Speaker 1: Today on switched On, I speak with Takea, Haro Kawahara
Speaker 1: and ulm Ezekiel, who were part of the team that
Speaker 1: wrote State of the Global Minigrids Market Report. This report
Speaker 1: is a minigrids partnership report and it was published by Bloomberg,
Speaker 1: n e F and Sustainable Energy for All. The aim
Speaker 1: of the report was to raise awareness around minigrids and
Speaker 1: to mobilize investments in the minigrids sector, as well as
Speaker 1: to serve as a benchmark to measure progress. In the
Speaker 1: process of writing the report, they interviewed sixty eight organizations
Speaker 1: and they also included six detailed case studies. The case
Speaker 1: studies were for Uganda, Tanzania, Nigeria, India, the Philippines and Indonesia.
Speaker 1: You can see the full report and the data under
Speaker 1: the publication section at SE for All dot org. That's
Speaker 1: s E F O R A L L dot org
Speaker 1: and there you will find State of the Global Minigrids
Speaker 1: Market Report. Additionally, it can be found at b NF
Speaker 1: GO on the Bloomberg terminal and at benof dot com
Speaker 1: or on b ANF mobile app. Quick reminder, b an
Speaker 1: EF does not provide investment or strategy advice and you
Speaker 1: can hear our full disclaimer at the end of the show.
Speaker 1: I am Dana Perkins and you're listening to Switch It
Speaker 1: on the b N e F podcast. Now let's hear
Speaker 1: from Tak and Ulama about mini grids. Hi, Tak, nice
Speaker 1: to see you as a see you know we'll actually
Speaker 1: hear you. I guess we we can't even see each
Speaker 1: other now, but nice to hear you. And Ulam, nice
Speaker 1: to have you on the show as well. Nice to
Speaker 1: be on the show. So we are going to be
Speaker 1: talking today about global mini grids in the state of
Speaker 1: the minigrid market. So let's start at the very beginning talk.
Speaker 1: What is a mini grid so many grey is like
Speaker 1: small independent PAS system can be either isolated computerly from
Speaker 1: the main grid or it can be connected to the
Speaker 1: grid to make it the more context it is a
Speaker 1: group of intaco have to distributed energy resource its with
Speaker 1: load or with loads within clearly defined electrical boundaries. And
Speaker 1: then these distributor energy resources can be very different kind
Speaker 1: of technologies are typically the modern minigrates, combined solar energy
Speaker 1: storage and diseel generators, but they all work as a
Speaker 1: single entity and typically in the emerging markets, this minigrids
Speaker 1: is used for energy access in the remote areas where
Speaker 1: there's completely off gride. However, it is also can be
Speaker 1: connected to the main gride. So for example, when the
Speaker 1: main grid system has some troubles m the milgrid control
Speaker 1: system can give order to the mitigrate to disconnect from
Speaker 1: the main grid and the minigrate can continue to operate
Speaker 1: and supply extacity to the customers. So sometimes it connects
Speaker 1: into the main grid, sometimes it doesn't, but it could
Speaker 1: in theory operate completely autonomously. That's kind of the differentiator
Speaker 1: from my understanding. You mentioned solar storage and diesel generation.
Speaker 1: Tell me a little bit quickly about the storage element.
Speaker 1: So what are we talking about with storage? Is it
Speaker 1: the lithium my own batteries that were familiar with in
Speaker 1: cars or is it a different type of battery technology
Speaker 1: that we're calling upon. Yeah, that's a good question. So
Speaker 1: it really depends on markets. But typically in imagine market,
Speaker 1: which is our main focusting this research, is let us
Speaker 1: in batteries because the biggest reason is because still cheap
Speaker 1: and then available in many of the African countries or
Speaker 1: imagine Asian countries. However, if you look at the high
Speaker 1: income countries. It's such as the US waste Adia the
Speaker 1: reason why own botteries are taking more share, and then
Speaker 1: we can see gradual uptake of Riffin wine botteries in
Speaker 1: emerging markets to be integrated into the minigrate as well.
