Analytics on Pricing Signals in Peer-to-Peer Solar Microgrids in Bangladesh

Abstract

To be able to provide growing populations with access to affordable, reliable and clean energy in a manner that satisfies requirements based on all three dimensions, economic, environmental, and socially equitable, current business models need to be overhauled and be in synch with government policy and operations. In order to reach universal energy access by 2030, as defined in the Sustainable Development Goal (SDG) 7, we need integrated electrification pathways, where grid extension and distributed energy can work hand-in-hand. Grid expansion must not act as a counterweight to the wider adoption of clean distributed electrification solutions. Moreover, in the race toward achieving SDG 7, the world needs to build approximately 50 new microgrids per day. This stands in stark contrast to the present average rate of only one microgrid per day. Bangladesh is home to the world’s largest Solar Home System (SHS) market. Since 2003 local partner organizations have deployed over 4.3 million SHSs through a soft-financing program provided by the government’s Infrastructure Development Company Limited (IDCOL). People living in energy poverty can be trapped in an (energy) poverty penalty that implies adverse effects for their development opportunities. This research’s implementation partner, SOLshare, is a Bangladesh-based social enterprise that is leveraging existing distributed energy infrastructure to allow households and small firms to trade their surplus energy with SHS owners and non-owners through a local smart microgrid. The peer-topeer trading network combined with mobile money-enabled pay-as-you-go billing provides customers with more reliable energy and allows them to generate a direct income from electricity sales. Solar microgrids enabling peer-to-peer energy exchange among off-grid households are poised to contribute to electrifying rural areas in the Global South. The trading price currently does not vary dynamically, and the company takes a fee on each transaction by establishing a sell price that is relatively lower than the buy price. These local trading platforms offer a unique opportunity to study the gains from trade for both consumers and “prosumers” (i.e. customers with SHSs that consume and sell the electricity they generate). Measuring willingness to pay will facilitate the estimation of demand elasticities and consumer surplus, which can thereby inform pricing and guide the design of subsidies, as well as improved business models, a necessary requirement for a much larger uptake of microgrid deployment across the globe.