Due to conflicts, instability, and corruption, central governments in many developing countries remain unable to provide their citizens with reliable access to basic services including electricity. Fortunately, the recent advancement of renewable energy technologies, especially solar photovoltaic (PV), allowed many citizens and businesses in such countries to achieve a certain level of individual energy independence despite the unreliability of the centralized electricity grid. However, PV systems used in off-grid mode exhibit a high level of wasted energy generation and impose restrictions on the demand at night and in cloudy days. Microgrids come as an interesting middle ground allowing the formation of a grid between physically connected energy producers and consumers, within a neighborhood or a village, to maximize the utilization of the available electricity generation assets and minimize the system inefficiencies.

Previous literature has addressed aspects of the technical, economic and market related dimensions associated with microgrids in two main contexts: developed countries exhibiting complex market dynamics and high demand, and poor regions in developing countries at the global electrification frontier characterized by very low demand levels and very limited purchasing power. In this grant, the project team will focus on the case of developing countries with relatively higher electricity demand levels and better economic conditions, yet with dysfunctional central governments such as Lebanon, Iraq and Nigeria. These countries exhibit a need for electricity that drives a flourishing business of distributed diesel generators and witness at the same time a high increase in the adoption of individual PV systems, either at the household or the small institutional levels. The implications of connecting the individual PV systems to the diesel-powered microgrid have not been previously assessed. The team will focus on the case of Lebanon and describe a modeling framework that allows answering their core research question: How can an efficient market, in the form of a microgrid, be established between the various types of private players involved in the local electricity sector to ensure value addition for all of them? The framework starts by addressing the composition and market structure of the microgrid under a centralized planner perspective characterized by a dominant position of one of the market players having control of the microgrid itself. Then they discuss the implications of liberalizing the microgrid and allowing equal access rights to it to the various market participants. They will study the effects of market liberalization on (i) the techno-economic status of the microgrid in terms of asset utilization, renewable energy penetration, and system costs and (ii) on the game theoretical market equilibrium in light of the strategic objectives of the involved agents. The project team will incorporate the price elasticity of demand into our analysis and assess its implications. To undertake their analysis, they will rely on a case study from Lebanon associated with an extensive data collection based on data logging equipment and surveys.

In addition to the tangible direct academic and educational outputs, the significance of this project lies in presenting a novel microgrid electricity market that promises increased access, improved efficiency and minimized costs of electricity services for citizens in Lebanon and other similar countries while accounting for the strategic objectives of the involved market players. The research will also shed light on policy interventions that induce the desired shift in the local electricity conditions from a monopolistic setting into a fair and liberalized market. Direct academic outputs include submitting at least three papers to peer-reviewed scientific journals and presenting their findings at three scientific conferences. They will also prepare policy briefs and communicate the results of our research to other stakeholders beyond the scientific community. On the educational front, they will supervise the completion of a master's thesis and give several seminars and lectures in multiple universities both in Lebanon and abroad discussing the results of this research.