The world is at a critical phase, with the challenges of an impending climate crisis and a growing energy demand. The relentless pursuit of fossil fuels has driven global temperatures to alarming levels, threatening the delicate balance of the planet’s ecosystems. Simultaneously, the increase in world’s population, and a rise in standards of living demand an ever-increasing supply of energy.
Nigeria, with over 200 million people, faces two intertwined challenges that threaten its environmental and socioeconomic well-being, climate change and energy poverty. These issues are not merely environmental concerns, they pose significant threats to Nigeria’s economic growth, social development and sustainability.
Since the announcement of the Energy Transition Plan in 2021, the need for better power generation while integrating renewable energy solutions to meet rapidly growing demand from Nigeria’s population has remained a prominent topic of discussion, with gas as a cleaner transition fuel.
As the world grapples with the pressing challenges of climate change and energy access, Distributed Renewable Energy (DRE) has emerged as a source of hope, promising a sustainable and equitable future for all. At the recent COP28 in the UAE, private and public sector players joined the global discussion, sharing significant programmes launched in the sector in order to support the universal climate goals set by world leaders.
All On, a Nigerian impact investment firm dedicated to catalysing the growth of DRE in Africa, believes DRE holds the key to unlocking a brighter future. Characterised by small-scale renewable energy solutions like solar mini-grids and household solar systems, DRE offers an approach to addressing energy poverty and empowering underserved communities. Unlike large-scale grid extensions, DRE can be deployed quickly and efficiently, reaching remote villages and towns that have long been overlooked by traditional grid infrastructure.
In Nigeria, where about 92 million people still lack access to electricity, DRE has the potential to make a profound impact. We have seen significant progress with the ETP in the renewable sector, through extensive solar mini grids and off grids programmes such as the Nigeria Electrification Project, the Energizing Economies Initiative and the Interconnected Mini-Grid Acceleration Scheme, amongst others via the Rural Electrification Agency (REA). All On aligns with the overarching goal of Nigeria’s Energy Transition Plan (ETP) to drive economic growth, improve the standard of living and bring modern energy services to all. Also focused on providing support to achieve net zero, the right funding is crucial do drive energy success in Nigeria.
Also, increasing access to renewable energy solutions is essential to meeting Nigeria’s rapidly growing energy demand and DRE offers a vital pathway to bridging this energy access gap, as they can quickly and cost-effectively reduce energy poverty. Mini-grids alone have the potential to power millions of low-income households and small and medium enterprises (SMEs), while also generating a $10 billion annual revenue opportunity. However, unlocking this potential requires focusing on levers that accelerate project development and implementation. This is where the Demand Aggregation for Renewable Technologies (DART) Programme comes in and plays a pivotal role.
DART, launched in 2022 by the Global Energy Alliance for People and Planet and All On, is a testament to DRE’s potential in Nigeria. By aggregating demand from multiple DRE developers, DART has been able to negotiate better prices for renewable energy components and secure financing from commercial lenders.
The results of DART have been encouraging. In just under two years, the programme has committed funding to 12 companies, both mini-grid developers and solar system companies, and is expected to unlock the deployment of over 40 mini-grids, facilitate the establishment of over 47,000 connections with over 230,000 lives and businesses positively impacted. A noteworthy achievement is the commissioning of the largest isolated mini-grid project in Benue State’s Chito Community. This project, powered by a 350KW mini-grid, will provide electricity to over 7,000 households and businesses, illuminating their lives and unlocking opportunities.
The impact of DRE extends beyond electrification. By providing clean and reliable energy, DRE is fostering economic development, enabling entrepreneurship, and improving healthcare services. It is empowering communities, particularly women, to participate meaningfully in the economy and contribute to their own well-being.
Despite its immense potential, DRE faces challenges that hinder its widespread adoption. These include limited access to affordable financing, inadequate technical expertise and regulatory barriers. To overcome these challenges, concerted effort from governments, development partners, and the private sector is needed.
President-Designate, Dr. Sultan Al Jaber during the African climate summit, announced a significant UAE finance initiative worth US$4.5 billion. This initiative aims to unlock Africa’s vast clean energy potential and aligns with Al Jaber’s repeated call for tripling global renewable energy by 2030. Additionally, the African Development Bank (AfDB) pledged $25 billion in climate finance by 2025, demonstrating their unwavering commitment to a climate-resilience and decarbonised future for Africa.
The Nigeria Sovereign Investment Authority (NSIA) also plays a crucial role in driving sustainable economic development in Nigeria. As managers of Nigeria’s sovereign wealth fund, it allocates approximately 50 per cent capital to domestic infrastructure development, with particular emphasis on energy. NSIA, functioning as an institutional investor, seeks to address sectoral imbalances by strengthening value chains and establishing enterprises and practices that enhance value. Recently launching its flagship renewable energy platform, the Renewables Investment Platform for Limitless Energy (RIPLE), this initiative, whose primary objective is to expand energy access, seeks to enhance energy efficiency and ensure overall energy security. RIPLE targets the entire energy value chain, from upstream technology manufacturing to energy generation and distribution, including sub-franchising within distribution companies’ network areas.
DRE is central to RIPLE’s objective of achieving expanded energy access to the unserved and underserved segments of the population. From a sustainability viewpoint, RIPLE is expected to target displacement of diesel-powered generation for commercial and industrial consumers. While RIPLE focuses on addressing the energy sector’s dislocations holistically, NSIA has implemented additional initiatives that support infrastructure development.
One such initiative is the Joint Project Preparatory Facility (JPPF), a partnership with Afrexim that provides project development capital support for climate-related infrastructure investments. This funding is crucial during the early stages of development, which typically have a higher risk profile and can pose a significant threat to project bankability. Strong institutional investor backing, both in terms of capital and project development expertise, enhances developers’ chances of reaching financial close and expands the pool of investable projects in the market.
In addition to the JPPF, NSIA has collaborated with InfraCredit to establish the Construction Finance Warehouse Facility (CFWF) and has seeded it with N10 billion to unlock long-term capital for sustainable greenfield infrastructure projects in Nigeria. This capital is subsequently refinanced through long-term debt financing guaranteed by InfraCredit from the domestic capital markets after the construction phase. These initiatives are among the tools NSIA deploys to de-risk infrastructure development at inter and intra-sectoral levels. They are designed to create value and attract local and international investors.
While these investments and commitments are made, the governments still need to encourage enabling policies, provide financial incentives and streamline regulatory processes. Development partners should continue to invest in DRE projects, providing both capital and technical assistance while the private sector must innovate and create scalable and affordable DRE solutions.
Committed to leading the charge in this collective effort, we are working with partners to address the barriers to DRE adoption and to scale up its deployment across Africa. We believe DRE is not just a solution to energy poverty but a catalyst for a more sustainable, equitable, and prosperous future. As we move forward, let us harness the transformative power of DRE and unleash its potential to empower communities, bridge the energy gap and build a brighter future. Together, we can make DRE the driving force of a sustainable and equitable energy transition.
Eboumbou and Umar-Sadiq wrote from Lagos.