Speaker 1: So those who listened to this show switched on usually
Speaker 1: focuses on a research report that we did. Now this
Speaker 1: this is a really big one. So it's a long,
Speaker 1: in depth global research report. Tell us a little bit
Speaker 1: more about what our mini grid research for this report
Speaker 1: was focused on. So the main focus is very comprehensive
Speaker 1: topics to be covered about mini grids, but the essential
Speaker 1: purpose is to understand what's the latest status of the
Speaker 1: minigrids for energy access in emagine markets, particularly in South
Speaker 1: South Africa, Asia and island nations. And then the reason
Speaker 1: why I said comprehensive is because, um, there's a lot
Speaker 1: of information and a clear understanding of what is happening,
Speaker 1: not only just in terms of market strends, but also
Speaker 1: the business models, financing policy reguations and impacts and also technologies,
Speaker 1: and I we need to cover those areas in the research.
Speaker 1: Um Hence I said it's comprehensive. Now I know that
Speaker 1: this piece of research from our standpoint, you know, we
Speaker 1: we tend to be very engaged with the research that
Speaker 1: we do. And I don't think I've spoken to anybody
Speaker 1: who works at be Enough who isn't excited about the
Speaker 1: projects they get they end up doing. However, I think
Speaker 1: every now and then we get something that we feel
Speaker 1: like it's truly meaningful. And I think doing a project
Speaker 1: with sustainable energy for all is for us, you know,
Speaker 1: great honor, and I think this is where I kind
Speaker 1: of want to take it with, you know, when you
Speaker 1: guys were given the opportunity to work from this, and
Speaker 1: maybe we'll pivot to you just because we haven't heard
Speaker 1: from you yet on the show today. You know, what
Speaker 1: about this project did you personally find really engaging? And
Speaker 1: you know, maybe why were you excited to work on
Speaker 1: this project? So I originate from the south of Nigeria
Speaker 1: River State to be specific, that's also known as the
Speaker 1: Self Self or in the Niger Delta region, and when
Speaker 1: traveling back home, I see energy poverty every day and
Speaker 1: the lack of stable, stable power seriously affects people's lives,
Speaker 1: and where the grid is available, consumers experience frequent power
Speaker 1: cuts ranging from as much as four to fifteen hours
Speaker 1: per day. And I think about it, that's four to
Speaker 1: fifteen hours of no light at random points during the day. Right,
Speaker 1: it's hard to get anything done by that. I mean
Speaker 1: almost everyone relies on their own gasoline or diesel generator
Speaker 1: if they can afford that of course, Um that's how
Speaker 1: bad the grid is. I mean almost every household has
Speaker 1: a switch outside their door where you can basically switch
Speaker 1: between grid power, so main grid power or your own generator.
Speaker 1: And that concept is actually unthinkable in the West if
Speaker 1: you think about it. So to put things into context
Speaker 1: in alone, actually Nigeria spent a whopping sixteen billion dollars
Speaker 1: to power these privately owned generators, and honestly, I really
Speaker 1: think mini grids or distributed distributed energy systems in general,
Speaker 1: for example rooftop TV, will solve this problem and provide
Speaker 1: localized regions with stable power instead of the country relying
Speaker 1: on one massive, unreliable national grid. And what is it
Speaker 1: that makes the national grid so unreliable and needing this
Speaker 1: distributed source so important? Nigeria has struggled with the grid
Speaker 1: for a long time. Nigeria has a population of some
Speaker 1: two million people and in total, the install capacity is
Speaker 1: probably just over thirteen gigawatts of power, and of that
Speaker 1: thirteen gigawatts, they probably generate on average less than four
Speaker 1: gig gigga watts per year as an average generation. I mean,
Speaker 1: the grid is outdated, there's not enough capacity to go around,
Speaker 1: and of course there's a lot of political issues as well.
Speaker 1: So I would say they're the basic problems, which is
Speaker 1: basically what's caused people to go to their own private generation.
