*2.2. Dimensions of RE Mini-Grid Sustainability*

The main simple baseline question of this study is, which factors are essential to operate MGs over the desired lifespan, usually twenty to twenty-five years, at optimal

capacity without generating significant financial losses which shall be understood as 'operational sustainability' in this context.

While the literature offers various concepts of defining and assessing the sustainability of MGs [9,18,35,36] the overall conclusion is, that only a few MGs currently exist that are operating sustainably and constitute more than 'boutique electrification' [35] establishing a photo opportunity for a foreign donor or a local politician [18] such success-cases, however, are scarcely documented and could not be retrieved for this study.

In many cases, RE MGs in developing countries show deficits with regard to their technical, social and/or financial sustainability [37,38] which shall be discussed in more detail in this section. Hence an evaluation of MG sustainability requires the incorporation of these three interrelated dimensions and to be considered within the local context which has a decisive impact on the operational logic and the sustainability of an MG [18,36].

The aspect of technical sustainability is comprised of four main components which are service reliability, service availability, safety and meeting the demand capacity of the consumers [37]. This means that the technical design and operation are optimised to a degree that outages are limited, efficient maintenance measures are in place to allow high service quality [32,39]. The technical sustainability of MGs can potentially be approached and optimised through comprehensive technical and operational planning processes which can be highly standardised across various regions but is potentially prone to a limited number of unexpected external events such as natural disasters or unexpected system failure which requires contingency plans to limit power outages as much as possible.

The question of social sustainability is slightly more complex than the technical dimension but is a ye<sup>t</sup> under-researched dimension [40]. The social sustainability of MGs can be viewed from two perspectives: the end-user perspective [41] and the wider community perspective which relates to socio-economic development including health and education as well as power—and gender structures. In the context of the baseline question of this paper, the most central elements of the social sustainability dimension are issues regarding affordability and income, the social acceptance of the energy services which is closely related to willingness to pay (WTP) and energy justice [18,42]. These dimensions are contextualised by the local livelihoods, understood as the wider community ecosystem outlined in Figure 1 which establishes specific system requirements, challenges and opportunities such as productive uses to any rural infrastructure solution including energy and water [43–45].

The financial sustainability of an MG in this context can be understood with regard to the initial investment costs, referred here as capital expenses (CAPEX), and the operating expenses (OPEX) of the system over its lifespan. In the ideal case, the minimum financial sustainability of an MG means that the non-gran<sup>t</sup> financed share of the CAPEX and the OPEX over the lifespan of the asset would be retrieved by its revenue.

The financing approach of a system including certain levels of gran<sup>t</sup> funding define to which extent CAPEX needs to be recovered over the lifespan of the system. In the SSA context, three MG financing models are prevalent, auction programs in which developers bid for construction and, most often also the operation of MGs at pre-determined sites, usually coupled with a capital subsidy which ranges between 60–80% of the initial costs versus results-based financing (RBF) in which developers are either paid a subsidy per connection, usually \$350–500 [46] or a blend of both.

The tariff schemes applicable to the MGs are usually laid out in the sectoral national regulatory frameworks as illustrated in Table 1. In a Uniform National Tariff, the regulator standardizes national MG tariffs which are equal to the on-grid sector and are usually subject to subsidies. In a 'Bid-Tariff Scheme', which has been piloted for the off-grid sector in Uganda, the MG tariffs are determined through an auction aiming at the lowest price while individual tariff limits are determined by the regulator in an 'Individualized Cost-Based Tariff Scheme' which are cost-reflective. In a 'Willing Buyer/Willing Seller Scheme', tariffs are agreed between the MG developer and the customers and are usually cost-reflective and approved by the regulator [47]. In Zambia for example, the regulator introduced a three-tiered system for off-grid solutions based on the size of the systems and generally require cost-reflective energy tariffs while tariffs in the on-grid sectors remain subsidised.

**Table 1.** Energy tariff-setting approaches for MGs in selected African countries (compilation based on: (NARUC: National Association of Regulatory Utility Commissioners, 2020).


The study suggests that the three sustainability dimensions of RE MGs presented in this section are closely interrelated. This means that financial sustainability depends on a well-operated and -maintained, optimised solution that is reliable and meets the demands and affordability levels of its customers who can socioeconomically benefit from the solution and are able and willing to pay the energy tariffs required [48]. Hence, the sustainability assessment and development of MGs need to account for the interdependency of these three sustainability dimensions and in the context of the community ecosystem, but these variables are ye<sup>t</sup> not fully understood due to a lack of longitudinal detailed data and in-depth case studies which account for these interdependencies applying a systemic approach.
