• Friday, March 29, 2024
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Nigeria’s silent off-grid energy revolution opens opportunities for entrepreneurs

Oyo plans 40 mini power grids, to install 250km of public lighting

A quiet revolution is happening in Nigeria’s off-grid electricity space representing a big opportunity for energy entrepreneurs who are able to provide clean, affordable and reliable power supply to the millions of people who have no access to electricity.

Eight years ago, low access to modern energy, erratic national grid supply and a lack of confidence in solar energy were some of the factors limiting the adoption of solar energy. But the steady improvement of access, reduction in cost and an improvement in reliability have put solar energy on the radar.

In 2012, the private market for renewable energy was nascent, untrusted and there were ad hoc public sector projects with high failure and high visibility rates. Rural electrification was driven by projects and vested interests. The policy was also misaligned.
Fast forward to 2020, one way of assessing Nigeria’s silent off-grid revolution is by looking at how start-ups in that space are doing.

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Arnergy, Nigeria’s first local solar home system (SHS) start-up has attracted significant investment critically enabled by the progressive and tailored support of Solar Nigeria Programme, a United Kingdom Government Department for International Development, over four years. Arnergy had the capability to succeed but lacked the funds.

In 2015 the start-up attracted £50, 000 pilot. This went well. But Arnergy still had limited net equity. But Solar Nigeria Programme did not want to overcapitalise with a grant.
The challenge was how to enable a capable local start-up to get through the Pioneer Gap without using just grant. A strategy evolved which entailed offering grants that were mainly paid out only if or when Arnergy secured fresh third party funding. This contingent nature enabled Arnergy to show the grant to investors as mitigation of their investment risk.
Over the following three years, three separate rounds of contingent grant were offered to enable Arnergy to breakthrough.

In 2016 £220, 000 was awarded of which £150k disbursed. This was a combination of ‘survival’ funds, and then lump sum contingent upon securing substantial third party funding.
Arnergy secured half the target funding amount. The contingent grant was disbursed in proportion to the amount of funding secured versus the target.
In 2017, £150, 000 contingent grant was awarded to All On (impact investor) to underpin $1 million investment, payable on financial close. The transaction did not close and so grant lapsed.

However, in 2018, £150, 000 contingent grant was awarded to All On to underpin All On $1m investment into a consortium of $9 million.
Then 2019, $9 million equity was raised through a consortium of Breakthrough Energy Ventures, Norfund, All On. Solar Nigeria Programme contingent grant to All On of £150, 000 to underpin risk was an important enabler.

Total grant direct and indirect grant was £365,000 pivotal to the development and ability to become investable and secure the $9 million.
Nigeria is the biggest and most attractive off-grid opportunity in Africa, and one of the best locations in the world for mini-grids and solar home systems.

There is a large potential for scaling — installing 10,000 mini-grids of 100 kiloWatts (kW) each can occur by 2023 and only meet 30 percent of anticipated demand.
Getting off-grid solutions to scale and commercial viability in Nigeria will unlock an enormous market opportunity in Sub-Saharan Africa across 350 million people in countries with smaller demand and/or less-robust economies.

BusinessDay Off-Grid Energy page is sponsored by All-On