The federal government is set to offer subsidies to developers and operators of solar mini-grids in underserved areas across Nigeria. This initiative will be facilitated through a $750 million loan approved by the World Bank under the Distributed Access through Renewable Energy Scale-up (DARES) project.
According to the financing agreement for the loan, signed by Minister of Finance Wale Edun and World Bank’s Country Director for Nigeria Shubham Chaudhuri, the objective is to increase electricity supply to households and micro, small, and medium-sized enterprises (MSMEs) through private sector-led distributed renewable energy initiatives.
The loan will support developing and operating privately owned solar hybrid mini-grids in unserved and underserved areas. It will include provisions for:
- Minimum Subsidy Tender: Conducting Minimum Subsidy Tender processes and providing Minimum Capital Cost Subsidies to selected developers/operators of isolated mini-grids, interconnected mini-grids, or solar rooftop solutions.
- Performance-Based Grants: Grants will be provided to eligible mini-grid operators based on new customer connections and a percentage of capital expenditures for interconnected mini-grid projects.
- Performance-Based Grants for Standalone Solar: Performance-Based Grants (PBGs) will support the expansion of Standalone Solar (SAS) systems for households, MSMEs, and agribusinesses in rural areas. These grants will facilitate the deployment of SAS solutions and the productive use of solar electricity equipment.
- Catalytic Grants: Offering Catalytic Grants, on a matching basis, to eligible SAS companies targeting poor, remote, or hard-to-reach consumers.
The loan is structured into three segments: credits of $350 million, $250 million, and $150 million, each designated for different project aspects. The Rural Electrification Agency (REA) and the Lagos State Electricity Board (LSEB) will spearhead the project, which various government bodies will support.
The loan terms include a Maximum Commitment Charge Rate of 1/2 of 1% per annum on the unwithdrawn financing balance. This initiative signifies a significant step towards enhancing access to electricity and promoting renewable energy adoption in Nigeria.
