Increasing Access to Electricity for Under-served Customers in the Niger-Delta
Inadequate access to electricity has been one of Nigeria’s most perennial infrastructural challenges, with only about 55–60% of the population connected to the grid, making the remaining 72 million persons that are not on the grid the largest un-electrified population in Africa and only second in the world to India.
When these numbers are disaggregated, they reveal a wide disparity in electricity access between the states, with states in the North having far fewer grid connections than those in the South. For states in the South-South, the proportion of the population that is on the grid is higher than the average national rate at 67%, with the least electrified state having 47%.
However, the true picture of electricity access in the region is highly dependent on service reliability — which is often very low: in Bayelsa, Delta and Rivers States, approximately 73% of the population (14.5 million people) is connected to the grid — but only 55% of this number enjoys more than four hours of electricity daily. When measured by generator usage, the number of those enjoying more than hours of electricity from the grid without augmenting with generators drops by a further ten percent.
These users who are referred to as ‘underserved customers’ are predominantly located in peri-urban and rural areas, are often not metered (about 43% and 38% of all electricity customers across the South-South region, which are served by the Benin and Port-Harcourt electricity distribution companies, are unmetered) and cost the DISCOs considerable amount of money (up to N2 billion annually) to serve them.
However, there are means by which the energy needs of these underserved consumers can be met, and the DISCO losses can be reduced by collaboration between the DISCOs, communities that are underserved and mini-grid developers.
This is the focus of the report, “Electrifying the Underserved: Collaborative Business Models for Developing Mini-Grids Under the Grid” which was developed by the Clean Technology Hub, the Rocky Mountain Institute and EMRC with the funding of All-On. The report explains how to deploy interconnected (or under-grid) mini-grids in about 4000 potential sites wit the potential to save DISCOs $30–60 million (N10.8 billion — N21.75 billion) annually while offering mini-grid owners $1 billion in annual revenue and saving communities $170 million (N61.6 billion) in yearly energy expenditures.
About 40% of SMEs in Rivers, Bayelsa, and Delta States are underserved electricity consumers, forcing them to spend significantly on expensive fossil-fuel alternatives such as petrol and diesel generators and form a significant proportion of the $1.6 billion spent (N580 billion) on energy annually by households and SMEs in these states. But they also form a market size for under-grid mini-grids that could be worth as much as $215.7 million (N78 billion) for SMEs alone.
This report explores four business models that can be implemented under today’s social, political, and economic environment. These models are:
1. A mini-grid operator-led approach in which a private mini-grid operator leads development in consultation across the distribution company and community;
2. A special purpose vehicle (SPV)-led model where the SPV may include distribution company investors;
3. A cooperative-led approach formed by the community to lead mini-grid development; and
4. A collaborative SPV-led model where ownership and operation are shared among stakeholders.
Initial proofs of concept can be deployed in the region to explore what models work best to enable such mini-grids to scale rapidly and even across the country. For example, the Bonny Utility Company provides an example in Rivers State to build off of with the community-led business model, which has been successfully used to provide reliable power and water in collaboration with oil and gas corporations.
We are very optimistic that through these potential business models — DISCOs, mini-grid developers and underserved communities can find win-win models for increasing access to energy, reducing DISCO losses and energy spending and opening new markets for mini-grid developers.
