30 Cambodia ................................................................................................................................................ 33 Discussion and Conclusions ........................................................................................................................ 35 References .................................................................................................................................................. 37 [v] [vi] 1| INTRODUCTION It is generally accepted that modern energy services, and especially electricity, are a critical ingredient for economic growth, social progress, and prosperity (UN 2002; Modi et al. 2006; Parshall et al. 2017). Taking into account the existing deficit of access to electricity services and coupling it with population projections, it is estimated that the population to be electrified by 2030 will surpass 2.5 billion people if universal access is to be achieved (IEA and The World Bank 2015). Achieving universal electrification (SDG 71) is thus an enormous task demanding appropriate technical, financial, social and regulatory support. The World Bank’s State of Energy Access Report (SEAR)2 provides a full context of these challenges as well as opportunities for addressing them. Various models and analyses show that both centralized and distributed power systems will be needed to achieve universal electricity access in a cost-effective (Mentis 2017) and sustainable manner (Szabó et al. 2013, 2011; Mentis 2017; Mandelli et al. 2016; Levin and Thomas 2016; Pachauri et al. 2013a, 2012; Rao and Pachauri 2017; Zerriffi 2011; IRENA 2015; IEA 2017). The IEA estimates that roughly half of the electricity consumed by newly electrified population in 2030 will be delivered by off-grid technologies (OECD and IEA 2011; IEA 2017). This will involve both new technologies (e.g. small scale renewables) as well as new actors (e.g. start-up entrepreneurs, community groups, etc.). To date, much focus on electrification has been on large centralized power systems (Mostert 2008; Taliotis et al. 2016), while off-grid configurations tend to play a small3, but rapidly emerging market segment. In the context of a technologically and institutionally dominant grid system, the supporting frameworks will have to be modified or created from scratch to facilitate the development of decentralized systems. Most importantly, these frameworks will have to regulate the interplay between on- and off-grid solutions in the development of national electricity systems.4 However, centralized grid systems have not always been the dominant form of generation and transmission of electricity. In fact, small isolated systems (mini-grids) were the initiating “spark� of electricity uptake some 130 years ago, and have played a pivotal role in the early development of most “modern� power systems. Few and disperse initially, their development was coupled with, and amplified by, the co-evolution of supply, demand, technology and policy. Gradually and as electricity systems became more complex, physical expansion and interconnection came as a natural consequence, leading to power systems as we know them today. This report provides the first historic overview of power system development focused on its evolution from distributed systems to centralized grid systems. It tracks the early development of power systems in several (now) middle- and high-income economies to inform the current drive to deploy new systems and achieve universal access to electricity services. We find that history can provide certain insights to a set of questions faced by today’s energy policy makers. Our review is non-comprehensive, but will hopefully provide fodder for future, more detailed historical research, and shed some light on the complex and fascinating role of mini- or isolated grids in power system development globally. 1 SDG 7: Ensure universal access to affordable, reliable and modern energy services, increase substantially the share of renewable energy in the global energy mix and double the global rate of improvement in energy efficiency, by 2030 (UN 2015) 2 http://www.worldbank.org/en/topic/energy/publication/sear 3 Decentralized generation accounts for approx. 1% of the average annual financial commitments for electricity access globally (Flemming et al. 2017). 4 For a timely mapping of these investments in the off-grid space, see e.g.: https://data.bloomberglp.com/bnef/sites/14/2017/01/BNEF-2017-01- 05-Q1-2017-Off-grid-and-Mini-grid-Market-Outlook.pdf [1] HISTORICAL APPROACH TO POWER SYSTEMS DEVELOPMENT The development of power systems began in several regions of the world in the second half of the 19th century, marking the start of a new era, characterized by disruptive innovation, rapid development and opportunity. Today, electric power systems constitute a fundamental pillar of modern societies and electricity is increasingly recognized as a crucial prerequisite for the achievement of socio-economic prosperity (UN 2002; Modi et al. 2006; International Energy Agency (IEA) and the World Bank 2017). The development of power systems was affected by multiple factors, some systemically endogenous, such as technical advancements, innovation, entrepreneurial drive and decisions, and some exogenous, such as economic principles, legislative constraints and support, institutional structures, historical contingencies and geographical aspects (Hughes 1983). While numerous paths have been followed over the years there was a common igniting point; small isolated power systems and mini-grids. Historically, areas with robust socioeconomic activity were the early adopters. Urban centers and productive facilities could foresee considerable improvements in their operations through the adoption of electricity. The first modern electric utility (the Pearl Street Station in Manhattan) was a thermal power plant fired by coal and initially served electricity for lamp lighting to about 80 customers via a DC distribution system (Hughes 1983). It was thus, by definition, an isolated mini-grid. From Pearl St. in New York City (1882) and Chicago in the US to London and Berlin in Europe, and Kimberly in South Africa, small generation units with limited distribution capacity started to emerge and operate autonomously in cities. Other similar systems emerged to provide electricity to industrial loads (e.g. in Sweden) or to serve particular populations (e.g. rural agricultural producers in the U.S.). Various factors supported the early deployment of decentralized electricity systems in areas of high demand density (urban areas and industrial facilities) or low cost supply (such as hydro sites). First, 19th and early 20th century’s technology did not allow for larger systems covering significant distances. Generation units were small and transmission capability limited. DC systems and early low voltage AC systems had physical limits that kept distribution local. Second, electricity demand was initially limited to a few services, such as public lighting. Third, as electric power systems were (and still remain) capital intensive, the maximization of electricity output, sales and thus returns has always been a key element of cost recovery. This was particularly evident through efforts to improve the load factor and the economic performance of these early electric power systems. As technologies improved, demand increased and the policy and regulatory regimes stabilized, larger generators could be built (taking advantage of economies of scale) and electricity could be transmitted over longer distances. These factors resulted in the emergence of centralized utilities (either privately or publicly owned). Typically, mini-grids either became integrated with one another forming the nucleus of a larger centralized system or were absorbed by a larger grid system as it expanded. An example of this can be seen visually by comparing maps over time of the evolution of the power system in the U.S. state of Pennsylvania (Figure 1). By 1900 there was a limited set of transmission lines already established linking major population centers. Over time, the network grew, different lines were connected to one another while smaller lines were built out to more and more communities. However, that process was not always a smooth one. For example, lack of technical coordination often resulted in the isolated mini-grids using different frequencies (e.g. Bolivia). This made their integration in a central grid challenging. Or, competing business and institutional interests, as isolated systems began [2] to overlap, resulted in unfair competition and in significant stranded assets (e.g. UK). However, in time, the increasing variety of sources, loads and control nodes created the extensive and complex grid network as known today. Over the next pages we will try to uncover key elements of power system evolution in various countries, while examining the role and main struggles of early mini-grids in supporting country (or sub-national) power system development and aspirations. [3] Figure 1. Development of electric power system in Pennsylvania (PP&L) between 1900 and 1930. The initially local mini-grid systems started getting interconnected as a means of coping with the growing, variable demand and achieving better economic performance (Hughes 1987). [4] CASE STUDIES DESCRIPTION This box presents a brief description of the case studies used to inform this paper. Case studies: USA: The USA saw the invention of the commercial incandescent light bulb in 1879, and installation of the first system for the distribution of electricity in 1882. Following that, private companies drove technological innovation and electricity access in the country. The electrification process started in urban areas and then expanded to rural areas, supported by the establishment of the Rural Electrification Agency in 1935. UK: Many of the early demonstrations and discoveries fundamental to the development of later electricity systems were made in the UK starting in the early 1700s. The first public experimental electrical supply was in 1881. By 1915 more than 600 isolated power systems operated across the country. Following that the UK government focused its efforts in providing efforts for the standardization and integration of the grids in a single national grid. Starting from 1947 the whole grid system was nationalized till full electrification. Sweden: In Sweden, starting from the late 19th century, electricity production for industrial customers drove the development of the electrical system. Several productive industries developed their own generating capacity. With a strong governmental support, these isolated power systems expanded throughout