Deploy microgrids to the developing world using a franchise business model based on open source hardware to reduce cost.
The challenge is to provide power based on renewable sources to some of the world’s poorest people. Many groups have recognized that a decentralized grid with small-scale generation close to the point of use makes more sense than trying to extend centralized grids. Communities that do not already have power are often small and remote. Distribution lines to reach them are expensive, subject to significant losses and vulnerable to power theft and terrorist disruption.
Microgrids based on PV, wind or pico-hydro sources solve these distribution problems, but have their own problems with cost and reliability. Many different deployment models are being explored. When systems are gifted without someone local to maintain them, they often fall into disrepair and disuse. Many companies have been formed to sell small PV systems to individual consumers but these systems are expensive relative to what the consumers can afford and force them into debt to purchase them. A business model that addresses these issues is the franchise model in which a local entrepreneur acquires training and standardized technology from a franchisor and sells the resulting power to the community. The franchisee is profit motivated to keep the system running and is better positioned to understand what the customers need and can afford.
How can the MIT community and alumni help make this model work globally?
1. Reduce the cost of equipment such as inverters and management systems that are not already on the steep cost reduction curves that PV cells and batteries are by open sourcing the designs and software.
2. Create training materials that enable people with limited educations to deploy and maintain small-scale power systems.
3. Provide the seed capital and business expertise to launch the franchisors in various countries.
4. Prototype the hardware and training in our own neighborhoods and businesses.
Category of the action
Reducing emissions from electric power sector.
What actions do you propose?
The Franchise Alternative
Existing approaches to providing power to the developing world all contain elements of a solution but have problems and limitations. Central grids plan to reach everyone eventually but at a potentially high cost in CO2 emissions and not in the time frame that people need. In many impoverished places there is an uncomfortable race between the expanding grid and an expanding population. The kiosk idea serves an immediate need and solves the cost issue for the poorest customers but doesn’t deliver enough power to push economic development. Similarly the small, dedicated systems deliver little power and can potentially trap people in a debt cycle. Microgrids provide local control and independence from an unreliable central source but need to be maintained by someone with the appropriate skills and motivation.
Old-fashioned capitalism can be a great motivator. Capitalism, of a sort, thrives in even the poorest communities as people make a living buying and selling goods. That spirit can be applied to the power problem if a complex technology can be simplified enough to be sold and maintained by people without an engineering degree, people who understand the needs of their community and, critically, their ability to pay. The franchise model works that way. The franchisor packages the service in a way that’s easy to understand, provides training and equipment, but depends on the franchisee to hustle sales of the service in return for the bulk of the profits. In this case, the franchisor can be a company, an NGO or even a central power authority. The franchisee is someone from the community willing to learn and work hard in return for a profit.
The franchise model can leverage a standardized business plan to spread rapidly over a wide area. It makes good use of development funds because it’s a profit-making activity, at least for the franchisee. Once the initial startup costs are applied they can be returned and reused after the franchisee starts collecting customer payments. The service, in this case power generation, can start small and grow with the community. It’s a shared service so it doesn’t require a large expenditure from any one customer and with an attentive franchisee it’s easy to temporarily or permanently withhold the service if the customer is unable to pay. As a member of the community, the franchisee is well positioned to know when to offer credit and when to withhold it depending on local conditions. A key benefit of franchising a microgrid is that the bulk of the revenue stays in the local community rather than being siphoned off to some central authority.
The franchisee is well positioned to sell essential components needed for the customers to utilize the power: LED lighting sets and efficient electric cookers. The franchisee may need to train people on how to use these cost effectively and safely.
A key challenge to deploy the microgrid architecture widely in the developing world is to keep the costs down. Essential components like PV panels and batteries are already on a rapidly declining technology cost curve. Other parts of the system such as the inverters, controllers, management and billing tools are not on as steep a cost reduction curve. The MIT community can help by developing standardized versions of these components and making the designs freely available so that low overhead assemblers can produce them in high volumes and competitive prices. Standardized designs also facilitate the development of training materials to simplify the creation of regional franchisors to get the ball rolling.
