The wider adoption of minigrids, largely powered by solar energy, offers the tantalising prospect of bringing a robust electricity supply to African towns, villages and businesses with no likelihood of being connected to the national grid anytime soon.
However, while minigrids may be cheaper to establish in remote areas than a link to the national grid, the outlays required to set them up are still much larger than, say, small-scale household solar services. And the less densely populated the area the grid serves, the more expensive it gets. In some rural or semi-rural settings, the cost can run to some $2,000 per connection.
This means that it’s almost impossible for private companies to build minigrids in rural or semi-rural areas without support from government or development financial institutions.
“Minigrids are a difficult area largely because at the moment, and for the foreseeable future, they will require substantial amounts of subsidy,” says Nick O’Donohoe, Chief Executive of UK development finance institution CDC. “Once you provide the connection, then perhaps you can run them sustainably, but providing the connection is going to require some steps.”
In June 2019, 12 energy and impact investors published a paper to coincide with the 2019 Africa Energy Forum in Lisbon, asking donors and other potential backers to reduce financial risks for them. Between them, the group held more than $2bn under management and had built or were developing about 100 minigrids.
But, where the right backing is available, minigrids are making a significant difference. In December 2019, Kenya-based PowerGen connected a minigrid system in Rokota, Niger State, which provides around 3,000 people with reliable power from a 64 kWp solar system, backed by a 360 kWh battery storage system for use in the evenings.
PowerGen has also agreed to build nine more minigrids across Niger State for Nigeria’s Rural Electrification Agency, as part of a World Bank-supported programme for off-grid energy development across Nigeria.
Minigrids are more viable in some environments than others, even if those project funding risks remain. Mid-sized towns too distant from main population centres to be on the grid, commercial and industrial (C&I) complexes or compact institutional settings are all areas where there can be high demand in a limited area, lowering connections costs and thus improving prospects that customers can afford to pay.
Gridworks, a company set up by CDC, said in December 2019 it was putting $7.2m of equity funding into Mettle Solar, a South African C&I power company, which provides power to business customers across Africa. This was the first investment by Gridworks, which has a remit to invest in transmission and distribution, as well as minigrids and C&I solar projects
METKA West Africa has recently provided local solar-power grids for four Nigerian universities (see case study).
Africa’s mining sector also presents opportunities for off-grid power provision on a relatively large scale, where customers usually have more reliable cashflows and deeper pockets than low-income families, or even some governments.
“We are following the mining sector in sub-Saharan Africa very closely, as this is an area where we feel more comfortable investing, as well as acting as an EPC contractor. The major mining companies in Africa are often more bankable off-takers than many state utilities,” says Vangelis Kamaris, CEO of METKA West Africa.
John Lewis, Managing Director of African operations at power generator Aggreko also believes the remote operations of well-financed mining companies offer some of the best opportunities for off-grid investments in Africa.
He notes that several mining firms have adopted green strategies that push them to at least partially replace oil-based power generation with renewables. In some cases adding solar can be a simple case of lowering costs in the longer term by cutting the amount of diesel that needs to be imported to a remote plant.
“Mining continues to be a strong area for us, we’ve done a number of new deals over the past 12 months. We’re working on several hybrid solutions involving thermal plus renewables and storage,” he says.
At Resolute Mining’s Syama gold mine in Mali, Aggreko has been installing three 10 MW thermal Wärtsilä Modular Blocks and a 10 MW battery storage system to replace less efficient diesel-based generation. In a second phase, an additional 10 MW Wärtsilä Modular Block and 20 MW of solar PV power are due to be added. The project is intended to enable Resolute to achieve a 40% cut in the cost of electricity, using a more environmentally friendly solution.
Case study: Creating a reliable power supply for Nigeria’s universities
Nigeria is fast becoming an African pacesetter for solar minigrid development. Demand is being driven by the lack of a national grid connection, or unreliable supply from the grid, even if there is a connection.
Currently, either of these situations usually requires the use of costly and polluting diesel generation, which the country is striving to reduce.
As part of its Energising Education Programme (EEP), supported by the World Bank and African Development Bank, Nigeria is working to bring off-grid power to 37 universities and seven teaching hospitals. These institutions provide ideal locations for minigrids, as they have high power demand in a relatively compact area and the supply needs to be reliable.
METKA West Africa was contracted by the Rural Electrification Agency to build some of the first university minigrids, including one at Bayero University Kano (BUK) and another at the Federal University of Petroleum Resources Effurun (FUPRE), which are now operational.
Generating capacity for the BUK project is 7.1 MW, comprising 3.5 MWp of solar PV generation from 10,680 solar panels, 2.4 MW from backup generators and 8.1 MWh of battery energy storage. This makes it one of the largest hybrid generation projects of its type in Africa.
It provides electricity for some 55,000 students and 3,000 staff at BUK, including accommodation, educational and commercial facilities, as well as powering street lighting across more than 11km.
METKA estimates that by reducing the need to deploy diesel generators the BUK project will save 49.4m kg of carbon emissions annually.
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