Speaker 1: And from the population standpoint, this is one of the
Speaker 1: fastest growing countries in the world, so in you know,
Speaker 1: in reality, this is an important problem to fix pretty
Speaker 1: quickly because their demand is only to be higher. So
Speaker 1: from mini grid standpoint, we've established that we definitely think
Speaker 1: it's critically important um and that there's an advantage here
Speaker 1: because really these diesel generators are serving almost like a
Speaker 1: mini grid for individual homes. So my question is what
Speaker 1: is the role of diesel generation in the storage and
Speaker 1: mini grid market, because you guys mentioned at the beginning,
Speaker 1: and I believe that was Utak, you said that diesel
Speaker 1: generation still does have a role to play in the
Speaker 1: mini grid market. So conventionally that mini grads are not
Speaker 1: really new, but conventionally that many rural communities rely on
Speaker 1: only diesel minigrades or sometimes hygder mitigrate depending on the
Speaker 1: resources are available. But that there a program now is
Speaker 1: I mean if you if you have to partise, if
Speaker 1: you want to run These are two narrators to provide existcy.
Speaker 1: It's expensive and also it's environmentally harmful and then also
Speaker 1: for good for health of neither. In the last ten years,
Speaker 1: technology has become more cheaper, especially solar and battery storage,
Speaker 1: and also technologies such as control system to integrate and
Speaker 1: operate distribute to enery resources as a sample entity has
Speaker 1: become available, so many countries or developers have paid attention
Speaker 1: to switching. Um those diesel integrates to solar hybrid integrates
Speaker 1: as it's cheaper in terms of cost of excity and
Speaker 1: then it's rest harmful environmentally UM. But diesel still makes
Speaker 1: the important rule because if you install just solar together
Speaker 1: with energy stories only, the system can be much bigger
Speaker 1: and then becomes expensive in terms of capics the initial
Speaker 1: costs because the minigrates still need to supply sciity to
Speaker 1: customers during the night when sun is not shining, so
Speaker 1: that diesel generator still preates the role to provide exacity
Speaker 1: even part of the twenty four hours. But if you
Speaker 1: combine with the sort of hybrid systems, you could potentially
Speaker 1: reduced round hours of Diger generations. Hence the course of
Speaker 1: exacity and also the course of diesel fuel would be reduced.
Speaker 1: So the diesel generation was almost being replaced by the
Speaker 1: storage rather than by the soular so to speak. If
Speaker 1: if we're thinking about it from a transition standpoint, so
Speaker 1: regarding many grids in emerging markets, so may you had
Speaker 1: pointed out that you know, having a diesel generator is
Speaker 1: almost unheard of, and I must say, you know, we've
Speaker 1: got one in my house in California, but that's only
Speaker 1: for when you know, you have a massive earthquake and
Speaker 1: the power goes out, which I will say some of
Speaker 1: that has to do with well also when I was
Speaker 1: a kid and we had rolling blackouts due to end ron,
Speaker 1: so that that was a totally different story and we've
Speaker 1: moved far far beyond That's your right, Consistent power is
Speaker 1: something that we're used to and diesel generators aren't going
Speaker 1: to start popping up. So these mini grids, this flexibility,
Speaker 1: this ability to you know, generate locally, store locally and
Speaker 1: also not lose as much energy, and the transmission distribution
Speaker 1: process has some benefits. Do you these many grids and
Speaker 1: micro grids having the applicability in emerging economies only or
Speaker 1: do you see them in other parts of the world. So,
Speaker 1: for example in California where I grew up. So what
Speaker 1: I'd say, I mean, my focus clearly has been looking
Speaker 1: at Sub Saharan Africa. Personally, I would say it's for
Speaker 1: emerging markets where the grid has been unreliable, possibly for
Speaker 1: the past ten or so years, or even twenty or years,
Speaker 1: for example in Nigeria. Having spoken to many of the
Speaker 1: stakeholders in the industry, be that developers or financiers, all
Speaker 1: of them seem to be really clear that they don't
Speaker 1: see the grid getting much better in the next five years.
Speaker 1: And that's similar for for many of the Subsuan African countries.
Speaker 1: So when we talk about emerging markets, I will say
Speaker 1: that many grids can potentially be the future of providing
Speaker 1: stable power in these emerging markets. Now, the reason why
Speaker 1: I say that is because I'll give you one good example. Actually,
Speaker 1: So at one point I visited a mini grid in
Speaker 1: again in the south of Nigeria, next to port Ourcots.
Speaker 1: To be specific, it wasn't a very big one. It
Speaker 1: was probably around Killer Whatsoso. However, what you find is
Speaker 1: that the guys it was a fully off grid location.
