When is a mini-grid the best economic choice? What are the costs? How do costs depend on technologies and the level of service to be provided? How can productive use of electricity from mini-grids improve mini-grid economics? This module explores these questions with reference to actual mini-grid projects.

During the project design phase, mini-grid developers need to compare the economics of different options. Project developers can use two key cost measures—levelized cost of electricity and connection costs—to determine whether a mini-grid or national grid extension is the most cost-effective solution. Costs are only one part of mini-grid economics, however. Project developers must also assess customers’ willingness and ability to pay for electricity. Productive use of electricity can increase household incomes, potentially increasing customers’ ability to pay for these new services.