Crowdfunding to finance solar mini grids
Since 2018, six pilot solar mini-grids are giving 15,000 people access to reliable electricity in Nigeria. Those people no longer rely on diesel generators to light homes and run small businesses such as grain mills, cocoa drying and welding operations, carpentry workshops, and small restaurants and hotels.
The solar mini-grids were partly funded through the European Union, the German government (GIZ) and the USAID-funded Renewable Energy and Energy Efficiency Project (REEEP) in collaboration with the Nigeria’s state government.
The funds available for the mini-grid component are USD 150 million. The Component consists of two funding windows: a minimum subsidy tender to electrify selected communities that have high economic growth potential; and a performance-based grant program for the development of mini-grids on a spontaneous basis.
The grant amount is set at USD 350 per connection. One of the main barriers to realize this project was the financial aspect.
Surprisingly, the project partners found two original solutions which could be applied elsewhere:
– First, they worked with a so-called split asset model. Instead of trying to convince banks and other financial institutions to invest in a mini-grid project, REEEP separated the distribution and generation components.
– Secondly, they decided to collaborate with the German crowdfunding platform Bettervest with the aim of entering the Nigerian market. The financial model developed for this project allowed to lower the risk faced by its investors.
Therefore, such financial models have the potential to improve access to finance in countries with higher investment risks.
Source:Solarize Africa Market Report | May 2019