Minigrid development a win-win scenario for Nigeria, says Rocky Mountain Institute

Rocky Mountain Institute (RMI) has published a report outlining the opportunity for minigrids to aid in better serving “undergrid” communities – those within the service territory of a distribution company (DisCom), but which receive limited/unreliable electricity service, or none at all.

The report, ‘Under the Grid: Improving the Economics and Reliability of Rural Electricity Service with Undergrid Minigrids’, highlights ways in which undergrid-minigrid systems – defined as self-contained electricity generation and distribution systems, which usually consist of a combination of solar PV, battery storage, and a backup diesel generator – could assist Nigerian DisComs in cutting financial losses from serving these areas, provide minigrid developers with access to a largely untapped market, and provide better electricity service at a lower cost to underserved rural communities in Nigeria.

Nigeria, says the RMI, presents a good opportunity to test the potential of minigrid deployment, thanks to policy developments supporting the technology. These include simplified regulations for minigrids up to 1 MW, permissions for separate generation systems to partner with DisComs and access their networks, and allowance for larger customers/groups of customers to seek alternative energy and meter providers.

The report outlines a win-win situation for all stakeholders. Minigrid deployment is predicted to result in lower financial losses for DisComs – with an estimate that these are currently operating at a loss of NGN 71 (US$0.21)/kWh – through charging minigrid developers a fee for distribution network usage.

Minigrid developers, meanwhile, would benefit from access to new customers. RMI estimates that around 40 million Nigerians are underserved by the country’s main grid, and that around 35% of these could be served by commercially viable minigrids, representing a revenue opportunity of more than $1 billion per year.

Finally, the rural communities served by these minigrids could benefit from more reliable electricity supply, and lower costs for it. The report estimates an average saving of NGN 54 ($0.15)/kWh for residential customers and possible annual savings of NGN 60 billion ($170 million) for Nigeria’s undergrid communities combined.

Making it happen

RMI outlines several steps needed to realize these benefits, all based on stakeholders working together, and notes that many of these can be applied similarly to markets beyond Nigeria. These include improving stakeholder communication, developing business models and pilot projects, and ensuring that projects on the ground actually realize their potential benefits.

“Government and regulators, distribution companies and minigrid developers, and – most importantly – communities can work together to mutual benefit to make this happen,” states the report. “However, perfect need not be the enemy of the good – existing policy allows interested stakeholders to begin experimentation today.”