The past decade was characterised by massive investments in renewable energy from research and development, to strategic deployment of technologies. According to the United Nations Environment Programme (UNEP), global investments in renewable energy from 2010 to 2019 reached USD 2.6 trillion. The world is geared to achieve increase clean energy access and reduce environmental carbon footprints.
In Nigeria, development of the renewable energy sector is led by government in collaboration with foreign partners and private companies all having off-grid RE projects. Notable among these are the Department for International Development (DFID) 1 megawatt (MW) solar plant to Usman Danfodio University, Lower Usman Dam 1.2MW solution in Bwari and many other smaller mini-grids across the country.
The Rural Electrification Agency (REA), under the Federal Ministry of Power, Works and Housing, is implementing the Rural Electrification Strategy and Implementation Plan (RESIP) of the federal government. With a project portfolio and rallying of investment, [1] the REA is implementing the following programmes;
Energizing Education Programme (EEP): The EEP is geared to provide off-grid power solutions (>60% renewable) for 37 universities and seven affiliated university teaching hospitals. The programme is being developed in phases with an average projected output of over 1 MW for each site.
Energizing Economies Initiative (EEI): The EEI programme seeks to deliver power across 300 economic clusters throughout the country. The EEI requires an upfront investment of $1.2billion – $2billion in the next 3-5years and total revenue opportunity of $8billion for willing investors.
Nigeria Electrification Project (Solar Hybrid Mini-Grids and Solar Home systems) & Rural Electrification Fund (REF): Through the provision of grants and other component support, the program seeks to catalyze off-grid development with secured funding from both the world bank ($350m), the African Development Bank (AfDB) ($200m) and the REF funds co-financed with the German International Agency (GIZ). The aim is to increase energy access and encourage private investment in rural off-grid electrification with programs like the performance base grant, minimum subsidy tender and matching grants.
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In the last few years, investments have flowed into renewable power projects having a significant impact. REA records its project impact within two years as 99,450 new connections, 457,470 people impacted, 5,042 jobs created, $550million funding sourced for projects completed and otherwise.
Impact Assessment for Sustainability
Impact assessment of off-grid projects are a must, considering the magnitude of required investments. The impact assessments should transcend consideration for the return of stakeholders’ investments in renewables and electrification of off-grid and underserved rural communities; they must also account for the physical sustainability of these projects. Despite the positive impact of deployed off-grid and mini-grid solutions across the country, the elephant in the room remains sustainability of projects. Such is the case with most projects commissioned or under development in Nigeria.
It is crucial to employ a loop of control in all stages to sustain expected outcomes. Identifying potential risks, assessing probable impact, response or risk strategies, and monitoring before and after completing will go a long way to ensuring that off-grid renewable projects are sustainable.
Pre- Completion Project Risks
Pre-completion project risks are factors that can affect the completion of an off-grid electrification project.
Financial Risk: Securing finance for renewable energy projects can be challenging and prove risky to projects. Lenders high-interest rates, cumbersome communication and documentation between mini-grid developers and mini-grid financiers need to be managed appropriately. Also, government policies should be directed towards rural electrification development to encourage lenders to reduce interest rates. Policies should also enable grants and subsidies for construction phases and remove duties from renewable energy equipment. These measures will significantly reduce the final tariff for end-users and sustain the project.
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Site and Project Feasibility: proper planning before an off-grid project is crucial. Feasibility studies should inform the right technology mix, design, customer tiers, productive use and projected growth. Prefeasibility is vital and should be given attention.
Communication: Developers will deploy most mini-grids in rural Nigeria. Inhabitants of such communities usually have a low level of education, information, and high government expectations. The policy of the government is for Renewable projects to be privately funded and privately managed. Therefore, it becomes essential for communities to receive the right messaging.
Through the Rural Electrification Agency (REA), the Federal Government has an experienced promotions department to design and send out tailored messaging to selected Renewable project communities. Privately driven initiatives are also advised to engage professionals for proper community engagements or approach REA for needed assistance.
Lease of Project Site: Land issues pose a serious risk to any project. RE developers should have legal authorization from the relevant authority before deployment. The Presidential Enabling Business Environment Council (PEBEC), a body that exists at the national level, is concerned with ease of doing business for Nigeria. As regards electricity development, it can assist developers in acquiring land where otherwise tricky.
Completed Project Risks
Apart from risks to look out for during the development and construction of projects, there are others specific to already operating solutions. For every off-grid project, post-completion risks must be carefully identified, analysed and managed, as they can affect the returns and sustainability of the project either positively or negatively.
Payment risk: The possibility that energy customers will reduce or stop payment affects the recovery of investment. Therefore, it is crucial to assess the potential customers’ willingness and ability to pay for power to design an appropriate business model. Project developers and managers must do proper community engagement and possibly introduce or influence productive services or activities to increase electricity consumption.
Policy risk: Change in policymakers can affect projects due to actions like withdrawal of financial incentives (grants, subsidies etc.). Consistency with policies is key to sustainability as it promotes investor confidence in renewable project development.
Insecurity: Communal clashes, banditry, kidnapping and sabotage. These vices discourage investments and affect project sustainability. RE projects should be insured to prevent total loss of investment and encourage reinvestment.
Logistics: Managing RE projects can be challenging as they mostly are deployed in rural areas with poor access roads, and inadequate accommodation and communication facilities. Getting experts to deploy, maintain and manage facility might be a challenge for the project. A solution would be to train locals for simple maintenance and operate a business model with more renewable projects in communities within the same geographic area. Deploying projects in proximity areas will reduce the cost of maintenance and improve ease of deployment of resources if situations arise.
Resource price variability: The risk of resource price variability must be considered for systems using diesel gensets or biomass. Considering the price of diesel which is usually higher in rural areas than in cities due to additional transportation costs, mini-grid project developers who rely on diesel generators have relatively few opportunities to mitigate the risk of increasing diesel prices after system installation. During the design stages of hybrid mini-grid projects, diesel share can be adjusted to reduce the exposure to price volatility risks. Project developers, who implement biomass-based energy facilities, need to ensure that the price is stable over time.
Customer Service Relations: Bottomline, what owners sell is service, not technology and not power solution. Therefore, it is critical to any business that customers can quickly contact operators to seek solutions when there are complaints. This ease helps increase confidence and consumer dependency, which ensures sustainability.
Developers should always assess project sustainability. Sustainability is key to any renewable energy deployment to avoid capital loss, encourage suitable business models, improve system design, increase investors and consumer confidence and improve rural productivity and the general economy.
