Nigeria likely to see 60% drop in mini grid electricity tariff by 2020 – report

Folks in Nigeria connected to electricity supplied from mini grid power systems which are mostly solar-based, could see their tariff drop by 60 per cent by 2020, the Nigeria mini grid investment report 2018, has disclosed.

Authored and published by the Nigerian Economic Summit Group (NESG) and Rocky Mountain Institute (RMI), the report explained that while people typically paid N200 per kilowatt hour (kWh) of electricity from mini grid systems, tariffs are however expected to continue to fall.

“Today’s cost-reflective mini grid tariffs are typically near N200/kWh (US$0.57/kWh), which is less expensive than the cost to run a small diesel or petrol generator set.

“Although this cost reflects the small scale and risk of a nascent market, mini grid tariffs are expected to continue falling and can be reduced by 60% by 2020,” said the report.

It further explained: “In March 2018, RMI and the Nigerian REA convened leading global experts from across the mini grid and investment community to identify a pathway to achieving mini grid tariffs of N70/kWh by 2020.

“These experts agreed that this is feasible through achievable cost reductions across six categories – hardware, load management, customer engagement, project development and O&M, finance, and policy.”

Painting a promising future for mini grid market in Nigeria, it noted: “As the mini grid sector in Nigeria grows, it offers both meaningful impact and exciting investment opportunities. In a matter of 12 to 24 months the number of commercial mini grid systems is expected to increase by a factor of ten, while project costs are falling and best practices are being implemented across the sector.”

According to it, this progress can be further accelerated as new investors enter the market and stakeholders address opportunities for enabling growth.

“As the Nigerian market scales, it can be a vanguard for expanded mini grid development across sub- Saharan Africa, where investors and developers can transfer the experiences and lessons learned in Nigeria to other countries with similar energy landscapes.

“Taken as a whole, the future is bright for the mini grid industry and the electrification of rural Nigeria,” it added.

The report however outlined what needed to be done by the various stakeholders in the mini grid sector.

It stated for instance that policymakers should allow tax and duty exemptions and reduce import delays; clarify current regulations and implement additional enabling policies; increase state and local government involvement; as well as review the ESIA process.

For the business community, it noted that they could create a mini grid business community consortium; design standardised, modular mini grid systems; and improve telecom service reliability.

Investors and development partners in the mix, it added can support efforts to increase affordability and availability of finance; provide partial grants and operational subsidies; create a mini grid finance consortium; and create cross-sectoral implementation.

Similarly, the report requested mini grid developers to improve customer engagement strategies; implement cost-reduction strategies; and develop a data-sharing platform.


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