Speaker 1: But one interesting thing there was that the community take
Speaker 1: ownership of the power in a way, they provide security
Speaker 1: because when they get grid power, they can't control if
Speaker 1: it works or not. However, if you have the minigrid
Speaker 1: on site and everybody has their own, community kind of
Speaker 1: clock closes that gap. So I would say that that
Speaker 1: example sort of showed me that once you see stable
Speaker 1: power and you can operate your business or do the
Speaker 1: standard things that you need to do, you would want
Speaker 1: to see more of those systems go up. So to
Speaker 1: summarize this, I'll see that clusters of minigrids can solve
Speaker 1: all the localized problems. If the grid improves in ten years, fine,
Speaker 1: but in the next five years, I don't see that happening,
Speaker 1: and I think that minigrids by the way forward in
Speaker 1: these emergent markets. Let's talk a little bit more about
Speaker 1: the financing, because you quickly touched upon that. You know,
Speaker 1: the demand is there for people who want access to electricity,
Speaker 1: the need for them to have reliable, consistent you know, no,
Speaker 1: no fifteen hour blackouts is definitely there as well. But
Speaker 1: from a financing standpoint, who are building these projects and
Speaker 1: kind of what are there big economic gains or they
Speaker 1: largely organizations like the World Bank and the i m
Speaker 1: F that are going in and doing the projects for
Speaker 1: you know, another purpose as well. During the report we
Speaker 1: looked at so we had fourteen funders in the minigrid
Speaker 1: Funders group and essentially they approved a total of say
Speaker 1: two billion dollars by the end of February. However, only
Speaker 1: had actually been dispersed into the mini grid sector. Let
Speaker 1: that sink in thirteen percent, which the low number of
Speaker 1: two billion dollars, right, and most of those funds were
Speaker 1: directed to African countries. Now, while the picture on the
Speaker 1: ground is likely to be better than the data suggest,
Speaker 1: it's clear that there can be significant delays and getting
Speaker 1: funding and therefore in projects basically moving forward. Right. So
Speaker 1: that's on the finance inside. And then I mean there
Speaker 1: are some possible reasons behind why that there's such a
Speaker 1: low disbursement rate. Again, I repeat that thirteen of two
Speaker 1: billion dollars and for example, one complex and lengthy procurement
Speaker 1: processes in governments to the minigrid market is not mature enough,
Speaker 1: meaning there's a lack of potential funded fund receivers I
Speaker 1: developers in the market. And three policy reform to make
Speaker 1: the minigrid market to be I say, more friendly with
Speaker 1: project development and funding timelines. Just don't think, I guess
Speaker 1: the policy. So policy is probably critically important to get
Speaker 1: this off the ground. As you point out, So which
Speaker 1: countries are kind of doing the best at adopting this,
Speaker 1: I'd say Nigeria. Now it's not because I did this
Speaker 1: case studies, So just going to say, you're really happy
Speaker 1: this is the one you know, Just just clear. Look,
Speaker 1: I worked on the financing section, the economic section, and
Speaker 1: the Nigeria case study. But when you ask me that question,
Speaker 1: which countries doing the best this is actually industry would
Speaker 1: agree with me. It will be Nigeria. It's I would say,
Speaker 1: it's a country that has made the minigrid market conditions
Speaker 1: friendlier towards product development and investment, more sold than others.
Speaker 1: And basically in twenty seventeen, the Nigerian government introduced a
Speaker 1: robust MINIGOD regulation which includes clear grid arrival rules. So
Speaker 1: it sets up three options for mini good developers for
Speaker 1: when the main grid reaches their mini grid asset, because
Speaker 1: one problem developers have always had is okay, you say
Speaker 1: that the grid may not improve in five years, but
Speaker 1: what aboutally improving ten years? Right then you've got to say, okay, Therefore,
Speaker 1: if I invest money into a minigrid, what's going to
Speaker 1: happen when the I don't know the distribution company, the
Speaker 1: national distribution company decides to extend my grid to my
Speaker 1: local community. And then I would say that the minigrid
Speaker 1: regulation Nigeria covers this because one, they provide a clear
Speaker 1: compensation schedule, so they say you get twelve months of
Speaker 1: revenue plus appreciated asset value should the national grid take over. Two,
Speaker 1: developers can export their mini grid electricity to the grid,
Speaker 1: their minigrid gets recognized as the main grid system. And
Speaker 1: three operating the minigrid in parallel to the main grid.
