1
Smart microgrids as a solution for Rural Electrification:
Ensuring long-term sustainability through cadastre and
business models
K. Ubilla, G. Jiménez-Estévez, Senior Member, IEEE, R. Hernández, L. Reyes-Chamorro, Student
Member, IEEE, C. Hernández, B. Severino, R. Palma-Behnke, Senior Member, IEEE.
Abstract-- The provision of energy at the local level by using
renewable and local resources is increasingly acknowledged as a
techno-economic solution for rural electrification. This work
describes an approach for implementing microgrid projects at the
institutional level by means of a specific entity that uses methods that
engage the community in microgrid operation and maintenance,
which ensures long-run benefits.
The first step, related to macro-level barriers is addressed by
building a complete cadastre of isolated communities, while the
second, at the micro level, focuses on business models for covering
investment and O&M costs. A cadastre uncovers the key
characteristics of each location (energy resources, availability, socio-
economic conditions, environment, etc.). A cadastre also helps
identify local needs, develop monitoring strategies, and determine
benchmarks among microgrids. Its information also assists with
proposing new projects, securing funding, and monitoring actual
microgrids.
At the micro level, local stakeholders, economic capabilities,
social capital and organizational structures are identified, which
contribute to the selection of a tailored business model that can
enable fundraising and O&M activities.
The approach is presented in a 4-stage framework: background
data collection, community profile building, system design and
detailed engineering. Each community is evaluated by a
prioritization index that considers the electrical conditions of each
residence.
Index Terms--. business models, cadastre, distributed
generation, microgrid, rural electrification.
I. INTRODUCTION
R URAL electrification programs around the world have
attempted to solve the problem of providing access to
electricity to communities that, due to their geographical and/or
economic characteristics, have remained excluded from
traditional electrification programs.
The paradigm of classical programs for electrification of
This work was supported in part by CONICYT/FONDAP/15110019 and
Renewable Energy Center (CER).
K. Ubilla, B. Severino, G. Jimenez and R.Palma-Behnke are with the
Energy Center FCFM, University of Chile.
R. Hernández is with the Environmental Sciences and Natural Renewable
Resources Department in the University of Chile.
L. Reyes-Chamorro is with the Distributed Electrical Systems Laboratory
at the Swiss Federal Institute of Technology of Lausanne.
C. Hernández is working independently.
rural areas usually considers two ways of addressing the
problematic: the use of independent generation units using
fossil fuels, or extending the existing distribution grid [1]. Such
strategies pose a number of disadvantages mainly on the phase
of operation and maintenance (O&M), considering the
timeframes that should be taken into account [2] [3].
In this framework, renewables have gained importance when
it comes to finding viable and appropriate solutions for a
particular location [4] [5].
According to the OECD [6], renewables give countries
under development the opportunity to stimulate economic
growth in rural communities when using strong and coherent
strategies, however their development benefits are not
automatic.
Renewables have become lately the driving force for the
proliferation of Distributed Energy Resources (DER), which are
inherently of small size and near the final customers, delivering
and allowing several technical benefits both to Active
Distribution Networks and to Isolated Electrical Systems in the
Microgrids (MG) context. Sample benefits include: optimal
allocation of storage systems, congestion relief, loss reduction,
voltage support, mitigation of voltage dips, peak shaving, and
an overall improvement of energy efficiency, reliability, and
power quality [7], [8], [9], [10], [11].
Different experiences of MGs around the world are
characterized by being responsive to the requirements of
communities with distinctive economic, socio-cultural,
environmental and institutional realities. Such programs
correspond, for instance, to cases developed in Philippines, Fiji,
Nepal, Sri Lanka, India and Timor-Leste [12]. There are
similarities among them on the socio-cultural impacts generated
in the populations. Such impacts correspond mainly to
improvements in health, education, and a reduction of costs for
heating. The case of Philippines and Sri Lanka are especially
significant in the advances in the social capital of the
communities.
Even when these experiences have been successful from the
technical point of view, which is the goal of the electrification
with all the benefits it entails, they do not attend to integrating
the technical with social development.
In this context, MGs become a suitable and feasible
alternative of integration between the technical solution and
social benefits [13].
In this work we consider MGs as electrical distribution
systems containing DER, such as distributed generators, storage

devices, or controllable loads that can be controlled and
coordinated, either while connected to the main power network
or while islanded [14]. In this sense MGs enable high
penetration of distributed and renewable generation without
requiring re-design or re-engineering of the distribution system
[15] [16].
The inclusion of MG projects in rural communities is
expected to solve basic electric energy needs of populations in
the household and community sphere, while producing social
benefits linked to the Local Sustainable Development of a
territory in reference to:
• Productive Development: generation of employment,
productivity, production diversification, and human capital.
