Financial Assessment Tools for Electrification: Empowering Nigeria’s Energy Future

5 min readMar 21, 2024

Written by Ifeoma Malo & Desmond Dogara Bardeson

The WISIONS Capacity Building programme, dedicated to nurturing a new generation of energy practitioners, recently held its fifth session, focusing on the critical aspect of financial assessment tools for electrification. This session is part of a series aimed at promoting People-Centered and Holistic Approaches to Off-Grid Electrification in Nigeria, a country where the energy needs are immense and the potential for renewable energy is vast.

To address these potentials and promote the utilisation of best practices and open tools for DRE project planning and implementation, Clean Technology Hub (CTH), in collaboration with Wuppertal Institute through the WISIONS of sustainability initiative, launched an online course titled ‘People-Centered and Holistic Approaches to Off-Grid Electrification in Nigeria for a New Generation of Energy Practitioners’.

The course aims to improve the social impact and sustainability of DRE projects by increasing long-term community governance of such projects. The course targets early-career energy sector professionals, entrepreneurs, and civil society actors with technical backgrounds who work in underserved communities in Nigeria.

The Session’s Focus

The session honed in on Project Planning Tools, Resources, and Networks, with a particular emphasis on Financial Assessment Tools for Electrification. These tools are essential for determining the financial viability and strategic planning of off-grid electrification projects, which are crucial for Nigeria’s sustainable development.

Diego Garcia’s Expertise

The session was led by Diego Garcia, the head of MicroEnergy International’s (MEI) Technology and Energy Competence Center (TECC). Garcia is an engineer with a Master’s degree in Renewable Energy Engineering and Management, specialising in solar thermal and solar PV systems. His extensive experience in methodological approaches for supporting clean energy technology providers and financial institutions has made him a pivotal figure in the field of sustainable energy. Diego has experience in designing methodological approaches for the implementation, monitoring, and evaluation of processes to support clean energy technology providers and financial institutions involved in energy access. He has facilitated the institutional assessment and identification of green growth opportunities for a financial institution in Grenada and conducted the techno-economic feasibility assessment of a solar loan programme in Afghanistan. Recently, Diego supported the elaboration of a diagnostic study on the introduction of market mechanisms for the promotion of ethanol-based clean cooking in Nigeria. He was also involved in the development of standards for solar panels, batteries, and charge controllers and the provision of support for the implementation of standard operating procedures for battery recycling in Nigeria. He has also worked for the Inter-American Development Bank to develop projections for the reuse and recycling of lithium-ion batteries in the Latin American region.

Key Insights from the Session

Understanding Financial Viability: Garcia provided insights into the use of financial assessment tools that help project developers, financiers, and policymakers evaluate the economic feasibility of renewable energy projects.
Strategic Project Planning: The session highlighted the importance of strategic planning and the use of resources and networks to support the implementation of electrification projects in rural and urban areas of Nigeria.
Empowering Local Communities: By focusing on financial tools, the session underscored the need for projects that are not only technically sound but also financially sustainable, ensuring long-term benefits for local communities.

Financial assessment tools are crucial for the planning and implementation of electrification projects, especially in regions like Nigeria where there is a significant need for sustainable energy solutions. One such tool is the FATE Financial Assessment Tool for Electrification, designed to establish the financial viability of mini-grid and solar home system (SHS) projects in rural areas of Nigeria. This tool is particularly useful for companies, project developers, financiers, and policymakers, providing a dynamic format that links all inputs and outputs, making it easy to evaluate electrification projects according to various criteria, including revenues, expenses, and the company’s financial situation.

The tool is adapted for electrification plans in rural villages, where mini-grids and solar home systems are affordable solutions. It estimates the financial feasibility of projects, providing results in the form of graphs displaying project performance over time, along with key performance indicators (KPIs) like internal rate of return (IRR) and net present value (NPV). The projects are assessed for a 25-year period, with an analysis conducted on a yearly basis.

The Impact on Nigeria’s Energy Landscape

Financial assessment tools for electrification projects, such as the FATE Financial Assessment Tool for Electrification, play a pivotal role in shaping Nigeria’s energy landscape. These tools enable stakeholders to evaluate the financial viability of projects like mini-grids and solar home systems in rural areas, which are crucial for increasing energy access.

The impact of these tools on Nigeria’s energy landscape is profound:

Enhanced Project Planning: By accurately assessing costs and revenues, these tools help in planning sustainable projects that can operate without subsidies.
Informed Decision-Making: Policymakers and investors can make more informed decisions regarding the allocation of resources and funding.
Increased Investment: With clear financial projections, it becomes easier to attract investment for renewable energy projects.
Rural Electrification: Financial tools facilitate the expansion of energy access to rural communities, contributing to economic development and improved quality of life.
Supporting Policy Frameworks: These tools aid in the development of supportive policy frameworks that encourage the growth of the renewable energy sector.

Overall, financial assessment tools are essential for Nigeria’s transition to a more sustainable energy future, enabling the country to harness its abundant renewable resources effectively.

Nigeria stands at a crossroad, with the opportunity to leapfrog traditional energy development pathways and embrace a future powered by renewable energy. The insights and tools shared in this session are instrumental in guiding the country towards achieving its energy access goals and fostering sustainable development.

Conclusion

The WISIONS Capacity Building program’s fifth session has been a testament to the importance of integrating financial assessment tools into the planning and execution of energy projects. As Nigeria continues to strive for sustainable energy solutions, the knowledge imparted by experts like Diego Garcia will be crucial in achieving these goals.

The session was very informative and inspiring, and trainees look forward to learning more from the upcoming sessions. If you are interested in learning more about the course or the DRE sector in Nigeria, you can visit the following links:

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