Ending Energy Poverty with Distributed Renewable Energy

NIGERIA

Today, the world’s largest unelectrified population lives in Nigeria. Of the country’s 200+ million people, more than 90 million³⁸ still lack any access to electricity. Low per capita electricity consumption (13% of the modern energy minimum (MEM) threshold),³⁹ dependence on mostly subsistence agriculture (70% of the population),⁴⁰ high unemployment (35%) and underemployment (22%)⁴¹ all combine to create substantial development challenges. Expanding access to clean and reliable energy is among the most powerful available levers to quickly change the economic prospects of all Nigerians.

NIGERIA

Ending Energy Poverty with Distributed Renewable Energy

The current installed base of electricity production is heavily dependent on expensive and polluting fossil fuels. The grid is so underdeveloped and unreliable that most households, businesses and institutions that can afford to do so have turned to gasoline- or diesel- powered generators.⁴² To combat all these challenges, Nigeria has created an Energy Transition Plan (ETP) that includes an ambitious commitment to reach net zero emissions by 2060 while closing the energy access gap, improving Nigeria’s national grid,⁴³ and making Nigeria’s electricity sector commercially viable. This will require an estimated $400 billion of total investment over the coming decades.⁴⁴

The Alliance’s Partnership with Nigeria

GEAPP is working closely with the government of Nigeria to build the country’s planning and policy capacity and to improve market conditions for renewable energy. Today, the Nigerian government is seeking $10 billion of funding for the first tranche of Energy Transition Plan (ETP) investments, developing a carbon market to facilitate the energy transition, and decarbonizing multiple economic sectors. These projects are an important starting point for Nigeria’s transformational goals.

Nbuba is an engineer who works at the solar grid station in Shimankar Village, Nigeria.

As part of its support for the ETP, the Alliance is working with an array of experienced upstream and financing partners to test, refine, and encourage private sector solutions and catalyze new business models. These interventions, discussed below, are expected to add 10 GW of renewable energy capacity and increase the total number of mini-grids to 2,000 by 2025 and to 10,000 by 2030. As a result, millions of Nigerians will experience improved lives and livelihoods through better crop yields (via renewably powered irrigation), food supply (via cold storage), and new or improved jobs in agricultural processing, small-scale manufacturing, information and communications technology, and other value-adding activities that require reliable electricity. By displacing fossil-fuel-powered generators, the Alliance’s interventions will also reduce costs, noise, and air pollution, with a targeted emissions reduction of 10 million tons of CO2 per year.

Solar mini-grids in Shimankar Village, Nigeria.

In developing its country programs, GEAPP seeks to apply one or more key levers that drive outsized impact: improving the enabling environment for private sector solutions, encouraging innovation and entrepreneurship, and supporting the deployment of risk capital to further encourage private sector solutions. This is further illustrated in the section below.

Community members in Shimankar Village, Nigeria.

Improving the Enabling Environment

GEAPP, along with upstream partner Sustainable Energy for All (SEforALL), is funding an embedded team of experts within the office of the Vice President of Nigeria. This SEforALL team, the Energy Transition Office, provides high-level support for implementation of the ETP and works to coordinate and align government agencies to improve the market conditions that will help Nigeria meet its goals. The team will also advise government policymakers on strategies to achieve universal and low-carbon electrification. Together, these activities will help create a more attractive environment for renewable energy development.

Market conditions for clean energy (especially for DRE) developers are constrained by the underperformance of past investments in off-grid electricity. For example, some existing mini-grid sites have not experienced the anticipated levels of electricity demand, which increases the perception of risk for future projects. To address this issue, GEAPP is supporting SEforALL’s Integrated Electrification Planning Tool, which is designed to help renewable energy project developers identify the best locations to build mini-grids. With better data and analysis on project sites, more developers will be able to attract investors, enabling scaled deployments and deeper impact.