• Community Development: demographic changes, especially
in relation to young population, degree of organization (new
organizations), social capital, and community participation.
• Individual and Collective Quality of Life Improvement:
anticipated improvement of earnings per capita, education
level, connectivity, health, environmental quality, and
higher level of general wellbeing.
These social benefits generated by the introduction of MGs
in rural communities contribute fundamentally to the social
sustainability of development projects at the local level,
ensuring general sustainable development [17]. Following this
perspective of analysis in [18] the authors take into account the
importance of the social dimension in the support of small-scale
generation technology projects. For this reason, it is necessary
to use a mixed methodology that uses quantitative and
qualitative tools, supported in a multi-criteria analysis for
deciding on the best technological solution.
In this paper, the problem of rural electrification is
approached considering the introduction of MGs. A global and
a specific analysis are presented to overcome the problem, thus
a methodology for the implementation of projects is first
proposed. This methodology will define the necessary criteria
to identify the communities that show potential for projects of
this nature, to then present a proposal for promotion,
management and execution of projects at the local and macro
level. Finally, the proposal is applied to a case study in Chile.
II. MICROGRID PROJECT DEVELOPMENT
In this section, a five-step methodology is proposed for the
development of a MG project, which aims to ensure that the
solutions designed are appropriate for the local reality of each
community, as well as for achieving the sustainability of the
project. We state that this last objective is achieved by
involving the community in every stage of the project,
particularly in the O&M [19]. Additionally, the methodology is
divided by the typical steps of a project, allowing its execution
by stages:
A. Pre-feasibility
This stage has the objective of quantifying the technical,
economic, and socio-environmental feasibility of the execution
of the project, considering the following sub-stages:
• Project Socialization: seeks to clearly inform the objectives
of the study in course, and to integrate management of the
2
expectations of the community.
• Community Profile Characterization: considers the
gathering of information on site (socio-environmental,
technical, administrative, cultural and institutional) needed
to define a technical and managerial solution.
• Techno-Economic Evaluation of Scenarios: based on the
information gathered in the community profile, an
evaluation of solutions is made for different scenarios. Here
the cost of the investment will be determined considering
the technical restrictions at this stage.
• Proposal for the Local Management Structure (LMS):
comprises the administrative structure that will be in charge
of the O&M of the MG.
• Best Solution Definition: after the execution of the previous
steps, a comparative analysis is made among the different
alternatives in order to make a decision on the best MG
solution for the community.
B. Design
This stage has the objective of dimensioning a preliminary
technological solution and defining guidelines for the
involvement of the community in the project. Additionally, in
this stage the method in which the community will take care of
the system’s O&M will be defined. The sub-stages considered
are: socialization of the project, gathering of antecedents,
dimensioning of the technological mix, environmental
evaluation, definition of the associability strategy, definition of
the LMS, and calculation of the budget.
C. Detailed engineering
The objective of this stage is to develop technical
specifications and the detail of strategies necessary to
implement the LMS.
The steps required are: socialization of the project, definition
of the participants for the LMS, communication and control
systems definition, detailed grid modifications, specifications
for the energy management system and specification of the
generation and storage units.
D. Implementation and Commissioning
The implementation is the materialization of the design of
the MG on site, making use of the specifications from the
previous stage. This stage involves the development of civil
works and assembly of structures, acquisition, installation and
configuration of equipment and software, validation of
procedures.
A training program for participants of the LMS, in relation to
the O&M and finally the performance of controlled failure
tests, as well as an associativity strategy is encouraged in order
to strengthen the links of the community with the project.
E. Operation and Maintenance
The established procedures for the O&M of the MG should
be executed at this stage along with the preparations for the
administration plan. This stage does not consider a defined
ending period in the short term.
This stage is key to the development of the project, given that
efforts from previous phases will be tested at this point,

especially in all matters related to the local management of the
system. O&M follows a cyclical process that considers two
decision-making areas: technical and administrative.
The communication network is used to monitor the state
variables of the system for the execution of O&M procedures.
The features a community needs to be able to develop a
project according to the proposed plan are:
• Energy resources with enough potential to cover the
electric demand of the population.
• Cohesive communities
• Low dispersion of homes.
• Reduced environmental effects.
• Electricity as a need for the community.
Considering the characteristics previously mentioned, we
next describe each key stage required to develop a MG project
in a community.
F. Ownership of the assets
Depending on the funding origin and the legal conditions
defined by the different stakeholders, a transferal solution of the
assets to the community will be proposed. In this context,
solutions that allow the improvement of a a sense of ownership
by the community should be preferred. Typical solutions are
based on the assets delivery under a commodate scheme for an
undefined time frame. It is expected that once the assets have
completed their life time, they are replaced by the community,
which should become the owner of the project assets.
