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2018: A Defining Moment For Mini-Grid In Nigeria

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In the quest to plug the huge gap in Nigeria’s power need, especially that of those who, either due to their remoteness or logistics factor, cannot access electricity from the grid, the introduction of mini-grids solution the federal government may have come the rescue. ABAH ADAH write

As the federal government of Nigeria moves to confront, with a view to solving, the endemic power crisis through a multi-pronged approach, there are strong indications that the mini-grid approach which has often been canvassed by decentralised-grid proponents, will boom and get about 43 percent Nigerians without access to electricity (World Bank report as at 2016) out of darkness as efforts intensify to prosecute the power sector reform agenda through 2018.

A mini-grid is used to mean an integrated local generation and distribution system with installed capacity below 1MW,   capable of serving numerous endusers independent of the national grid. It may be ‘isolated’ with no link to any other network or ‘interconnected’ with the main grid such that energy exchange is possible between them.

On the 24th May, 2017, the Nigerian Electricity Regulatory Commission (NERC) released a new Mini Grid Regulation to govern the development of integrated electricity generation and distribution supply systems of under 1MW either in isolation from the Distribution Companies (Discos) or interconnected to the Discos’ existing network infrastructure.

The Mini Grid Regulation seeks to incentivise and simplify the process for private sector participation in the Mini Grid sector of the Nigerian Electricity Market, which will in turn contribute to increasing access to electricity in unserved and underserved parts of Nigeria (rural and urban areas),

For very small projects below 100kW, only a simple registration with NERC is mandatory. However, an interested investor may voluntarily obtain a permit. The difference between a registration certificate holder and a permit holder is that while the latter enjoys exit compensation like larger systems, the former does not. To be qualified for a permit, however, the project must adhere to minimum network technical and safety standards.

The regulation set the stage for mini-grid investment to flourish in the country, addressing the fears of stakeholders especially investors and consumers.

The conference on mini-grid organised by the Rural Electrification Agency (REA) in conjunction with the World Bank’s Energy Sector Management Assistance Programme (ESMAP), the Climate Investment Funds (CIF), and the UK Department for International Development (DFID), focused on Nigeria’s mini-grid power market and its potentials to lift more than 50 per cent of her population without electricity services.

For the more than 600 people with diverse expertise and interests in mini grid electricity operations who were part of the conference tagged:”Upscaling Mini-Grids for Low Cost and Timely Access to Electricity Services” and on which platform Nigeria’s mini grid electricity market was intensively deliberated, the paths to take were conceivably made clear.

During the five-day meeting, opinions shared with OGN by participants indicated that while the sector enjoyed a different level of devotion than it had ever seen, the outcome to a large extent was that ‘there is a sheer shortage of business intelligence’ to guide investments to the hugely lucrative-mini grid electricity market in Nigeria.

From conversations on off-grid opportunities and challenges in Nigeria, to creating enabling environment for mini-grid investments, access to finance and more importantly, engaging with State governments to push through investments, the discussions at the event opened the veil from the business potentials if mini-grid business in Nigeria.

Opening up on its business findings, the REA said the annual investment potentials in Nigeria’s mini-grid electricity market was now worth up to $9.2 billion, indicating that its recent studies on the market potentials confirmed there were enormous opportunities than the challenges the market talked about.

Its Managing Director, Damilola Ogunbiyi, said in a presentation: “Overview of the Off-Grid Opportunities and Challenges in Nigeria“, she made at the conference, that the country’s federal authorities had created an enabling environment for mini-grid operators with the provision of a regulation to support the market’s growth.

Ogunbiyi, also said REA had made provisions for rural electrification fund, which she asked investors and developers to tap from to develop mini-grid projects.

She explained that a $350 million support from World Bank would be dedicated to the development of mini grid electricity in Nigeria, and it would fund electricity projects to electrify 200,000 household and 50,000 entrepreneurs.

She emphasised that Nigeria with her huge gap in municipal electricity supplies presented investors the biggest and most attractive off-grid opportunity in Africa.

The country, Ogunbiyi, added, was also one of the best locations in the world for mini-grids and solar home systems.

