Nigeria, Ethiopia, Kenya comprise key markets for mini-grid developments in Africa

Nigeria, Ethiopia, and Kenya are emerging as dominant markets for mini-grid developments in Africa, alongside Tanzania and Uganda.

Off-grid renewable energy options, notably standalone systems and mini-grids, are projected to see strong sustained growth in the coming decade, in response to demand for energy in areas unlikely to be serviced by national grids, according to the latest African Energy Outlook 2021 report released by the African Energy Chamber.

Towards 2030, standalone systems and mini-grids could provide almost 50 percent of the new electricity access as this represents the least cost solution to connect about 450 million (41% of the population) people on the continent. In Nigeria, over 40 percent of its 200 people have no access to the conventional grid.

To bridge the energy access gap in Africa, governments will require a successful mix of strategies that integrate grid extension and improvement, mini-grids, and standalone generating systems. Mini-grids are cheaper and cleaner than owning generating sets. They use renewable energy resources and bring the load closest to the community where the electricity is consumed, minimising technical losses.

“The mini-grid and standalone generating systems are a multibillion-dollar market in Nigeria. This is because there are areas where it is neither economically nor financially feasible to extend the national transmission lines to,” Ayodele Oni, energy partner at Bloomfield Law Practice, said. “Pricing remains a major challenge though and electricity distribution companies also weaken the expansion of mini-grids in Nigeria,” he said.

The relevance of mini-grids in addressing the energy access challenge is spurred on by the increasing competitiveness of solar and battery storage, not forgetting improved energy efficiency of appliances.

“There are huge opportunities in Nigeria’s mini-grid market. We have not even started scratching the surface. Challenges exist but the rewards are worth fighting for,” Habiba Ali, CEO, Sosai Renewable Energies Company, told BusinessDay.

Owing to the heightened importance the Covid-19 pandemic has put on access to affordable and reliable energy, short- to medium-term recovery planning by most governments is highly likely to prioritise expanding access to areas the grid is yet to reach to reduce vulnerability and improve resilience.

For example, Nigeria’s government has detailed in its 2020 Economic Sustainability Plan a solar power strategy that it seeks to install five million solar-home systems and mini-grids for communities and health clinics.

The recovery plan also states a commitment to support private installers with low-cost financing and a requirement for solar equipment manufacturers to create additional job opportunities by setting up production facilities in Nigeria.

In Africa, mobile connectivity, coupled with the use of mobile money, has created opportunities to improve electricity access by leveraging the mobile internet of things (IoT).

At present, providers of electricity via solar home systems and micro-grids leverage mobile IoT for accurate metering and billing of consumers as well as collecting data about power supply and demand.

The use of mobile IoT is likely to grow as millions gain access to electricity towards 2030. Although many African countries acknowledge the importance of modernising the grid and improving system flexibility through smart grids, the high costs and degree of the market development will be a barrier in the next decade.

Washington-based Energy Information Administration (EIA) estimates indicate that annual energy investment needs in Africa will have to increase by 100 percent from the current $60 billion per annum (1.8% of the continents gross domestic product, GDP) to $120 billion (2.4% of GDP) in order to attain universal access.

This will go into both expanding generation capacity and upgrading the electricity network. This is corroborated by the IEA estimates, which indicate that annual power supply investments would need to increase to $120 billion per year until 2040.