the country in order to serve the growing industrial and municipal electricity demand. China: China had its first small electrification projects at the end of the 19 th century. However, electricity supply in China till 1949 was limited to a few urban areas. Electrification started progressing from 1949 when the People’s Republic of China was founded and accelerated rapidly after the market reforms of 1979. Through a top-down effort the country managed to provide access to electricity to more than 900 million people within 50 years, often through decentralized mini-grids. By 2012 China had achieved universal access to electricity. Case briefs: Ireland: Starting in the 1880s, the country saw a first phase of electrification driven by the private sector, followed in the 1920s by a centralized governmental effort for electrification. In Ireland, electrification was completed in the early 1980s, with some of the country’s smaller islands supplied with mini -grids. India: Soon after independence in 1947, India’s power system was organized in the form of five regional grids, which operated in isolated mode until 1989. Those regional grids became fully interconnected between 1991- 2014. Despite considerable improvements in centralization of the power grid in the country, a significant part of the population remained for years (and in some cases still remains) without access to electricity. Off-grid solutions have emerged to fill this gap and successfully speed up electrification efforts in the country. Bolivia: Poor regulation in the electricity supply sector in the early days of electrification in Bolivia resulted in isolated systems developed under different frequencies and voltages, up to the establishment of the National Electricity Company in 1962 which set regulations for electricity provision. As of 2015, 44% of rural settlements still did not have access to electricity. Off-grid systems currently provide approximately 8% of the total generating capacity in the country. Cambodia: In Cambodia, the state reconstruction of the national power system started in the early 1990s. In rural areas in the country’s borders with Vietnam, Laos and Thailand electricity was supplied with off -grid systems through the private initiative of local entrepreneurs. Starting from the Electricity Act of 2002, the isolated mini-grids were exposed to a new set of regulations, which successfully integrated larger private mini- grids into the centralized system. That allowed mini-grid operators to divert their business models to the retail/distribution side without losing the commercial value of their assets. [5] Country case studies USA a. Historical context The massive electric utility industry in the USA was driven by Edison’s invention of the first commercial incandescent light bulb in 1879. Soon after, in 1882, Edison started operating the first system for distribution of electricity. It consisted of a generating station (the Pearl Street Station5 in the heart of New York City) and a low-voltage6 direct-current (DC) distribution network over an area of approximately half square kilometer (Andersson, Batten, and Karlsson 1989). Similar systems were then deployed throughout the USA, employing generation units large enough to only power municipal lighting (though DC was eventually supplanted by AC). Early utilities then followed Edison’s lead also by focusing on dense urban areas where demand by multiple customers (residential, municipal and commercial) could be met within a limited geographic area. Technological innovation soon allowed for larger systems to be deployed in terms of generation capacity, transmission distance and loads served. Edison’s three-wire system7 (1883) and the introduction of storage batteries notably improved the system’s technical and economic efficiency (Hughes 1983). Inventions such as the ones of Sprague with large motors and his multiple unit-system (1895) and Diehl (1884) of a variable-speed DC motor improved components of that central system (Hughes 1983). The commercial development of the alternating current (AC) technology by Westinghouse and Tesla in 1886, fundamentally changed the power distribution network and provided electricity at high voltage and low current. This facilitated the use of distant hydro (see Niagara Falls, NY in 1895) or mine mouth generation for regional power systems and led to a major increase of distant connections. In addition, the introduction of Tesla’s polyphase motor and transmission system (1890) reduced transmission costs and expanded the capacity (and thus future market share) of AC over DC (Hughes, 1983). These technological innovations were accompanied by a set of institutional changes. Nascent utilities had to find ways of balancing revenue and expenditures by establishing appropriate rates and charges. Power system planning techniques were developed and by the time bigger power systems were emerging in the USA, system planning and forecasting techniques were already an integral part of business. Such tools aimed to provide an overview of the system as a coherent whole to guide business strategy and investment. As discussed below, policy and regulatory development also had to evolve in order to deal with the implications of electricity as both a technology and business. For example, the slow pace of rural electrification led to national level efforts to extend electricity’s benefits to all Americans. Over these early decades the advent of electricity was evident in most of the big urban centers (Figure 2), with several isolated generation units striving to serve a continuously growing demand. The industrial and commercial loads of the daytime were supplanted in the evening by that of theatres, hotels and restaurants. As those loads and that of residential customers tapered off, the demand of bakeries, 5 Consisting of 6 “Jumbo� dynamos with capacity of approx. 99 kW each (Andersson, Batten, and Karlsson 1989) 6 110 V 7 An ingenious modification of the two wire system that allowed the reduction of the copper conductors’ size thus lowering the installation cost for distribution over larger areas. [6] dairies, cleaning services, and other night-time businesses reached a peak (Cunningham 2014). As the demand for electricity grew, new load had to be first anticipated in timely fashion and then adequately accommodated, requiring additional generation or wider distribution or both. However, the value of electrification was soon much more widely appreciated and smaller municipalities also began developing their own systems (as they were not always considered as financially attractive markets to the emerging utilities). By 1912 there were 1,562 municipally owned power plants over the country, a number that grew to 2,581 by 1922 (Slattery 1940). These locally operated systems were an important component of early electrification in the USA. Figure 2. This figure illustrates the areas having access to electricity in the US by the year 1925. Notably, urban centers in the Mid-West and Western coast adopted electricity services faster than rural settings. That is due to the vibrant socio- economic environment in these areas, which promoted technological and business innovation in the electricity sector (International Magazine Co. 1925). It is evident that over the first thirty years of its development, the electric power industry in the USA was primarily focused on the provision of electricity to urban rather than rural America. Figure 3 shows large parts of the country disconnected from the existing electric power systems and relying on local generation in a limited number of cases. In 1923 only 2.6% of farm homes in rural areas were electrified compared to 42% of residences in cities and towns (Slattery 1940). Rural electrification was justifiably not appealing for private utilities, which could see high financial hurdles in the construction of an extended distribution network to remote, sparsely populated areas with low levels of electrical demand. [7] Figure 3. Early interconnections and grid development in the US in 1927, prior to the establishment of REA. Most parts of rural America are not connected to the grid and electricity (where available) comes primarily from small isolated systems running on coal, diesel or hydro(International Magazine Co. 1925). Social pressure in accordance with political will to boost economic activity (the ‘New Deal’ program), triggered electrification efforts. It resulted in the establishment of the Rural Electrification Administration (REA) in May 1935 (first by Executive Order of the President and then made more permanent through an Act of Congress) (Slattery 1940). REA’s initial aim was to use a loan system to financially support states, corporations, individuals, municipalities, and co-operatives in order to construct and operate power plants, transmission and distribution lines and bring electricity to people unserved by the centralized network (Slattery 1940). The REA also began to take on the more technical tasks of designing and planning for rural electrification as the mandate to serve large areas at reasonable tariffs was an engineering challenge as well as a financial one (Slattery 1940). One of the more important features of the REA program was that it provided training to engineering and construction firms, in order to engage the private sector to participate in infrastructure development. Initial private sector involvement quickly waned and turned into opposition while on the other hand, several farm organizations and public power entities strongly supported the effort and tried to avail themselves of the REA's financial programs (Slattery 1940). While some existed prior to the REA, the financial and technical support of the REA arguably incentivized the development and rapid growth of several non-profit cooperatives, which actively supported electrification efforts in rural areas of the USA. Cooperative staff was hired and participated in the construction phase, but the majority of construction was performed by contractors who were trained in rural electrification design and standards. Together they dug the holes, set the poles and strung the wires by hand, supplying their small homemade [8] electrical systems with a couple lights for each house and barn, plus a few small motors or other minimal use appliances (“In the Beginning – Golden State Power Cooperative� 2017). Within 5 years and having spent 321 million USD, REA electrified approximately 1.7 million farms, more than in the previous fifty years since 1882 (Slattery 1940).8 This movement transformed rural America with electricity co- operatives and mini grid systems serving as facilitators for electrification. A few selected examples