Conducting an economic and financial analysis of a decentralised electrification project

Before studying the various solutions for access to electricity and the needs they meet, let us share a common preliminary vision by asking the question : "when and on what criteria can we consider that we have "access to electricity"? This is the purpose of this first module. 

The various categories of electricity consumers (current and future) have different expectations in terms of the services provided by an electrification infrastructure, and have very heterogeneous payment capacities, or even none at all. Let's see who these consumers are, and what solutions can meet their needs.

The economic relevance of an electricity access project depends on many parameters; one of the most influential is the amount of electricity that needs to be produced to meet the needs of the people and businesses involved.     

This module introduces the overall approach to electricity demand assessment, which is one of the feasibility studies required before defining the technical solution to be deployed. There are several ways to conduct such an assessment: this module describes the broad outlines of the methodology to be followed, and it highlights recurrent issues that need to be addressed.

What solution should be proposed to meet the needs expressed by households, entrepreneurs and community services in the area targeted by the rural electrification project? Should a small grid be deployed and if so how should it be supplied with electricity? Should a stand-alone systems distribution network be set up ? Or should we rely on kiosks where people can buy services? 

In this module, we will see how the project owner can choose  the relevant rural electrification solutions with regards to the characteristics of the area targeted by its project. Four steps should be followed: 

1. Assess locally available energy resources;
2. Geospatial consumers assessment;
3. Sizing production and storage facilities;
4. In the case of a small grid: choose the configuration of the production/storage/distribution system.

EPC, WCR, CAPEX or OPEX... These concepts are simpler than you might think, but they are essential for managing an electricity access project. Discover or revisit them in this module.

This course only deals with economic and financial concepts, not with legal and regulatory ones: the various ownership and facility management models will be covered in the "Policy and Governance" course.

The NPV, IRR, and LCOE... Go into the details of these indicators by calculating them yourself! But first, let's recall them.

A project sensitivity analysis is a financial modelling tool used to predict the impact of different variables on project outcomes. This analysis helps to understand how changes in key assumptions (these variables were covered in Module 5) such as the volume of energy sold, costs, price per kWh and other financial measures, affect the profitability and overall financial health of a project. This exercise helps to identify the risks that a project may face if there is a change in the environment that the project was designed and built in.

Validation of this module with a view to certification is not conditional on completing a Quiz, but only on completing the various applications on offer.

After a project leader has prepared a project of decentralised access to electricity that seems viable, based on a business model that quantifies its economic interest, it will have to find the necessary funding.

Understand green finance and how it aims to meet the needs of electricity access stakeholders. Electricity is a basic resource that African countries do not have full access, while the potential of sustainable energy projects for electrification remains under-exploited.

• Be familiar with the key carbon footprint concepts, as well as the main international standards and reporting frameworks,
• Understand the carbon footprint of organisations and products, as well as key data, tools and resources,
• Know how to calculate a simple carbon footprint, discover the results of case studies and discuss how to reduce your carbon footprint.

To convince investors and creditors to support the project, the project owner must prepare two very distinct documents: the business model and the business plan.

At the end of this module, you will know what characterises these two documents and what differentiates them.