Isolated or interconnected? An equilibrium framework for swarm electrification in rural energy planning

Swarm electrification–the interconnection of isolated decentralized energy systems for local energy sharing– could accelerate rural electrification, yet it remains largely absent from major initiatives that still prioritize solar home systems and centralized mini-grids. To determine when swarm interconnection is most justified, we develop a techno-economic decision-support framework, introducing three heterogeneity indexes: budget heterogeneity (BHI), demand shape diversity (SDI), and demand peak diversity (PDI). We use these indexes to investigate how heterogeneity increases the value of interconnection in the swarm-grid setting. We translate model outputs into policy-relevant indicators, e.g., avoided investment and added social welfare, and combine these into a single benefit ratio (BR). Using mixed complementarity problem (MCP) models–common in market and other equilibrium settings–we simulate decentralized energy trading under two competitive assumptions: perfect competition and Cournot competition, thus deriving tariff levels endogenously. We also include a central-planning benchmark where prices are exogenously fixed. Results from a Madagascar case study indicate that heterogeneity reshapes the economic rationale for interconnection. Demand differences yield at least 3% avoided investment through more efficient allocation and reduced oversizing, and complementary load-profiles increase energy sharing more than fivefold. Budget heterogeneity dominates, inducing over fifteen times more energy sharing by redistributing investments across nanogrids. Different market designs highlight a profitability-affordability trade-off: payback periods as short as 1.5 years are maximized under cost-recovery-oriented settings, imposing higher tariffs and underscoring the need for governance mechanisms aligned with energy-justice objectives. This framework offers practical guidance for a more adaptive and socially-inclusive rural electrification.