Speaker 1: There's another option. So another point why I say in
Speaker 1: Nigeria is the government has developed the largest results based
Speaker 1: finance in mechanism under what's called the Nigeria Electrification Project
Speaker 1: also known as the NET or n EP. Now, the
Speaker 1: total amount of the budget to support solar minigrids under
Speaker 1: This program is two hundred and twenty million dollars which
Speaker 1: comes from the World Bank and the African Development Bank. Now,
Speaker 1: results based financing is very interesting and as I said,
Speaker 1: we feel like it's the future. Results based financing is
Speaker 1: where the host government agrees to pay a per connection
Speaker 1: grant developers once they can prove a minigrid is operational
Speaker 1: and provides reliable power to end users. So, in summary,
Speaker 1: I would say results of based financing is an excellent
Speaker 1: way of ensuring developers complete their end of the deal
Speaker 1: before they get the grant from the government and again
Speaker 1: keeping all parties happy, right because the end user gets
Speaker 1: stable power. But that's taking on an awful lot of
Speaker 1: risk on the part of the person building the project
Speaker 1: to begin with. How easy is it for them to
Speaker 1: get ahold of the financing at the end, and how
Speaker 1: are they able to get the loans to start the
Speaker 1: project to begin with. This is where we think results
Speaker 1: based financing essentially closes the viability gap. So if you
Speaker 1: can get a guarantee from the government that you are
Speaker 1: going to be paid x amount of like x percentage
Speaker 1: of your capex, say six months after what once your
Speaker 1: projects go online, and you can prove that the operational
Speaker 1: It's great, right, because then you can go to the lenders,
Speaker 1: the commercial banks, which actually we have spoken to quite
Speaker 1: a few commercial lenders that said they really feel that
Speaker 1: results based financing will close this viability gap. So once
Speaker 1: the results based financier sees that actually you have this
Speaker 1: agreement from the government two to basically cover your capex
Speaker 1: or to cover a portion of your capex once you've
Speaker 1: completed the project. So it is a grant cash. You're
Speaker 1: not going to have to pay this money back, remember that,
Speaker 1: So it's different finances, it's a grant. What really makes
Speaker 1: sense here is that the commercial financier will say, okay,
Speaker 1: since you've got this guarantee from the government, we can
Speaker 1: therefore lend you the money for you to carry out construction.
Speaker 1: So once construction complete, you know you're gonna you're going
Speaker 1: to be paid within six months, right the I don't
Speaker 1: know whatever percentage could potentially depending on what the agreement
Speaker 1: is with the government, you will be paid for each
Speaker 1: of those connections and you can therefore pay back the lender. Right.
Speaker 1: So it just makes the viability of the project far
Speaker 1: more promising with results based financing, and it gives some
Speaker 1: sort of guarantee the commercial lenders too, So this is
Speaker 1: a bit of a path forward that other countries can
Speaker 1: definitely learn from you mentioned previously. And and maybe let's
Speaker 1: pivot over back to you tak Uh. We're saying that,
Speaker 1: you know, Nigeria that a lot of people are saying
Speaker 1: that over the next five years, they're not anticipating that
Speaker 1: the state grid is actually going to expand. I don't
Speaker 1: know if that's the right way to phrase it, but
Speaker 1: this minigrid market is a really good place to look.
