5.2.3. Off-Grid Energy Tariffs

With this regard, it is generally questionable whether MG development at scale is desirable and realistic under the requirement of cost-reflective tariff setting, also in the light of energy justice. In Zambia for example, private consumers in the on-grid sector currently pay between ZMW 0.56 or \$0.02 and ZMW 2.31 or \$0.10 per kWh after a heavily debated price increase in September 2020 as on-grid energy tariffs remain subsidized in Zambia. These households represent around 31% of the Zambian population of around 5.5 million people and are mainly located in the urban areas with an average monthly income of ZMW 3152 or around \$142 [69]. A tariff adjustment towards cost reflectiveness suggested by the Zambian Energy Regulation Board was axed by the Zambian President after serious public outcry [88] but further tariff increases are on the horizon. Over 95% of rural households with an average household income of ZMW 810 and below or \$36 do not currently have access to the electrical grid. Interviews with project developers revealed that Zambian mini-grid customers in rural areas are currently paying around ZMW 10 per kWh under the latest MG deployment scheme [89]. Hence, within the further roll-out of MGs in rural areas due to the limited feasibility of scaling on-grid connections exhaustively within the next decade [54], the majority of the rural population in Zambia could be potentially facing energy tariffs that are up to 20 times higher than in grid-connected urban areas despite them having a much lower household income. This is not simply unjust or questionable with regard to economic feasibility, it also bears the potential of future political or civil rifts as the energy sector is a highly debated and critical topic in Zambia [88].

A more just approach could either integrate on- and off-grid energy planning and implementation under a national tariffing scheme which, if scaled, must also address specific requirements in terms of energy distribution and demand-side managemen<sup>t</sup> which will require significant technology investment in developing countries [90–93]. The managemen<sup>t</sup> of a potential future integration of MGs in the national electricity grid upon grid arrival should be a component during the MG planning stage and must also be sufficiently addressed by the regulatory frameworks to avoid decommissioning of the MG upon gridarrival due to limited tariff competitiveness. On national level, strategic energy planning scenarios should account for the projected or potential integration of solar PV MGs and other decentralised energy sources such as wind- or hydropower into the national grid in terms of infrastructure investment—as well as demand-management planning, to avoid future drawbacks on the grid if this is going to be further extended in the future [94,95].

Alternatively and since off-grid electrification is heavily driven by foreign donor engagemen<sup>t</sup> [43], funding strategies could shift from a purely OPEX-based approach to a blended model that includes a tariff subsidy component to trigger energy consumption and include longer-term results-based funding (RBF) components [83] that are focused on MG operation and utilisation of electricity generated. This model would then ideally include a scenario of shifting towards cost-reflectiveness after a certain period of time when the targeted measures implemented alongside the MG deployment to increase income through productive use of energy, irrigation or improved farming methods for example triggered the desired income generation and stabilisation. This strategy could also potentially incentivise the implementation of financially and technically more optimised solutions, encourage CAPEX-reduction and incentivise the longer-term sustainable operation of the MG.
