The unbroken hum of the refrigerator keeping medicine cold in the health clinic of Mokoloki community, in Nigeria’s Ogun State, is an unassuming example of collaboration at its finest. A new undergrid minigrid pilot in Mokoloki, which provides stable electricity through a new, sustainable economic and regulatory model, shows how utilities, private developers, and communities can work together for mutual benefit.
This project marks a milestone in terms of distributed energy resources (DERs) supporting energy resilience in local communities, by demonstrating a highly replicable model that enables privately owned minigrid assets to provide reliable service to a community within the utility’s territory. The undergrid model can help to address the millions of underserved customers in Nigeria, where—as throughout sub-Saharan Africa—universal electrification continues to be a challenge. In fact, undergrid minigrids can be a solution for the more than 200 million households underserved by traditional utilities worldwide.
The first-of-its-kind project in Mokoloki came online in February and demonstrates the new business model’s economic, technical, and social feasibility. The project was made possible through valuable cooperation among power sector stakeholders, having been implemented by Ibadan Electricity Distribution Company (IBEDC), Nayo Tropical Technologies (Nayo Tech), and Mokoloki community leaders—with support from Rocky Mountain Institute (RMI) and the Nigerian Rural Electrification Agency (REA).
“The Mokoloki project is a first step on the broader pathway to utility innovation, for both IBEDC and the power sector in sub-Saharan Africa.”
Underserved communities like Mokoloki have existing grid infrastructure but minimal service availability from their utility, requiring a unique solution. Fortunately, Nigeria’s Ministry of Power has taken an open-minded approach to regulation. This open-minded approach enables utilities like IBEDC to explore new business models, encourages creative private sector developers like Nayo Tech to participate, and keeps Nigeria as a front-runner unlocking new pathways to increased energy access.
Injecting vital economic stability
Mokoloki’s minigrid does more than reinforce electricity supply—during times of uncertainty, minigrids drive community resilience and self-reliance. In particular, this minigrid is strengthening local healthcare delivery, enhancing agricultural opportunity, and attracting businesses.
As in other recent installations, the minigrid has provided the community’s health clinic with 24/7 power, which means vaccines and other medication can be refrigerated and provided reliably. Ategun Folake Elizabeth, who works at the clinic, notes that she can now treat patients in the evening due to the consistent lighting.
As Nigeria and the world battle the COVID-19 pandemic, having reliable, locally produced power also means Mokoloki can operate self-sufficiently and with reduced ties to nearby towns. More services are available locally, and the community no longer relies on the diesel supply chain to operate generators. Reliable electricity access can further enhance the role of rural communities in agricultural value chains, and in a time of global uncertainty, stable electricity service can strengthen local economies and drive small business success.
Stable electricity has also created new opportunities for business development in Mokoloki while the rest of the world’s economy is in turmoil. Oba Ademola Joseph Ogunbona, the leader of Mokoloki, says, “When there is light, there is always life… those that are using [the minigrid] for business—using it for freezers, using it for selling drinks—are enjoying it. The minigrid is a pride to me. I am happy to have it in my community here.”
The minigrid powers water purification, metalworks, a bakery, a hotel, and a range of other small shops. Further, in the weeks since the minigrid was introduced in Mokoloki, four nearby businesses are now considering relocating to the community. MAX, an electric mobility company, plans to deploy four electric motorcycles, building on the learnings from their pilot projects around the world including in nearby Gbamu Gbamu. Other new local enterprises, like Green Farms, Mokoloki Millers, and a soya drink factory, aspire to leverage increased agricultural activity to provide value-adding processing, keeping more profits in Mokoloki. Engineer John Ayodele, Chief Operating Officer of IBEDC, adds “I can see a lot of re-migration of their own people back home [because of this] development.”
An innovative utility model
Prior to this project, Mokoloki’s grid service left the community in a political no-man’s land. Although the community and IBEDC had a good relationship, the utility was unable to provide reliable service due to Nigeria’s broader power sector challenges. As a result, the electricity Mokoloki received was insufficient to stimulate economic development, yet the existence of any electricity service meant the community was considered “grid connected” and off limits to private developers. IBEDC recognized this gap and, together with RMI, began to look for solutions.
Enter the undergrid minigrid business model, which uses a cooperative tripartite agreement to create win-win-win solutions for the utility, developer, and community. In Mokoloki, the parties agreed to a ten-year agreement in which Nayo Tech directly serves the community with a new minigrid and refurbished distribution network. Nayo Tech privately financed the project, including the generation assets and distribution upgrades, demonstrating significant investor confidence in the model.
This model is already returning promising results. Initial data shows that the minigrid has achieved 99.9 percent reliability and is reducing the average cost of energy for customers (including both the main grid and energy alternatives, like diesel generators) by ₦20/kWh ($0.06/kWh) while reducing IBEDC losses in the community by over 90 percent. This first commercial undergrid minigrid in Nigeria offers invaluable lessons for future projects and scaling programs:
- Extensive community engagement, including several community meetings and staff in the community, ensured project buy-in and developed mutual trust between project partners.
- Developing trust between the utility and developer required open discussions about motivations, cost drivers, and investor interests, but was critical to achieving the collaborative spirit required for success.
- Remembering the purpose of the pilot project promoted financial viability and reduced negotiation time by enabling partners to focus on testing feasibility, rather than achieving contractual perfection.
- Standardized contracts can significantly reduce negotiation time in the future.
- Despite existing distribution infrastructure, upgrades were necessary and more extensive than anticipated due to the age and condition of many poles.
The Mokoloki project is a first step on the broader pathway to utility innovation, for both IBEDC and the power sector in sub-Saharan Africa. The pilot tests the feasibility of undergrid minigrids to reduce utility losses and drive economic development in rural communities, while also pioneering a new approach to support utilities in reaching performance improvement targets. As IBEDC’s Ayodele notes, “We have many places where this initiative can be replicated… Electricity is the engine room for progress, so [where] minigrids are sited, there would be an economic boost.” IBEDC and other utilities, along with partners like Nayo Tech, will continue evaluating pilots for customer satisfaction, financial sustainability, and technical success to shape their plans for expanding their undergrid portfolios.
The approach modeled in Mokoloki is complemented by additional work underway across sub-Saharan Africa, including RMI’s collaboration with Abuja Electricity Distribution Company to develop new DER-centric business models, REA and GIZ’s Interconnected Minigrid Acceleration Scheme to expand undergrid model demonstrations, Konexa’s work in northern Nigeria to test integrated franchise models, and the Utility 2.0 program by Umeme, Power For All, and Rockefeller Foundation in Uganda. These efforts individually are enabling reliable, clean, and cost-effective energy; together, they are developing new, more sustainable power systems with the capacity to expand across Africa.