Limits of grid extension in the Lao PDR: A financial perspective

Abstract

This paper articulates a financial model for estimating the limits of grid extensionin the Lao PDR versus three decentralised renewable energy (DRE) options: micro-hydropower,pico-hydropower and solar photovoltaic. The model is based on a like-for-like comparison of thedifferent DRE options against grid extension, such that each option supplies the same amount ofelectricity (in kWh) over the project timeframe. The amount of electricity supplied is estimatedbased on the forecast electricity demand of a typical rural Lao household. Therefore, if a householdconsumes 7 kWh per day, then the micro-hydro, pico-hydro, solar PV and grid extension systems areall sized in the model to supply 7 kWh per day. This is in contrast to more conventional approaches,where grid extension is compared to DRE systems of typically lower capacities (e.g. grid extensioncompared against 50 W solar home systems). The limits of grid extension are expressed in termsof a breakeven distance, which is the maximum distance from a village at which grid extension isthe more cost-effective option. Beyond this breakeven distance, DRE technologies can be installedat a lower cost, while providing the same amount of electricity to the end-user.