III. PROPOSAL FOR THE DEVELOPMENT OF AN ELECTRIFICATION
PLAN BASED ON MICROGRIDS
In Fig. 1 the steps for executing an electrification plan using
MG for isolated communities are presented:
Cadastre Elaboration
MG Development Plan Elaboration
Management and Monitoring
Fig. 1. Electrification plan
A. Cadastre
Once the base for the development of projects has been set,
it is possible to identify the locations with potential for these
solutions through a cadastre of electrically isolated
communities, which should follow the steps presented in Fig. 2.
Gathering information
Filters Apply
Validation
Fig. 2. Methodology used for the development of site cadastres.
3
First, information is gathered to identify communities that
lack continuous electricity service, including the communities
with fossil fuel gen sets that have a limited supply schedule.
Then, filters will be applied according to the characteristics
needed for the development of a MG based on the assessment
of decision-makers, and finally the information obtained is
validated with local institutions or by organizing site visits.
This will depend on the resources at hand for the project, as
well as availability of information.
B. Plan for the Development of Microgrids
Once the cadastre is completed with the information
corresponding to resources, energy consumption of the
residents, and distance to the grid for each community, they are
prioritized according to the objectives of decision-makers.
The general criteria proposed is:
• Social: identification of communities with greater needs in
terms of quality of life. For this purpose it is suggested to
use the Human Development Index (HDI) used by United
Nations Development Program [20]. In support for social
equity, communities with lower HDI are priority.
• Productive: communities with productive activities that
strongly depend on access to electricity should be priority,
as well as the ones with a higher potential to improve or
generate new productive activities.
• Economic: identify the Present Value of the Costs (PVC)
of the project, and prioritize from lower to greater. The
proposed methodology that optimizes the size of each MG
solution based on the minimization of the PVC is presented
below.
Once the three indicators are computed, it is proposed to
follow an execution scheme of projects for communities that
are at the Pareto front. The Pareto front corresponds to the
subset of communities that possess at least one indicator better
than the rest of the universe of locations. Once such a subgroup
is established, we recommend proceeding with the lowest HDI,
then with the highest potential of economic development, and
finally with the lowest PVC per capita. After all of the projects
from the first Pareto sub-group are executed, move on towards
the next fronts.
The HDI, which is associated with the improvement of the
life standard of lower income locations, is considered as a
priority to achieve the suitability of MG projects, considering
the result of analyzes made over previous experiences executed
by development agencies,. This methodology differs of the ones
actually used for resources assignment for the development of
projects, which prioritize those with lower PVC, making that in
some occasions communities with a greater need of support
may be postponed.
To compute the PVC, a MG is sized for each community of
the final set. For the modelling, four energy sources are
considered: photovoltaic generator (P), wind generator (W),
diesel generator (G) and lead acid battery bank (B). Additional
types of renewable generation technologies such as biomass
and mini hydro systems have not been considered due to the
complexity on estimating the availability of the resource due to
lack of data.

Then, the installed power of each unit and the operation of
the system at each time step are optimized in such a way that
minimizes the PVC, namely, to solve the following
optimization problem:
min      𝑃𝑉𝐶! + 𝑃𝑉𝐶! + 𝑃𝑉𝐶! + 𝑃𝑉𝐶!
!! ,      !! ,      !!,!,!,!
The decision variables for the problem are: 𝐼! , which stands
for the installed power in [kW] of each machine 𝑚; 𝑃!,!,!,ℎ the
instantaneous generated power [kW] of unit 𝑚, in the year 𝑎,
day 𝑑, and hour ℎ. Note that 𝑚 stands for each generation unit
𝑚 = {𝑃, 𝑊, 𝐺, 𝐵}. To be able to solve this problem is necessary
to include the decision variable 𝐸! , which refers to the initial
energy on the battery bank. This is done because the problem is
evaluated with the use of typical days of the year. This strategy
allows the reduction of computation time, but in turn it
dissociates the cyclical operation of the battery bank. As
consequence to this last issue, the initial energy impacts in the
result of the dimensioning, and then it is necessary to establish
the value that minimizes the total operation of the system.
The PVC of each generation unit is computed as
!"
!!!
1 The following models are used to evaluate the behaviour of
𝑃𝑉𝐶! = 𝐼! 𝐶𝐼! + 𝐼! 𝐶𝐼!
1 + 𝑟 !∙!!!
!!!
!" !" !"
𝐶𝑉!,! 365 24
+ 𝑃!,!,!,ℎ
  𝐸!,!,!,! = 𝐸!,!,!,!!! −   𝑃!,!,!,! ∙ 𝑛𝐵.
1 + 𝑟 ! 𝑁𝐷 𝑁𝐻
!!! !!! ℎ!!
In (1) the first term corresponds to investment, the second to
the replacement costs brought to present value, and the third to
the variable O&M costs brought to present value.
