About two years ago, an off-grid community in Ogun State, Isalu, had to pay about N70 to a local vendor in order to charge their mobile devices due to the lack of access to electricity in the community. Kerosene lamps, candles, torchlights and firewood are their major sources of energy, while just a few people had generator sets.
The Renewable Energy Research Cluster, Covenant University, empowered the community by providing a mobile solar-power generator in order to bridge the energy gap in charging their devices.
Two years on, the Isalu community is still using the solar-power generator to charge their phones, but electricity access remains a huge challenge.
The Isalu community is among the estimated 100 million people in Nigeria who remain without access to electricity. According to the Nigerian Economic Summit Group’s (NESG) MiniGrid Investment Report, up to 53 percent of Nigerians(or about 100m people) have no access to electricity and rural electrification rate in Nigeria is just about 36 percent.
With majority of Nigerians in need of off-grid power solutions to provide energy for their households and businesses, energy analysts say this virgin market is becoming increasingly interesting for impact investors who have an opportunity to impact rural communities and also make high investment returns by providing basic mini-grid solutions to these communities.
Currently, only 10 commercial mini-grids with a combined total capacity of 364 kW serve 2,000 households and 250 businesses in Nigeria. These mini-grids are located in 10 out of the 36 states in Nigeria (Sokoto, Niger, Abuja, Ogun, Edo, Rivers, Cross River, Plateau and Kaduna); thereby reflecting a huge market in other states especially the northern states where solar energy is readily available.
The average daily sunshine in the northern areas is about 9 hours/day. The NESG estimates that investing in 10,000 mini-grids of 100 kW each is expected to satisfy 30 percent of the anticipated energy demand over 10 years. The expected return from this investment is about $8 billion per year with an additional $5 billion by 2020 as a result of the falling installation costs.
Source: NESG – MiniGrid Investment Report
“There is a lot of investments currently being channelled to provide off-grid solutions to rural communities. Investors can easily make between N100-175/kWh providing energy to homes in communities which are not connected to the national grid. This compares to less than N30/kWh that Discos charge in urban areas that are connected to the grid.
“The prospect to make money while still making an impact to society is what will make this opportunity so interesting to impact investors,” said Temitope Adeyemi-Kayode, a lecturer and researcher at Covenant University.
One of the biggest energy impact investors in the world is Acumen. According to Jacqueline Novogratz, CEO and Founder, Acumen, “Acumen and a handful of other investors have helped start-ups bring energy access to 360 million people over the last decade.”
Still there is a lot more to be done in funding rural electrification projects. United Nations states that 85 percent of the 1.2 billion people who lack access to electricity and 78 percent of the 2.8 billion who still rely on unsustainable solid biomass as fuel for cooking and heating, live in rural areas. Globally, there are close to 4 million premature deaths from household air pollution every year, 70 to 80 percent of which are women and children.
“Despite proven successes in off-grid energy in recent years, investors are unwilling to fund early-stage companies that are addressing the needs of these communities. These companies operate in fragile or underdeveloped markets, and require patience to develop sustainable business models that can operate in challenging places.
“So, when we think about Acumen’s work today, and whether there is still a need for early-stage, patient capital in off-grid energy, the answer is clear: a resounding yes,” Novogratz said in a 2018 company report titled “Accelerating Energy Access: The Role of Patient Capital.”
Experts say the main economic benefit to increasing energy access to all include increased studying time and reduced pollution.
“Most households in rural communities create their own power through kerosene lanterns or small generators which cause a lot of pollution and are very expensive to maintain. Although, the cost of providing alternative off-grid power solutions in these communities are quite expensive than the traditional on-grid solution, many households and small businesses in these communities spend way more money providing this power by themselves than it will cost to pay for the off-grid solution,” Adeyemi-Kayode added.
This year about 5 mini-grids were commissioned in the country to provide steady electricity to power small businesses.
“The best place to have power is in your workplace and not in your home if you they are not doing any income generating activity in your house. Investors should target un-served communities where there is booming commercial activity, that’s where they can make the most social impact and be more profitable”, Adeyemi-Kayode added.
Impact investing in several mini-grids to bridge the energy gap is also expected to benefit the government in terms of cutting down expenditure on energy goods. According to the National Bureau of Statistics (NBS), energy goods import rose to N98.17 million in Q2 2018 from N32.45 million in Q1 2018 representing an astonishing increase of about 202.6 percent. The excessive import bill on energy goods will not be sustainable in the long run as an increasing population will only induce higher demand for energy, therefore calling for more investments in alternative energy sources.