The microgrid offered by the franchisee consists of modular power components scaled to match demand and managed by an application running on a cell phone or tablet. All of these components are available today but existing components typically lack management and billing capabilities. To minimize the cost of batteries and power sources, the franchisee needs to be able to manage the load, shutting down certain applications that can be deferred until more power is available. Local knowledge of the demands and customer expectations is key.
The basic building blocks include:
· Power source: most commonly PV panels but possibly wind, pico-hydo or fossil fueled generators.
· Fixed Battery Pack
· Distribution Panel
Other components that may be required for some installations include:
· Portable batteries with Integrated Identity
· Battery charging station
· Accessories like efficient cookers
A minimal installation in poor community might consist of little more than a single PV panel, inverter and battery charging station similar to the kiosk model described previously. To avoid fixed wiring costs, customers carry their batteries to the charging station when sun power is available. Convenience and greater economic benefit occur if the franchise and its customers can afford a more robust power source, fixed battery pack and fixed wiring to one or more distribution panels. Unlike established practice in the developed world, costs can be minimized if the distribution panels can be shared provided that individual circuits can be monitored for consumption and certain circuits designated to shutdown when insufficient power is available.
In a larger installation, the franchise will hardwire multiple inverters and multiple distribution panels for redundancy and reliability. Adding a stand-by fossil-fuel generator improves system availability on cloudy days without adding too much cost and CO2 impact so long as its use is minimized. If and when a central grid tie becomes available this can be added to the system but the franchise still provides the service of ensuring power availability and reliability while handling the billing and resisting theft.
The franchise model assumes industry standard PV panels and battery packs are used with the franchisor assisting with component selection and system design in support of the franchisee. For other components, the franchise model would benefit from features not commonly available in existing products. These are typically command and control features that need not add much cost if the designs were widely available via open source. To manage the load and monitor the status of batteries and power sources, the system needs to connect the modules via WiFi or power line networking.
Distribution Panels with Watt-Hour Meter, Overcurrent Protection and Remote Load Shedding
Basic electrical components like electrical panels, circuit breakers, wiring and outlet boxes are amortized over many years in the developed world and hence do not figure prominently in power cost analysis. But in a poor community new to electricity, these costs are an important part of the overall installation. An essential part of any electricity business is the capability to measure usage, the watt-hour meter. In the developed world, these are typically stand-alone, relatively expensive devices but there is great opportunity to reduce costs in the microgrid context by sharing circuits between multiple customers and taking advantage of highly integrated processors developed for portable devices that incorporate wireless functionality such as WIFI and Bluetooth. The proposal here is to create a standalone box that measures energy independently on several circuits and reports usage wirelessly as a linked WIFI network. Such a box could easily incorporate overcurrent and GFCI protection at minimal additional cost. In addition it can remotely shut down individual circuits for load management. The processor can report usage by time to allow the grid manager to implement time-of-use pricing and thus encourage high power applications like cooking to run when PV power is available and limit battery consumption to lower power applications like lighting.
Scalable Island-Mode Inverters with Remote Access
The developed world typically uses grid-tie inverters that lack provisions for battery packs and standby generators. Microgrid inverters will normally use batteries and possibly standby generators. They still need a way to safely disconnect when linked to the microgrid for system maintenance. With a geographically small system a mechanical switch might suffice. As noted, network monitoring of the available power and demand is needed.
Portable Batteries with Integrated Identity
Standard batteries don’t come with an integrated identity but when one is making a living distributing small amounts of power it’s useful to know who is consuming power from the charging station. Adding something like an RFID chip to the battery would add minimal cost but be very helpful in keeping track of usage.
Management and Billing Software as a Smartphone or Tablet App
The franchisee needs to monitor the status of the microgrid and potentially shut down loads when it power limits are reached. The franchisee also needs accounting functionality to keep track of consumption and payments by customer.
