Who benefits from mini-grids in rural African communities? Evidence from southwest Nigeria
by Temilade Sesan, Unico Uduka, Israel Faleye and Deji Yusuf, September 19, 2022
Market Day in Gbamu Gbamu. Traders come from far and near to fetch a bargain on staple crops. Photo credit: Israel Faleye.
The jagged earth road that connects the village of Gbamu Gbamu in Ogun State, in southwest Nigeria to the nearest highway is 40 kilometres long - a good three-quarters of an hour by car or motorbike, the most common means of transportation in and out of the community. The road is flanked on both sides by acres of open land sprouting a variety of tree crops, some of which are visible from the edges: pineapple, cocoa, oil palm.
Gbamu Gbamu community itself is a farmer’s haven: nested within a government forest reserve area, it boasts some of the most fertile land in the southwest region. Going by the projections of the government and development actors, this is the perfect spot for mini-grid investment: a community that is isolated and unconnected to the national electricity grid, yet brimming with development potential.
The southwest region of Nigeria, where Gbamu Gbamu is located, is shaded in dark blue.
Globally, mini-grid development has come a long way, especially since the 1980s when the limits to conventional grid expansion in developing countries began to be acknowledged by governments and donors. In this time, stakeholders have gone from focusing overwhelmingly on powering rural communities to a realisation that those communities need economic growth to sustain any gains in electricity access. Along the way, a productive-use narrative emerged which has driven much of the activity around mini grids in recent years. According to this narrative, electricity access is only as good as the uses it can be profitably put to, and therefore supply needs to go hand-in-hand with significant demand from ‘productive’ and/or ‘anchor’ users. This narrative has been championed by mini-grid developers, development finance institutions, investors, donors and governments alike, showing the broad appeal of the neoliberal thinking driving energy transitions in developing countries.
The productive-use narrative, at first glance, appears to have been borne out in the Nigerian context: private developers on early mini-grid projects – starting from around a decade ago – failed to recover their costs because many of their rural customers simply did not generate enough income to enable them to afford the substantial tariffs charged. Consequently, several developers have begun, within the last half-decade, to devise strategies to catalyse broader economic development in project communities. A common example is the introduction of electric motors to productive users like grain millers and vulcanisers who traditionally operate mechanical equipment, with the expectation that the overall demand for electricity will go up as a result.
It is against this background that our research team set out to interrogate the dynamics and distribution of mini-grid electricity access in the Nigerian context, using Gbamu Gbamu as a case study. Built by a private developer and commissioned by the state governor in 2018, the installation – the only one of its kind in Gbamu Gbamu – has a generating capacity of 85kWp and was originally built to serve the approximately 500 households and small businesses operating in the community. (This number has grown to more than 600 households – about 7,000 people – in the intervening period, a consequence of the community’s newfound status in the region as an electrified hub.) The team was interested in understanding how the productive-use narrative has panned out in the context and in identifying the impacts of mini-grid electricity on different categories of user. To do this, we conducted in-depth interviews and focus group discussions with mini-grid operators, community authorities, household users and a variety of small business operators. We found that while the advent of the mini grid has spurred economic activity in the community, the benefits of productive-use are more nuanced than the narrative might suggest, and would benefit from greater scrutiny.
‘Productive use’ does not extend to the mainstay of the local economy
One of the most striking findings from our research in Gbamu Gbamu was that, contrary to what one might expect from such a notable farming hub, agro processing activities barely register on the electricity use scale. Processing of the main crops grown in the region - cocoa, palm nuts and cassava - has remained largely unchanged with the availability of power from the mini grid. Of the many cocoa farmers in the community, only one uses electricity for lighting and general operations, and even this is from a small standalone solar system rather than from the mini grid. Drying, a key stage in cocoa processing, would seem to be a likely candidate for mini-grid power; however, as it turns out, farmers in the region are not keen to acquire electric-powered machines for this purpose. This is because those machines are so effective at sucking out moisture that the dried cocoa weighs much less than the traditional sun-dried variant and makes sellers less competitive in the local market.
Palm oil processing is also heavily reliant on traditional methods and consequently benefits little from the mini grid. To understand why this is especially problematic, it is helpful to have some insight into the way the palm oil value chain in the southwest is structured. Women are so visible in the open-air oil processing units dotted across the region that it is easy to mistake them for the owners of those enterprises. In reality, however, the operations (and most of the profits) are typically owned by male relatives, mostly husbands, and women merely provide the labour for everything from treading the nuts with their bare feet to cooking them over scorching temperatures in huge wood-fired vats.
The women who provide the labour for the palm oil processing industry in southwest Nigeria get none of the benefits of mini-grid electrification at work. Photo credit: Dixon Torimiro.
The only stage in the process that is typically mechanised involves the crushing of raw palm nuts in a grinder which is traditionally powered by diesel. In Gbamu Gbamu, the developer’s efforts to facilitate the acquisition of electric motors for this purpose stalled early on for reasons of technical incompatibility; however, success would have done little or nothing to ameliorate the drudgery of the women who traditionally do the heavy work of treading and stirring.
Go big or go home
If small-scale agro processors do not derive much benefit from mini-grid electricity, then, which categories of productive user do? Again, the findings from Gbamu Gbamu provide some insight into this question. To begin with, productive users in the community constitute a relatively small slice of demand for mini-grid power – around 20 percent of the population – with the remaining 80 percent being households and a smattering of social users. Many of those productive users relied to some extent on petrol generators before the arrival of the mini grid to the community, and, at a cost of NGN 190 (about US$ 0.45) per kWh, they generally deem the latter to be more cost-effective and conducive to their business. Nevertheless, the distribution of benefits from the mini grid seems to occur along the lines of pre-existing hierarchies in business performance, which are, in turn, split along gender lines.
