Everyone knows of Nigeria’s problems with power provision. A country of over 200m people served by a little more than 5 GW of functioning power generating capacity.
A troubled privatisation in the electricity industry in the last decade has done little to alleviate widespread power outages. Neither has it speed up efforts to bring electricity access to Nigerians without it. The result is a country still dependent on small-scale generators to compensate for unreliable grid supply if there is supply at all. There are an estimated 16m generators in the country, mainly running on polluting and costly diesel.
To help overcome the problem of power generating, President Muhammadu Buhari’s government is turning to the off-grid sector. The focus is mainly on increasingly cheap solar energy. The aim is to see if it can provide a more reliable and cost-effective alternative.
The Beginning of Rensource
This fresh thinking has provided new opportunities for Rensource Founder and CEO Ademola Adesina. Ademola first moved into the Nigerian market in 2016, when he set up a business providing residential power for Nigeria’s urban middle classes. He had previously started up a business providing cheap solar hybrid power for mobile phone masts in India, when he was working as an entrepreneur in residence for the Capricorn Investment Group in the US, the country in which he grew up.
He then looked at establishing a similar operation in East Africa. Although, he soon discovered that customers there were not as focused on getting power cost reductions as those in India. This made the business proposition difficult. However, Nigeria, Adesina’s birthplace, has provided more fertile ground and a potentially huge market.
According to Adesina, he wanted to find the part of the value chain where he could bring the most value quickly. Subsequently, he would create a business out of it.
For Rensource, the residential power business fitted the bill. This is because it provided a simple and standardised solution to customers’ need to reduce the expense and hassle of burning diesel in generators.
“The model was: you pay the bill, and we’ll handle everything else. We were growing at a pretty good clip,” Adesina says.
Working together to generate Power with the Government
In 2017, Nigeria’s Rural Electrification Agency – the body handling the government’s off-grid drive contacted Rensource. They specifically asked if Rensource could devise a new model to bring reliable power to Nigeria’s many large urban markets, where badly maintained and often dangerous small-scale generators proliferated.
“We proposed a mini grid, essentially a large solar-hybrid system, blanketing the rooftops with solar panels, with hubs throughout the markets. We put our systems in those hubs and provide a smart meter for every shop owner.” he says.
Urban markets reap benefits
Solar power is a good fit for markets, which do most of their business in daylight hours. However, Rensource also provides back up generation and some small-scale battery storage for cloudy days and the rainy season.
“Beyond the technology, we also built a large customer service infrastructure within the market. We have agents, technicians, and other staff. At any point during the day, we are fixing problems, collecting payments, cleaning the panels, or whatever. We basically became a utility just for the market,” he adds.
The Covid-19 pandemic has however led to a pause in the roll-out in further markets. Nigeria’s usually busy markets reopened in May after several weeks of closure due to the pandemic. Rensource is reluctant to commit to further market projects. At least until the longer-term trajectory of the pandemic is clearer and the risk of further market shutdowns recedes.
C&I model comes into its own
However, the company has recently developed another side to its business that is less affected by the pandemic. In 2019, it adapted its model to begin providing single off-taker power plants for large manufacturers and commercial and industrial (C&I) clients.
Adesina explains that this business model involves building a power plant for a mill or a poultry farm. Then the business that they build the power plant for just pay “per-kilowatt-hour” price based on a 10 or 20-year contract. He also says Rensource price is cheaper than diesel and is competitive with grid power in some parts of Nigeria.
Adesina says that the falling price of solar panels and other equipment has enabled the company to keep the cost of its service down.
Rensource is now developing seven of these commercial and industrial solar projects for single off-takers. These include one of the largest poultry farms in Nigeria, near Abuja, for which the company is building a 1 MW power plant.