𝐶𝐼! is the machine investment in [$/kW], 𝐶𝑉!,! the variable
costs of the machine 𝑚 for the year 𝑎, 𝑁𝐴 is the project
evaluation horizon in years, 𝑁𝐷 is the number of typical days
considered, 𝑁𝐻 the number of typical hours considered, 𝑉𝑈!
the life of the machine 𝑚, and 𝑟 the discount rate considered for
the calculation of the cash flow.
The optimization is subject to the following constraints:
1) The generated power of units must be less than or equal
to the installed power. In the case of batteries, it should
also be considered that de discharge power must be
lower than the upper limit.
0 ≤ 𝑃!,!,!,! ≤ 𝐼! ,        𝑚 = 𝑃, 𝑊, 𝐺   of funds for the development of projects. Different
−𝑃!"#$ ≤ 𝑃!,!,!,! ≤ 𝑃!"#$ = 𝐼!
2) The energy of the battery bank at each time step
(𝐸!,!,!,! ) must be less than or equal to the rated energy
𝐸!"# and greater than or equal to 20% of it.
0.2𝐸!"# ≤ 𝐸!,!,!,! ≤ 𝐸!"#
3) The equilibrium constraint, namely the demand
𝑃!,!,!,! at each time step must be equal to the sum of
the power from all the units.
𝑃!,!,!,! = 𝑃!,!,!,! , ∀𝑎, 𝑑, ℎ
!! !,!,!,!
4
4) The wind power must be equal to
!
𝑎𝑇
𝑃!,!,!,! = 𝐹 𝑊!,!,! ,
𝑎𝐷
where the function 𝐹 is the operation curve of the wind
generator. 𝑊!,!,! is the wind speed in [m/s] in the
specified time step. 𝑎𝑇 and 𝑎𝐷 are the nacelle and
anemometer heights respectively and 𝑘 the roughness
length factor.
5) The PV power must be equal to
𝑃!,!,!,! = 𝑐𝑃 ∙ 𝐺!,!,!
with 𝑐𝑃 in [m2] an adjustment factor and 𝐺!,!,! the solar
irradiance in [W/m2] in the specified time step.
6) The total energy cycled daily by the batteries must be
zero. This is because the problem is solved using typical
days.
!"
𝐸!,!,!,! = 0, ∀𝑎, 𝑑
!!!
the battery pack:
(1) −𝑃!"#$ =  𝑐𝐵1 ∙ 𝐸!"#    
𝑃!"#$ =  𝑐𝐵2 ∙ 𝐸!"#
.
Where 𝑃!"#$ and 𝑃!"#$ are the minimum and maximum
powers, 𝑐𝐵1 and 𝑐𝐵2 the nominal C-rate for charge and
discharge respectively, and 𝑛𝐵 the efficiency of the battery
bank. The last formula corresponds to the energy balance.
This step can be also carried out using commercial tools like
HOMER or Ret Screen. The specific development responds to
the practical need of being able to evaluate a large number of
communities and specific input data. Using commercial tools,
the configuration is quite complex and does not allow easy
evaluation of different projects at the same time, nor are they
adequate to make aggregated sensitivity analyses.
C. Microgrid Management and Monitoring
At this step, three issues are of main importance:
• Funds Management: this issue relates with the collection
Financing Models may be designed considering the
possibilities for each zone.
• Check and Status: development of solutions that are
“custom made” for each location.
• Technical Support and Auditing during the O&M: provide
technical support for communities once projects are
completed when deemed necessary. Auditing is
considered as a control measure to monitor the correct and
responsible operation of the MG.
a) Microgrid Management and Monitoring Unit (3MU)
Once the previous points are identified it is necessary to
establish a 3MU. We define this unit as a centralized or
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decentralized body that must hold direct duties through the
different stages of the projects, allowed to manage several
projects in parallel:
• Pre-feasibility and monitoring of the MG: must be
responsible to identify and/or generate mechanisms
necessary to collect funds. It will also be in charge of
coordinating developers, differentiate the actors
responsible, and guarantee the work as the indirect
executor. It is encouraged as the responsible for the
development of tasks, capable of assigning execution
responsibilities of each stage to appropriate actors.
• Detailed Engineering and Commissioning: must follow up
on the development and advances of the engineering and
construction duties.
• O&M: overseeing the sustainability of the project, for
which, it must continuously monitor the function of the
MG, coordinating when necessary the technical support to
overcome difficulties related to the operation.
Additionally, in terms of financing, it should ensure that
the resources are available for the system to operate
continuously, regardless of their source. It is of main
importance to maintain the association between the unit
which is coordinating on a global level, and the LMS,
responsible for the operation of the project on site.
b) Business Models and LMS
The LMS has the responsibility of ensuring the O&M of the
MG on site. This structure will be defined according to the
characteristics of the community, where two possibilities are
explored here: community cooperatives or hybrid
administrative entities formed by the community, public and/or
private bodies. Business models should be previously defined
for the local administrative structure based on the
characteristics of the community.
