An energy market for rural, islanded micro-grids

Micro-grids are increasingly viewed as a tool to expand energy access in remote rural areas. However, micro-grids are a capital-intensive investment; risks must therefore be significantly reduced in order to attract private-sector capital, which is key to rapidly increasing energy access. One of the principal risks for financing is accurately predicting user demand, which determines revenues (and therefore project viability). This paper proposes an internal energy market for islanded micro-grids, with three primary objectives. First, reducing investor risk by dynamically adjusting pricing to encourage demand when loads are less than expected, thereby increasing revenues. Second, the market invites local entrepreneurs to provide capacity to the grid, which reduces the upfront capital cost. It also provides an opportunity for local entrepreneurs to earn income selling electricity to the grid. Lastly, by regulating demand via pricing, loads can be reduced when grid capacity becomes constrained. This leads to less load shedding and an improved customer experience. The grid is simulated in a two-step process. It is first constructed using standard sizing criteria in the HOMER modelling software. Once sized, the hourly data is input into a custom simulation that models the users' response to changes in prices. Results from a sensitivity analysis are presented to show that the proposed market increases revenues and customer experience under a wide range conditions.