1. On Wednesday, September 21, 2016, Nextier Power, through its initiative, Nigeria Electricity Hub, organised its monthly Nextier Power Dialogue to discuss the impact of mini and micro grids in Nigeria’s electricity market. The discourse was held at the Thought Pyramid Art Centre in Wuse 2, Abuja.
2. The guest speakers included Yusuf Suleiman (Chief Executive, Blue Camel Energy Limited), Dr. Sanusi Ohiare (Senior Advisor, Nigerian Energy Support Programme-GIZ), Ifeanyi Orajaka (Founder & Chief Executive, GVE Projects) and Faruk Yusuf Yabo (Renewable Energy Expert & Assistant Director Renewable Energy and Rural Power Access Department). Patrick O. Okigbo III (Principal Partner, Nextier Advisory) moderated the discourse.
3. The Nextier Power Dialogue holds every third Wednesday of the month and aims to share knowledge, explore investment opportunities and generate ideas for policy formulation in the power sector. The key policy issues discussed at these event are articulated in a policy brief that will be shared with the Honourable Minister of Power and other sector leaders to help shape government’s policy responses.
4. It is designed that at the end of each Dialogue, government and private sector stakeholders in the power sector would have gained a deeper understanding of the issues discussed and, in turn, equipped to seek pragmatic ways to achieve sustainable development of Nigeria’s electricity market.
PROJECT IN FOCUS: Blue Camel Estate (100% Solar and Wind-Powered Estate)
5. Blue Camel Energy Limited provides alternative energy and power backup solutions. The company designs and builds solar powered water supply systems, solar streetlights and solar/inverter energy backup systems for homes and offices. The company developed the “Green House Project” which is a ten (20) unit residential estate that is 100 percent off-grid.
6. The Blue Camel Estate is powered by a combination of solar and wind energy. Yusuf Suleiman, Chief Executive of the company, explained that the project is a sixty (60) Kilowatts solution. The renewable energy solution powers all the appliances in the estate including air conditioners, fridge, freezer, water pumps, etc. A video documentary of the project was presented at the session.
7. Mr. Suleiman explained that there are three (3) classes of solar panels in the market in Nigeria:
- Grade A Solar Panels – These are the standard solar panels that are certified and have an average life span of 25 years
- Grade B Solar Panels – These solar panels are not exactly similar to the grade A panels but works very well but have less than 25 years guaranty
- Grade C Solar Panels – These panels are usually unbranded without clarity on the source country. They do not have a long lifespan and carry very minimal guaranty.
8. Mr Suleiman explained that the battery backup systems have a life span of between 3 years and 12 years depending on the grade, operating condition, and usage.
9. The “Green House Project” was delivered in 2015 at a cost of N3.5 million for each of the ten apartments. This amount includes the cost of the solar panels, wind vanes, inverters, batteries, and provisions for battery replacements and maintenance. This solution works out to about N970 per day for uninterrupted and clean power supply.
Sanusi Ohiare, “Mini and Micro Grids as Panacea to Power Challenges”
10. Dr. Sanusi Ohiare defined mini and micro grids as any electricity supply system with its own power generation capacity, supplying electricity to more than one customer and which can operate in isolation from or to be connected to a Distribution Licensee’s network. Mini-Grids range in capacity from greater than 0kW to about 1MW of generation capacity. In Nigeria, both mini and micro grids are classified as mini-grids.
11. Mini-grids are most appropriate for serving the electrification needs of remote areas of developing countries. They provide reliable power supply and ensure sustainable services for consumers (especially from hybrid systems). They help decongest the central grid and frees up energy for other underserved areas. Furthermore, they ensure energy security by diversifying the energy mix, and reduce greenhouse effect.
12. About 80 million Nigerian are without access to the main electricity grid and the Government of Nigeria needs an estimated $10 billion to expand the central transmission grid. Dr. Ohiare advocated that mini-grids could become effective alternatives to grid-connected electricity supply for unserved and underserved markets. Globally, about 26 million households (or 100 million customers) are already being served through mini grids. Currently, Nigeria has less than 50 mini-grids (including both successful and failed projects).
13. Dr. Ohiare established that mini-grids have a ripple effect and a positive social impact on communities in which they are implemented, but not without some challenges including paucity of data for planning purposes, absence of government policy and regulation, lack of appropriate financing for project development, resource planning and system operations, and lack of clarity on the best for of technology. The Nigeria Electricity Regulatory Commission recently released a draft regulation for mini-grids that is currently being subjected to reviews and comments by the public before it is adopted.
Ifeanyi Orajaka, “Assessing Financial Strategies for Developing Mini and Micro Grid Systems in Nigeria’s Electricity Market”
14. GVE Projects has built and is operating mini-grids in xxx communities in 6 states across Nigeria. So far, it has raised about $2.2 million for its projects. Ifeanyi Orajaka, Founder and CEO of GVE, shared his experience with raising financing for his mini-grid projects. While the company got some seed capital from the founders’ personal assets, family, and friends, it was the grants (or financial award given by donor agencies) that catalysed their activities. They have also raised money from angel investors and ventures capital firms. There is also available financing in the form of soft loans from multinational development banks. These loans typically have no or low interest rate and can be obtained from the African Development Bank, or affiliates of the World Bank. Commercial debt financing is also available for firms that raise money for working capital or for capital expenditure by selling bonds, bills or notes to individuals and/or institutional investors.
