Process design

Key to the design process was consultation with various stakeholder groups including several governmental departments and ministries, regulator, distribution companies, private sector players, and multilateral development organisations that are active in the energy sector in Nigeria. Through these consultations, REA was able to assess the policies in place and develop interventions to overcome the barriers identified collectively. In collaboration with the above-mentioned stakeholders, REA has developed the operational guidelines to the competitive procurement process for both the REF 1 call and currently, the  Mini-Grids Acceleration Scheme (MAS). The design processes leveraged the experience of the Nigerian Energy Support Programme (NESP), financed and implemented by GIZ, which has been instrumental in guiding REA in creating a conducive environment towards mini-grid development. Importantly, existing on-grid Distribution Companies (DisCos) also played an instrumental role in the mini-grid planning process to understand their rollout plan and prevent stranded assets in the future in the prospect communities where mini-grid implementation is to occur.

As a result of the prevailing tariff regime in Nigeria, market conditions dictated the tariffs agreed upon by the developer with the recipient community. It is up to the prospective developer to assess the potential energy demand, and the ability and willingness to pay, to establish cost-reflective tariffs. Tariffs need to be lower than the various energy alternatives used in that particular community to increase their willingness to pay. An agreement is then signed between the developer and the community for at least 15 – 20 years – based on the expected life span of the energy system.

Priority geographical zones for energy access are demarcated at the macro scale at the outset of the bidding window and left up to the developer to identify recipient communities. This engagement process is time-consuming with high upfront costs to be borne by the developer; however, it ensures that they work in communities that have met their criteria in terms of the ability and willingness to pay the established tariffs. In order to build the skills and expertise in the sector, only local companies can bid under the competitive procurement process.