Battery Charging Station
When using portable batteries, a place to charge them is needed. This functionality might be bundled into the inverter but for practical reasons, it might be better in a separate box. It needs to keep of record of each battery that is attached and how much power was drawn. Conceivably the charger and billing could be integrated into the battery itself without adding too much cost so it could be plugged into any nearby distribution panel.
Since the typical microgrid proposed here is essentially an island that only needs to conform to existing voltage and frequency standards at the edges, there is an interesting opportunity to reduce wiring costs by running the grid at a higher voltage and reduce conversion transformer size by running at a higher frequency with voltage step-down and conversion in the distribution boxes. Running with non-standard parameters makes power theft more difficult.
Call to Action
1. Open Source Designs to Reduce Cost
2. Create Training Materials
3. Prototype the Technology and Training
4. Provide the Seed Capital and Business Expertise
Who will take these actions?
Microgrid franchises can be franchised by multiple potential actors:
Governments: In the targeted countries, government agencies can promote franchises through public-private partnerships providing capital and expertise to start local franchises. Using this method of deploying franchise requires an enlightened government since centralized energy production monopolies may feel threatened by local production as they are today in developed countries but collecting a share of the profits might give them an incentive.
Businesses: In the standard franchise model, a franchisor provides the technology, marketing and sometimes capital to help entrepreneurs establish the franchised business. This model should work for energy production as well as it works for fast food. Deploying the model through a franchising business adds costs relating to the franchisor's profits but also creates incentives to run the model efficiently.
NGOs: In many parts of the developing world NGOs have boots on the ground to provide assistance and expertise in multiple areas such as health-care and food production. NGOs targeting energy production are not common but with expertise and technology support from MIT, expanding into this arena should not be too much of a stretch. Some NGOs have access to capital or can funnel global capital sources in a fashion analogous to the way micro-loans are distributed today.
Individuals: Ultimately individual franchisees have to be motivated to create local franchises. Identifying and motivating people to create these businesses will require marketing from the franchisor and sweat and enterprise from individuals to get their businesses going.
Where will these actions be taken?
The proposal targets most specifically the 18% of the world who currently have no access to electricity and a similar number who lack stable, reliable sources. Most of these people are located in developing countries such as India, parts of Africa and the remoter parts of South and Central America.
Many countries in conflict zones such as the Middle East who once had reliable power have lost access. Places like Gaza and Iraq could begin reestablishing their economies if people had stable and adequate power at the local level.
The economic need is less compelling in developed countries but the franchise model is more familiar here and there are fewer barriers from accessing technology, finding people with the right skills and marketing the concept. Once could imagine Planned Unit Developments, apartment and condominiums complexes and others offering low-cost power as an amenity the way they now do with landscape and building maintenance with profits shared among the participants. An easy-to-deploy model could piggy-back on existing smart-power and distributed load shedding initiatives being proposed in California and other places.
How much will emissions be reduced or sequestered vs. business as usual levels?
Assuming 1.2 billion people without electricity today and assuming they initially have modest needs of 1kWh / day, serving these people using conventional fossil-fueled generation would release an additional between 2.5 and 1.5 millions tons of CO2 per day depending on the fuel.
Creating and maintaining the required number of micro-grids would generate substantial emissions via manufacturing, transportation etc. but so would extending the grid and building conventional power plants.
The goal in either case is to pull people out of poverty which would, if successful, potentially create yet more emissions. Micro-grids based on non-emitting technologies can accommodate this growth without burdening the atmosphere.
People in the target communities often gather firewood for cooking. While firewood is normally a renewable resource, expanding populations tend to strip the surrounding areas leading to a kind of deforestation. This proposal would reduce that impact.
What are other key benefits?
