A mini-grid is a self-contained power system or an integrated local generating and distribution system with an installed capacity of less than 1MW that can serve multiple end customers while remaining independent of the national grid. A mini-grid can provide reliable and affordable electricity in remote areas where population density is insufficient to justify connecting the community to the national grid, and it represents a viable and cost-effective solution for electrifying Nigerian communities through a decentralized energy system.
Global advocacy for the use of renewable energy sources is growing, and rightly so, as the negative effects of global warming and climate change continue to worsen. As a result, renewable energy mini-grids have become a critical component in combatting global warming and ensuring simple access to affordable, clean energy. Renewable energy deployed via a mini-grid would be able to benefit from the Regulation’s predictable structure, as well as other renewable energy policy measures now in place. Nigeria has a ready and sustainable market for the generation and distribution of electricity via renewable mini-grids, reflecting the worldwide movement against greenhouse gas emissions and climate change, as well as the over 55 percent of Nigerians who are in need of access to clean energy. From a policy perspective, there are a number of policies made by the Government relating to renewables and incentives available therein.
Renewable energy (RE)-based mini-grids are gaining traction and attracting interest from both public and private investors. For communities all over Sub-Saharan Africa, mini-grids have the potential to be a game-changer. New technologies, creative finance methods, well-informed investors, and aggressive government goals are all combined to allow for rapid growth. Now is the moment for the region’s energy leaders to reflect on their previous experiences and take action. The lack of reliable data, such as desegregated PV/hybrid mini-grid cost factors, limits the ability of private and public investors to analyse rural electrification solutions.
Access to electricity is critical for development, especially among low-income people in the African sub-Saharan. The equal distribution of power via a national grid is difficult to achieve due to limited financial resources and the dispersed and scant availability of infrastructure in rural parts of Sub-Saharan Africa. Furthermore, the urgent need to transition away from traditional fossil fuel-based power production is highlighted by climate change problems. Furthermore, innovation in technological infrastructure, as well as energy production and consumption, may be advantageous to climate change mitigation. As a result, efforts to establish small and medium-sized renewable energy systems should be based on international technology transfer, that is, technology transfer from industrialized to poor countries.
The main causes of Nigeria and other sub-Saharan Africa’s energy problems are a power generation system that does not produce enough to meet demand and an ineffective tariff system that makes it difficult for power distribution businesses to earn a profit. In addition, more than half of Nigeria’s population lacks connection to the national electricity grid, posing a substantial infrastructure gap. The electricity rate in rural sections of the country is significantly lower. Governments and mini-grid developers recognize that investors are looking for a better business environment that allows the rapid deployment of mini-grid installations at scale in countries across Africa. Top challenges identified by developers included obtaining permits, risks related to the integration of mini-grid systems and national grids, and the lack of local currency financing at affordable rates and long tenors. Nigeria’s Rural Electrification Agency seeks to develop 10,000 mini-grids by 2023 to serve 14 per cent of its population, with private sector participation. Investors are searching for a stronger business climate that enables the quick deployment of mini-grid installations at scale in nations across Africa, which governments and mini-grid developers understand. Obtaining permissions, hazards associated with the integration of mini-grid systems and national grids, and a lack of local currency funding at affordable rates and long tenors were among the top hurdles mentioned by developers. With private sector cooperation, Nigeria’s Rural Electrification Agency hopes to build 10,000 mini-grids by 2023 to service 14 per cent of the country’s population. It also manages the Nigeria Electrification Project, a $550 million World Bank-African Development Bank joint credit facility that offers developers performance-based funds to build mini-grids and solar household systems.
“Mini-grids bridge the gap between expensive grid extension projects and low-power options like solar household systems,” according to the researchers. Importantly, the market is transitioning from government-funded projects to viable commercial models.
Mini-grids could provide a cost-effective alternative for providing energy to around 7 million households in Nigeria, according to the organisation. With a functional mini-grid regulatory environment and relatively high rural power demand, the country is reasonably progressing in its mini-grid development. According to the World Bank, mini-grids have a cumulative investment potential of over $10 billion by 2030, but to grow nationwide, initiatives to release loan funding, particularly in local currency, are required.
