Mini-Grids in Africa: How to prepare for the Nigerian ... · Mini-Grid Regulation 2017 • Designed...
Transcript of Mini-Grids in Africa: How to prepare for the Nigerian ... · Mini-Grid Regulation 2017 • Designed...
Mini-Grids in Africa: How to prepare for the Nigerian Revolution
Ify Malo
CEO , Clean Technology Hub
Nigeria Campaign Director, Power for All
Chibuikem Agbaegbu
Co-Founder, Beckaphyll
Nigeria Lead - Market Access, Power For All
Content
• Nigeria’s Electricity Predicament.
• DRE Market Potential.
• Electrification Economics.
• Nigerian Mini-Grids. – Drivers – Trend – Status – Policy – Finance – Challenges – Opportunities – Stakeholders
© 2017 Power For All. All rights reserved.
• 75 million Nigerians un-electrified.
• 55% of population is energy poor.
• 70% of energy poor live in rural areas.
• 45% grid-connected population suffer from unreliable grid power supply.
• Un-electrified population has grown from 44
million in 1990 – an increase of 70%.
Nigeria’s Electricity Predicament
© 2017 Power For All. All rights reserved.
Lighting Global 2018 Market Trend Report
DRE Market Potential
Reference: Lighting Global (2018) The 2018 Global Off-grid Solar Market Trends Report. Available from: https://www.lightingglobal.org/2018-global-off-grid-solar-market-trends-report/
Least Cost Energy Solutions
Right Mix Results in:
• Lowest capital to achieve access.
• Fastest electricity connection time.
Most Cost-Effective Electrification Approach:
Mix of solutions: grid, mini-grid, stand-alone systems
Tailored to needs of each location and type of user
Best technology that fits the location: solar, mini-hydro, wind, etc
Electrification Economics
Least Cost Energy Solutions
Electrification Economics
Reference: EUEI-PDF, Mini-Grid Policy Toolkit, 2014
Technology & Cost of Grid Extension Over the Years:
• Things that matter most to the cost of rural electrification – transformers, wires, poles etc haven’t changed much.
Technology & Cost of Decentralized Renewable Energy:
• Solar panels, LED lighting - 90% cost decline over the past 10 years.
• Battery life and power density massive gains.
Least Cost Energy Solutions – Rural Electrification
Electrification Economics
Speed • Median time to complete a World Bank electricity
project: 9 years.*
• Average new transmission & distribution project: 3-5 years.
• Average new grid extension project: Unpredictable. • Average Mini-Grid deployment: Months (9 – 18
months).
Cost Private Sector & Government
• Technology, Capital, Expertise.
Additional Advantages of Mini-Grids
Electrification Economics
* Reference: Power for All (2016) Energy Access & the Multilateral Development Banks (MDBs). https://www.powerforall.org/resources/fact-sheets/power-all-perspective-energy-access-and-mdbs
Key Takeaways:
• Off-grid areas very diverse and dynamic.
• Every un-electrified area has a unique profile - least cost, fastest access is ideal.
• Rural households can be unprofitable to service with traditional grid.
• Decentralized Renewable Energy (DRE) technologies and cost are improving rapidly; while grid power is not.
• Today’s least-cost mix might not be tomorrow’s.
Electrification Economics
© 2017 Power For All. All rights reserved.
Climate Goals Electricity Access Rural Development
Economic Empowerment Global Shift towards DRE Energy Security
Nigerian Mini-Grids: Drivers
Reference: 1. https://theconversation.com/millions-of-urban-africans-still-dont-have-electricity-heres-what-can-be-done-92211 2. https://climate.nasa.gov/system/content_pages/main_images/1321_cc-vs-gw-vs-wx-768px.jpg 3. https://www.phbdevelopment.com/wp-content/uploads/2017/04/gh-blog2.jpg 4. https://thenationalpilot.ng/investment-opportunity-in-kwara-state-8/ 5. https://popularresistance.org/newsletter-shake-off-hypnosis-see-root-causes-of-crises/ 6. https://www.smithsonianmag.com/science-nature/us-could-switch-mostly-renewable-energy-no-batteries-needed-180957925/
© 2017 Power For All. All rights reserved.
• 2009 to Date Development of mini-grids (Gradual transition from pilot to commercial mini-grids).
Technical Support and Finance from Development and Donor organizations.
• 2016 Rural Electrification Strategy and Implementation Plan (RESIP).
• 2017 Mini-Grid Regulation (MGR). Rural Electrification Fund Operational Guideline (REFOG).
• 2017 World Bank $350 million rural electrification facility.
• 2018 Launch of Nigerian Chapter of the Africa Mini-Grid Developers Association (AMDA).
• 2018 Launch of Mini-Grid Investment Report (MIR) – NiReR/NESG/RMI - Assessment of 10 commercial mini-grids (99% collection rate)*.
