 The barriers to mini-grid systems in general and to renewable energy based mini-grid systems in particular have been documented in many studies. These barriers are the result of a variety of legal and regulatory practices, economic and financial factors, and market and business risks that discourage entrepreneurs from entering the market and prevent the successful development of projects. The most relevant barriers to mini-grid renewable energy systems are:
 Legal and Regulatory
- Lack of a policies and institutional support for cooperatives and private sector rural electricity supply systems
- Lack of subsidies/incentives that support renewable energy mini-grid systems
- Policies that impede establishment of cost-recovery tariffs
- Limited knowledge on regulatory framework for mini-grids
Institutional - Difficult to set up local institutional arrangement for mini-grids due to the “tragedy of common goods”,
Cost and Pricing - High investment and transaction costs
- Uncertain resource supply projections
- Low customer ability to pay
- Uncertain customer demand
Market Performance - Inability to access capital/financing
- Lack of technical skills for design, construction and O&M
- Lack of skills for system management, monitoring and customer relations
- Insufficient community involvement/responsibility (the tragedy of the commons)
Village-grids (communities from 20 to 200 households) face even greater challenges to electrification, due to the difficult relation between socio-economic issues and technology options: (i) transaction costs and upfront investments are extremely high (which worries donors, project developers and regulators alike); (ii) technical capacity and financial strength of providers in this market segment is often very low (and lots of technical assistance is required); (iii) the high sensitivity of economic and financial analysis to the specific local resources and demand curves makes a wholesale approach to program design extremely difficult – which slows roll-out and disbursements compared to grid and SHS projects that are much easier to standardize; and (iv) distribution problems due to common use of limited local energy resources often create severe social problems and/or uncontrolled load growth. All these specific demand and supply side characteristics of the village-grid market segment require specific solutions for service quality, pricing and subsidy schemes. These solutions are often different from those for larger mini-grids or grid extension. Above 200 households, it becomes more likely that a diesel-hybrid or hydro generation with professional provider and metering is least cost – which drastically reduces the social issues and sizing problems. 
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