A new Rocky Mountain Institute report showcases a pathway to implementing undergrid minigrids that has the potential to save electricity distribution companies and communities millions of dollars while dramatically expanding the market for distributed energy resources in Nigeria.
ABUJA, Nigeria, Oct. 8, 2019 /PRNewswire-PRWeb/ -- A new report, funded by All On and produced by Rocky Mountain Institute (RMI), Clean Tech Hub and Energy Market and Rates Consultants (EMRC), titled: Electrifying the Underserved: Collaborative Business Models for Developing Minigrids Under the Grid, describes four business models as practical solutions to guide stakeholders through the process of implementing undergrid minigrids in Nigeria today.
Communities under the grid are within the territory of an electric utility but are unserved or underserved by the utility. Undergrid minigrids are self-contained electricity systems up to 1 megawatt (MW) in size.
The report addresses the complex decisions that make up undergrid minigrid business models, with the goal of accelerating the market and enabling the many interested stakeholders to act. Through engagement with utilities, minigrid companies and communities on the ground, two key barriers were identified: a lack of familiarity around how to collaboratively develop an undergrid minigrid and concerns about competing stakeholder interests getting in the way of partnerships.
In Nigeria alone, thousands of rural communities could be best served by undergrid minigrids. Implementing 4,000 undergrid minigrid projects has the potential to save Nigerian distribution companies $30–$60 million annually while offering minigrid owners $1 billion in annual revenue and saving communities $170 million in yearly energy expenditures. The opportunity continues to scale to Nigerian peri-urban communities—where higher loads strengthen the business case for minigrids—and underserved communities throughout sub-Saharan Africa and the world.
"The growth of the energy access sector in Nigeria is evident in the growing interest of distribution companies in increasingly exploring ways to grow their market base and meet underserved needs. This report will be a pivotal guide for minigrid developers, investors, and distribution companies in deciding the best business models for a ready market of energy-hungry consumers," said Ifeoma Malo, CEO of Clean Technology Hub.
"Undergrid minigrids are a promising and commercially viable solution that can deliver reliable electricity to hundreds of thousands of Nigerians today. The business models outlined in this report can kickstart the undergrid minigrid industry in Nigeria by providing guidance on how to start projects, which will provide a precedent for private sector, community and utility collaboration that is applicable across many other countries in sub-Saharan Africa and around the world," said James Sherwood, principal at RMI and coauthor of the study.
According to Dr. Wiebe Boer, the CEO of All On, an off-grid energy investment company backed by Shell that funded the research, "the undergrid minigrid business models introduced through this research provide a framework for minigrid developers, distribution companies and communities to collaborate to provide reliable, affordable and sustainable power at scale to millions of underserved, low-income households and SME customers across Nigeria. We need collaborative approaches like these to address Nigeria's energy access gap and improve livelihoods nationwide."
The four business models that can be implemented under today's social, political, and economic environment include:
- Minigrid operator-led, in which a private minigrid operator leads development of the minigrid with consultation across the distribution company and community.
- Special purpose vehicle (SPV)-led, in which development is led by an SPV (potentially formed by a distribution company's investors) and certain specialized functions are subcontracted to a minigrid operator.
- Cooperative-led, in which a cooperative formed by the community leads minigrid development.
- Collaborative SPV-led, in which ownership and operation functions are shared among the minigrid operator, community cooperative and DisCo investors.
These business models were developed with extensive stakeholder consultation and consideration of commercial dynamics and regulatory frameworks in the Nigerian Electricity Supply Industry to ensure successful project implementation that meets the needs of all actors. The most critical aspect of each business model is the requirement for multiple project participants to work together toward a common outcome. Executed projects need to reflect real community needs while working within Nigerian regulation to support customer well-being and economic development.
"The four business models discussed in this report explore the possibility of developing an undergrid minigrid in Nigeria which presents an opportunity for improved energy access to unserved and underserved communities, developers to make returns on their investment and existing electricity distribution companies to reduce losses," said Oladiran Adesua, senior consultant at EMRC.
Notes to Editors
Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables. RMI has offices in Basalt and Boulder, Colorado; New York City; the San Francisco Bay Area; Washington, D.C.; and Beijing.
Clean Tech Incubation and Acceleration Foundation is a pioneering hybrid hub for the research, development, demonstration and incubation of clean technologies in Africa, and their validation for commercial stage development. It is also an early start-up incubator for inventions and innovations in clean energy, a consultancy for sustainability and energy efficiency solutions, and a driver of clean energy investment into Africa.
Energy Market and Rates Consultants (EMRC) are independent consultants providing energy market, regulatory, transaction, techno-economic, and financial advice for electricity, renewables, and gas sector clients in Nigeria and internationally. We serve the UK and Ireland as Energy Market and Regulatory Consultants (EMRC) from our offices in Edinburgh. We were founded in 2011 as Mercados EMI. Our office in Abuja was established in 2013, and we changed our name to EMRC in 2015. We are part of the MRC Group of Companies, a family of nine sister companies sharing a long and common history of working together. The MRC Group of Companies has a professional team of over 80 experts, with a presence in 10 different cities.
All On, an independent impact investing company, was seeded with funding from Shell, and works with partners to increase access to commercial energy products and services for under-served and un-served off-grid energy markets in Nigeria, with a special focus on the Niger Delta. All On invests in off-grid energy solutions spanning solar, wind, hydro, biomass and gas technologies deployed by both foreign and local access-to-energy companies that complement available grid power across Nigeria and help bridge the significant energy gap.
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