INCREASING ACCESS TO FINANCE: UNLOCKING CAPITAL FOR MINI-GRID DEPLOYMENT

Dr. Yusuf Abdussalam

Modern energy supply is critical to growth of rural economy and stemming rural -urban
migration in Africa. Centralized grid electricity supply will not reach the rural area in good time
given the existing supply deficit in urban area and the difficulties in accessing remote rural
communities.

• It is increasingly becoming obvious that decentralized supply such as renewable energy-

based minigrid is the most suitable way to energizing rural development but the cost is
beyond public sector budget. The main challenge to private sector participation in offgrid
energy delivery has been the lack of access to finance. This paper takes a look at the
following:

• What are the peculiarities of renewable energy based minigrid electrification

• what financing instruments and approaches can upscale minigrid development

especially in low income countries.

• What are the key barriers affecting the flow of capital into minigrid
development?

• What enablers are required for channelling capital into the minigrid market in low
income countries

• Snapshots of Nigerian experiences in offgrid electrification

The minigrid regulation

Rural electrification fund implementation guideline
 Progress made in the last two years
Renewable Energy based Minigrid
BLOCKERS OF MINI-GRID FINANCING IN LOW INCOME COUNTRIES
Enablers of Minigrid investment
Factors of Success in Nigeria
Success factors in the Nigerian Minigrid Industry
Partnership Models for Operational Mini-Grids
Impact of the mini-grid Regulation

• The following are some early indicators of the success of the Nigerian mini-grid regulation
in increasing electrification
• 33 projects spread across 14 states of the federation supplying more than 20,000 rural
households and other customers

• 9 companies are currently active

• collection rates are near 100%

• Customer satisfaction is very high across most sites

• Most of the project used owner-operator business model, funded through a 70:30 mix
of debt and equity supplemented with grant funding
RECOMMENDATION

 Group purchasing: Take advantage of volume discount by group planning and procuring of
components OEMs thereby reducing CAPEX by 10-20%.
 Pooled Funds: multiple developers can create resource pooling platform for long term
debt capital from multiple sources managed by an independent fund manager to
increase access to finance for members. This will be singled digit IR and typically up to
15yr
Conclusion

• The Nigerian minigrid market within just two years has

• reached an inflection point - costs are competitive with alternatives like diesel and
petrol generators

• projects are moving away from grant funding to commercial investment.

• Potentials exist for cost reduction by more than 50% over the next five years,

• Mini-grid costs are higher than the main grid but lower than small generators,
which typically cost upward of 70 cent per kilowatt-hour.

• 4000 clusters identified as suitable for isolated mini-grid that are more that 10km
away from existing grid line

• REA is providing grants from REF

• Most minigrid projects today are situated in densely populated agrarian

communities, typically with a population of around 2,500 distributed among 300–
500 households.
 • REA is aggregating 200 projects sites for easy financing over the next 2 years
Thank you for your attention