Innovation and Entrepreneurship

Innovation and entrepreneurship are central to GEAPP’s program in Nigeria. By encouraging experimentation, supporting venture-building, and catalyzing new business models, GEAPP can significantly magnify impact over time. Since 2019, Alliance upstream partner All On has been leading an Innovation Hub that is supporting ventures that are developing commercial energy products and services in underserved communities. This intervention is creating a cohort of economically sound, sustainable, and scalable off-grid energy businesses. The Innovation Hub offers participating ventures training, grants, workspace, and a variety of support services to help them grow and achieve scale, including help with raising debt and equity financing. It is expected that by the end of 2022, approximately 100 companies operating in the most vulnerable parts of Nigeria will be receiving some level of support from the Innovation Hub.

Experience has demonstrated the importance of productive use of energy (PUE) to the success of mini-grid developments. As mentioned above, some past clean energy projects have underperformed because electricity demand failed to materialize. Investments in PUE activities address this demand shortfall while also accelerating the broader economic development that comes from more entrepreneurship. Alliance upstream partner Rocky Mountain Institute (RMI) is working with the Rural Electrification Agency (REA) of Nigeria on a program, Energizing Agriculture, that is applying this lesson.

The project is focused on stimulating PUE demand at mini-grid sites through a wide variety of profitable business activities. This is expected to improve livelihoods for local residents, reduce risk for clean energy investors, and significantly improve market conditions for developers. Energizing Agriculture is piloting new agriculture-energy solutions at mini-grids across the country with the goal of scaling up across 200 sites in the coming months. More details on this project can be found here.

RMI is also leading a project to pilot innovative approaches to mini-grids, in partnership with developers and local electricity distribution companies. These pilot projects are exploring interconnected mini-grids, which are connected to the existing low-voltage electricity grid. This interconnection between mini-grids and distribution networks is an innovation that improves the reliability of supply by enabling mini-grid customers to use a combination of day-time solar, batteries, and the national grid as a more cost-effective source of electricity than diesel generators. Mini-grid developers and customers benefit from lower costs.

More broadly, the Nigerian public also gains from the expansion of the national grid. Much of the ongoing renewable energy development is “captive” off-grid power that serves only the most financially-capable (commercial and industrial) customers. Interconnected mini-grids contribute to the national grid, rather than diverting resources away from it. GEAPP’s grant capital and technical assistance are helping to demonstrate the viability of this model. If successful, this innovative approach to mini-grid development promises to scale across Nigeria and in other countries with weak electricity grids.

Unlocking Risk Capital

While Nigeria’s energy transformation will depend on significant private sector investment, access to capital has been a key constraint. Exchange rate issues, inflation, low foreign direct investment, and local banks’ inexperience with the long-term financing needed for these kinds of infrastructure projects are all limiting progress in Nigeria. The country has a significant unmet need for local currency debt that can support the growth of the energy sector, and particularly distributed renewable energy (DRE) that can serve communities that lack access to the grid. GEAPP is working to develop new debt and blended capital facilities that will lower the costs and risks associated with clean energy development in Nigeria.

One promising approach, already underway, is reflected in a multi-country program called Demand Aggregation for Renewable Technology (DART). Managed by Odyssey Energy Solutions, DART is aggregating demand, standardizing equipment selection, and providing a platform for procuring components for renewable energy projects, in bulk. DRE developers in Sub-Saharan Africa typically pay between 2.5 and 3.8 times as much as the global average for lithium-ion batteries and more than 20% more for solar PV equipment. DART brings utility-scale pricing to smaller-scale projects, with a goal of reducing developers’ capital expenditures by 30% and customer tariffs by 50%.

These lower costs improve project profitability and developers’ access to private capital, enabling the development of more projects. DART also includes a working capital debt facility, managed in Nigeria by All On, that provides needed short-term loans to mini-grid developers. These loans enable developers to fund the purchase of solar equipment through DART’s procurement platform. Demand for the facility has been strong, with up to $5 million of loans expected to be processed in 2022 and a further $20 million to be completed by the end of 2023, with repaid funds recycled for further lending. This project is already accelerating Nigeria’s renewable energy sector and demonstrating a scalable approach that could be applied across GEAPP’s partner countries.

The Alliance’s Partnership with Nigeria

Nbuba is an engineer who works at the solar grid station in Shimankar Village, Nigeria.

Solar mini-grids in Shimankar Village, Nigeria.

Community members in Shimankar Village, Nigeria.