• 2019 First beneficiaries of the REF 1 Fund (12 developers).
Nigerian Mini-Grids: Trend
Reference: RESIP http://rea.gov.ng/download/rural-electrification-strategy-implementation-plan-resip/ MGR http://www.nercng.org/index.php/library/documents/Regulations/NERC-Mini-Grid-Regulation/ REFOG http://rea.gov.ng/inc/uploads/2017/11/Approved-Operational-Guidelines-for-the-REF-2017-v3.pdf MIR https://www.rmi.org/wp-content/uploads/2018/08/RMI_Nigeria_Minigrid_Investment_Report_2018.pdf
© 2017 Power For All. All rights reserved.
• Nigerian Electricity Regulatory Commission (NERC), defines mini-grids as an integrated local generation and distribution system with installed capacity below 1MW.
• Mini-grids are capable of serving numerous end‐users independent of the national grid and may be ‘isolated’ or ‘interconnected’ with the main grid.
• Ideal for increasing energy access and reducing grid dependence.
• GIZ estimates that over 26 million Nigerians can be most effectively provided with electricity via nearly 8,000 isolated mini-grid systems providing 4.4 GWh per year and investment of $4 billion.*
Nigerian Mini-Grids: Status
Reference: Cader, C. and Moller, J. 2015. Preliminary modelling of off-grid PV capacities for the whole of Nigeria. GIZ.
• Growing mini-grid local expertise - the Nigerian chapter of the Africa Mini-Grid Developers Association (AMDA).
• Mini-grid tariff are cost-reflective – typically near N200/kWh (US$0.57/kWh), which is cheaper than powering a small diesel or petrol generator.*
• Most current mini-grids are situated in densely populated agrarian communities, typically with a population of around 2,500 distributed among 300–500 households.*
Nigerian Mini-Grids: Status
* Reference: Mini-Grid Investment Report (2018) https://www.rmi.org/wp-content/uploads/2018/08/RMI_Nigeria_Minigrid_Investment_Report_2018.pdf
Mini-Grids: Policy
Reference : Mini-Grid Investment Report (2018) https://www.rmi.org/wp-content/uploads/2018/08/RMI_Nigeria_Minigrid_Investment_Report_2018.pdf
© 2017 Power For All. All rights reserved.
Mini-Grid Regulation 2017
• Designed to accelerate the electrification of un-served and under-served areas especially rural and peri-urban communities.
• Incentivise and minimize major risks associated with mini-grid investments.
• Simplify the process for private sector participation in the mini-grid sector of the Nigerian electricity market.
• Grid extension, increase profitability of loss making areas and wider coverage of paying customers.
Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
• Covers mini-grid capacity of 100kW and below, and between 100kW to 1MW for isolated and interconnected mini-grids.
• Covers license/permit application, tariff structure, relationship and obligations between developer and DisCo, operating structure/arrangement and commercial arrangement.
• Encourages the use of renewables on a small scale (particularly small hydro and solar).
• Regulates installation & maintenance, quality of service, safety & environmental protection, dispute resolution.
• 12-month (extendable) exclusivity period for mini-grid project development – addressing risk of unanticipated competition.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Nigerian Mini-Grids: Policy
Isolated Mini-Grid Development Process
Reference: Detail Solicitors (2017) Presentation made during the Seminar On Solar Pv Development In Nigeria organized by the Delegation Of Germany Industry And Commerce
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
Permit Requirements
• Duly completed application form.
• Agreement between the community and mini-grid developer.
• NERC Evaluation.
• Written consent of the DisCo of the intended area (where the proposed area is within its five year expansion plan).
• Proof that location is un-served and currently un-assigned.
• Proof of land acquisition and assets.
• Proof of any other necessary permits.
• Tariff evaluation based on the MYTO methodology.
• Health and Safety assessment.
• For isolated mini-grids up to 100kW, a Permit is optional. The mini-grid developer may only choose to register with NERC.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Mini-Grid Operations Nigerian Mini-Grids: Policy
Interconnected Mini-Grid Development Process
Reference: Detail Solicitors (2017) Presentation made during the Seminar On Solar Pv Development In Nigeria organized by the Delegation Of Germany Industry And Commerce
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
Permit Requirement
• Duly completed application to NERC.
• Proposed retail tariff calculated using the MYTO methodology and agreed by the mini-grid developer, the distribution licensee and connected community, and approved by the commission.
• Execution of a tripartite contract between the mini-grid developer, the distribution licensee, and the connected community.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
Tariff Payments
• For Permit holders, tariff is calculated based on the MYTO methodology for mini-grids provided in the regulations.
• Tariffs are to be subject to technical and non-technical losses of a maximum of 10% each.
• Tariffs for permit holders can be subject to review based on an application by a Permit holder or an inspection of accounts by an authorised person.
