Techno-economic analysis of microgrid projects for rural electrification: A systematic approach to the redesign of Koh Jik off-grid case study

Abstract The objective of this study was to redesign and refinance a rural microgrid on the small island of Koh Jik in Thailand. A series of microgrid scenarios were modeled and evaluated using HOMER software with the aim of providing techno-economic insights on the sustainable redesign of a rural and resilient system. Existing assets were analyzed and integrated into a new system design, whereby the addition of extra PV panels and replacement of current lead-acid (LA) battery by a lithium-ion (Li-ion) battery increased the renewable fraction of electricity generation from an estimated 55%–83%. The system was optimized holistically to provide the lowest cost of electricity (LCOE) combined with the highest renewable fraction in order to attract private investment for such electricity access projects. A LCOE as low as 0.220 €/kWh was obtained for Li-ion, compared to 0.307 €/kWh for the LA basis translating into a project payback as low as 6.3 years (IRR 15.28%). All the modeling economics were cross-checked with a cash flow statement model using the island's financial books and current price of electricity (a common practice amongst private investors) and showed that the HOMER modeling results were within a range never exceeding 4%. Comparison of scenarios clearly outlined the advantages of Li-ion microgrids over LA in all aspects except capital expenditure, explaining why as of today, rural electrification projects still commission less sustainable LA systems due to initial capital constraints. While the battery CAPEX price per kWh storage was found still considerably lower for LA, in order to reach high renewable fractions (60% and up) larger battery banks are required, thus driving project costs higher and closer to Li-ion prices. Positive lessons learned from Koh Jik case study can increase the confidence of both investors and governments while accelerating such initiatives in neighboring Southeast Asian countries or other territories around the world struggling with island electrification.