How productive uses of minigrid electricity make farmers richer and energy cheaper

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  • Income-generating productive uses of energy (PUE) allow rural entrepreneurs to utilize clean electricity to support their businesses and increase their incomes.
  • PUEs also boost revenues for rural utilities struggling to achieve profitability and maintain reliable energy services because of limited demand.

The Energizing Agriculture Programme (EAP) recognized PUEโ€™s potential to transform livelihoods and improve the economics of energy access. It brought together Nigerian energy and agriculture companies to design and test business models that deliver affordable PUE equipment to rural customers. The EAP confirmed the value proposition of PUEs. By switching from fossil fuel-powered equipment to electric PUE alternatives, agribusiness owners saved up to 82 percent on their energy costs.

In one year of operation, a $61,000 investment in PUE yielded 2x in value-added commodities for their businesses. Similarly, PUE deployment benefits minigrid developers. Our analysis shows that the largest energy-consuming PUE, a 3-ton cold room, increases electricity sales enough to drop the levelized cost of energy by 25 percent. A minigrid serving multiple PUE loads can produce electricity at half the cost of a minigrid serving predominantly residential customers.

This report narrates the EAPโ€™s experience deploying and operating 269 mills, freezers, electric vehicles, and other agricultural equipment at rural minigrids in Nigeria. It also distils the lessons learned from testing business models that deliver integrated energy-agriculture solutions in rural contexts. The report provides a set of recommendations for public, private, and philanthropic partners to realize the opportunity that PUEs offer at scale across Nigeria, including the following.

  1. The government should ease PUE companiesโ€™ supply chain and resource challenges by exempting equipment from import duties, extending state financial and advisory support, and establishing quality standards.
  2. PUE companies must build their rural O&M capacity, invest in data collection on customer needs, and improve their pay-as-you-go offerings to boost affordability.
  3. Minigrid developers must support PUE and energy supply in tandem by identifying opportunities before construction and building the necessary partnerships to realize them.
  4. Investors must support nascent companies through working capital loans, inventory finance, credit guarantees and equity investment to avoid them being overburdened by interest payments.
  5. Donors should focus grant support on non-revenue-generating activities critical to the PUE industryโ€™s success, such as needs assessments, PUE coordination platforms for funders, and industry associations.

Download full report HEREย 

Authors:ย Habiba Ahut Daggash,ย  Ayodeji Ojo,ย  Folawiyo Aminu,ย  Zihe Meng,ย  Scarlett Santana,ย  Suleiman Babamanuย and ย Andrew Allee.

This article was originally published by the RMI and is republished with permission through theย Creative Commons CC BY-SA 4.0 license.

Disclaimer: The articles expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Green Building Africa or our staff. The designations employed in this publication and the presentation of material therein do not imply the expression of any opinion whatsoever on the part Green Building Africa concerning the legal status of any country, area or territory or of its authorities.

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