Can developing countries leapfrog the centralized electrification paradigm?

•We review the costs of solar home systems (SHS) and grid expansion around the world.•We present a framework for comparing the cost of grid extension and SHS deployment.•We calculate the SHS costs necessary to provide five UN SE4All energy access tiers.•SHS deployment can help achieve universal access to basic energy services.•Grid extension will provide higher access levels, unless SHS costs decrease.

Due to the rapidly decreasing costs of small renewable electricity generation systems, centralized power systems are no longer a necessary condition of universal access to modern energy services. Developing countries, where centralized electricity infrastructures are less developed, may be able to adopt these new technologies more quickly. We first review the costs of grid extension and distributed solar home systems (SHSs) as reported by a number of different studies. We then present a general analytic framework for analyzing the choice between extending the grid and implementing distributed solar home systems. Drawing upon reported grid expansion cost data for three specific regions, we demonstrate this framework by determining the electricity consumption levels at which the costs of provision through centralized and decentralized approaches are equivalent in these regions. We then calculate SHS capital costs that are necessary for these technologies provide each of five tiers of energy access, as defined by the United Nations Sustainable Energy for All initiative. Our results suggest that solar home systems can play an important role in achieving universal access to basic energy services. The extent of this role depends on three primary factors: SHS costs, grid expansion costs, and centralized generation costs. Given current technology costs, centralized systems will still be required to enable higher levels of consumption; however, cost reduction trends have the potential to disrupt this paradigm. By looking ahead rather than replicating older infrastructure styles, developing countries can leapfrog to a more distributed electricity service model.