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Published On: Fri, Oct 12th, 2018

Nigeria’s Mini-grid Market Exhibits High Growth Potential

(By Oxford Business Group)

The development potential of Nigerian mini-grids – generation and distribution systems capable of supplying up to 1 MW of capacity from renewable sources, independent of national transmission networks – is valued at up to $20bn, according to a report issued in late August by private sector think tank Nigerian Economic Summit Group and the US-based sustainability NGO, Rocky Mountain Institute.
The report, based on a study of 10 solar-powered mini-grids with a combined capacity of 364 KW, said that development of off-grid systems, including mini-grids and solar home systems, could save individuals and businesses $6bn per year.
In addition, by scaling up the mini-grid market to 10,000 sites, each with a 1-KW capacity, the sector can electrify an estimated 14% of the population and generate annual returns of $3bn for investors by 2023. At present, there are 30 solar-powered mini-grids in Nigeria serving around 6000 customers.
Rural communities, in particular, would benefit from development of the market. Just 36% of the rural population is estimated to have consistent access to a centralised power supply, and use diesel and oil generators, which cost around N0.70 ($0.0019) per KWh compared to N0.57 ($0.0016) for a mini-grid connection.
As the market expands, costs for consumers could fall even further – by as much as 60% by 2020, the report found.
In addition to providing communities with a cheaper, more reliable electricity supply, the expansion of off-grid systems could help the energy sector circumvent distribution shortfalls affecting the transmission network.
While the national grid’s capacity is steadily expanding – from 12,500 MW to 20,000 MW by 2021, according to forecasts from the state-owned Transmission Company of Nigeria (TCN) – the system’s maximum transmission capacity stands at just 7500 MW.
In order to fully leverage future generation capacity, the TCN estimates the network will require $4bn in private spending from local distribution companies (DisCos) by 2021.
DisCos have called TCN’s investment figure into question; however, industry stakeholders agree that improving access and efficiency will require reinforcements to the grid or supply alternatives. Nigeria’s transmission losses still far exceed the benchmarks for electricity systems in emerging markets, even though system outages have fallen significantly since 2010.

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