Opportunities from COVID-19 for distributed renewable energy companies
Coronavirus pandemic is speeding up the adoption of distributed renewable energy solutions to complement inadequate supply from the national grid. It is also quickening the development of a local supply chain.
Nigeria’s weak national grid has strained power supply to health facilities, essential enterprises, citizens sheltering and working from home, and vulnerable communities.
So distributed renewable energy (DRE) systems are increasingly serving as either complementary or substitute to the grid. They provide an often cheaper alternative and sometimes provide the entire energy requirements for essential facilities. Utilities are now receptive to the option of partnering with DRE developers like mini-grid companies through the increasingly popular “under the grid” models.
According to Rocky Mountain Institute, energy markets and regulatory consultants with offices in Beijing and New York, in a report titled “Under the Grid” throughout sub-Saharan Africa, hundreds of millions of people live “under the grid.” Such communities are within Distribution Company (DisCo) territory, but receive unreliable, inconsistent, and/or low-quality power that does not meet their needs—or they receive no power at all. These communities are thus under-grid yet also underserved.
“Nigerian utilities have the third-lowest reliability in sub-Saharan Africa, 90 percent of grid connections are considered unreliable, and outages are longer and more frequent in rural areas. Customers often average just two hours per day of unreliable, low-quality electricity service,” Sachiko Graber, Patricia Mong, and James Sherwood stated in the report.
One other driver of opportunity DRE companies are the growth of local supply chains. The COVID-19 pandemic led to delays in supply of imported solar components and stocking out due to restrictions affecting logistics. Players in the African solar industry are now seriously exploring local solutions to reduce import dependence.
“Some existing local companies who have been meeting local needs for almost a decade and local content requirements in countries such as South Africa and Morocco have supported the growth of the local market,” Ojunwa Ojemeni, an impact investing, energy development and policy expert. said in an article published by Forbes.
Some local assemblers have experienced an up to a sevenfold increase in demand for their locally assembled solar panels and are now exploring ways to increase their capacity. This is an opportunity for enabling policies and incentives across African countries to help expand local manufacturing. This would enable value-chain competitiveness and support access to sustainable energy for all.
In Nigeria, some companies are taking advantage of the opportunity. Abuja based Konexa, an integrated utility company intends to develop up to 2.5 megawatts (MW) of solar photovoltaic (PV) energy to serve grid and under-grid customers. The company also plans to incorporate 30MW of hydropower into their generation mix, which they intend to procure from an existing hydropower plant that has been constructed, but not commissioned.
More than 100 million Nigerians, out of a total population of 200 million, live in rural areas without access to electricity. Renewable energy can be a reliable and affordable source of electricity for rural under-grid communities.
Traditionally, the government or foundations provided grants for installing a set of electricity generators interconnected to a distribution network that supplies electricity to a localised group of customers (mini-grids); and stand-alone photovoltaic systems for remote off-grid households (solar home systems).
Few private investors were attracted to the sector because it was hard for them to get information about the market and find qualified professionals with the skills required to install and maintain the equipment.