A recent report, funded by All On and jointly produced by Rocky Mountain Institute (RMI), Clean Tech Hub, and Energy Market and Rates Consultants (EMRC), titled: “Electrifying the Underserved: Collaborative Business Models for Developing Minigrids Under the Grid”, has revealed that Implementing 4,000 undergrid minigrid projects has the potential to save Nigerian electricity distribution companies (DisCos) $30–$60 million annually while offering minigrid owners $1 billion in annual revenue and saving communities $170 million in yearly energy expenditures.
According to the report made available to LEADERSHIP, communities under the grid that are unserved or underserved by their electric utility usually resort to supplementing with expensive diesel or petrol gensets instead of grid power, whereas a minigrid project up to 1 megawatt (MW) in size can solve the challenge.
The report addresses the complex decisions that make up minigrid business models, with the goal of accelerating the market and enabling the many interested stakeholders to act.
“In Nigeria alone, thousands of rural communities could be best served by undergrid minigrids. Implementing 4,000 undergrid minigrid projects has the potential to save Nigerian distribution companies $30–$60 million annually while offering minigrid owners $1 billion in annual revenue and saving communities $170 million in yearly energy expenditures.
“The opportunity continues to scale to Nigerian peri-urban communities—where higher loads strengthen the business case for minigrids—and underserved communities throughout sub-Saharan Africa and the world.
Commenting, the CEO of Clean Technology Hub, Ifeoma Malo said “The growth of the energy access sector in Nigeria is evident in the growing interest of distribution companies in increasingly exploring ways to grow their market base and meet underserved needs; the report could be a pivotal guide for minigrid developers, investors, and distribution companies in deciding the best business models for a ready market of energy-hungry consumers.”
On his part, the principal at RMI and coauthor of the study, James Sherwood said “Undergrid minigrids are a promising and commercially viable solution that can deliver reliable electricity to hundreds of thousands of Nigerians today. The business models outlined in this report can kickstart the undergrid minigrid industry in Nigeria by providing guidance on how to start projects, which will provide a precedent for private sector, community and utility collaboration that is applicable across many other countries in sub-Saharan Africa and around the world.”
According to Dr. Wiebe Boer, the CEO of All On, an off-grid energy investment company backed by Shell that funded the research, “the undergrid minigrid business models introduced through the research provide a framework for minigrid developers, distribution companies and communities to collaborate to provide reliable, affordable and sustainable power at scale to millions of underserved, low-income households and SME customers across Nigeria.
“We need collaborative approaches like these to address Nigeria’s energy access gap and improve livelihoods nationwide.”
The four business models that can be implemented under today’s social, political, and economic environment include a minigrid operator-led approach, in which a private minigrid operator leads development in consultation across the distribution company and community; a special purpose vehicle (SPV)-led model, wherein the SPV may include distribution company investors; a cooperative-led approach formed by the community to lead minigrid development; and a collaborative SPV-led model wherein ownership and operation are shared among stakeholders.