Rapid Rural Appraisal (RRA) method [21] [22] is used to
compile the most relevant antecedents for the design of the
energy solution. The RRA is deemed the most appropriate
methodological solution for the objectives of this proposal
given its interdisciplinary character, based on knowing the local
population, the attainment of subjective and objective
information, and the use of field methods and techniques
appropriate to achieve results in a community in the smallest
amount of time. The use of interviews to key informants, as
well as interviews to representative groups and the use of
observation specifically focused towards certain aspects of the
social scenario are highlighted. Additionally, the use of diverse
methods and techniques allow the triangulation of the data to
obtain direct, veritable and reliable information.
The antecedents to consider in the RRA are:
• Social aspects
o Economic activities
o Infrastructure and basic services
o Territory and legal situation
o Diagnostic and social analysis
• Environmental aspects
o Geographic aspects
o Availability of resources
o State of conservation
• Technical aspects
o Current state of the electric system
o Diagnose of the heating and electricity demand
With this and after the validation with competent institutions
as well as on site, the set of communities to be considered for
electrification programs through MG is reduced to 80.
In Fig. 3 results of HDI obtained for the macro regions are
shown.
Number
HDI Stadistics
Region
of communities
HDI 1 HDI 2 HDI 3

North 15 6 2 7
IV. CASE STUDY
We present the case of Chile in South America to implement
the proposed methodology, where isolated rural localities can North Center 42 4 16 22

be found all along the country. In the following, the four steps
of the methodology are detailed. Center 4 0 1 2

A. Cadastre
As stated in the first step, using information from secondary South 10 0 9 1

sources gathered from public entities in charge of energy topics,

296 localities at national level are identified as communities Austral 9 0 5 3

without continuous electrical supply.

To this total, two general filters are applied:
• Filter 1: just villages with a minimum of 10 houses are
considered, assuming this as a necessary condition for the Fig. 3: Results of the cadastre by region and number of communities by
introduction of a MG. HDI
• Filter 2: villages with actual electrification projects in any
of their stages are excluded.
B. Plan for the Development of Microgrids
After defining the subset of feasible villages, the selection is
validated with the main entities related to energy policies at Starting from 80 communities, only 63 of them have 100% of
local at national level. Additionally, and in order to have all necessary information in order to develop the plan. For each
accurate, updated and full data, site visits are done in a selected of these communities a MG was sized using the proposed
number of communities in the filtered set. In these visits the methodology described in Section III.B. A planning evaluation
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horizon of 20 years, an annual rate of demand growth of 3%, considered as an investment base in the microgrids
and annual rate of diesel cost growth of 3% are considered. development plan
Table 1 summarizes the main evaluation parameters. Already having the background for the design of a MG
solution for each of the 56 selected communities, we made a
The energy resources estimation (wind and sun) per prioritization for each based on the PVC per capita, namely
community were obtained from the computational tools without considering incomes, and HDI per community. The
developed by the Geophysics Department of the University of productive potential was not considered, as a result of a lack of
Chile.12. data in all the evaluated communities. Nevertheless, the
previously explained methodology was applied, making use of
Table 1: Value of the parameters the HDI and the PVC per capita. Table 3 shows the plan results
Parameters Value Unit considering a 4 year time frame for the execution of all MG and
𝑟 0.06 -
𝐶𝐼! 3000 [USD/kW] an equal annual investment for the considered years.
𝐶𝐼! 4500 [USD/kW]
𝐶𝐼! 1000 [USD/kW] Table 3: General results of plan for development of microgrids considering
𝐶𝐼! 1042 [USD/kW] 56 communities, 4 years for the execution and Pareto prioritization
𝐶𝐼! 25000 [USD/km] methodology.
𝑉𝑈! 25 [years] Execution Number of Number of Total
𝑉𝑈! 25 [years] year benefited people benefited investment
𝑉𝑈! 5 [years] communities [MCLP]
𝑉𝑈! 5 [years] 1 18 788 615,951123
𝑛𝐵 0.9 - 2 12 890 630,63
𝐻!"# 10 [hours] 3 11 906 631,44
𝑘!"# 3 - 4 15 736 637,30
𝑘!"# -1 -
𝑐𝑃 1/1000 [1/W/m2]
𝑎𝑇 10 [m]
C. Management and Monitoring of Microgrids
𝑎𝐷 25 [m] 1) Financing
𝑘 0.2 - The proposed mechanisms for financing the projects
𝑐𝐷𝑖𝑒𝑠𝑒𝑙𝐺 0.25 [lts/kWh]
𝑐𝐷𝑖𝑒𝑠𝑒𝑙 1.34 [USD/lts]
consider the participation of diverse sources:
• Public Institutions: Government funds destined for
In addition to the MG dimensioning, the grid extension cost electrification and infrastructure projects are considered in
to each one of the communities was also calculated this category. Yet, the goal is to maximize the participation
determining that in seven of them it is more profitable to of external actors and reduce the financial burden on the
develop a grid extension Project compared with a MG as a state, in order to distribute the allotted budget on a larger
consequence of the short distance to the distribution network. number of projects and take into account local partners.
