Government, UNDP-GEF plan $13.24m off-grid lighting market project

Following estimates by the United Nations that it could cost up to U$250–270 billion per year to shift developing countries to 20 per cent renewable energy by 2025, the Federal Government has teamed up with the United Nations Development Programme (UNDP) and Global Environment Facility (GEF) to make renewable energy investment financially attractive for the private sector.

To ensure Nigeria attracts the needed private sector financing, UNDP-GEF is supporting the government of Nigeria to develop a project titled “De-risking Sustainable Off-grid Lighting Solutions in Nigeria.”

The aim of the project is to promote private sector investment in the sustainable off-grid lighting technologies by establishing a sound policy environment that facilitates the creation of a self-functioning and sustainable market in Nigeria.

To this end, UNDP Nigeria Country Office, recently held a validation workshop for the project in Abuja.

The workshop served as a platform to present the overview of the project to stakeholders in the sector and subsequently allow inputs into the project design.

The development agency had issued Derisking Renewable Energy Investment, a report to assist policymakers to promote renewable energy investment in developing countries. The report introduces a framework, with an accompanying financial tool, to quantitatively compare different public instruments and their cost-effectiveness.

The Derisking Renewable Energy Investment (DREI) framework systematically identifies the barriers and associated risks, which can hold back private sector investment in renewable energy. It then assists policymakers to put in place packages of targeted public interventions to address these risks.

Specifically, the validation workshop attracted major stakeholders in renewable energy, including the private sector, UNDP and government officials.

The project is being financed through a $2.64 million GEF grant and $10.6 million of co-financing from the UNDP, government institutions, multi-lateral institutions, and private sector players. The Rural Electrification Agency (REA) is the national implementing partner.

The project consultants – Etiosa Uyigue, Ejiro Joyce Olive-Igbuzor and Sanju Deenapanray, revealed that the project will use UNDP’s DREI methodology to quantitatively analyze the barriers and risks for sustainable off-grid solutions in Nigeria.

Subsequently, it will serve as a tool to select the most cost-effective government measures to mitigate or transfer these risks, ultimately leading to private investment in the sector and a significant uptake in sustainable off-grid lighting products.

The team listed barriers to the deployment of off-grid rural electrification to include: ONE: Power market: Uncertainty regarding the electrification and renewable energy targets slows the progress of market mechanisms for efficient off-grid lighting products and systems.

TWO: Social acceptance: Low level of awareness of solar power and, where it exists, the reputation of solar technology is often low, also due to high system failure rates of ‘give-away’ programmes in the past.

THREE: Technology and hardware: Insufficient standard-setting has led to an uptake of low-cost generic products such as no-names, copycats or counterfeits, representing a major risk to the market as lower-quality products undermine customer satisfaction and trust. Customs clearing processes for importing sustainable off-grid lighting hardware and components lead to delays in delivery and increased costs for solar technology providers.

FOUR: Digital platform and Telecoms sector: Mobile Network Operators (MNOs) are not allowed to provide financial services and need to partner with banks, which results in under-investment in mobile money by MNOs. A high rate of financial illiteracy with respect to mobile money exacerbates this problem.

They said that the project comprises three components. For instance, under the first component, policy derisking of off-grid lighting solutions, the project will focus on supporting the creation of a favourable legal and regulatory environment to address the remaining policy-related barriers and to ultimately facilitate investment in sustainable off-grid lighting solutions and corresponding business models for basic, social and productive uses in rural areas.

Activities under this component will increase confidence on market outlook, create a level playing field for sustainable off-grid lighting solutions and ensure quality standards for sustainable off-grid lighting products.

The financial derisking of off-grid lighting solutions component will establish a working capital finance facility for sustainable off-grid lighting companies and in close collaboration with the domestic banking and financial sector, the GEF-financed project will facilitate and support the design of financing products for sustainable off-grid lighting and solar power use business models, ultimately promoting a mass market and a significant scale-up for these technologies, products and services.

The component on knowledge management and scale-up strategy will focus on documenting good practices, lessons learned, market assessments, demand-supply surveys, delivery models and business models, and producing guidelines for scaling-up, including creating a knowledge network. In close collaboration with the outcomes and lessons learned from other relevant initiatives and projects.

They stated that the global environmental benefits is that the project will contribute to both direct and consequential greenhouse gas (GHG) emission reductions through a significant increase in private sector investment in sustainable off-grid lighting technologies as a result of establishing a sound policy environment that facilitates the creation of a self-functioning and sustainable market for off-grid lighting products in Nigeria.

The project estimated that approximately 10,000 solar home systems and about 17,700 solar lanterns will be sold by the small businesses that will benefit from this project.

The deployment of 10,000 solar home systems will result in GHG savings of 90,000 tonnes of Carbon dioxide (CO2).

Therefore, the project is expected to generate a total of 92,832 tonnes of CO2 in direct GHG emission reductions. Consequential GHG emission reductions are estimated at 4,533,480 tonnes of CO2.

Furthermore, the activities will lead to black carbon emission reductions as well as avoided environmental and health impacts.