Speaker 1: So let's look further beyond the next five years. How
Speaker 1: about the next ten years. What do you see the
Speaker 1: outlook for mini grids in the next ten years, not
Speaker 1: just in Nigeria, but globally the island nations as well
Speaker 1: and the other places that you also looked at in
Speaker 1: this report. I think the globally, I think the more
Speaker 1: governments we expect that the more governments are realizing that
Speaker 1: distributed energy technology is including many grides and the soul
Speaker 1: of home system for the PRAMO roles for en as
Speaker 1: the access purpose, because I mean, the one issue in
Speaker 1: this sector is a roup of governments conventionally thought that
Speaker 1: great extension is the best way to supply exacity and
Speaker 1: a reliable way. However, there are two problems. One it's
Speaker 1: it's very expensive in terms of building such infrastructure and
Speaker 1: also secondly in terms of the cost parer ecstacy on
Speaker 1: ky to about the our basis, it's difficult for rural
Speaker 1: customers to pay for the extacy because this high cost
Speaker 1: compared to other distribute energy resources such as minigrations or
Speaker 1: consist What are we talking about in terms of costs,
Speaker 1: like how much more expensive is it? Yeah? We have
Speaker 1: it actually, so give me immediate collarlesses and in calgated
Speaker 1: cost of excity for different technology configurations. If you use
Speaker 1: a soul or hybrid mini grads um, the cost of
Speaker 1: excity in a hey to about our basis can be
Speaker 1: between fifty cents and one dollar party about hour. But
Speaker 1: if you used let's say just diesel generates in the
Speaker 1: same scenario, it could be more than it could be
Speaker 1: more than double dot simply because the community uses a
Speaker 1: lot of diesel fuels, which is costly. Do we foresee
Speaker 1: a situation where mini grids cost competitive compared to um diesel,
Speaker 1: I think is what you're saying correct exactly? So do
Speaker 1: we foresee a situation where many grids which are cost
Speaker 1: competitive compared to diesel, but not really when compared to
Speaker 1: some of these you know, well developed, established large infrastructure
Speaker 1: grids like the one i'm recording this podcast on now. Um,
Speaker 1: do we foresee a situation where they become price competitive
Speaker 1: close to parity or is it always just going to
Speaker 1: be more expensive given the level of complexity. So I
Speaker 1: think that the economics of the many grids of microL
Speaker 1: it's quite complex, um depending on where it is. So
Speaker 1: if I talk about imaging markets, it's definitely cheaper in
Speaker 1: terms of cost party or our basis, but the program
Speaker 1: is still it's course, is expensive from the customers prospective.
Speaker 1: That's why public funding is always very important to make
Speaker 1: projects possible. But in the context of the country is
Speaker 1: such as the US Austra area, it's a different story there.
Speaker 1: It's not only just cost comparison between many grids or
Speaker 1: micro grids and the great exist. It's also about the
Speaker 1: value you get from reliability of texicity. One of the
Speaker 1: big reasons why some developers are installing micro grids or
Speaker 1: minigrades in the US is resiliency improvement, because there are
Speaker 1: in some state there is a potential risk of greater
Speaker 1: nexiscity is cut down due to the hurricanes or sometimes wildfires.
Speaker 1: So combination with those of different reasons resiliency in the
Speaker 1: cost some deripairs, some customers decide to install s to
Speaker 1: micro grids. SOAK, you've you've taken a look into the
Speaker 1: future for us, What is your view on the next
Speaker 1: ten years for many grids micro grids? So what I'd
Speaker 1: say is to scale the mini grid market. It is
Speaker 1: important to have these two things right. So one, it's
Speaker 1: important to have subsidies as many good projects do have
Speaker 1: a high risk, as take mentioned earlier, and results based
Speaker 1: financing is the favorable subsidy as it's straightforward, as we
Speaker 1: also explained, and again as it also ensures that the
Speaker 1: work gets done right. You don't want to give that
Speaker 1: grants and then all of a sudden nothing's getting done.
Speaker 1: Number two now, being able to get project financing. This
Speaker 1: this is something we haven't touched on yet actually, so
Speaker 1: being able to get project financing for a portfolio of
Speaker 1: minigrid projects as opposed to a single project, because a
Speaker 1: single project is too small to attract project financing. So
Speaker 1: we think that the future business model will be I'm
Speaker 1: a developer. I owned say ten or twenty or even
Speaker 1: fifty or potentially a hundred minigrids under an SPV a
Speaker 1: special purpose vehicle, and each of those minigrids have a
Speaker 1: predictable revenue stream. What is project financing. Project financing is
Speaker 1: being able to lend on predictable future cash flows. So
Speaker 1: if I can predict the revenue of each of those,
Speaker 1: say fifty projects minigrids, I can then go to a
Speaker 1: commercial financier and he can lend me money based on
Speaker 1: that future Nash law. So we think that you need
Speaker 1: to have results based financing on each of those assets
Speaker 1: as well as project financing to be able to scale
Speaker 1: the sector upright, because if you think about utility scale
Speaker 1: projects are usually finance with project financing because you can
Speaker 1: just carry out bigger deals. But no one's going to
Speaker 1: do project financing on say a fifty killer what project
Speaker 1: You're looking at megawatts plus projects to get project financing.