Therefore, the MG development plan only takes into account • Private Institutions: several tendering models have been
56 communities. Table 2 shows the aggregated economic analysed to maximize the participation of private actors on
results of the MG dimensioning. projects, according with the conditions of each case, the
location, and resources at hand [23].
Table 2: General economic results of 56 microgrid designs. Invitations for tender normally call for the participation of
Variable Value Unit two or more organisms for each project – technical and
Beneficiaries – Total 3320 social – who should collaborate in all phases of
Investment at year 0 5.31 MMUSD implementation and community support. Given that the
Investment at year 0 per capita 1601.7 USD/hab governments are in a special position to communicate with
PVC total 24.1 MMUSD
academic, private and other state actors, it must be them
PVC total per capita 7261.5 USD/hab
Average Energy Cost O&M 0.24 USD/kWh who should orchestrate the initiative through the 3MU.
In addition, considering the lack of technological companies
Average Energy Cost O&M + 0.32 USD/kWh
in the zone, the tendering offers should initially be proposed
Replacement
Average Energy Cost O&M + 0.42 USD/kWh as pilot projects for companies that specialize in a single
Replacement + Investment type of technology. Some of the strategies to keep in mind
for the design of the project bidding are:
It is important to note that 16 of the 56 communities present o Service transition: For cases where the technical,
the existence of a genset, making it necessary to assign zero institutional or social conditions are less developed, the
cost to the investment on these equipment at the beginning of contract with a company may include a concession
the evaluation period in accordance with the methodology period (e.g. 2-5 years) to allow a transition of the O&M
explained in section II.C. However, given that there is not to the communities. The goal is to develop the
certainty about the actual state of the gen sets, these were not relationship with the 3MU and prepare the community to
manage the system during this time.
1
http://ernc.dgf.uchile.cl/Explorador/Solar2/
2
http://ernc.dgf.uchile.cl/Explorador/Eolico2/
 7

o Economies of scale: for regions where there is a needs and characteristics of the communities.
prevalent natural resource that is homogenous within a 1) Cooperative Structure
geographical area, it would be most efficient to power a This business model is suggested for communities where
cluster of communities by using similar systems. there is not the issue of dependency on outsiders, and who have
Expanding the scale of implementation would improve experience in active community involvement and participation,
cost efficiency to facilitate the later administration and with high levels of social cohesion (Fig. 4).
regulation of the MG- and also allows covering a greater
number of clients in less time. Tenders can be designed
to favour the company that offers to electrify a greater
number of communities in a given region.
• Community: it is key that communities assume full
responsibility for the functioning of their MG once
operative. This sense of ownership strengthens the
commitment of its users, and improves its performance in
the long-term [24]. In order to cover the O&M costs of the
system, the community must participate in the design and
implementation of the tariff scheme, and must also be
responsible for the fulfilment and administration of a
monthly fee paid by every home in the community. It is
anticipated that such a tariff contributes to a fund that covers
the costs of basic maintenance (oil, diesel, small
replacements) and the salary of a technician. If possible,
such a fund may also contribute for the purchase of Fig. 4. Tasks and responsibilities of the 3MU.
replacement batteries. In case the community cannot afford
it, government resources must be considered. The cooperative is in charge of the administration,
• Multilateral Institutions: Different financing/advising coordination, decision-making, O&M of the MG, whereas the
support schemes are available from organizations dedicated 3MU will take care of advising, supervising, and identifying (if
to support initiatives that impact development, needed) a collaborating entity that may assist with technical
electrification, promotion of renewables and rural issues based on the location.
development among others. Therefore access to loan
programs, co-financing, technical and social support, may
be available for different stages of the project depending on
the fund and its objectives. In a joint work with the project
stakeholders who present funding capacity, a suitable means
of asset transfer will be sought, such as, commodate, direct
funding transferal for purchases, and loans among others.
• NGO´s: even with limited financial resources- are key for
the provision of support and basic training that is essential
for communities to manage and operate their MG across
time. Also, those dedicated to the promotion of rural Fig. 5. Community management structure
development can offer support on economic and
productivity issues to small producers or entrepreneurs: The community- represented by a cooperative- should
whether for financing, effective use of resources, or support manage the financial resources for O&M of the MG, for which
for the commercialization of their products. the collection mechanism suggested will be through a fee for
2) Check and status the use of the service.