Improving the Enabling Environment

Innovation and Entrepreneurship

Unlocking Risk Capital

The Alliance’s partnership with Nigeria is driving greater government capacity, improving market conditions, expanding access to capital, and thereby facilitating more entrepreneurship and innovative new approaches to accelerating a clean energy transition. In the short term, GEAPP aims to mobilize $100M of direct grant funding from across the Alliance and $1B of additional catalyzed finance. In the coming years, Nigeria will demonstrate how an emerging economy can address energy poverty while furthering a transition to clean energy solutions, lighting the way for more rapid and equitable energy transitions worldwide.

Footnotes

Source: IEA, “Global energy crisis shows urgency of accelerating investment in cheaper and cleaner energy in Africa”; available at: https://w/ww.iea.org/news/global-energy-crisis-shows-urgency-of-accelerating-investment-in-cheaper-and-cleaner-energy-in-africa
Source: Tracking SDG7 – SDG 7.1.1 Electrification Dataset; available at: https://trackingsdg7.esmap.org/downloads
Source: Tracking SDG7 – SDG 7.1.1 Electrification Dataset; available at: https://trackingsdg7.esmap.org/downloads
Source: IEA, SDG7: Data and Projections; available at: https://www.iea.org/reports/sdg7-data-and-projections
Source: Tracking SDG7 – SDG 7.1.1 Electrification Dataset; available at: https://trackingsdg7.esmap.org/downloads
Source: SEforAll “Lasting Impact: Sustainable Off-Grid Solar Delivery Models to Power Health and Education” (2019), available at: https://www.seforall.org/publications/lasting-impact-sustainable-off-grid-solar-delivery-models
Source: 60_decibels: Uses and Impacts of Solar Water Pumps; available at: https://storage.googleapis.com/e4a-website-assets/Use-and-Impacts-of-SWPs-July-2021-v2.pdf
Source: Authors’ calculations assuming average-sized smartphone battery (4,000 mAh, 3.8V; 15 Wh) and average electricity rates in the US and Europe ($0.15- $0.30 per kWh) vs. typical charging service cost in developing contexts.
Source: IFC, The Dirty Footprint of the Broken Grid, 2019; Available at: https://www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/financial+institutions/resources/dirty-footprint-of-broken-grid
Source: IFC, The Dirty Footprint of the Broken Grid, 2019; Available at: https://www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/financial+institutions/resources/dirty-footprint-of-broken-grid
Source: World Bank, Underutilized Potential: The Business Costs of Unreliable Infrastructure in Developing Countries, 2019; Available at: https://elibrary.worldbank.org/doi/10.1596/1813-9450-8899
Source: World Bank Enterprise Surveys; available at: https://www.enterprisesurveys.org/en/enterprisesurveys
Source: Authors’ calculations, leveraging Tracking SDG7 – SDG 7.1.1 Electrification Dataset, IEA per capita electricity consumption data
Source: Energy for Growth Hub, The Modern Energy Minimum; Available at: https://www.energyforgrowth.org/wp-content/uploads/sites/4/2019/01/FULL-Modern-Energy-Minimum-final-Jan2021.pdf
Source: Authors’ calculations, leveraging US EIA data for US historicals, IEA per capita electricity consumption data, and World Bank country designations.
Source: IEA Data Browser, Available at: https://www.iea.org/data-and-statistics/data-tools/energy-statistics-data-browser
Source: Authors’ calculations based on regression analysis of per capita GDP and electricity consumption data vs. HDI score
Source: Authors’ calculations, leveraging IEA per capita electricity consumption data, IEA residential share of electricity consumption data, and UN DESA World Population Prospects 2022 medium variant projections (all publicly available).
Source: IEA Data Browser, Available at: https://www.iea.org/data-and-statistics/data-tools/energy-statistics-data-browser
Authors’ calculations based on IEA, Tracking Transport 2021, available at: https://www.iea.org/reports/transport
Solar PV indirect emissions occur during the manufacturing, distribution, installation, and disposal of systems component
Source: IRENA, Power Generation Costs, 2021; Available at: https://www.irena.org/publications/2022/Jul/Renewable-Power-Generation-Costs-in-2021
Source: Bloomberg New Energy Finance, “Battery Pack Prices Fall to an Average of $132/kWh, But Rising Commodity Prices Start to Bite”, available at: https://about.bnef.com/blog/battery-pack-prices-fall-to-an-average-of-132-kwh-but-rising-commodity-prices-start-to-bite/
Source: IEA, Annual energy storage additions by country, 2015-2020; available at: https://www.iea.org/data-and-statistics/charts/annual-energy-storage-additions-by-country-2015-2020
Source: Author’s calculations leveraging NREL’s U.S. Solar Photovoltaic System and Energy Storage Cost Benchmarks: Q1 2021
Source: Rockefeller Foundation, Electrifying Economies; Available at: https://www.rockefellerfoundation.org/rf-microsites/electrifying-economies/
Source: SEIA, “Solar Industry Research Data”; available at: https://www.seia.org/solar-industry-research-data
Source: Ember Data Explorer; available at: https://ember-climate.org/data/data-explorer/
Source: Author modeling leveraging data from CAIT and assuming that OECD countries reach net zero by 2050, emerging economies by 2060, and energy-poor countries by 2070, with emissions growth reversed in the latter by 2040
Source: Author modeling leveraging data from CAIT and assuming that emissions grow at a CAGR of 2.8 percent per year through 2050 and 1.4 percent in the following decade, only beginning to decrease starting in 2060.
Source: Author’s calculations based on OPEC crude oil reserves of 267 billion barrels and and 0.3714 tCO2/barrel from ‘Carbon Majors: Accounting for Carbon and Methane Emissions 1854-2010 – Methods & Results Report’

