A US$9.2 billion a year market opportunity for minigrids and home solar PV systems is expected to save Nigerian homes and businesses $4.4 billion per year in energy spending, as well as dramatically improve human and environmental health and safety, according to a market study produced by Nigeria’s Rural Electrification Agency (REA), Rocky Mountain Institute (RMI) and the World Bank.
“Nigeria offers an unparalleled business opportunity to expand minigrid deployments, rapidly and cost effectively – the best we’ve seen yet over the course of our work in Sub-Saharan Africa,” James Sherwood, a manager with RMI’s Electricity Practice, said in an interview.
“Nigeria offers an unparalleled business opportunity to expand minigrid deployments.”
The savings are expected as Nigeria rolls out some 1,200 minigrids to serve a projected 200,000 households and 50,000 local businesses, as per REA’s off-grid electrification strategy, part of the broader-based Power Sector Recovery Program.
Hybrid microgrids combining solar, battery-based energy storage and diesel generators are poised to play a central role in the effort to expand clean energy access and enhance grid reliability, resiliency and sustainability.
A big, bustling economy, and a glaring lack of access to electricity
With a population last estimated at 180 million people, Nigeria’s economy is the largest in the Sub-Saharan region. National gross domestic product has reached $405 billion, and has been growing at a compound annual growth rate (CAGR) of 15 percent annually since 2000, according to the “Nigeria Minigrid Investment Brief,” released this month by REA, RMI and the World Bank.
That said, nearly half of Nigerians have limited or no access to electricity grid service. Compounding the challenge for businesses and households, grid service, where and when it is available, suffers from poor quality and lack of high reliability.
Use of diesel generators by businesses and households is prevalent as a result. That amounts to a “shadow” energy infrastructure that costs not only in terms of fuel spending, but also in terms of human and environmental health and quality, Sherwood pointed out.
Nigerian households and businesses spend nearly $14 billion annually to generate their own electricity, an estimated total of 10-15 GW of small-scale power generation. It’s costly per unit of energy – $0.40/kWh, it’s inefficient, of poor quality, noisy and polluting, according to the study.
Nigeria’s off-grid electrification strategy
Sharp, sustained declines in cost, improvements in performance and wider availability have made renewable and hybrid energy microgrids and home and business solar PV systems more affordable and attractive as an investment.
“There is large scale potential for scaling – installing 10,000 minigrids of 100 kW each can occur for 10 years and only meet 30 percent of anticipated demand,” according to the market study.
REA’s off-grid electrification strategy consists of four distinct work streams, Sherwood explained:
- Small, standalone solar PV and possibly battery energy storage systems for basic household needs
- Scalable, renewable and hybrid minigrids for communities that make use of solar PV, battery energy storage and diesel generation to create an independent, localized power grid
- Energizing education – deploying minigrids for universities and school districts
- Energizing local economies – larger microgrid systems that can generate and distribute low-emissions power and energy for large commercial hubs.
“There are thousands of small shops and businesses that are poorly served by the grid today,” Sherwood noted. “They’re running a lot in the way of small, inefficient, noisy and polluting diesel generators. Renewable and hybrid microgrids can serve as a source of cleaner, more reliable and cost-effective electricity for these local economic hubs.”
REA rates high among the government energy agencies RMI has worked with in Sub-Saharan Africa. “I’d say REA is one of the best, most organized government agencies we’ve worked with in this region. They’ve taken a holistic approach to the issue and their strategy is really well focused and sharp,” he told Microgrid Knowledge.
Sustainable energy and development challenges
Infrastructure, by nature, is a long-term investment that requires capital and technological know-how. Investing in infrastructure in emerging countries is riskier still. Lack of institutional capacity, stability and integrity can thwart the best intended program and project plans, as can project risks, such as equipment theft and customers that have never participated in a money-based economy.
In addition, billions of dollars in international development funding has been invested in Nigeria, yet some 50 percent of the population still lacks, or has limited, access to reliable, clean and affordable electricity. Why do RMI, REA and the World Bank think it will be any different this time around?
“Multilateral development agencies still have a role to play in energy infrastructure development financing here in Nigeria, but one key difference is that today we see great opportunity to develop commercially viable microgrid projects,” Sherwood said. “There are all sorts of problems and challenges when investing in emerging markets such as this. It’s a learning, and proving, ground, but we see the key problems being dealt with.”
Security guards are being employed at some installations, for instance. And strategies are emerging around the ability to control smart meters to get around the problem of low customer income and the lack of any banking or credit history.
Dealing with problems and challenges
“The ability to control electricity meters and shut off power is central,” Sherwood said. “When it comes to customer payment prospects, providers are using prepayment plans, along the lines of mobile phone service plans as well as micropayments and other means of addressing this issue.”So-called mobile pay-go home solar PV-energy kits and energy efficient product and services packages are proving to be extremely popular in Nigeria and throughout the Sub-Saharan region.
“Mobile pay-go definitely figures to be an important component in all of this,” Sherwood said. “REA has started analyzing around 500 prospective solar microgrid sites and around half of them have really good mobile telecoms coverage.”
REA’s nationwide solar microgrid assessment will provide a solid information for those interested in developing solar PV and solar microgrid projects as part of realizing Nigeria’s off-grid electrification strategy
“Those willing to commit capital, other resources and expertise can enter the market and establish themselves as market leaders. That will start to bring costs down and they’ll quickly be able to expand, which will attract others,” Sherwood said.
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