that illustrate the transition follow. i. Illinois (Chicago) Electricity arrived in Chicago in 1878 with arc-lights lighting up big public spaces and streets around the city (Platt 1991). Even though adopted with lackluster enthusiasm in the early years, electricity proved to be one of the influential factors in the city’s rapid industrialization in the early 1900s. Chicago grew to become a metropolis in the process, a railroad crossroad, with significant stockyards, factories and a rapidly growing population9 (Hughes 1983). In 1892, there were more than twenty small electric-lighting utilities in the city producing electricity mostly by small reciprocating engines. One of them was Chicago Edison, one of the numerous Edison franchisees around the country. The company had a generating capacity of approximately 2.8 MW and served approximately 5,000 customers in a city of more than one million (Schewe 2005). Samuel Insull took over the presidency of the company in 1892, and within a few years managed to transform considerably the electricity landscape in MidWest US (McDonald 2004). Insull’s visionary character made him among the first to foresee and actualize an all-embracing, interconnected electric power system over Chicago. Using his business, managerial and political skills, he managed to overcome competition by acquiring one by one all the small individual power systems in the city. Initially, these plants would operate alongside with the larger Chicago Edison units (Adam’s Street station first, Harrison and Fisk Street stations later on). This however, caused inefficiency as they were able to serve only a small surrounding area (Hughes 1983; McDonald 2004). Insull surmised that economies of scale were the solution to overcome the financial hurdles standing before a more centralized system. Over time, the small inefficient units were transformed into substations with the use of rotary converters10. Turbogenerators replaced the obsolete, un-scalable reciprocating engines and big AC generating power stations became predominant (Fisk Street Station, world’s first modern turbogenerator, 1902). Mass production of these machines led to low electricity prices11. On the one hand, this further reduced Insull’s competition, and on the other hand brought new subscriptions (from 5,000 in 1892 to 200,000 in 1910) (McDonald 2004). By 1910 the power network in Chicago was one of the most advanced systems in the world (Hughes, 1983). 8 It is worth to mention that this translates to an investment of ~$192 per farm (1940 dollar value), which corresponds to approximately $3,292 (2016 dollar value) today (US Department of Labor 2017). This value draws parallels between past and current electrification efforts. According to a recent study carried out by KTH dESA, the estimated investment requirements for achieving universal access to electricity by 2030 in 44 African countries, shows a weighted average of about $2,248 per household – with the lowest value observed in Benin ($988/HH) and the highest in South Sudan ($11,373/HH). 9 Population between 1890 and 1910 increased by 599,000 the largest in the city’s history (Hughes 1983) 10 In the early 1900s most industrial, commercial and residential applications were running on DC power. Rotary converters were commonly used to convert AC to DC before the advent of chemical and solid state rectifiers in the 1930s and 1960s 11 In that remarkable 30-year period, the rates charged for power had fallen to half even as the price of the fuel used to make electricity had tripled (McDonald 2004) [9] After Chicago’s unification into one system, the absorption by large distribution networks of smaller isolated grids in the vicinity expanded rapidly within 80-120 kilometers from the city (see Lake County, for example in Figure 4) (McDonald 2004). Insull would acquire isolated utilities in nearby towns, convert the small power plants into substations and send transmission lines from the centralized power plants. By 1923, more than two hundred rural communities had been interconnected over an area of 16,000 square kilometers (Hughes 1983). Figure 4. Insull’s power system expansion plan near Chicago in 1906 , where isolated utilities in nearby towns were acquired, and had their the small power plants slowly converted into substations, modified accordingly so as to receive power from the large centralized power plants (North Shore Electric Company (Gish Elton) 1906). The expansion of Insull’s grid system provides a notable lesson. The core of the system started in areas of growing economic activity, thus high demand density and then with the absorption of small systems by a larger competitor. This then expanded outward with multiple systems in more rural areas (but near the city) eventually being taken over. The usable asset (the distribution network) would remain but their generation would be replaced by transformers that could step-down the voltage from the larger system. However, this growth pattern did have limits and much of the rural Midwest that was not adjacent to a major city would only be electrified later (largely through farmer cooperatives and REA support). [10] ii. California Similarly, urban electrification was the starting point of electrification in California. The main cities were electrified at the end of the 19th century. They used steam power plants fueled either by expensive Australian coal or by oil from the newly discovered oil fields (Williams 1988). Meanwhile in the countryside, hydropower was successfully harnessed by local crafts (sawmills, agro processing), mining and industry for their purposes (washing out ore, moving belts and gears etc.). The abundance of rainfall, steep slopes and rushing streams in eastern California in accordance with advancements in electric power technology and entrepreneurial vision showed the way out of the energy crisis in the state (Hughes 1983; Williams 1988). Small hydropower plants started to emerge especially in the Sierras to the north and west of Sacramento, with limited transmission reaching nearby mines, farm communities and towns. The previously isolated Folsom (American river, 1888), Colgate (Yuba river, 1898), and Nevada City (1895) hydroelectric power plants were connected through what was, at the time, the world´s longest transmission line (140 miles) stretching from Colgate to Oakland on San Francisco Bay (1901). This defined the change of power systems in the area (Hughes 1983). The increasing electricity demand in the cities (Sacramento, San Francisco, Los Angeles), the establishment of a long-distance transmission system and improvements in water turbine technology led to a rapid expansion of hydropower capacity and point-to-point transmission. California became the birthplace of long point-to-point transmission of hydropower power as can be seen in Figure 5. By 1914 several hydropower plants were interconnected with formerly isolated steam plants under an integrated system serving 1.3 million people over an area of 96,000 square kilometers (Hughes 1983; Williams 1988). Figure 5. Interconnection of first hydropower plants & long distance transmission in California in 1904 (Locke, Fred (Gish 1988). The generation plants (shown as red dots) were previously isolated individual systems that then became the backbone of a new integrated system serving more distant urban centers. [11] iii. Alaska In Alaska, initial electrification efforts started in the early 1890s, supporting economic activities (mining, local merchants) around the major cities. In 1893, Willis Torp, a local merchant, introduced a water mill at the banks of Gold Creek river, which coupled with an electrical generator could serve small nearby loads (AELP 2013). Three years later the city was equipped with a coal fired power plant in an attempt to provide reliable service during the winter months when the Gold Creek plant was running low.12 Over the following years several hydropower plants were set into operation (e.g. Sheep Creek, Nugget Creek, Salmon Creek, Eklutna plants) (United States Department of the Interior - National Park Service 1980). By 1908 there were at least 30 hydropower installations in southeast Alaska, with an estimated capacity of 11.5 MW, powering mining, canning and sawmill businesses (Hollinger 2002). Steam power plants were also introduced in the main urban centers (Juneau, Anchorage). However, residential consumption in Alaska remained low. In the run up to and during World War II (WWII) (1939-1945), the Alaskan power system developed due to military activity in the area, which led to infrastructure development on the one hand, and a rapid population (thus demand) growth, on the other. The development of the power system however was not an easy task. Operation, maintenance and/or expansion of the local power plants was often under stress due to security reasons, scarcity of raw materials or challenging environmental conditions (ARECA 1994). For example, in 1941 a section of the transmission departing from the Eklutna power plant had to be relocated under military order (Hollinger 2002). The electrification wave in rural Alaska was however a function of the REA program started in the late 1930s. As in the Midwest and other areas of the continental USA, rural electrification came largely in the form of non-profit consumer-owned electric cooperatives (coops). Coops13, as previously described, helped in building small power stations, erecting power lines and progressively electrifying unserved areas (ARECA 1994). 12 Since it was a run of river the flow in winter months was reduced 13 Several co-operatives were born at that time in Alaska: Matanuska Electric Association (1940), Golden Valley Electric Association (1947), Glacier Highway Electric Association (1947), Chugach Electric Association (1947) to name a few [12] In the post-WWII years until the 1960s, the electric cooperatives worked hard towards building the facilities that would provide reliable and affordable electricity services to a growing population (ARECA 1994). Many would form associations in order to share knowledge and enhance rural electrification (e.g. Alaska Rural Electric Cooperative Association - ARECA). Yet, an estimated 206 communities still did not have access to electricity by the mid-1960s (ARECA 1994). The construction of the Trans-Alaska pipeline (1973) based on the oil discoveries (1957) in the area, further increased the population and the energy needs. These factors, combined with the rising oil prices in 1970s, compelled the state to construct several hydroelectric and thermal (natural gas or coal) power plants in order to meet rising demand at lower electricity prices than oil-fired generation could provide (ARECA 1994). Currently, Alaska is divided in 11 energy regions (Villalobos Melendez 2012) but the majority (¾) of Alaskan residents are served by what are known as the six “Railbelt� utilities14 (U.S Energy Information Administration 2016; Fay, Villalobos Meléndez, and Converse 2012). Still, due to the unstable climate conditions and logistical challenges many remote communities are electrified by mini grids (see Figure 6). An example, are the 58 rural communities operated under the Alaska Village Electric Cooperative (AVEC) that are getting electricity mainly from diesel (or hybrid diesel/wind) generators (AVEC 2015). Figure 6. Map of current power system status (on – off grid) in Alaska (U.S. Energy Information Administration (EIA) 2017). Approximately 10,900 people in 58 villages rely on mini-grids to cover their daily energy needs (AVEC 2015). 