The 3MU proposed for this case is represented in Fig. 4, with The tariff should be set in consultation with the community
a scope focused on two spheres: from the beginning, ensuring that they understand the
• Temporal Sphere: related to the development of the project importance of their payment, their responsibility over the
over time. administration of the system, and to make sure that the amount
• Level of Activity Sphere: comprising the activities collected is significant and affordable for the people [23]. We
associated with maintenance and monitoring (in terms of propose the charging program to follow one of four
the unit), financing, execution, and development of the alternatives:
MG. • Charging by consumption: Payment is proportional to the
D. Business models and LMS consumption of each household; fixed cost per kWh.
• Fixed fee tariff: A fixed periodic payment per household,
For Chile there are two business models proposed, each of
regardless of consumption.
which has a local management structure, and adapts to the
• Differentiated consumption fee: A payment per

consumption that sets different values for the service
depending on the time of use; with the purpose of
influencing demand based on the availability of the
resource.
• Fee per quota: Household are “assigned” an average
consumption quota at a given rate, consumption above
such level is to be charged at a higher rate.
For this model, the creation of a donations fund is also
discussed in order to guide contributions from private sector
firms that may not be associated with the energy sector. This
donation fund may be created through a NGO, where firms may
give a contribution and obtain fiscal incentives in turn. In order
to achieve a wider reach and effective dissemination of
information, this process may be handled in collaboration with
firms committed to Corporate Social Responsibility (CSR)
initiatives.
2) Hybrid Structure
In the case that the community has no previous experience in
the execution of projects, and the social cohesion is considered
too weak to assume the responsibility of operating and
maintaining the MG, and additional administrative structure
may be organized -formed by public figures committed to the
territory, or private actors with an interest in assuming the
O&M in return for a fee. This model is identified as a hybrid
structure (Fig. 6), where the community participates in the
decision-making associated with the energy system, with the
private/public actor assuming responsibility for O&M.
Fig. 6. Hybrid management structure
In the case that in there is a public sector figure involved in
the administrative structure, it should ensure the availability of
resources for the O&M.
In the case of private figures, the presence of economic
incentives will be critical for their participation, and thus the
following alternatives should be explored:
Commercial incentives: governments may offer the firms a
“grace period” (e.g. 2-3 years) for tax payments and other
duties: to import equipment free of tariffs, tax release, the
ability to expatriate earnings free of charge, among other fiscal
incentives. Governments could also offer firms other contracts
for state energy programs that come up for a period of time.
These incentives are specially attractive for private companies,
which is why tendering could favor a company willing to
8
finance a greater portion of the investment, with the remaining
cost to be covered by regular public sector electrification funds.
Payment for service: This case considers charging of a fee
by the company responsible for the O&M. This tariff -as
opposed to the amount charged by a community cooperative-
must include an additional profit for the company apart from
covering costs of the O&M.
V. ACKNOWLEDGMENTS
The authors want to thank Ricardo León Cifuentes from
CER for his comments and support regarding the cadaster and
the plan for the development of microgrids.
VI. CONCLUSIONS
We propose a hierarchical organization for the development
and operation of rural electrification projects bases in MG.
This approach is driven by the creation of a Management
and Monitoring of Microgrids Unit, which ensures the
formalization of MGs as instruments for rural electrification,
that plays the role of coordinator at macro level, with the
inclusion of a Local Management Structure as an essential
entity at micro level to guarantee the sustainability of a
particular project, involved in all its stages, but especially in the
O&M.
The proposal considers a LMS that could be based on a
Cooperative or a Hybrid System, showing different business
models and tariff alternatives depending on the level of social
cohesion of the community.
The methodology is applied in the case of Chile, where big
heterogeneity of social and technical characteristics is found all
along the territory, and where some of the elements that hamper
the implementation of this type of project were identified, such
as a lack of reliable and updated information available, and
ineffective communication among state representatives at
different levels
It is important to point out that even when the solution of
electrification for rural isolated communities considers the
technical component as most important, it also reinforces the
need to incorporate social and institutional components as
inputs necessary for the sustainability of projects over time.
This is the reason why the proposed methodology considers
especially significant that these rural electrification projects
contribute to the local social capital, through a community
participation that fosters empowerment and appropriation by
the benefitted local communities.
The experience of an interdisciplinary focus to build this
methodological proposal expressed in the integration of
technical, economical, socio-cultural and environmental factors,
as well as the use of quantitative and qualitative methods are
necessary to develop holistic proposals. This shows the
complexity and dynamism of initiatives that seek to answer a
specific need: electrification. It is required to study further on
this crucial topic, to understand the processes of rural
development.
