One-on-One with Alastair Smith, CEO PowerGen Nigeria
Impacting and transforming people’s lives through smarter power
PowerGen Nigeria set to connect 55,000 people in rural Nigeria to electricity by May 2022 as part of a new partnership with CrossBoundary Energy Access, Oikocredit, Triodos Investment Management and EDFI ElectriFI
Can you briefly tell us about you and PowerGen’s operations in Nigeria?
I’m a co-founder of PowerGen, which began in 2011. I was living and working in East Africa for about eight years and then I came over to Nigeria where I started our entity in 2018. Currently, I’m leading our team here in Nigeria. We are a distributed renewable energy solutions provider which includes both rural communities, as well as urban communities, working with Electricity Distribution Companies (DisCos) as well as commercial and industrial projects. Those are just to name a few. PowerGen’s focus is to always look for other creative ways to help solve some of the energy challenges that people face with lack of reliability, or lack of access to power, both in Nigeria and across Africa as a whole.
I spend most of my time these days overseeing our team here in Nigeria, which as of today is around 20 people but we’re hoping to grow that to around 26 in the next few months. And probably by the end of the year, we will be around 32 people. In addition to the rural minigrid side, we have additional projects both for commercial industrial clients as well as urban utility and DisCos projects that are still under development.
Last month, PowerGen published a press release on the new partnership with CrossBoundary Energy Access, Oikocredit, Triodos Investment Management and EDFI ElectriFI to connect 55,000 people to electricity in rural Nigeria. Can you tell us more about the partnership?
This project came about through the Nigeria Rural Electrification Agency’s (REA) and the Nigeria Electrification Project (NEP) funded by the World Bank which has enabled the sector to build and operate grids under the current regulatory environment and support the economic feasibility by providing grants to rural minigrid developers. That program was launched in 2019 and PowerGen was the first company to build a grid under that program. This project connecting 55,000 people utilizes grant funding from the NEP program alongside funding from CrossBoundary, Oikocredit, Triodos Investment Management, and EDFI ElectriFI to build the additional grids and allow people to have 24 /7 access to electricity that they have never had before.
What will be the source of financing for this partnership?
CrossBoundary will provide the long-term project financing while Oikocredit, Triodos, and ElectriFI will provide construction financing. The grids will transfer to CrossBoundary after completion of the sites which will happen in 2022. From there, PowerGen will continue to operate those sites on CrossBoundary’s behalf.
Is this project already operational? How are you planning to use this financing and what is the role of PowerGen?
We already actually have seven of our sites operational and already connected around 11,000 people to electricity. We’re about a fifth of the way through the project. PowerGen provided some upfront capital in order to kickstart the program. And then the capital will come in from Oikocredit and Triodos Investment Management, and EDFI ElectriFI to allow us to continue to build out the remaining portfolio. PowerGen’s role spans the project life cycle: we are the developer, the builder and the operator of the sites.
55,000 people is a significant number of people who will benefit from this partnership and connecting them certainly requires a number of providers. How do you intend to reach this goal and when?
So, we have sourced the locations of the communities. We worked with the communities themselves, the local government authorities, and the regulatory bodies to receive the necessary permits and approvals. And then we sourced the equipment to be able to develop and build the sites. Upon completion of building, we will also continue the management of the sites, which will also include additional activities around productive use and demand stimulation, that can be appliance financing, financing of agriculture equipment like milling machines, and additional activities that will contribute to the growth and development of communities.
Our current plan is that we will have connected all 55,000 people to electricity by the end of May in 2022.
From your perspectives, what are the key benefits of innovative financing structures in the minigrid sector?
An innovative financing structure is a critical component to developing these distributed renewable energy resources. The reason being is that we are constructing infrastructure in these areas that will then operate for 25 years or more. And so the length of time that we are providing power for requires that there is a fairly high upfront capital cost. And in order for us to be able to deploy these projects and to be able to connect these people. It’s an absolute necessity that we have cheap capital that is enabling the marketplace. This capital, as well as the funding provided by the REA and the World Bank in Nigeria, is what allows this project to happen.
What are the main challenges the minigrid sector is facing in Nigeria. What are the opportunities one can seize if looking to scale-up the sector?
I think the main challenges that we face in Nigeria, is that the sector is still a relatively new concept. Minigrids have only been existing in Nigeria for around five years. And so it’s something that we’re getting the different regulatory organizations up to speed and I think they are learning quickly. We’ve been able to support and collaborate with them around how they can improve, but they’ve been doing a very good job so far. But because it’s really the first project of such magnitude, there are always small things that can cause problems. But I think what’s been great is that we do have great partners in REA, NERC, NEMSA, which are the different regulatory bodies and the World Bank that are helping solve these challenges.
Additionally, I think there are some challenges around the importation of equipment. There have always been difficulties around importing renewable energy equipment and having the port to be able to support with the clearing of equipment on time and efficiently. There are some antiquated import duties that can be associated with equipment that I know of and organizations like AMDA and other institutions are helping to work with the federal government of Nigeria, as well as other governments throughout Africa to try and improve some of those regulations to help enable the sector to scale-up.
We see a tremendous amount of opportunity in this space and I believe that there is a very collaborative environment. And we see that there’s a lot of eagerness for both the electrification of rural individuals, but also to improve the power quality and availability in urban areas as well.
Where do you see the minigrid sector in Nigeria in the next 5 years ? Where do you picture PowerGen (Nigeria) in this future?
I think that ideally, the sector will be to a point where we have hundreds, if not 1000s of mini grids, across a number of developers operating effectively, efficiently and generating both capital for investors but being able to provide low cost power to the end user customers. Part of our vision is that energy provides a basis for platform and a basis for growth of rural communities. And it is important to note that after we installed this project, at the end of May, that’s not where our work ends but instead that’s where things are just beginning. We then are looking to provide additional support to the community, help bring in other businesses as well, to expose them to opportunities that lie within these communities, but also help these communities themselves grow and develop as time goes on.
Another thing that I would like to add is that we want to be impacting people’s lives, and transforming people’s lives through smarter power. The utilization of solar energy is the lowest cost option in the communities where we work and it’s great for the environment, helping mitigate small diesel generator usage, which mitigates the impacts of climate change. As PowerGen, we want to continue to grow and impact as many people as we can, by being able to provide them with reliable, and clean electricity. We will only be limited by the aspects of available financing, and an enabling environment from a regulatory perspective. We’re dealing with a difficult challenge in electrification and in what are typically known as difficult places to operate but we’re very enthused by the progress we’ve made so far and we’re hoping to continue to make progress and connect up as many people as we possibly can across Nigeria and Africa as a whole.
In terms of expanding,
We are continuing to look at other countries to expand into, and it’s about support and grant programs as well as an enabling regulatory environment. So there’s a number of countries that we’re continuing to analyze and scan with a hope to continue to expand. It’s a matter of us being able to hit those criteria.
PowerGen was founded in 2011 with the vision of making clean, renewable energy accessible to more people in Africa, a continent in which 600m people still lack access to energy. Today, PowerGen have offices in 4 countries, hundreds of projects deployed, and tens of thousands of people benefitting from PowerGen’ energy services every day. Learn more at www.powergen-renewable-energy