14 Consisting of Anchorage Municipal Light and Power, the City of Seward Electric System, Chugach Electric Association, Golden Valley Electric Association, Homer Electric Association and Matanuska Electric Association and so named because they exist in the general geographic area served by the Alaska Railway. The utilities developed and operated independently until 1984, when the Alaska Intertie Agreement was established (Black & Veatch 2010). [13] The Alaskan case illustrates, in part, the diversity of multiple successful electrification pathways. The progression from islanded operations to extensive national grids is significantly more challenging if not prohibitive when population densities are low, distances are vast, communities are isolated topographically (e.g. on islands) and either meteorological or topographical features make transmission hard (e.g. harsh winter weather or mountains). Under such conditions (for which parallels may exist in currently unelectrified areas in developing countries), the emphasis might be more on technological and institutional advances that can make smaller scale systems more efficient, reliable and cost-effective. a. Reflections Regional systems in the USA developed as a natural approach to efficiently serving growing demands, tying urban demand centers to distant generating sources, locating plants where land or fuel was cheaper, and optimizing economies of scale. In addition, their development was highly interconnected – shaped by existing legislation, financing mechanisms, ownership and politics in each area. Together these led to the transition of utilities from small lighting companies and generation units to support productive activities, to what is called a universal system (Hughes 1983). The brief historical review reveals some salient insights:  The rapid industrialization of the country with its consequent socio-economic shifts, created a demand for new, low-cost energy forms and self-sufficiency.  The electric power sector was rapidly seen by many as a new business opportunity. It thus, attracted a lot of entrepreneurial and investment activity. And, in turn appeared to reinforce the [14] country’s economy. In addition, the competitive environment in the electric industry promoted technological innovation leading to new technical systems that were quickly adopted by utilities.  The earliest power systems, regardless of type or size, were designed to be successful in terms of economics as well as engineering, contributing to their profitability and competitiveness. The systems were often (or eventually) built based on available resources and specificities of the locality.  Early deployment of isolated stations and urban mini grids (and later peri-urban systems) was primarily driven by an evident, growing demand for electricity. While this is true for rural areas as well, system expansion was also a function of an explicit social welfare policy aimed to bridge the gap between urban and rural settings.  Private power companies, would not or could not serve all of the population and provide power at large scales. The gap was filled with small municipal public systems, rural cooperatives, large federally owned power generation corporations (e.g. TVA and BPA) and supported through public and non-profit entities (e.g. REA, NRECA).  Local participation – and ownership – appears to be an attribute of many public or cooperative efforts, particularly in smaller communities and rural areas. Rural communities were eager to get access to electricity and in most of the cases the local population was actively involved in the process. Community engagement and political commitment through financial and regulatory support, were crucial parameters of success.  Interconnection of neighboring mini grids followed as a measure of coping with load variation and increasing the systems’ flexibility whereas growing generating capacities (per unit) proved to be an effective way to lower costs through economies of scale. The end goal was to increase market share and maximize profitability.  Centralized grid versus mini-grid electrification was a lengthy process that depended upon technological advances, geographic factors (e.g. Alaska), resource availability (e.g. hydropower), socio-demographics (e.g. demand density) and policy. With the exception of resources and geography, the other factors shifted and changed over time with accompanying changes in how electricity demand was met (both technically and institutionally). [15] UK a. Historical context Many of the early demonstrations and discoveries fundamental to the development of later electricity systems were made in the UK starting in the early 1700s. Francis Hawksbee’s early static electricity demonstration in London’s Royal Academy (1705), Davy Humphry’s battery in London’s Royal Institutions (1808), Michael Faraday’s electromagnetism discoveries in 1820s and Joseph Swan’s experiments with the incandescent lamp (1850-60s), are landmarks in the history of electricity. Yet the development of “modern� power systems in England was long and knotty, characterized by vested interests, political interference and numerous debates about public vs private power. The first public electrical supply experiment occurred in 1881, when the streets of Godalming were lit using hydro power and a dynamo-electric generator (Strange, 1979). Other cities followed next. It was common for individual companies or people to install their own supply to their factory or (large) home. Often the generator (dynamo) was driven by steam, supplying direct current for lighting 15 (Weightman 2011). It was clear that electric lighting was competitive to gas lighting, and likely to overtake it in popularity. By 1900, London had proportionally more privately owned generators than any other big city (Hughes 1983). The development of a bigger supply system to cope with the growing demand was seen by some as a necessary next step. The first such plant, at Holborn Viaduct - London, opened in April 1882 with capacity of approximately 200 kW16. It was vital that the cost of electric lighting be as close as possible to that of gas lights to be competitive. In this stage of development, it is reported that the price was more important than the quality of service (Weightman 2011). The Holborn plant needed to expand to leverage economies of scale and for that it needed permission from the Board of Trade to dig up public roads and lay its distribution lines underground. In England, these forms of public supply were set up either by private companies created for this purpose or by local authorities. Both needed statutory authority to put cables and pylons on private land and to lay cables in streets. This created debates over power infrastructure development and environmental disruption in London. Plans and counter proposals were prepared by or presented to local authorities. They included forecasts of benefits or of dire consequences arising from plant construction and/or from private investment therein. The debate about public vs private power reflected local authority concerns about monopoly abuses of property on the one hand vs having the public bear the potential costs of an untried, first of a kind technology on the other (Hughes 1983). The favored regulatory solution was to grant limited franchises for small service areas to avoid costly duplication of distribution. This solution protected both private and public investment concerns to some extent, and reinforced the jurisdictional power of the local authorities. Interestingly, the building of public utilities and municipal cooperatives were also encouraged. This was undertaken in the firm belief that public enterprises would compete with private companies. 15 An example was William Siemen’s 4.5 kW installation at his private property near Tunbridge Wells. A steam engine was driving two dynamos producing enough power to light 30 incandescent lamps all over the house 16 It consisted of two “Jumbo� dynamos (Andersson, Batten, and Karlsson 1989; The Electricity Council 1987) [15] The first national electricity regulation came through The Electric Lighting Act of 1882 (amended 1888). That permitted private companies to build and operate electricity generation and distribution infrastructures for 21 years (Weightman 2011). The theory was to have private investors assume the risk of ‘first of a kind’ technology, with the provision that after a number of years the municipal authorities had the right to buy the companies for the price of the equipment as scrap (Hughes 1983). This is an earliest application of “build, own, operate transfer� (BOOT) as a regulatory tool for managing the risks and benefits of new technologies. The Act, however, not only reduced private sector interest in the business but also led many early electricity companies to bankruptcy. While electricity companies proliferated in other parts of the world (New York, Chicago, Berlin etc.) Holborn station closed down in 1886 (Weightman 2011). The experience of the Holborn plant highlights the planning difficulties of early electricity companies in England. While a company was making plans for expansion of service, the local authorities meanwhile were making rival plans to either constrain or compete with this company. They were also making plans for economic development not always congruent with those of the electricity company. Securing licenses for expanding systems was an ongoing effort, proposals for which required more than a modicum of planning. Despite legal and financial complexities, one company managed to flourish due to a loophole in the 1882 Act. Grosvenor Gallery’s small AC generator started operating in 1883 lighting up a few arc-lamps in the exhibition room. This attracted a lot of attention and interest from nearby shopkeepers on New Band Street in London’s West End (Weightman 2011). Wires