Distribution grids, mini-grids and interconnectors: Unit economics
Why the wires cost more than the solar panels
What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.Distribution takes more investment than transmission: US utilities spent about USD 50.9 billion on it in 2023. Best-in-class solar mini-grids cost about USD 0.38 per kWh, high but often cheaper than the alternatives in remote areas.
Key costs
| Measure | Value | Note |
|---|---|---|
| US utility capital spending on distribution | 50.9 USD billion (2023)2 | Up 160% since 2003; transmission was USD 27.7 billion |
| Solar-hybrid mini-grid electricity cost | 0.38 (0.20 possible by 2030) USD/kWh67 | Best in class, 2021; down from USD 0.55 in 2018 |
| Solar-hybrid mini-grid capital cost | About 3,700 (below 2,500 by 2030) USD per kW of firm capacity7 | Best in class, 2021, down from about 3,900 in 2018 |
| Mini-grids to reach 490 million people by 2030 | More than 217,000 sites, USD 127 billion count, USD6 | At the 2022 pace only 44,800 would be built |
| European interconnection in the 2030s | At least 150 for 151 GW EUR billion10 | About EUR 1 million per MW (calculated); CEF grants cover on average about 31.5% of a cross-border line's cost |
| Global grid investment (all voltages) | About 400 per year (2025) USD billion1820 | IEA said in 2023 it must exceed USD 600 billion a year by 2030 |
Where the money goes
| Item | Share or amount |
|---|---|
| US distribution 2023: overhead lines, poles and towers | USD 17.4 billion2 |
| US distribution 2023: underground lines | USD 11.8 billion2 |
| US distribution 2023: line transformers | USD 7.5 billion2 |
| US distribution 2023: substation equipment | USD 6.1 billion2 |
| Mini-grid capital cost: distribution (poles and wires) / batteries | 27% / 15%7 |
| Mini-grid capital cost: PV modules / inverters and energy management | 10% / 9%7 |
The local wires are the largest single item even in a mini-grid, which is why customer density decides costs. Alternatives to a mini-grid are main-grid extension (cheaper per kWh where density is high, but slow and costly to reach remote villages), solar home systems (cheaper but smaller) and private diesel generators.
Sources
- Grid infrastructure investments drive increase in utility spending over last two decades (Today in Energy) US EIA, 2024
- Solar mini grids could power half a billion people by 2030, if action is taken now World Bank, 2022
- Mini Grids for Half a Billion People: Market Outlook and Handbook for Decision Makers (2022 edition) World Bank ESMAP, 2022
- Money on the line: scaling electricity interconnection for Europe's energy future Ember, 2025
- Lack of ambition and attention risks making electricity grids the weak link in clean energy transitions IEA, 2023
- Global energy investment set to rise to USD 3.3 trillion in 2025 amid economic uncertainty and energy security concerns IEA, 2025