Speaker 1: And the other thing is there has to be an
Speaker 1: availability of public funding. That's very important to attract commercial investors.
Speaker 1: And finally back to the Nigeria point. If Nigeria's performance
Speaker 1: based grants work, which the World Bank and African Development
Speaker 1: Bank are implemented now, there could be more results based
Speaker 1: financing programs in the next ten years based on what's
Speaker 1: happened in Nigeria now. So Nigeria in the way is leading,
Speaker 1: so you see a pretty bright future. It's just there's
Speaker 1: a lot of criteria that need to be met. Maybe
Speaker 1: take some notes. If you're listening and you're thinking about
Speaker 1: doing these sorts of projects, We've we've got some things
Speaker 1: that can help you out. So when launching into this report,
Speaker 1: I think people always when they start to reachsearch research something,
Speaker 1: they have a few assumptions and let's maybe you know,
Speaker 1: play a little bit of fact tennis. Here was there
Speaker 1: one factor finding each of you guys had to close
Speaker 1: us out today that you found particularly interesting when doing
Speaker 1: this project, I found it. Why interesting thing is the
Speaker 1: large measure energy companies, all your measures and trading houses
Speaker 1: are participating in this mini greak market as a financials
Speaker 1: So for example, Shell Total they both invest in some
Speaker 1: very experienced minigree differ bads who are different playing projects
Speaker 1: in Africa, and also the Japanese trading houses such as
Speaker 1: needs Be. She recently told to they all they all
Speaker 1: invest in Mani gree different pls as well. So of
Speaker 1: course still financial as well is very important to support
Speaker 1: many grades. But with the very very real public funding,
Speaker 1: we have seen more big private corporate are participating in
Speaker 1: this sector, which is very a positive news, and I
Speaker 1: pulled and to push that sector forward. Okay, how about you?
Speaker 1: So for me, it was basically one I mentioned earlier.
Speaker 1: It was the fact that from the Minigrid Funders Group
Speaker 1: a total of two billion dollars were dispersed as of February,
Speaker 1: but the fact that only of that funding had actually
Speaker 1: been were committed, but only were dispersed. So that's a
Speaker 1: really low number and a lot needs to be I mean,
Speaker 1: it could be the data again, but that needs to improve,
Speaker 1: should I say, or to put it in another way,
Speaker 1: there's money to be spent. There is definitely money to
Speaker 1: be spent. And the other point I had was that
Speaker 1: the fact that it's really obvious that solo solo hybrid minigrids,
Speaker 1: based on the like the c O numbers that Attacking
Speaker 1: quoted earlier, it's just cheaper to solar rather than just
Speaker 1: having the diesel generator and having that run in twenty
Speaker 1: four hours a day or whatever. It's just cheaper and
Speaker 1: the final point is that I found it really interesting
Speaker 1: how results based financing and I keep pushing this point
Speaker 1: because honestly, the financier is really the commercial funders. Financiers
Speaker 1: really want to make it clear that they need to
Speaker 1: see this. Results based financing is just like magic in
Speaker 1: a way because it just solves many problems. It solves
Speaker 1: the problem of people being awarded a contract and potentially
Speaker 1: taking the money by not doing the work, where results
Speaker 1: based financing doesn't allow for that. It basically says that, look,
Speaker 1: I'm going to guarantee you this. I'm a host government,
Speaker 1: I've got sovereign guarantees they or whatever. I will give
Speaker 1: you this money, but you need to prove that your
Speaker 1: system is providing stable power. So it's really powerful because
Speaker 1: one issue that you found in Sub Saharan African countries
Speaker 1: is that you may get someone awarded a contract. It
Speaker 1: could be to build a bridge, but then some of
Speaker 1: that contract money doesn't get the funds don't always get
Speaker 1: used appropriately, and results based financing fixes this. It makes
Speaker 1: developers work hard, gives the end user something to be
Speaker 1: happy about, and then it gives the government some guarantee
Speaker 1: that these guys I'm giving the money to is going
Speaker 1: to be used. So we've talked a lot about like
Speaker 1: the opportunities and solutions as we see them, and I
Speaker 1: think that's it's always very constructive to think about how
Speaker 1: we're going to get things done. But let's acknowledge some
Speaker 1: of the challenges that exist. So take you know, you
Speaker 1: have a few I think that immediately come to mind
Speaker 1: when we were prepping for this. So what are some
Speaker 1: of the biggest barriers that you see? I think that
Speaker 1: this is a common challenge for the migrant sucer. So
Speaker 1: we already we already talked that UM technology is already
Speaker 1: available the coastal Solar about their stories got cheaper. However, UM.