GEAPP Program and Partner Project Highlights

Source: Benchmarking Distribution Utilities in India, October 2020, SPI & Niti Aayog; Available at: https://smartpowerindia.org/wp-content/uploads/sites/4/2021/07/WEB_SPI_Electrification_16.pdf
Source: Rooftop Solar final render; Available at: https://www.youtube.com/watch?v=4wwvbXpuWgs
Source: Rooftop Solar final render; Available at: https://www.youtube.com/watch?v=4wwvbXpuWgs
Source: SPI Customer Report; Available at: https://smartpowerindia.org/smart-power-india-launches-its-report-on-rural-electrification-in-india/
Source: Health Effects of Diesel Exhaust; Available at: https://www.cancer.org/healthy/cancer-causes/chemicals/diesel-exhaust-and-cancer.html ; https://erj.ersjournals.com/content/17/4/733 ; https://oehha.ca.gov/air/health-effects-diesel-exhaust
Source: SPI Deployment estimates
Source: ESMAP, Nigeria Tracking SDG 7, available at: https://trackingsdg7.esmap.org/country/nigeria
Authors’ calculation based on IEA 2019 data
Source: FAO, Nigeria at a Glance, available at: https://www.fao.org/nigeria/fao-in-nigeria/nigeria-at-a-glance/en/
Source: National Bureau of Statistics, available at: https://www.nigerianstat.gov.ng/
Source: IFC, The Dirty Footprint of the Broken Grid, 2019; Available at: https://www.ifc.org/wps/wcm/connect/2cd3d83d-4f00-4d42-9bdc-4afdc2f5dbc7/20190919-Full-Report-The-Dirty-Footprint-of-the-Broken-Grid.pdf?MOD=AJPERES&CVID=mR9UpXC
Source: IFC, The Dirty Footprint of the Broken Grid, 2019; Available at: https://www.ifc.org/wps/wcm/connect/2cd3d83d-4f00-4d42-9bdc-4afdc2f5dbc7/20190919-Full-Report-The-Dirty-Footprint-of-the-Broken-Grid.pdf?MOD=AJPERES&CVID=mR9UpXC
Source: Nigeria Energy Transition Plan, available at: https://www.seforall.org/events/launch-of-nigerias-energy-transition-plan
Source: International Energy Agency Energy Statistics Data Browser; Available at: https://www.iea.org/data-and-statistics/data-tools/energy-statistics-data-browser
Source: International Energy Agency – South Africa; Available at: https://www.iea.org/countries/south-africa
Source: South Africa Department of Energy Energy Balances 2018 (pg. 14); Available at: http://www.energy.gov.za/files/media/explained/2021-South-African-Energy-Sector-Report.pdf
Source: GDP by Country; Available at: https://www.worldometers.info/gdp/gdp-by-country/
Source: UNDP Climate Promise – South Africa; Available at: https://climatepromise.undp.org/what-we-do/where-we-work/south-africa
Source: World Bank data; available at: https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS?locations=MM. However, SPM estimates this number to be closer to 55%.
Source: https://www.unfpa.org/data/world-population/MM
Source: SPM: Energising Agriculture in Myanmar; available at: https://downloads.ctfassets.net/nvxmg7jt07o2/aw1dQBBaMLxivJ7jRLu4Z/716b0732a3e83bfa6c3bbe50a573f565/Final_SPM-agriculturalvaluechains-final_1.pdf
Source: Fulcrum, “Myanmar’s Post-coup Electricity Woes: Stalled Power Plans, Shattered Public Trust”; available at: https://fulcrum.sg/myanmars-post-coup-electricity-woes-stalled-power-plans-shattered-public-trust/