started hovering over rooftops (bypassing the Act’s restrictions when laying underground lines), connecting more and more end users. The increasing demand required additional capacity and despite the failure of an initial expansion in 1885, the power station was ultimately transformed by an ambitious young engineer, Sebastian Ferranti. Inspired by Insull’s success in Chicago, Ferranti envisioned an interconnected, centrally powered system in London. A site at Deptford was then selected for the construction of the biggest at that time power station in the world. The plant was designed to run with two coal-fired generators with 30 MW of total capacity (South Western Electricity Historical Society 2003). A 10 kV line (Wilson 1991; Black and Science Museum (Great Britain) 1983) would transfer electricity to the Grosvenor Gallery’s station, which had transformed into a substation in order to distribute electricity to the nearby users. The Deptford plant was granted a license to generate electricity in 1887, but for a much more limited area for distribution than Ferranti aspired. Therefore, a far scaled-down version of the original plan was eventually commissioned. The plant started operation in 1889, running on a small generator of 938 kW (South Western Electricity Historical Society 2003), however a fire in 1890 interrupted its operation. It should be noted that questions of safety and environmental protection, sometimes seen as recent concerns, were at the time already important issues in the infancy of the industry. It was fears for public safety that led to limiting the size at Deptford putting an end to Ferranti’s auspicious plans. Development of universal or regional systems was discouraged outright by public sentiment or licensed in a limited fashion. Electricity supply subsequently remained local for nearly half a century, with mini- grid isolated systems operated by councils or small private companies (Weightman 2011). In 1915, the newly established Electric Power Supply Committee identified more than 600 isolated power systems operating across the country (JACOBSON Washington and Joelatarr 1996). Their average generating capacity was 3.75 MW, in many cases too low to be economically sustainable. To cope with the scattered generation and the multiple standards these systems were operating with, the committee suggested the division of the country into district boards. The boards would take over generation and distribution of electricity in their allotted area (Hannah 1979; Weightman 2011). [16] Despite this effort, in 1921, there were still approximately 500 authorized suppliers of electricity in the UK. They were generating and supplying electricity at a variety of voltages and frequencies. The Electricity Act of 1926 created a central authority to promote a national transmission system. The Act finally provided a more coherent framework for system growth, establishing “the Grid� (an interconnecting system of selected stations and distribution systems), and the Central Electricity Board (CEB) to manage it. All participating generators sold electricity to the Grid and participating distribution systems bought it from the Grid. This system was largely completed by the mid-1930s. Within seven years, 4,000 miles of cable were hoisted onto 26,265 pylons transmitting electricity all over the country mainly at 132 kV. The scheme costed approximately £ 27 million17 (Weightman 2011). Different schemes were deployed to bring electricity to the poorest communities. For example, pre-paid arrangements with a minimum consumption threshold (100 kWh/year) in Manchester; increased tariffs for the existing customers; or amortized costs (in the tariff) over a number of years for new customers. Yet, in 1939 before the start of WWII only 12% of the rural population was electrified. WWII imposed its own changes and requirements on the power system, electricity being by then a more central and pivotal part of every wartime economy. However, postwar recovery saw changes with regards to ownership, and major expansions to serve growing civilian demand (Weightman 2011). The post-war Labor government viewed state enterprise as best to provide this service and nationalized the system. Access to reliable electricity services and exploitation of economies of scale in the UK became an unquestioned policy path. The first wave of nationalization started with the Electricity Act in 1947, when 500 power generation and distribution organizations (private companies and/or municipal utilities) went under state control, upon compensation18. The generating assets and liabilities of these organizations were also transferred into a single state-controlled body. In addition, the Act introduced fourteen19 regional Area Boards (Katzarov 1964), which carried out the distribution and retail of electricity in their own region (Simmonds 2002). 17 This translates to approximately £1.76 billion today (using the UK 1935-2016 composite consumer price index values) (Office for National Statistics - UK 2017) 18 The cost of compensation to private power companies was estimated at £542 million. Municipal utilities were not considered eligible for compensation (Weightman 2011) 19 12 in England and Wales - 2 in Scotland (Simmonds 2002) [17] Figure 7. Division of power supply over the greater area of London, 1944. Private companies and municipality utilities were operating in a highly competitive environment. In many cases, this fostered co-operation, especially in the years after WWII due to the dread of an imminent nationalization. The nationalization of the power system forced many local power stations to turn their generators off since they were inefficient and too costly to compete with the big, centralized power plants. This effectively ended the era of small-scale local generation and management of electricity as the 50s and 60s saw increasing use of large centralized power plants based on coal and nuclear (plus hydro in Scotland).20 b. Reflections There are a few key reflections, that are drawn from the UK story:  Mini grids were an important element of the British power industry until a later stage of its development than in comparable economies (e.g. U.S.A.). 20 Between 1948 and 1961, 62 new centralized power stations were built in the UK (Weightman 2011) [18]  Overregulation and political parochialism hindered the quick and vigorous development of the power sector in the UK, with policy being a highly influential factor in the adoption of new technologies and schemes.  Safety and environmental protection were important factors for the development of power systems in UK, even if they may hamper their rapid expansion.  Power enterprises, whether private (for-profit or non-profit) or publicly held, were setting charging rates to levels that were sufficient to cover their costs of maintaining service, match changing load to changing investment needs, and meet external policy demands. This was a critical success factor even where electricity was seen as an investment in social welfare or economic development.  Finally, achieving universal access to electricity required strong political commitment and relied to a great extent on public investment. [19] Sweden a. Historical context Electric power arrived in Sweden in the second half of the 19th century. In its early stage, electricity generation was spatially constrained around areas with high demand. As in the USA and the UK, street lighting was the first application of electricity – a DC facility put in operation in Härnösand (1885). Similar utilities were founded in towns, usually as an initiative of a prominent person/group within the municipality (local elite, bankers, traders, etc.). The utilities were small with a limited number of customers, forming small isolated islands of electricity distribution (Bladh 2011). At that time, Sweden was entirely dependent on coal imports for its energy supply, so electricity was usually generated in coal-fired steam stations providing low voltage direct current. However, unlike the USA and UK cases, where expansion of the early electric power systems was concentrated in more urban areas serving multiple needs, the Swedish case followed a slightly different pattern. Namely, electricity production for industrial customers quickly became a major driver for development of the electrical system. For example, by 1885 the number of incandescent lamps in industry was greater than in other part of society – 2,233 industrial out of a total of 4,432. The energy- intensive processes of Swedish industries and the productivity benefits from using electric motors resulted in an increasing demand for electricity. Several energy intensive industries (saw mills, mines, manufacturing companies etc.) developed their own generating capacity - the biggest in the pulp and paper industry and in steel (Bladh 2011). Isolated power systems expanded throughout the country in order to serve the growing industrial and municipal electricity demand. At the beginning of the twentieth century, industries alone had a generating capacity of 66 MW. Unlike urban centers that relied on coal, industrial production was derived predominantly from hydropower (60%). Electricity boosted productivity in industry but also introduced a new way of life in the Swedish households almost as a side effect (Enflo, Kander, and Schön 2009). Due to the variation in electricity production (as a result of seasonal variation of hydropower) and in order to increase profit many industries were selling the surplus electricity to nearby customers (communities in the vicinity). That stimulated demand, which steadily grew when new devices were introduced (electric irons, radios and later stoves, refrigerators etc.). Furthermore, electricity was highly preferred as a safer means of energy but also as a more stable one. It was cheaper than imported fuels such as lamp oil, kerosene etc. In addition to the industrial capacity, in the year 1900, there were close to one hundred municipal electricity plants all over the country accounting for about 16 MW (Bladh 2011). At the same time and under a political impetus, power generation activities were highly supported by the government. There were deliberate efforts focusing on the exploitation of one of the country’s most abundant resources, water. The arrival of AC helped overcome the barrier of spatial mismatch between the location of beneficial conditions for electricity generation (North of Sweden for hydropower), the location of residential and commercial electricity consumers (in cities further south) and the location of industry. Early DC power systems required industries to be located near to the energy source. With AC’s ability to transmit power