• Thursday, February 29, 2024
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Can mini-grids solve Nigeria’s electricity access problem?

Can mini-grids solve Nigeria’s electricity access problem?

The hybrid (solar photovoltaic and diesel) mini grid in Akpabom, Akwa Ibom was installed by private developers in partnership with the federal government in 2019.

The acute shortage of electricity in Nigeria is so entrenched that it has almost ceased to be shocking to the population. The numbers cast a pall over any ray of hope: roughly 90 million people were without an electricity connection in 2023; of this figure, the majority – 69 million people – live in some of the poorest and remotest rural areas of the country.

Enter mini grids, decentralised electricity generation and distribution systems with up to 1-megawatt capacity which promises to deliver electricity connections at a faster and cheaper rate than conventional grid extension schemes. These bespoke grids are seemingly poised to disrupt business as usual: according to the World Bank, 2,700 of them were planned for Nigeria in 2022.

Roughly 90 million people were without an electricity connection in 2023; of this figure, the majority – 69 million people – live in some of the poorest and remotest rural areas of the country

Further sweetening the deal, many third-generation mini grids – so-called to distinguish them from earlier waves of mini-grid development that were larger in scale and heavily reliant on fossil fuels – are at least partly powered by renewable sources. These types of mini grid are mostly based on solar, but also biomass, wind and small hydro sources, making them an essential piece in Nigeria’s plan to bring its carbon emissions down to zero by 2060.

Investment in mini grids in Nigeria has expanded significantly over the last half-decade, thanks to a combination of enabling government policy, targeted development finance and private sector innovation. The investment climate has been particularly favourable to a handful of homegrown start-ups: the regulatory and financial incentives offered by the government have been crucial in helping these local companies navigate what remains a challenging, high-risk macroeconomic context. The result was the generation of 72 megawatts of mini-grid electricity across over 160 communities nationwide as of 2022, up from barely 20 megawatts in 2001.

There are important caveats to this growth trend, however. While the generation figures cited above are important, they give little indication of the patterns of electricity distribution within rural communities, triggering questions of who benefits from mini grids, and to what extent.

Researchers at the International Centre for Energy, Environment and Development and the University of Ibadan have been engaging with these questions over the past two years, including through visits to 11 mini-grid sites spread across the six geopolitical zones of the country. The information gathered from this extensive data collection exercise shed light on a few realities.

First, mini-grid electricity is, quite frankly, expensive for rural customers, with tariffs typically ranging from three to five times that for customers on the national grid. The widely cited premise of catalysing rural industry through mini-grid electricity has led versatile private developers to help prospective customers launch or retool their businesses, which have ranged from barbing salons to bet shops and grain-milling platforms.

The clear winners have been a handful of relatively big rural enterprises (such as cold rooms and guest houses) that previously relied on even more expensive petrol or diesel generators for electricity, and for whom the mini-grid tariff regime has been a welcome reprieve.

There are those in the middle, including small-scale agro processors, provision stores and households that benefit little from their new connections because local demand for their goods and services is too low to yield reasonable profit margins after the cost of electricity is deducted.

These conditions make cost recovery difficult for private developers, even with the capital subsidies that have been enabled by development finance. Finally, at the bottom, there are the large swathes of rural communities across the country that are so poor that not even the hardiest private developers will venture to operate there.

A major conclusion we draw from this patchwork of access is that hinging the country’s rural electrification strategy on a private sector-led model as the government has done imperils its policy vision of achieving universal energy access, including through decentralised renewable energy generation, by 2030.

Of the 11 mini-grid sites reported, none was on track to being commercially viable over the medium to long term. In particular, solar-diesel hybrid systems are neither able to meet the running costs of diesel nor replace their solar inverter batteries after they inevitably expire, leading to substantial drops in quality of power supply over time.

The promises and pitfalls of the last few years of mini-grid development in Nigeria indicate that a more socially responsive approach is required, one that pursues the equitable distribution of electricity access alongside growing opportunities for expansion. In practice, this would mean the Nigerian government making social investments in rural electrification that are commensurate with the scale of the deficit.

Crucially, it would require the government to put agriculture and allied industries – the mainstay of rural communities around the country – at the centre of its rural electrification strategy. In other words, it would require the government to regard electricity provision as a public good that is essential for broad-based development, rather than as a private.