• Registered operators have two options (1) tariff based on the MYTO methodology or (2) an agreed tariff between the operator and at least 60% of the community.
• Agreed tariff may be subject to intervention by NERC where the operator’s rate of return exceeds typical non recourse commercial local currency debt by 6%.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
Network Usage Charge
• The Network Usage Charge is a charge agreed between the mini-grid operator and the DisCo subject to NERC’s approval.
• Where the parties are unable to agree on the value of the Network Usage Charge, the regulation provides guidelines to aid parties in reaching a fair and mutually acceptable charge.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
Other Provisions
• Mini-grid Developer Compensation by DisCo.
• Compliance Requirements.
• Accounting Requirements.
• Environmental Protection Requirements.
• Health and Safety Requirements.
• Insurance Requirements.
• Reporting Requirements.
• Technical Requirements.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
Challenges
• Limitations as to generation capacity.
• Uncertainty as to the DisCo expansion plans and grid extension.
• Adequacy of compensation mechanism.
• Permit requirement to obtain land.
• The EIA ambiguity and generality of environmental protection provisions.
• The regulation technical requirements vs Nigerian Electricity Management Services Agency (NEMSA) guidelines.
Nigerian Mini-Grids: Policy
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
• 70:30 mix of debt and equity supplemented with grant funding.
• Several finance sources - Rural Electrification Fund (REF), Multilateral Finance Institutions, Climate Funds, Private Impact Investments, Commercial Banks, Crowdfunding, Government Allocation etc.
• REF provides capital subsidies through grants, and technical assistance to supplement private investment.
• Innovative finance models such as the split-asset model.
• Commercial debt obtained mainly through concessional loans and impact investment. Mini-grid developers report 15-20% return on successful projects.*
Nigerian Mini-Grids: Finance
* Reference: Mini-Grid Investment Report (2018) https://www.rmi.org/wp-content/uploads/2018/08/RMI_Nigeria_Minigrid_Investment_Report_2018.pdf
© 2017 Power For All. All rights reserved.
Mini-Grid Operations
• 350 million World Bank investment leveraging an expected $1 billion in investment
o 150 million for mini-grids with private sector opportunity of $300 million.
$70 Million: Competitive bidding for portfolios of mini grid sites. Already 100 pre-selected sites up for auction with an additional 70+ in high risk environments.
$80 Million: Connecting new customers. $300+ for each new connection to a mini grid, 100% payment made after connection.
First-mover potential in the next 5 years: 300,000 households and 30,000 SMEs served by 1,000 mini grids.
Nigerian Mini-Grids: Finance
Reference: REA (2018) Nigeria’s Off Grid Renewable Energy Opportunities
© 2017 Power For All. All rights reserved.
Opportunities Arising
Developers
• Limited track record and experience of mini-grid developers.
• High capital requirement.
• Unfamiliarity of banks with sector and collateral requirements.
• Limited credit history of enterprises.
• Minimal experience. Gradual transition towards commercial projects.
Nigerian Mini-Grids: Challenges
© 2017 Power For All. All rights reserved.
Opportunities Arising
• Proven commercial viable market with annual market revenue potential of ₦2.8 trillion ($8 billion).
• Government target of 10,000 mini-grids by 2023.
• Growing inflow of foreign and local finance.
• Scaling the mini-grid market to 10,000 mini-grids of100 kW capacity by 2023 would power 14% of the population and create a ₦7 trillion ($20 billion) investment opportunity generating over ₦1.05 trillion (US$3 billion) in annual revenue.
• Cost-competitive tariff.
• With or without a key anchor client, mini-grids capable of achieving operating margins as much as 30% of revenues.
Nigerian Mini-Grids: Opportunities
Reference: Mini-Grid Investment Report (2018) https://www.rmi.org/wp-content/uploads/2018/08/RMI_Nigeria_Minigrid_Investment_Report_2018.pdf REA (2018) Nigeria’s Off Grid Renewable Energy Opportunities
© 2017 Power For All. All rights reserved.
Opportunities Arising
Key Stakeholders
• Rural Electrification Agency. • Nigerian Electricity Regulatory Commission. • USAID, Power Africa – Nigeria Power Support Programme. • GIZ - Nigerian Energy Support Programme (NESP). • United Nations Development Programme. • Bank of Industry, Nigeria. • Institute of Electrical and Electronics Engineers. • Federal Ministry of Power. • Africa Mini-grid Developers Association. • Power For All. • Nigerian Renewable Energy Roundtable / Nigerian Economic
Summit Group. • Rocky Mountain Institute.
Nigerian Mini-Grids: Stakeholders
© 2017 Power For All. All rights reserved.
Ify Malo: [email protected]
Chibuikem Agbaegbu: [email protected]
Contact