Besides reducing carbon emissions this proposal attempts to reduce the poverty endemic in places that lack electricity. Studies have shown that providing access to electricity has a direct economic benefit raising living standards when it arrives. This creates a virtuous cycle in which improved economics makes electricity more affordable and available which, in turn, further improves living standards. One of the benefits of electricity is that it helps students study at night improving education which creates another virtuous cycle in that education tends to reduce birth rates which reduces resource competition which improves economics and so on.
Specific benefits include:
Lighting: reduced health problems from kerosene fumes.
Cooking: Reduced labor and improved safety by avoiding firewood gathering. In many parts of the world women are at risk from rape while gathering fuel.
Well pumps and machinery: eliminating inefficient animal power and related emissions.
What are the proposal’s costs?
Each franchise requires capital investment commensurate with the amount of power produced. A franchisor needs to have access to enough capital to deploy many franchises in quick succession, some of which may fail and generate potential losses but a key benefit of this proposal is that the costs are incremental with a comparatively quick payback so capital can be redeployed.
To throw out some rough numbers, people without electricity today and people with poor grid service number roughly 2 billion. A typical system might serve 100 customers, who each have initially modest needs of 1kWh per day. Using 2020 cost projections for PV panels, battery storage, a stand-bye generator, wiring and inverters, such a system could be built using sweat equity for installation labor for $20,000. With annual revenue at $.20/kWh producing $7500, expenses including interest around $2500 leaves a net income of $5000, a substantial amount in these communities. Twenty million such systems could be built with total invested capital of $400 billion.
Deploying small-scale PV generation in this way is less efficient on a per watt basis than large-scale projects so there is a cost in less efficient use of capital. This has to be balanced against grid losses and load management more responsive to local needs that potentially reduce overall capacity needs.
A major goal of this proposal is to pull people out of poverty but impoverished people use less power per capita than those with more wealth so the total power production would tend to go up. People with money often spend it on vehicles which, if carbon powered, generate emissions and pollution. On the other hand, moderate poverty is associated with high birth rates so by improving access to education, particularly for women, the high birth rates endemic to the targeted areas can reduced, perhaps reducing the ultimate emissions load on the planet.
The proposed actions are, by design, intended to be phased in rapidly, in 10 years or less to prevent the necessary capital being deployed into carbon-based generating capacity.
This proposal suggests technology to minimize costs but the franchise business model can be deployed immediately using off-the-shelf components at a somewhat higher cost. For a typical microgrid, the biggest cost drivers are currently PV panels and battery storage. The proposed components reduce the cost of control and management and add flexibility to the franchise's ability to manage its grid but these expand the market to more cost sensitive customers without changing the underlying business model.
A key component to collect revenue fairly is the energy meter. In established markets these are typically expensive devices but a start-up called Glen Canyon has plans to disrupt this market with a $25 device. Using an open-source design like that proposed here to could push that cost much lower.
2016-2018: Identify potential franchisors on a country-by-country basis. Initiate early adaptor, example franchises. Develop training and marketing materials. Design and prototype open source inverters, control systems and software to reduce cost.
2018-2020: Expand the market to more countries. Market the opportunity into local communities. Begin training entrepreneurs with the necessary technical and business skills. Refine marketing and training materials based on experience.
2020-2025: Begin widespread deployment. Begin using the franchisor's cut of profits to expand available capital to create more franchises.
2025+: Continue roll-out. Manage franchise consolidation and integration with national grids using smart-grid and load management technologies.
Insulator Slow Cooker Bags - Reducing the need to collect firewood for cooking is a key benefit to providing electricity to people currently off-grid. To keep electricity costs within their modest budget, they need to be able to cook efficiently. Low-cost highly efficient electric cookers are needed and the proposed slow cooker bags might reduce power consumption even further.
FACILITATING ADAPTATION TO CLIMATE CHANGE THROUGH SOLAR IRRIGATION TECHNOLOGY - This proposal focuses on PV power for irrigation particularly in Tanzania. Irrigation and related agricultural applications are a good fit for a community-based microgrid franchise in poor countries. The proposal's action of training rural technicians aligns with training franchise operators.
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