Rocky Mountain Institute’s Andrew Allee describes a problem arising out of electrification in Nigeria. Minigrids are bringing electricity to rural areas, but residents do not benefit if they cannot afford appliances.
In early 2018, a solar minigrid installation transformed energy access in Gbamu Gbamu, a Nigerian town 45 minutes from the nearest paved road. Before the minigrid, the smoke of kerosene lanterns and the cacophony of diesel generators filled the evening hours. Those who couldn’t afford a $150 fossil-powered generator had no electricity. Today, community members flip a switch to draw clean, green, and quiet power.
Customers say they’re satisfied with their service: the power is reliable, they feel safer with lit streets, and their children now study beneath a steady overhead light bulb. In the traditional view of electrification, a connection to the minigrid is enough to spur rapid economic growth and bring the energy services of modern life: well-lit parlors at home, better tools in the workshop, internet in the classroom, and new businesses in town.
Wealthier customers have happily switched off their generators and purchased reliable minigrid power for existing appliances. However, many customers’ use of electricity has remained low throughout the first year of operation. The appliances that make further use of power have high up-front costs and aren’t available for purchase in town.
Presently, electricity supply investments (e.g., power plants) receive 50 times more financing than access to productivity-enhancing equipment in Africa. If end-users are not able to obtain and use new appliances, much of this new generating capacity is at risk of underutilization.
Shortcoming of electrification in Nigeria
Like many Gbamu Gbamu homeowners, Olatunji Amope balances a business alongside child care. Her daytime usage is typically low. After dark, her family enjoys overhead light for homework and watching a TV show or movie. All of this comes at a much cheaper rate with high-quality minigrid power, as opposed to a diesel generator. She often lays out cocoa beans to dry just outside her front door, where previously they could be stolen under cover of darkness.
Though Amope’s power demand is high for a residential customer in Gbamu Gbamu, it is still just 50% of the monthly consumption of a typical urban Nigerian household. She wants a milling machine and personal computer. However, it is hard for her to imagine purchasing these appliances outright.
Babalola Rofiyat is founder of Bab’s Computer Technology, a small shop offering internet access, printing, lamination, and computer training. While growing up in a nearby village, she learned computer skills and worked at a local technology shop. With a loan from her parents, Ms. Rofiyat seized the opportunity to open her own store when she learned that Gbamu Gbamu would receive reliable power.
For aspiring entrepreneurs, replicating the success of Rofiyat’s computer shop requires access to starter funds and responsive customer service. New business owners often need support to procure specialized equipment or to fine-tune a connection to match the energy needs of new appliances.
Lack of credit
Many households would like to purchase new appliances but have trouble finding them in town. They also need access to credit payment plans that break down big up-front costs into manageable monthly installments. For businesses, fossil-fuel-powered generators are easily displaced by cheaper minigrid power, but entrepreneurs often require support to acquire and operate specialized equipment. Because most customers’ loads peak during the evening, there is ample opportunity to stimulate electricity demand during daytime hours, when the solar panels generate excess power.
Through a partnership with the Mini-Grid Innovation Lab, Rubitec participated in an appliance financing program, which offered common appliances—blenders, televisions, fans, and even a washing machine—on credit plans with 12 monthly installments. After five months of participation, the 26 customers who had purchased appliances on credit used 25 percent more electricity than before. These results suggest that microfinance can bridge a critical gap for some credit-constrained customers.
For low-income farmers, poverty may pose a limit to development that access to electricity and appliance financing cannot solve. Two-thirds of the Nigerian labor force is employed in agriculture, the majority as smallholder farmers. Twenty-five percent of Gbamu Gbamu customers use less than 100 watt-hours per day. But reliable power has significant potential to add value to local agricultural value chains if used to process crops into higher-value products or to minimize spoilage. Today, Mr. Babalola reports that Rubitec and GIZ—the German international development agency—are testing electric alternatives to diesel listers in old agricultural mills, which may reduce fuel costs and improve profitability of local processing.
Recognizing this need, the Nigerian Rural Electrification Agency is leading efforts to synchronize investments in electricity supply and customer demand stimulation. REA is implementing the $550 million Nigeria Electrification Project, which will support productive use of electricity alongside development of minigrid and solar home systems.
As the number of Nigerian minigrids grows, demand-side programs must accompany new electricity access, and successful programs will respond directly to the needs of individual customers.
Allee is a research fellow with the Rocky Mountain Institute’s Sustainable Energy for Economic Development (SEED) program.