Nigeria’s
electricity problems mainly revolve around a power generating system
that doesn’t produce enough to match demand and an ineffective tariff
system that means power distributing companies can hardly make a profit.
Just as crucial, there’s a significant infrastructure gap as more than half
of Nigeria’s population lacks access to the national power grid. Across
the country’s rural areas, the electrification rate is even lower.
One
way to solve the problem is to take on the expensive and difficult task
of connecting tens of millions of homes to the struggling national
grid. But independent solar mini-grids offer a more feasible
alternative, according to analysis in a report by the Rocky Mountain Institute and the Nigerian Renewable Energy Roundtable. With large-scale solar power projects likely to be delayed by high-level red tape, freeing developers to install mini-grids for local communities is a viable panacea.
The
mini-grids “fill an important gap between expensive grid extension
projects and low-power solutions like solar home systems” the report
says. Mini-grids already exist across Nigeria. Indeed, in making its
analysis, the report audits ten existing mini-grids in Nigeria which
serve 2,000 households. The success of existing mini-grids which have
implemented “cost-reflective tariffs and generated customer demand,” the
report states, is evidence of “the potential profitability of
commercial mini-grid projects.” Crucially, the market is evolving from
projects backed by the government grants to viable commercial models.
There’s
major upside for both customers and mini-grid developers if the local
market is scaled. The report forecasts that deploying 10,000 sites with
an output of 100 kilowatts (kW) by 2023 would power around 14% of the
population. At that scale, tariff forecasts also show mini-grid
developers can generate $3 billion in annual revenue.
An
added boon for local communities are lower power costs in the
long-term. A majority of residents in the communities served by the
mini-grids report spending less on power compared to the expense of
alternatives like a diesel and petrol power generator, the report says.
It also projects that tariffs, currently high relative to the national
grid, will fall by 60% in the next two years as more development occurs.
Already,
eight of the 10 audited mini-grid projects say there are expansion
plans for an additional 200 mini-grids across Nigeria.
But
there’s still a part for government to play. While current
policy—including regulation protecting the developers’ ability to set
cost-reflective tariffs—is largely favorable, developers say that with
several government agencies sharing overlapping mandates more clarity
for enforcement and taxation is required.
