- Daystar Power and RMI have unveiled a groundbreaking business model aiming to unlock 3.3 GW of solar capacity and attract $6.5 billion in investments, offering substantial cost savings for 170,000 Nigerian corporations by transitioning from diesel-fired generators to utility-enabled solar systems with backup battery storage.
- Based on a tripartite agreement, the model highlights benefits for businesses and electricity distribution companies, addressing challenges in unreliable grid services and rising diesel prices while aiming to deepen Nigeria’s solar industry and promote clean energy implementation.
In a March 12 press release, Daystar Power and Rocky Mountain Institute (RMI) released a U.S. Trade and Development Agency (USTDA)-funded feasibility study titled, “Scaling Utility-Enabled Distributed Energy Resources for Nigerian Commercial & Industrial (C&I) Customers”.
The report introduces a groundbreaking business model designed for grid-connected hybrid solar power systems, with projections indicating the potential to unlock 3.3GW of solar capacity and attract $6.5 billion in investments. This study targets 170,000 corporations and industrial manufacturers in Nigeria, offering them substantial cost savings by transitioning from diesel-fired generators to utility-enabled solar systems with backup battery storage.
This research emphasizes the great benefits of the new model, not just for businesses using electricity but also for electricity distribution companies (DisCos). Businesses can reduce energy expenses when they adopt solar systems with utility support. At the same time, DisCos can boost its earnings by improving grid usage and connecting new customers to the grid.
Many commercial and industrial (C&I) customers grapple with unreliable grid services, often experiencing blackouts resulting from transmission and distribution network failures. In light of these challenges, a significant number of customers rely on diesel-fired generators as both their primary and backup power sources, incurring energy costs that are three times higher than standard grid tariffs.
The reason behind the business model
Over the past two years, diesel prices in Nigeria have witnessed a substantial increase, escalating from 260 Naira per litre in 2021 to over 800 Naira per litre in Lagos and 850 Naira per litre in Abuja as of the study conducted in 2023.
In an effort to address these issues, Daystar, through a tripartite agreement, will facilitate the financing of upfront grid infrastructure upgrades by deducting payments from Distribution Companies (DisCos).
“While Nigeria’s solar industry is taking off, it’s still relatively in its early days, and innovative studies like this are key to deepening the market and adding more value to the business community. We can provide even more affordable and reliable power to Nigerian businesses if we team up with distribution companies in close partnerships to solve challenges and eliminate uncertainties in the power value chain,” said Victor Ezenwoko, Daystar Power’s country Head of Nigeria and Ghana.
”RMI is very proud to have de-risked a pipeline of projects at 20+ C&I customer sites and facilitated the contract signing of the first project in Nigeria. The business model exemplifies that unlocking sustainable grids and scaling distributed energy systems can go hand in hand and create win-win-win scenarios for customers, developers, and DisCos. It’s time for radical clean energy implementation, and we hope the project will lead to scaling distributed energy resources (DERs) in Nigeria to help improve reliability and reduce reliance on expensive, polluting fuels,” said Suleiman Babamanu, RMI, Nigeria Program Director.
How it works
The business model is based on a tripartite agreement between the customer, Daystar, and DisCo. Daystar installs and operates a fully-financed hybrid solar system for Nigerian businesses to provide power during peak hours (9 a.m. to 3 p.m.). Meanwhile, the DisCos will extend hours of grid power to supply electricity to customers in the evening, night, and early morning hours (3 p.m. to 9 a.m.). Backup batteries and generators mitigate against any grid outages and outperform generator-only backup systems in cost savings and reliability.
A historical view
In 2023, Daystar and RMI collaborated on Nigeria’s inaugural feasibility study to create personalized hybrid solar power systems linked to the national grid. The study involved 20 commercial and industrial (C&I) customers in Abuja and Lagos in collaboration with Abuja Electricity Distribution Company (AEDC), Eko Electricity Distribution Company (EKEDC), and Ikeja Electric (IE).
Results showed that 17 out of 20 customers reduced energy costs, with an average savings of 26%. The project added 27 MW in new solar capacity, offsetting approximately 25,000 metric tons of CO2 emissions. The model also led to a remarkable 1,000% increase in DisCos’ profitability.
Access the complete Scaling Utility-Enabled Distributed Energy Resources for Nigerian Commercial & Industrial (C&I) Customers study here.