over longer distances, industries started to be located closer to the market and where there was plenty of labor. The period between the 1890s and 1920s was the major growth period for industrialized cities in Sweden (Bladh 2011). [20] Since the construction of new power plants along with transmission lines required significant investments, coalitions of interested entities were formed to share the high costs and minimize the risk. These coalitions were typically institutionalized in the form of limited companies, founded by municipalities and/or energy-intensive industries (Figure 8). Examples, to name a few include Kungliga Vattenfallstyrelsen (later Vattenfall21), Stora Kopparberg, Stockholms elverk and Uddeholm. This simultaneously attracted a number of private investments with many power generation companies being introduced within 1904-1906. (Those included: Sydsvenska kraft - E.ON from 2004 - Hemsjö Kraft AB, Yngeredsfors Kraft AB, Stenkvill-Klinte Kraft AB and Kraft AB Gullspång-Munkfors) (Bladh 2011). Figure 8. Vattenfall’s power system in Southern Sweden as in 1916 (left) and 1922 (right). The figure illustrates how within a few years, power stations initially developed to serve industrial loads start expanding in the surrounding area so as to cover a growing residential demand. Inter-connection between existing municipal/industrial power stations occurred as an early form of public-private partnership (PPP) (Vattenfall 2017). From a regulatory perspective, the power company constructing a transmission line was given monopoly over the areas served by that line. In order to construct the line, a distribution agreement was required between the power company and its customer (small industries, commercial stores or households). Thus, in the early stages there was a race towards new agreements and consequently more distribution lines. Even though the network effect triggered local monopolization in some cases, competition was generally high between the early utilities (Bladh 2011). Utilities were financing their network expansion either through bank loans or governmental support. In order to keep costs down the main strategy among suppliers was to support the formation of cooperative distribution associations at a local level. Similar to the USA scheme, members of the 21 http://history.vattenfall.com/ [21] cooperative were actively involved in the electrification process. They built the network themselves, erecting poles and mounting wires. A collective tariff scheme was followed where each member was contributing according to the energy used. The number of electric cooperatives increased from 119 in 1916 to 1,010 in 1919 and reached a maximum of 2,401 cooperatives in 1947 (Bladh 2011). Gradually, bigger companies dominated and took over control of power generation. However, distribution of power remained under control of local cooperatives until the 1990s (Wangel 2015). b. Reflections Sweden is another example where mini grids played a significant role in the early stages of power grid development. Selected reflections of their contribution are summarized below.  Mini grids paved the way for the development of the national grid system by making electricity available as an energy carrier to industry, agriculture and eventually households. Electricity was highly preferred to other fuels as it was safer (in comparison to gas lamps in households) and more affordable than imported fuels (coal, lamp oil, kerosene etc.). For industry, the increased efficiency that came with electrical drive motors was a major productivity boost.  Electricity from these isolated systems spurred productivity and increased profit in industries and other enterprises, mobilizing in parallel the economy in the nearby communities.  Their decentralized manner allowed competition on local level. This helped to spur relatively low rates, increasing the affordability of electricity services, receptivity to new technology adoption and consequently enhancing social welfare. [22] China a. Historical context China is commonly characterized as a success story in the field of rural electrification. Within 50 years the country managed to provide access to electricity to more than 900 million people (Pan et al. 2006). Along with the strong political commitment, the deployment of mini grids and especially small hydropower contributed to a great extent to this success. Electricity arrived in China at the end of the 19th century and as in many other parts of the world was used first for lighting purposes. The first electric company, Shanghai Electric Co. was formed in 1892, three years after Edison’s breakthrough in New York, promising a new way of lighting up the city’s streets. (Chen 2013). A few years later Zhang Garden of Shanghai was the first public place to lit up by electric arc lights (Pang 2007). Even though electricity was economically less competitive than the well- established gas lighting, it started gaining popularity quickly in areas with foreign activity (Xiaoqing 2003). Banks, theatres, tea houses, restaurants were the early adopters, yet the majority of the population remained un-electrified. Electricity supply spread slowly over the following decades. From 1920s onward, small isolated power units (mainly hydropower or internal combustion engines) started appearing in rural areas, covering lighting and motor loads in mining and agricultural processing (Wright 1992). In 1923, lines were extended from a coal fired power plant to nearby rural areas in Jiangsu Province to support irrigation and food processing (Pan et al. 2006). The progress was slow. In 1949, there were only 33 small hydropower stations in rural China with a total installed capacity of 3.6 MW (Pan et al. 2006). Rural electrification progressed steadily but slowly from 1949 when the People’s Republic of China was founded until the economic liberalization of 1979. The 1980s and 1990s saw a rapid expansion of rural electrification with small hydropower stations playing a major role in electrifying hundreds of millions. By 2012, China had achieved universal electrification (The World Bank 2017). Various forces (political, social and economic) triggered electrification progress in three different stages. The first period, from 1949 to 1978 was characterized by central planning and a significant increase of small isolated hydropower projects over the country. In 1953 the Ministry of Agriculture established the Small Hydropower Agency. Its aim was to train experts that would help actualize the colossal venture of China´s rural electrification. By 1959, 1000 small hydropower plants were built, operating in isolated mode and transmitting electricity at low voltage to nearby communities. Electricity was used for lighting, agricultural processing, drainage, irrigation and industrial operations. Small hydropower capacity expanded from 150 MW in 1959 to 255 MW in 1963 to 380 MW in 1966 and 729 MW in 1969 and 800 in the late 1970s. Meanwhile, the national grid started to expand from the urban centers towards the outskirts reaching some rural areas with 6-10 kV lines. By 1970 there were 1.02 million kilometers of high voltage distribution line stretching off the biggest cities. It is important to mention here that the management and operation of the isolated mini grids was a duty of the local government and remained so even after these areas were connected to the regional or national grid. It is reported that this policy cultivated a sense of ownership in the shareholders. It attracted more farmers, water agencies and local governments to invest (both in cash and labor) in hydropower deployment. As a result, by 1987, 500 million people had gained access to electricity (Pan et al. 2006; Bhattacharyya and Ohiare 2013; Niez 2010). [23] The second period from 1979 to 1998 was characterized by rapid and large scale development of the power system in the country. Decentralized systems were further supported by the government, which provided funds and financial incentives to promote their development. For hydropower, a number of policies were set in place to promote ownership, facilitating access to loans and foreign investments, allowing revenue streams to local government under lower tax rates and supporting interconnection with the main grid when possible. Over a period of twenty years, 653 counties in remote areas gained access to hydropower based electricity. Small-scale thermal power plants were also built where resources were available in order to achieve greater stability and reliability of supply. In 1998, mini grids covered 26.3%22 of the rural electricity demand with the remainder coming from the regional or national grid. In this period the electrification rate in China reached 97% (Niez 2010). By the end of the 20th century, there were still 8.8 million households without access to electricity in the country (~30 million people). In addition, rural households that had access did not consume more than a few hundred kilowatt-hours per year. They were also experiencing frequent shortages since the rural grid network was outdated and insufficient. The third period of electrification started in 1999. This period was characterized by institutional reforms in the electric power industry and an extensive renovation of the rural electricity infrastructure. State and regional systems were updated and interconnected to the national system while a standardized electricity tariff was introduced (Pan et al. 2006). Figure 9. The story of China shows that, when appropriate, both decentralized (on the left) and centralized (on the right) approaches of electrification can be successful and effective (Niez 2010; He and Victor 2017) In addition, technological advancements in the renewable energy field allowed numerous stand alone and mini grid systems (solar, wind, biogas, hybrids etc.) to be deployed in areas where grid extension was not an economically viable option23 (Figure 9). Several schemes and pilot projects were introduced such as the “Brightness�, “Township�, “County Hydropower Construction of National Rural Electrification�, “Power for All�, “Golden Sun� electrification programs and the “China Southern Grid� 22 Small thermal power plants produced 51.1% of the mini grid electricity in comparison to 48.9% from small hydropower (Pan et al. 2006) 23 Primarily in Xinjiang, Qinghai, Inner Mongolia, Tibet, Gansu, Ningxia, Sichuan provinces (Niez 2010) [24] modernization effort (Niez 2010). By 2012 China achieved universal access to electricity (The World Bank 2017). b. Reflections The history of electrification in China provides valuable insights for countries that are currently coping with low electricity access rates, especially in regards to the role of off grid technologies.  