Speaker 1: The reason why many public organizations such as development, development
Speaker 1: financing institutions and don't agencies are involved are because of
Speaker 1: the challenge. So the first challenge is there's a lack
Speaker 1: of regulation that protect cast throws of the migrants. Some
Speaker 1: people stay that as create cleer lows of the main
Speaker 1: grate arrival on many grades, which means that if the
Speaker 1: main grid, which is the main grade, what would happen
Speaker 1: to the assets? So the developers always concerned that if
Speaker 1: there's no cle creer rule, the mity grate assets cannot
Speaker 1: be compensated by the state owned utilities, or they mean
Speaker 1: they may have the lower accessy tariffs from the state utility. Unfortunately,
Speaker 1: at the moment um there's just more than ten countries
Speaker 1: we have studied have such creal rules, including a Nigeria.
Speaker 1: The second reason is customers. So the dominant customers for
Speaker 1: the milling grids are rural household who typically dely on
Speaker 1: our culture and then income is typically limited or sometimes
Speaker 1: unpredictable depending on the weather conditions that affects agricultural productivity.
Speaker 1: By that it's sometimes difficult for minigry customers to pay
Speaker 1: for the electricity from sula hybrid miniguies, even though the
Speaker 1: the cost of the migrant is still competitive against other alternatives.
Speaker 1: That second way, yeah, the second reason, just to delve
Speaker 1: into that a little bit more. Not only is it
Speaker 1: going to be difficult for them to pay, but my
Speaker 1: question is how do they go about even requesting this access?
Speaker 1: How does some of these governments go about actually trying
Speaker 1: to find out who wants these sorts of projects and
Speaker 1: is most engaged and interested and supportive of them. So
Speaker 1: essentially many customers won't have the labor ectacity. But the
Speaker 1: way the way to find out where they develop the
Speaker 1: migrants is different by an organization, the typically government. If
Speaker 1: the governments think that minigrates it is very important technology
Speaker 1: to provide exacity UM. Sometimes they they do the investigations
Speaker 1: and then they stop the candidates. For example the case
Speaker 1: of Nigeria are initially the government selected the two thousand
Speaker 1: candidate sites and then after that they listed up. But
Speaker 1: also the private companies. Some private companies do that. Example,
Speaker 1: it's identification of the potential minigrate site is work that
Speaker 1: many developers do. So they sometimes use the satire images
Speaker 1: to identify the concentrated communities with commercial industrial customers. Often
Speaker 1: the case they also visit the candidate communities to check
Speaker 1: the feasibility with the minigrate projects. So there are different ways.
Speaker 1: Points three is a typical size of minigrate is very small.
Speaker 1: So in the countries like the United States, the microgride
Speaker 1: mini grade project is typically more than one MiG a lot.
Speaker 1: This is huge and but they need African case for
Speaker 1: mini grades for communities that typically less than fift So
Speaker 1: from the investors point of view, if you invest good
Speaker 1: single so will hybrid many grades. UM. The retail can
Speaker 1: be very limited. So unless you have a portafolio of
Speaker 1: many many projects, it's not very attractive for invest from
Speaker 1: the investment perspective. So that's why I'm making ports for you.
Speaker 1: Is another input on saying um to make the investment workable.
Speaker 1: So TAK, thank you very much for joining us today.
Speaker 1: Thank you very much, Thank you for having us. Bloomberg
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