According to her, with a GDP of $405 billion, 180 million people (about half of which are un-electrified), and a flourishing economy (with a compound annual growth rate of 15% since 2000), Nigeria ticked all the right boxes for investment in mini-grid power solutions.

Similarly, she noted that a significant amount of the country’s economy was powered largely by small-scale generators (10–15GW), resulting to an almost $14 billion (N5 trillion) annual spend on inefficient and expensive ($0.40/kWh or ₦140/kWh on the average compared to grid power) power generation systems that are also noisy and polluting.

Ogunbiyi, stated in her presentation that: “Developing off-grid alternatives to complement the grid creates a $9.2B/year (N3.2T/year) market opportunity for mini grids and solar home systems that will save $4.4B/year (N1.5T/year) for Nigerian homes and businesses.”

She added to buttress the opportunities and why Nigeria could remain attractive to investors for a long time: “There is a large potential for scaling – installing 10,000 mini grids of 100kW each can occur by 2023 and only meet 30% of anticipated demand.”

The domino effect a healthy Nigerian mini-grid electricity market could have on the rest of Africa, Ogunbiyi, pointed out were that: “Getting off-grid solutions to scale and commercial viability in Nigeria will unlock an enormous market opportunity in Sub-Saharan Africa across 350 million people in countries with smaller demand and/or less-robust economies.”

The REA, she assured investors has in anticipation created the Off-Grid Electrification Strategy which is part of the Power Sector Recovery Programme (PSRP) to ensure this pushes the market to commercial viability.

Days after the conference, English billionaire and owner of Virgin Group, Sir Richard Branson, a renowned business person and one who has had previous business experience in Nigeria took to his personal blog to offer an informed business review on Nigeria’s mini-grid sector.

It in fact inferred that there were huge opportunities that global investors could take advantage of in Nigeria’s renewed efforts to connect about 50 million of her citizens currently without any form of electricity, adding that recent reports that Nigeria’s mini grid electricity sector was worth up to $9.2 billion per annum was encouraging from an investment point of view.

While Branson did not state if he would put his money in the sector, he however suggested to investors in mini grid power systems that 2018 would be a bumper year for Nigeria’s mini grid market, and that they should head there if they were interested in taking from the $9.2 billion potential profit the market offered.

“Energy access in Africa is close to my heart. Bringing clean, renewable power to people instead of building coal-fired power stations is absolutely essential if we are going to tackle climate change,” he said.

He further explained: “Developing off-grid alternatives to complement the grid could create a $9.2B/year market opportunity for mini-grids and solar home systems that will save $4.4 B/year for Nigerian homes and businesses. And there is large potential for scaling – installing 10,000 mini-grids of 100kW each can occur for 10 years and only meet 30 per cent of anticipated demand.”

According to him: “The combination of large revenue opportunity (USD $9.2 billion per year), a supportive government, and a dynamic entrepreneurial environment unite to make Nigeria the ideal location. If you are an impact investor that wants to make a difference in energy access next year, I’d suggest a trip to Nigeria.

Branson noted that even though investors have viewed the market for mini-grids as being too risky, making gaining access to project financing rare, and market rate debt expensive, he was however, “really thrilled to hear during that week  that the Rocky Mountain Institute may have cracked the problem with their partners, the Nigerian Rural Electrification Agency and the World Bank.”

The organisations, he explained, released an independent investment brief that touts Nigeria as the nation which can now unlock the nascent mini-grid market in Africa in 2018.

“Nigeria is the biggest and most attractive off-grid opportunity in Africa. It has the largest economy in Sub-Saharan Africa (GDP of $405 billion), a population of 180 million people, and flourishing growth (15 per cent a year since 2000).

“A significant amount of the economy is already powered largely by small-scale generators (10–15 GW) and almost 50 per cent of the population have limited or no access to the grid. As a result, Nigerians and their businesses spend almost $14 billion annually on inefficient, polluting and noisy generation that is expensive, and suffer from poor quality,” he added.

With the prospect of reliable access to electricity by the unserved and underserved members of the Nigerian public that the forum has unveiled, it is hoped that a at least a tangible part of these people will have gained access to reliable off-grid electricity courtesy of mini-grids by the end of this year.




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