The businesses that have benefitted the most from the mini grid are those that are established enough to spend relatively highly and consistently on electricity. Businesses in this category include guest houses, cold rooms, betting shops, welding shops and tailoring shops that run electric sewing machines. A common denominator across these businesses is that they are typically operated by men. Smaller businesses that are more typically run by women, such as hairdressing salons and cold drink stores, have also benefitted from the mini grid; however, given that their overall use of electricity is intermittent and minimal (they have about a quarter of the daily electricity spend of the more established businesses), they have not seen much growth.
Indeed, the effect has gone in the opposite direction in some cases. For example, the proliferation of cold drink sellers in the community as a result of the mini grid has had the unintended effect of increasing supply and, by extension, reducing profit margins for the mostly female individuals involved. The situation with the tailoring shops mentioned above is also instructive: while female tailors abound in Gbamu Gbamu, none of them is trained to do the kind of specialised (and more profitable) work that requires the use of electric machines. These examples show how women, who are generally more constrained in their business choices than men, are at risk of being relegated to the lowest rung of benefits obtainable from the electricity provided by mini grids under a business-as-usual approach.
The benefits to social users are minimal
Our research in Gbamu Gbamu uncovered another important dynamic that can be obscured by stakeholders’ uncritical focus on prioritising productive use benefits from mini grids. As can be expected from a solar hybrid mini-grid plant, the batteries in the Gbamu Gbamu installation have become depleted after four years in operation. A host of issues related to maintenance and cost recovery have delayed their replacement, with the consequence that the community does not get power from the mini grid outside of daylight hours unless the diesel backup option is activated – an option which has grown increasingly remote in the wake of global fuel price hikes.
The developer is currently managing these inadequacies by prioritising daytime operations, when the plant is able to generate power directly from its solar panels – the assumption being that electricity is most valuable to productive users during the day when most business is conducted. In reality, there are exceptions to this: many businesses in the community do operate far into the night. More importantly, however, the current approach takes little cognisance of another category of users for whom nighttime operations are inevitable and crucial: social users, defined in the context as establishments that may not be profitable but which provide essential social services to community members.
Two establishments are of particular relevance here: the lone primary health centre in the community, where the staff attend births at all hours of the day and night, many times by the light of their mobile phones; and the local security committee, which is responsible for safeguarding the community against crime and for whom street lighting at night would greatly ease operations. Again, women are especially affected by the relative neglect of these social institutions, and they are the ones who would benefit the most from greater attention to their peculiar electricity needs.
An emphasis on stimulating productive uses of mini-grid electricity in rural areas can obscure the needs of social institutions like health care facilities. Photo credit: Israel Faleye.
What does this mean for energy access expansion?
Since their emergence as a viable option for scaling up rural electrification, mini grids have contributed to plugging the vast energy deficit in Africa, and especially in Nigeria where 85 million people still lack access to electricity. While the bold strides made in mini-grid investment and installation are noteworthy, the metric that is of utmost importance is how well the resulting projects serve their intended beneficiaries in poor rural communities in Nigeria.
Our research into the impacts of mini-grid operations in Gbamu Gbamu sheds some light on end-user experiences in this regard. We found that the act of privileging productive uses of mini-grid electricity may make business sense for developers and relatively well-off commercial ventures, but it adds little value to lower-tier users in the agricultural and social sectors that are crucial to the attainment of broad-based rural development goals.
To alter this dynamic, public and private stakeholders need to conceive of rural development and energy access holistically, taking agriculture as the starting point. It is especially important to understand the needs of different categories of farmers and agro processors, how different agricultural value chains are structured, the actors involved at every stage, and what the justification for expanding their energy use would be. With this background knowledge, rural energy access projects (including, but perhaps not limited to, mini grids) can be better targeted to achieve more equitable distribution of benefits.
Some forward-thinking developers in Nigeria, including a few operating in the southeast and southwest of the country, have taken on some of this work, investing in farmers to raise their crop yields so that there will be more of an incentive on both sides to use electricity for agro processing. Going forward, it would be highly beneficial if investments in agricultural value chains for the purposes of energy access planning could constitute part of donor and government support to the private sector. Those strategic investments would require a lot of public commitment; however, given the centrality of the agricultural sector to rural development, the eventual payoffs on all sides would be worth the effort.
Both within and outside the agricultural sector, the common challenge is how to include women meaningfully in the payoffs envisaged from investment in mini grids. As we saw in Gbamu Gbamu, the putative benefits for productive users are below par for smaller-scale businesses which use minimal electricity, regardless of their latent demand, and which are often run by women. Our findings echo those of researchers in Tanzania who found that the benefits to productive users from mini-grid electricity in rural communities were correlated with business size. It is clear that, for female productive users to benefit equitably from mini grids, greater attention needs to be paid to upskilling them and upscaling their operations.
Finally, the conceptual and discursive emphasis on productive use in the mini-grid sector needs to be balanced by proportionate attention to social uses of electricity, particularly in the context of local health centres and schools, which are sometimes the only signs of government presence in rural communities. Recognising that these social services do not fit into the profit-making paradigm and may not be suited to cost-recovery frameworks is an important first step. This would need to be followed up with affirmative action such as prioritizing social-use customers for round-the-clock availability of electricity, with any extra costs to developers passed on to the government. All of this is important feedback for all stakeholders to take on board as we keep working towards the SE4All goal of achieving universal energy access by 2030.
Acknowledgement
Thanks to Lucy Baker for providing insightful comments on an earlier draft of this article.