The Democratic Republic of the Congo, too, has potential, according to the workshop attendees. There is a huge unconnected population in the country that might be supplied by mini-grids, resulting in a possible investment of $12.5 billion that could reach around 8 million households. However, the panellists agreed that a lack of safety, government capability, and financial tools must be addressed in order to encourage further private sector participation.
Despite an economic dip between 2016 and 2017, Nigeria’s economy is steadily recovering. Nigeria has achieved significant progress in strengthening the economy, according to the World Bank’s 2018 Doing Business report, and was listed among the top 10 improvers for the first time in 2016-2017.
Nigeria has improved in the following categories in terms of ease of doing business: beginning a firm, dealing with construction permits, registering property, acquiring financing, and paying taxes. Democratic administration has improved, and Nigeria has experienced three peaceful transitions of power between democratically elected executive presidents since 1999.
Despite the improving economic climate, fewer than 15% of the population in most Nigerian states has access to the main grid and only a small number of those who do receive energy from the grid. The Rural Electrification Fund released its first request for expressions of interest for off-grid projects in 2017 to deliver electricity to Nigeria’s distant communities.
Through financial and technical aid from organizations such as the World Bank and the Rocky Mountain Institute, the Rural Electrification Fund was established to expand on-grid and off-grid electrification in rural regions, including small grids. The REF frequently bridges the viability gap in off-grid projects via capital grants and subsidies, allowing mini-grid developers to cut their tariffs and expand their customer base.
If the local market is scaled, there are significant benefits for both customers and mini-grid developers. By 2023, deploying 10,000 sites with a 100-kilowatt (kW) output would provide electricity to roughly 14% of the population. Tariff projections show that mini-grid developers may earn $3 billion per year at that scale.
The government’s promise to extend the national grid to areas that are currently unserved or underserved by the grid may be viewed as a deterrent to investment in the electricity industry, as investors may believe that they will not be able to recoup their investment once the national grid reaches the community where the investors operate.
This risk may be mitigated by a provision of the Regulations that encourages collaboration between a Mini-Grid Developer and a Distribution Licensee by requiring a Mini-Grid Developer to obtain the consent of a Distribution Licensee if its proposed operations plans are within the Distributor Licensee’s five-year expansion plan.
This risk may be further mitigated in the case of interconnected grids where community engagement and endorsement is mandated through a tripartite contract between the community, the Distribution Licensee, and the Mini-Grid Developer, ensuring that the Mini-Grid Developer can negotiate clear terms of engagement that benefit it.
When a Distributor Licensee extends its network operations to an isolated mini-grid run under a permit, it acts as a buffer should the national grid reach the community where the mini-grid investors are located.
What Needs To Be Done
The financial viability of mini-grid projects can be mitigated by grants or subsidies from donor organizations, allowing a developer to expand its customer base and scale-up, and there is a lot of room for scaling, installing 10,000 mini grids of 100 kW each can take ten years and only meet 30% of expected demand. Mini-grid operations in Africa are no longer a risky greenfield, since nations like Tanzania have demonstrated success, and such success models can be duplicated in Nigeria with sufficient investment.
Mini-grid distribution systems are frequently more sophisticated than normal grid distribution systems. Mini-grids, unlike traditional grids, can feature bidirectional power flows as well as various energy sources. This level of operational complexity necessitates additional controls and software. Each power source requires its own controller in hybrid systems, and the mini-grid must have an overarching management control to combine the various power sources. The EPA will make it easier for you by guiding you through the entire procedure.
When constructing the distribution system, the EPA takes into account the end-user system, including meters. The key variables in choosing metering technologies are tariff collection and the business aspects of the mini-grid project. The payment system is chosen by the EPA during one of several stages of the design process. The Environmental Protection Agency (EPA) normally designs metering and payment systems before the technical systems. The EPA ensures that the end-user system can accommodate loads and tariffs while also taking into account the cultural context and user preferences in the area. With large-scale solar power projects likely to be delayed by high-level red tape, enlisting the help of the Environmental Protection Agency to establish mini-grids for businesses and local communities is a realistic solution.
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