However, knowledge about the human development
powered by projects of rural MG is not enough to apply the
HDI proposed by the UNDP. Thus it is necessary to dig deeper

into new indicators that take into account the richness and
complexity of human development. It is worth to note that this
methodology can be easily extended in order to also consider
rural communities in a grid-connected context, where MG are
able to work in the same way but also consider income from
energy exports to the electric or heating utility.
VII. REFERENCES
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an energy plus approach for the poor. A review of good practices and
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[2] H. Rodriguez, "Programa Remoción de Barreras para la Electrificación
Rural," 2012.
[3] Chilean Ministry of Energy, "Programa de Energización Rural y Social
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and Pacific," Renewable Energy, vol. 33, pp. 1-4, 2008.
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deployment on local sustainability: Towards a theoretical framework,"
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2008.
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distribution networks," CIGRÉ, 2010.
[15] R. Lasseter, "MicroGrids," in Power Engineering Society Winter Meeting,
vol. 1, 2002, pp. 305 - 308, doi: 10.1109/PESW.2002.985003.
[16] R. Lasseter, "Microgrids and Distributed Generation," Journal of Energy
Engineering , vol. 133, no. Distributed Energy Resources-Potentials for
the Electric Power Industry, pp. 144 - 149, 2007.
[17] A. Colantonio, "Social Sustainability: Linking Research to Policy and
Practice," Oxford Institute for Sustainable Development, 2009.
[18] F. Ribeiro, P. Ferreira, and M. Araújo, "The inclusion of social aspects in
power planning," Renewable and Sustainable Energy Reviews, vol. 15, pp.
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methodology for community engagement in the introduction of renewable
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3, pp. 314 - 323, September 2011.
9
[20] PNUD, "Informe Anual del Desarrollo Humano," PNUD, 1999.
[21] R. Chambers, "Rural Appraisal: Rapid, Relaxed and Participatory,"
Institute of Development Studies, 1992.
[22] M. Schönhuth and U. Kievelitz, Diagnóstico rural rápido diagnóstico
rural participativo. Métodos participativos de diagnóstico y planificación
en la cooperación al desarrollo: una introducción comentada.:
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[23] World Bank. (2012) Case study 32: Bolivia SHS Medium-term Service
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VIII. BIOGRAPHIES
Karen Ubilla was born in Santiago, Chile on December 5th, 1984. She
received her BSc degree in Renewable Natural Resources Engineering from
University of Chile in 2012. Her main research interest is sustainable
development of microgrids projects.
Guillermo A. Jiménez-Estévez (IEEE Senior Member) was born in Bogotá,
Colombia. He received the B.Sc. degree in electrical engineering from the
Escuela Colombiana de Ingeniería, Bogotá, in 1998, the M.Sc degree and Ph.D
degree in electrical engineering from the Universidad de Chile, Santiago, in
2003 and 2010 respectively. His main research interests are distributed
generation and distribution systems planning.
Roberto Hernández was born in Coquimbo, Chile on April 5th, 1939. He
received his bachelor on Teacher of History, Geography and Civic Education,
specialization in Anthropology from University of Chile and the degree of
M.Sc. in Rural Development from Universidad Central de Venezuela. He was
Professor of Anthropology in University of Chile. He was Associated Professor
of Rural Sociology and Social Sciences Methodology in University Simón
Rodríguez, Venezuela and currently is Joint Professor of Anthropology in the
Department of Environmental Sciences in University of Chile (2006 – 2013).
He is Member of the Latin American Association of Anthropology (ALA) and
the Society of Applied Anthropology of US.
Lorenzo Reyes-Chamorro (IEEE Student Member) was born in Santiago of
Chile on September 8th, 1984. He received his BSc degree in Electrical
Engineering from University of Chile in 2009. Since January 2013 he has been
enrolled as a Ph.D. student at the Distributed Electrical System Laboratory
(DESL) at the Swiss Federal Institute of Technology of Lausanne (EPFL),
Switzerland.
Claudia Hernandez Irigoyen was born in Barquisimeto, Venezuela on June
13, 1988. Received a B.A. in Economics and International Relations from
Boston University in 2010. In 2011 she enrolled for a year in the Advanced
Study Program from the Massachusetts Institute of Technology focusing on the
subjects of Sustainability and Energy Economics. Currently she is participating
in a Master in Business Innovation from the University of Deusto in Bilbao,
Spain.
Bernardo Severino received his B.Sc. degree in electrical engineering from the
University of Chile, 2011. His main research interest is modeling energy
storage systems for microgrids.
Rodrigo Palma-Behnke (IEEE Senior Member) received his B.Sc. and M.Sc.
degrees in electrical engineering from the Pontificia Universidad Católica de
Chile and a Dr.-Ing. from the University of Dortmund, Germany. He is
currently an associate professor in the Electrical Engineering Department at the
University of Chile. His research field is the planning and operation of electrical
systems in competitive power markets and new technologies.