15. Mr. Orajaka stated that the key criteria for a bankable project include:
- Quality of Sponsors and Developers: It is imperative to partner with investors who can bring in technical expertise and part of the project equity.
- Studies should be conducted to understand the demand and market risks before embarking on a project.
- There is the risk (Technology Risk) of adopted a technology that has not been tested. Project developers must seek technologies that have prototypes and long-term warranties.
- The project must be ready with land permits secured, and project agreements negotiated.
- Project Developers should undertake pre-feasibility studies at an early stage in the project before approaching their financiers.
- Other studies should include Environmental and Social Impact Assessment, and other studies on development outcome and impacts.
Faruk Yusuf Yabo, “Policies to Promote Investment in Mini-grids and Micro-Grids”
16. Faruk Yabo stressed the need for the right enabling policies to attract private sector investments to increase energy access across Nigeria. He stated that there are about 47,000 settlement clusters across Nigeria and that 45,000 of these clusters are not electrified. Given the enormity of resources required to expand the main grid, Mr. Yabo argued that mini-grids are the most effective option for Nigeria.
17. Mr. Yabo outlined the following key policies, financial and regulatory measures used to promote mini-grid projects across the globe:
- Clear national targets for mini-grids in the National Energy Mix Policy
- Simple licences and contract regulation (generation and distribution permits and licences)
- Simple process for concessions, power purchase agreements, etc.
- Clarity and consistency in economic policy and regulation especially around taxation, import duty, etc.
- Financial support for project developers and consumers (performance based grants and subsidies for capital and operating expenditure)
- Technical assistance for increasing awareness, promoting the solution, capacity development, network development, project developer guidelines, relevant data (e.g. grid extension, socio-economic data, resource maps).
18. Furthermore, Mr. Yabo explained that within two years of creating the Renewable Energy Department at the Federal Ministry of Power, it has developed a set of policy documents to promote renewable energy and to support mini-grids in Nigeria. The policy documents include National Renewable Energy and Energy Efficiency Policy (NREEEP 2015), National Renewable Energy Action Plan (NREAP 2016), National Energy Efficiency Action Plan (NEEAP 2016), and Sustainable Energy for All (SE4All 2016).
19. Mr. Yabo also highlighted some milestones achieved in promoting mini-grids in Nigeria to include:
- Recent release of a Draft 2016 Mini-Grid Regulation by the Nigeria Electricity Regulatory Commission. The draft regulation is currently undergoing review by various stakeholders.
- Renewable Energy Micro Utility (REMU) concept developed
- Pilot project: 40 kW Solar PV project Mini-grid in Gnami, FCT completed and in service for one year. Huawei funded the project.
- Bank of Industry provides project support to local mini-grid developers
- Various aid agencies provide technical assistance to private mini-grid developers
The moderated panel discussion and audience participation raised a number of issues including the following:
20. Designated Coordinator to Ensure Implementation: It was highlighted that one of the challenges with developing the renewable energy segment, in general, and the mini-grids space, in particular, is the lack of a coordinator responsible for ensuring that the various elements of the Action Plan are implemented. Faruk Yabo used the National Renewable Energy Report to explain that the Ministry of Finance is the main body responsible for sequencing the activities in the mini-grids market. Nnanna Ude of the Nigerian Economic Summit Group contributed that his organisation has recommended the creation of a Renewable Energy Roundtable comprising of the Ministers of Finance, Environment, and Power (and chaired by the Vice President) to accelerate coordination and the development of the Nigerian renewable energy market.
21. Affordability and Willingness of Consumers to Pay: Ifeanyi Orajaka used the GVE market study to explain that an average household in a rural community spends between N300 to N500 everyday on power and the GVE solution in these communities is one-third of the amount they pay for other sources of power. The Panellist also agreed that there are rural electrification funds that subsidize payment for the rural communities, which, in turn, enables consumers to pay for power used.
22. Framework for Collection: The session established that the best framework for bill collection in the mini-grid electricity market is achieved through the use of smart pre-paid meters. There is need to explore other forms of online payments as is currently in use across East Africa.
23. Liberalisation of the Mini-Grid Market: Participants at the Nextier Power Dialogue agreed on the need to minimise the role of the government in regulating the industry. Simon Gusah, a Policy Analyst, argued that the most successful sectors in Nigeria are the ones with minimal government interference.
24. Public Access to Sector Data and Policies: Participants at the Dialogue encouraged the government and aid agencies to make available to the public all data and policies related to the renewable energy market to enhance investment decisions in the space.
25. The September 2016 Nextier Power Dialogue agreed though mini-grids present some challenges due to lack of regulation and other factors, it is clear that mini-grids are the quickest way to spread power to the people. The Dialogue applauded the recent release of the draft 2016 Mini-grid Regulation and encouraged the government to ensure widespread review and adoption of the document. These regulation and policies are important for investors and project developers to know how best to engage the market.
26. At the end of the session, Patrick Okigbo III, Principal Partner, Nextier Advisory, announced that a Policy Document will be developed to articulate all the points generated during the three-part dialogue on renewable energy. Nextier would work with a select team of sector experts and development agencies focused on renewable energy to develop the policy paper. The document will be presented to the Government of Nigeria and widely circulated to aid investments in the renewable energy market in Nigeria.
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