Governmental commitment along with substantial financial and regulatory support can play a pivotal role in electrification processes.  China followed a bottom up approach to electrification which proved to be very successful. Local communities and counties developed off grid generation capacity based on their resource availability and their respective demand. Building self-reliance allowed technological flexibility, capacity building (for construction, operation and maintenance) and an increased sense of ownership by communities.  The main grid gradually overtook smaller systems, but not everywhere. The Chinese case shows that power24 struggles may potentially occur when the grid butts up against mini-grids. However, this also indicates that the electrification mix may require a diversity of solutions that are both time and condition dependent.  Finally, it should be noted that in the early electrification days, access to electricity was seen as a way to boost productivity and rural economic development, rather than social welfare policy. This gradual electrification process for productive uses through mini grids allowed the demand to grow in parallel with the ability of rural population to pay for additional services. The resulting observation is that extending and updating the main grid to such areas on a later stage was less challenging since there had been already developed (and growing) electricity demand and functional distribution systems in place. 24 In this case political or social [25] Case briefs In the following sub-sections, the focus is on a smaller set of insights per country gained from Ireland, India, Bolivia and Cambodia. The electrification process in each one of these countries was (or still is) motivated by various factors, yet mini grids are seen as an important element of power system development. Ireland The first public electric light in Ireland was lit at Princes Street, Dublin, in the year 1880. Following the general pattern of the times, urban areas were the first to utilize electricity. DC low voltage electricity was distributed over a short distance either for public lighting or for powering local commercial activity. Private companies also played a crucial role from very early on. By 1925 there were 161 independent entities in the country (local authorities or private companies) operating in various frequencies and voltages. Hydro, coal, peat, gas and wind power were all being utilized to generate electricity (Shiel 2003). The evolution of the power system in the country is deeply entrenched to the formation of the Electricity Supply Board (ESB) in 1927. Its history began with the Electricity Supply Act (1927) to manage Ireland's electricity supply as the massive Shannon hydro scheme at Ardnacrusha was being completed. The Ardnacrusha facility, opened in 1929, was the largest hydroelectric plant in the world at the time. Figure 10. High-voltage network and the Shannon electrification scheme in the Free Irish state in 1930 (Siemens 2017). [26] The Shannon scheme was undertaken to power the city of Shannon as an industrial base for the country (Duffy 2004). The scheme led to Ireland's first large-scale electricity plant – and six years later, it covered 80% of the total electricity demand of Ireland (Shiel 2003). The importance of the Shannon hydropower scheme can be seen in the concurrent development of a large-scale transmission system that covered much of the country (Figure 10). For the next 25 years, much of the development was through hydropower providing electricity to cities. After the urban areas were completed the rural electrification scheme began. Although its centralized electrification efforts started later than the UK and the US, Ireland is acknowledged in the literature as an example of major centralized25 electrification schemes (Schreurs 2008) and demonstrates a case of rapid transition from smaller systems to a single large system. By 1965, 81% of rural households were electrified with total expenditures amounting to 36 million Irish pounds26. Electrification was finally complete in the early 1980s. Most of the smaller islands are now connected to the main grid, but a few still rely on mini grids, primarily through wind- and/or diesel-based generation. 25 Both in terms of the system architecture and top-down national government action 26 Approximately 1.5 billion today (Boland 2016) [27] India In July 1879, the first Indian demonstration of electric lighting was conducted in Kolkata (former Calcutta) by the privately owned company P.W. Fleury & Co. Two years later, the first commercial application of electricity lit 36 lamps at Mackinnon & Mackenzie Company’s Garden Reach Cotton Mills. Mumbai saw electric lighting for the first time in 1882 at Crawford Market. As in many other parts of the world, electricity in India was initially introduced in urban centers for lighting. Small, isolated, privately owned power systems started to appear gradually over the country and particularly deployed by productive units, which saw great potential in this new form of energy (“History of Indian Power Sector | Power Sector� 2017). Darjeeling in North East India was the site of the first hydropower application in the country (Sidrabong station – 1896). A 130 kW generator driven by impulse turbines provided electricity to nearby tea plantations. Emambagh thermal power station (1896) in Kolkata served commercial loads in the vicinity. Sivasamudram station (1902) near Bangalore supplied power to the Kolar gold mines and the Ultadanga station (1910) supplied the jute industry. Bombay Electric Supply & Tramways Company (B.E.S.T.) set up a generating station in 1905 to provide electricity for the tramway. Over the next decades, big power plants were built in order to cope with increasing demand, while early interconnection processes had been established as a way to cope with load variation (e.g. Khopoli – Bhivpuri – Bhira interconnected hydropower plants (Madan, Manimuthu, and Thiruvengadam 2007; Journal 1912). Figure 13. India’ second hydro-electric project in Khopoli (1915) & inter-connection with cotton mills in Mumbai. Early power systems in India were developed around zones with economic activity, based on the available local resources. Soon after independence, the Electricity Supply Act of 1948 introduced State Electricity Boards (SEBs) in 16 states, which were given autonomy over the generation, transmission and distribution of electricity [26] within their territory. The aim of this was to enhance reliability of supply, allow economies of scale and increase geographical coverage (Tongia 2007). At that time, the generating capacity was approximately 1.3 GW27, mostly provided by privately owned companies28. The centralized grid systems were increasingly dependent on large generating stations and became inter-connected in stages from the formation of five regional grids29 (1967) to the gradual creation of a single grid (1991-2014). This single grid supplies almost half of the power in the country (PGCIL 2017). However, despite this decades long effort to build out the grid system and increase power generation, grid electricity still does not reach approximately 240 million people who reside in currently unserved areas (IEA 2015). In many cases, off grid systems are an economic electrification alternative for these areas, especially where public funds have proven insufficient to provide central grid electricity. As of 2013, approximately 10,154 villages and hamlets have been electrified through mini grid systems under the Remote Village Electrification Program (RVEP) (Ministry of New and Renewable Energy 2017)(Norton 2010). Many renewable-based private mini-grid models have emerged as a means of reducing energy poverty in the country. They range in size and scale from providing very low levels of power to each household sufficient only for a light and cell phone charging (e.g. Mera Gao Power), to others that provide power suitable for a range of household needs or even productive activities (e.g. OMC, Husk Power). However, while some have managed to provide electricity to hundreds of villages and thousands of customers, they face a number of challenges. These include unclear regulations around mini-grids, perceptions around grid vs mini-grid power, and difficulties in obtaining finance (Zerriffi et al. 2016). 27 In February 2017 the generating capacity exceeded 315 GW (Central Electricity Authority of India, 2017) 28 Calcutta Electric Supply Company, Bombay Suburban Electric Supply Company, The Delhi Electric Supply Company, The Ahmedabad Electric Supply Company etc. 29 Southern, Northern, North-Eastern, Western, Eastern regional grids [27] Bolivia During the colonial period and until its independence in 1825, Bolivia’s economy had a mono -productive profile based on mining of the large silver ores discovered in Potosí. In the second half of the nineteenth century, the exploitation of silver as well as other minerals intensified, with growing investments flowing in the country mainly by English and Chilean investors. It was at that time the first electric power systems start appearing in the country around areas with mining activity. Public electricity arrived in the cities of La Paz, Oruro, Potosí, Cochabamba and Sucre in a relatively short period of time. In 1898 the first 45 kW diesel generator started operating in Oruro and within 6 years the capacity reached 440 kW powering nearby mines, public and residential lights for about 5.5 hours/day. In 1908, the first privately owned hydroelectric power plant (Cayara - 370 kW) was built near the city of Potosí (ENDE 2017). Due to lack of adequate legislation regulating the electric power industry, systems were developed under different frequencies (25, 50 and 60 cycles per second) and voltages (besides the common 110 and 220 volts, 380, 400, 440, 500 and 600 volts were used, especially in mines). The regulation of the electric industry was also local in character and was carried out through concession contracts awarded by the municipalities to private companies. In order to control the regulation of the sector and cope with the country’s supply limitations, the National Electricity Company (Empresa Nacional de Electricidad S.A - ENDE) was established in 1962. ENDE was created as an institution of public service to fulfil the specific role as a regulator of production, transmission and distribution of electricity and also supervise activities related to operation, construction and planning. During the following decades, significant investments were made in transmission, interconnecting the main generation systems from the north to the south of the country (ENDE 2017). In