^[1]Source: World Bank, Myanmar Rice and Pulses: Farm Production Economics and Value Chain Dynamics (2019); available at: https://documents1.worldbank.org/curated/en/623701579900727742/pdf/Myanmar-Rice-and-Pulses-Farm-Production-Economics-and-Value-Chain-Dynamics.pdf
Source: Myint, T and Myo Thu, K – National Export Strategy (2019) Rubber Sector Strategy, 2015-2019; retrieved from https://ap.fftc.org.tw/article/2606
Source: Myint, T and Myo Thu, K – National Export Strategy (2019) Rubber Sector Strategy, 2015-2019; retrieved from https://ap.fftc.org.tw/article/2606
Source: Myint, T and Myo Thu, K – National Export Strategy (2019) Rubber Sector Strategy, 2015-2019; retrieved from https://ap.fftc.org.tw/article/2606
Source: USAID: Rapid Market Assessment of Aquaculture Sector in Myanmar (2021); available from: https://pdf.usaid.gov/pdf_docs/PA00XCRW.pdf
Source: World Data Population Comparison; Available at: https://www.worlddata.info/populationgrowth.php
Source: GEAPP DREAM Initiative; Available at: https://www.energyalliance.org/news-insights/dream-initiative/
Source: FAO Smallholder Farmer Data Portrait; Available at: https://www.fao.org/family-farming/detail/en/c/385074/
Source: GIZ Solar Irrigation Market Analysis in Ethiopia, IWMI/FAO Suitability Framework for Solar Irrigation ; Available at: http://www.practica.org/wp-content/uploads/sites/4/2021/04/Solar-irrigation-market-Analysis-in-Ethiopia_GIZ-NIRAS-IP-Consult-PRACTICA.pdf
Source: Catalyst calculations leveraging information from the Ethiopian Agricultural Transformation Agency Minigrid Viability Report.
Source: Catalyst estimations leveraging World Bank Multi-tier Framework
Source: Catalyst estimations leveraging GEAPP “Transforming a Billion Lives” Report; Available at: https://www.energyalliance.org/reports/
Source: Catalyst estimations leveraging: CDM AMS-I.L. Electrification of rural communities using renewable energy — Version 3.0; Available at: https://cdm.unfccc.int/methodologies/DB/CCZKY3FSL1T28BNEGDRSCKS0CY0WVA, CDM AMS-I.F.Renewable electricity generation for captive use and mini-grid — Version 4.0; Available at: https://cdm.unfccc.int/methodologies/DB/VLTLVBDOD19GFSTDHAR0CRLUZ6YMGU, CDM AMS-I.B. Mechanical energy for the user with or without electrical energy — Version 12.0; Available at:https://cdm.unfccc.int/methodologies/DB/M204DLP0XMSWSZ9H4SIZ6W86M8RHCM and SE4ALL Emissions Tool; Available at: https://www.seforall.org/mini-grids-emissions-tool
Source: NREL Island Energy Snapshot; Available at: https://www.nrel.gov/docs/fy15osti/62708.pdf
Source: Energy Information Administration – Hawaii; Available at: https://www.eia.gov/state/?sid=HI
^[1]Source:Energy Information Administration – Electric Power Monthly; Available at: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
Source: The Socio-Economic Impacts of the Puerto Rico Electric Power Authority (PREPA) Restructuring Support Agreement (RSA) on the Population of Puerto Rico; Available at: https://ieefa.org/wp-content/uploads/sites/4/2019/12/PREPA-RSA-Cordero-Guzman-UTIER-REPORT-9-10-19-FIN-ENGLISH.pdf