addition, local mini grids (local cooperatives, municipal utilities and private companies) were technically and financially reinforced by the government, expanding electricity coverage within and around major cities. Centralized generation prevailed, based initially on hydro and later (in the 1980s) on natural gas thermal power plants. At this point in time, industrial and mining isolated stations were shut down since grid electricity became a much more affordable option. Two rounds of privatization (1989-1993 and 1994-1997), resulting from Bolivia’s economic crisis of 1982) further reinforced the dominance of large-scale power generation. The generating capacity was increased significantly primarily due to the construction of big thermal power plants running on the country’s abundant natural gas reserves. Access to electricity improved during the privatization period, yet in rural areas the rate still remained low. In 2005 a new Rural Electrification scheme was approved (Supreme decree No. 28567) aiming to increase rural access to electricity through further reinforcement and extension of the grid network. In 2012, a second scheme (Plan de Universalización Bolivia con Energía� later “Plan Eléctrico 2025� ) was developed targeting universal access to electricity by 2025 (Ministerio de Hidrocarburos y Energía 2010). Still, in 2015 it was estimated that 44% of rural settlements did not have access to electricity, compared to 2% in urban areas (Ministry of Hydrocarbons and Energy 2014). Currently, the National Interconnected System (Sistema Interconectado National - SIN) serves big parts of the country’s demand. However, several parts of the country are served by smaller-isolated grids (referred to as Systemas Aislados - SA). For example, the regions of Beni, Pando, Tarija and the eastern region of Santa Cruz are not connected to the SIN and constitute autonomous systems. As in 2014, the [30] installed off grid capacity in Bolivia was 135.7 MW, approximately 8% of the total generating capacity in the country (Autoridad de Fiscalización y Control Social de Electricidad 2014). The electricity distribution of these systems is led by cooperatives and community organizations which sell electricity to middle-size towns and small rural communities. According to the Bolivian government, the capacity of off-grid systems will follow a 10% annual increase and their capacity is estimated to reach approximately 274 MW by 2025. The government is planning the gradual interconnection of these systems with the national system (SIN) within the same time period. Bolivia is another example where mini grids played (and still continue to play) a significant role in electrification processes. [31] Cambodia The reconstruction after decades of conflict that halted development and damaged existing electricity infrastructure of the national power system in Cambodia started in the early 1990s. While the electricity utility company – Electricité Du Cambodge (EDC) – undertook the challenging task of extending the grid to the more densely populated parts of the country, rural areas in the country’s borders with Vietnam, Laos and Thailand remained unserved. In those areas, electricity was supplied through the private initiative of local entrepreneurs setting up small diesel generators primarily in order to supply households in the vicinity. These mini-grid systems generally did not surpass 200 kW in capacity with low voltage distribution30 and a generally unstable provision of electricity. However, an estimated 20% of these systems served larger district level towns. These mini-grid systems were able to deliver a few watt-hours daily to each household31 at relatively high tariffs (approx. 0.8 – 1 $/kWh) in comparison to the retail tariffs charged by EDC (0.15 – 0.25 $/kWh) in urban areas (Tenenbaum, Greacen, and Vaghela 2017). In some cases, they also provided power to village commercial or productive activities during the day when not serving households, as well as providing battery charging services to households too far to be served by the village micro-grid. In this way they were able to meet multiple demands and segment their market (Zerriffi 2011). After the Electricity Act of 2002, the isolated mini-grids were exposed to a new set of regulatory, commercial and technical arrangements. The formation of an independent regulator led to rules requiring independent generators/distributors to be licensed. At the same time, the expansion of EDC’s territory in a limited range around cities and also along the power transmission corridors created uncertainty for their ability to serve the majority of customers. Many of the smaller, remote, rural entrepreneurs were not in the planned service territory of the utility. In addition, as a new agency, the regulatory authority was focused on larger systems and establishing new rules. For the larger systems, particularly the district town systems, the arrival of the grid triggered a shift in their business models with most of them becoming retail distributors of electricity purchased at wholesale (Tenenbaum, Greacen, and Vaghela 2017; Zerriffi 2011). From a regulatory perspective, the provision of distribution franchises and the supporting schemes introduced by the Electricity Act in 2002, were of significant importance in the interconnection process. Government’s subsidies to mini-grids based on full cost recovery tariffs and granting no-interest loans for network upgrades, prevented isolated systems from going out of business. In addition, this scheme allowed mini-grid operators to divert their business models successfully without losing commercial value of their assets. In fact, many mini-grid owners found it more profitable to be on the retail/distribution part rather than bearing the operation and maintenance cost of the generators (Tenenbaum, Greacen, and Vaghela 2017). As of 2015, nearly 35.7% of Cambodia’s retail electricity was sold through licensed small power distributors deriving from previously isolated mini-grids (EAC 2016)32. Approximately 573,000 rural customers33 (EAC 2016) have seen benefits from this electrification approach which is estimated to cost 3.5 $/customer/month (Tenenbaum, Greacen, and Vaghela 2017). Furthermore, the quality of supply and affordability appear to have increased to a great extent. Customers connected to distribution 30 230/380 V 31 Tier 2 according to the World Bank Energy Access Tier framework (IEA and The World Bank 2015) 32 Annex 5B 33 About 68.6% of villages in the country are covered by a licensed area (EAC 2016) [33] franchises could have access to electricity 24 hours per day while their consumption levels increased from watt-hours to kilowatt-hours per day (Tenenbaum, Greacen, and Vaghela 2017). The electrification approach in Cambodia was a result of multiple factors. The lack of funds and interest by EDC to invest in reaching rural customers allowed the government to adopt a proactive regulation approach that allowed distribution network upgrades prior to interconnection and capital and operational cost subsidy programs that help mini-grids transition to Small Power Distributors (SPDs). This approach enhanced electrification efforts, with the national utility (EDC) focusing more on the construction of enhanced MV lines, while the experienced mini-grid operators focused on distribution to their own local communities (Tenenbaum, Greacen, and Vaghela 2017). [34] Discussion and Conclusions Even if much has changed from the development of early electrification systems over a century ago, this brief historical perspective provides insights on the role that mini-grids can play in current and future electrification efforts. Those insights include a better understanding of the various phases of development, from the inception, to the implementation and the economic scale up of mini-grids, as well as guidelines on how the private and public sector can interact in a mutually beneficial manner. Electrification processes are wedded to the specific social, political, technical and economic environment of each the era, and while parallels do exist, today’s electrification challenge is different from the ones a century ago, in several aspects. For example, unelectrified areas with high population density may now bypass or leapfrog the need for isolated systems that were historically common in urban and peri-urban areas. On the other hand, given the significant technological and cost progress of recent years, various system configurations may be best-suited even within one jurisdiction (based on demand, resources, distance from the existing grid network, etc.) (Mentis 2017), (Bazilian et al. 2014), (Fuso Nerini; Broad et al. 2016), (Pachauri et al. 2013b), (GEA 2012). For mini-grids to realize their potential in achieving SDG 7, there is a need to ensure well-designed enabling environments. Those include technical standards for mini-grids and power-purchase agreements for the integration of mini-grids into the central grid system, among others. Targeted policies can make grid extension vs. mini-grid development more or less financially attractive to private actors and consumers. In some cases, schemes for private entrepreneurs to access electricity supply subsidies could support reaching last-mile consumers and affording grid-ready mini grid solutions. Both historically and again in more recent mini-grid projects, the private sector helped deploy locally appropriate technologies and develop sustainable business models. In several instances, that was despite an unfriendly regulatory environment for private entrepreneurs. Reducing uncertainty around grid extension planning and creating mechanisms to deal with potential sunk costs can support the flourishing of private mini-grids. In addition, compared to early electrification efforts, some important new elements can favor the large- scale roll out of mini-grids. Monitoring systems allow companies to gather a large amount of data on systems usage, allowing them to refine their business models and technical solutions. The development of smart grids with improved automation and communication between supply and demand side technologies can enhance the role of mini-grids in the future. Further, the introduction of higher shares of intermittent renewable energy technologies will necessitate a more robust system design. In this regard, the centralized grid can be supported by possible interconnected mini-grids, providing flexible generation options to cope with rapid fluctuations in generation or demand. We have shown the essential role played by small, isolated grids in the early development of power systems in very different cases. 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