Source: The Socio-Economic Impacts of the Puerto Rico Electric Power Authority (PREPA) Restructuring Support Agreement (RSA) on the Population of Puerto Rico; Available at: https://ieefa.org/wp-content/uploads/sites/4/2019/12/PREPA-RSA-Cordero-Guzman-UTIER-REPORT-9-10-19-FIN-ENGLISH.pdf
Source: Tracking SDG7 – SDG 7.1.1 Electrification Dataset; available at:https://trackingsdg7.esmap.org/downloads
Source: The World Bank, “Nigeria – Food SmartCountry Diagnostic,” 2020.; Available at: https://openknowledge.worldbank.org/handle/10986/34522
Source: PWC. Boosting rice production through increased mechanisation, (2018); available from: https://www.pwc.com/ng/en/publications/boosting-rice-production-through-increased-mechanisation.html
Food and Agriculture Organization of the United Nations, World Food and Agriculture – Statistical Yearbook 2020. Rome, 2020. doi: 10.4060/cb1329en. ; Available at: https://www.fao.org/3/cb1329en/CB1329EN.pdf
Source: Boosting rice production through increased mechanisation, (2018); available from: https://www.pwc.com/ng/en/publications/boosting-rice-production-through-increased-mechanisation.html
Source: Tracking SDG7 – SDG 7.1.1 Electrification Dataset; available at:https://trackingsdg7.esmap.org/downloads
Source: Prospects for Energy Efficiency in Sierra Leone’s Power Sector; Available at: https://www.energyeconomicgrowth.org/sites/default/files/2022-02/Lucas%20Davis%20working%20paper.pdf
Source: Estimations based on GEAPP Jobs report multipliers and International Labour Organization Hydropower Jobs ; Available at: https://www.ilo.org/wcmsp5/groups/public/—ed_emp/documents/publication/wcms_562269.pdf
Source: Catalyst calculations based on World Bank Multi-tier Framework
Source: CDM AMS-I.L. Electrification of rural communities using renewable energy — Version 3.0; Available at: https://cdm.unfccc.int/methodologies/DB/CCZKY3FSL1T28BNEGDRSCKS0CY0WVA
Source: CDM AMS-I.D. Grid connected renewable electricity generation — Version 18.0; Available at: https://cdm.unfccc.int/methodologies/DB/W3TINZ7KKWCK7L8WTXFQQOFQQH4SBK
Source: Catalyst calculations based on Tracking SDG 7.
Source: IADB Energia Hub; Available at: https://hubenergia.org/index.php/en/indicators/access-electricity-service
Source: IADB Energia Hub; Available at: https://hubenergia.org/index.php/en/indicators/access-electricity-service
Source: Tracking SDG 7 Report; Available at: https://trackingsdg7.esmap.org/country/malawi
Source: IRENA Statistical Profiles – Malawi; Available at: https://www.irena.org/IRENADocuments/Statistical_Profiles/Africa/Malawi_Africa_RE_SP.pdf
Source: Catalyst modeling based on expected improvements to power supply reliability for grid-tied customers served by the new BESS and VRE systems.
Source: Catalyst modeling based on storage industry multipliers for direct BESS construction and general economy sector splits for Malawi applied to estimated employment multipliers from GEAPP’s 2021 Jobs Report.
Source: Catalyst modeling based on displacement of stop-gap and backup power sources for households and businesses
IEA Energy Statistics – Indonesia; Available at: https://www.iea.org/data-and-statistics/data-tools/energy-statistics-data-browser

INDIA

Accelerated Solar for Rural Small Businesses

SOUTH AFRICA

Facilitating a Just Energy Transition