Business Case and Intervention Summary
Project Title: Solar Nigeria Programme (SNP)
Intervention Summary
What support will the UK provide?
The UK will provide £37.1 million of grant finance over 6 years (2014 – 2020) for the installation of
solar photovoltaic (PV) systems in 200 schools and 8 super health centres in rural areas of Lagos
State, Nigeria, and to expand the PV market and build a commercial base for that market in the North
of Nigeria. Systems for schools and health centres will be installed and operated by the Lagos State
Electricity Board (LSEB). The International Finance Corporation (IFC) will overcome the major barrier
to private solar market development (large and small) by mobilising commercial finance. Funding will
also support the development of a programme for schools and health centres in Northern Nigeria. The
Lagos State Government will provide £15 million of matching finance for the investment in the schools
and health centres; the Federal Government has indicated they will provide matching finance for a
future Northern component.
The programme will be funded from the International Climate Fund (ICF) as follows:

Direct investment in equipment (primarily PV systems and testing equipment): £15 million;

Technical Assistance (TA) provided to the LSEB on programme design, procurement and
implementation: £2.8 million;

TA to Federal Government to develop a Northern component: £0.5 million;

A First loss Facility of £12 million, managed by the IFC, to help mobilise commercial finance for
solar, with TA provided by IFC and the Nigeria Infrastructure Advisory Facility (NIAF) of £2.2
million;

Output Based Aid (OBA) grants of £3 million for provision of user finance for small solar
systems in the north, with TA of £1.6 million. These will be managed partly by IFC and partly by
NIAF.
Figure 1: Investment Summary
Component
Social (Lagos)
Preparation for the Social (North)
Commercial markets
Small Systems market
Capital
(£m)
£15.0
£12.0
£3.0
£30.0
TA /
Management
(£m)
£2.8
£0.5
£2.2
£1.6
£7.1
Total
(£m)
£17.8
£0.5
£14.2
£4.6
£37.1
Under the Social (Lagos) component, PV systems will be jointly purchased with the LSEB, with
oversight by DFID funded procurement specialists. Payments will be separate, with no UK funds going
through government systems. UK funds will be wholly allocated to equipment purchase and
installation, with other costs, such as training, funded by LSEB.
Technical preparation for the North will draw lessons from Lagos and will create the conditions
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necessary for supply chains to provide social solar infrastructure provision on a sustainable basis.
Why is UK support required?
Nigeria is the most populous country in Sub-Saharan Africa, accounting for 20% of the region’s
population. It has one of the worst grid power supplies in the world. Lagos is the region’s largest city
with around 20 million people. The population of Lagos is growing rapidly, overwhelming the State’s
ability to provide adequate social services, notably in health and education. In contrast to the stagnant
and conflict affected economy in Northern Nigeria, Lagos is experiencing high rates of output growth.
The result is a rapid growth in emissions of CO2 and other greenhouse gases (GHG).
Because of its sheer size, finding less carbon intensive ways of meeting Lagos’ energy needs is
important for Nigeria and other developing countries. The Lagos Government is committed to
developing infrastructure that both helps the city adapt to likely future climate change and limits its
production of climate changing emissions. Historic under-investment and rapid population growth
mean, however, that the State already faces large fiscal challenges in financing its infrastructure gap.
Investing in low-carbon approaches involves significantly higher up-front costs than more polluting
options. Co-financing from UK climate funding therefore will enable a more immediate take up of low
carbon solutions, without placing an unsustainable burden on Lagos State’s budget.
The poorer North of Nigeria has some of the highest levels of solar radiation in the world. It also has
the greatest need in terms of essential social service improvements. A combination of poor public
procurement, limited private demand and a weak supply chain have meant that progress in realising
the potential of solar in the North has been slow. This has been true even as falling lifetime generation
costs have made solar the obvious long-run solution to many of the North’s unmet off-grid power
needs. Strong collaboration with the Federal Government on reform of Nigeria’s power sector means
that DFID is already well placed to help expand power access in the North using solar technology. The
IFC, one of DFID’s key multilateral development partners, has comparative advantage to strengthen
solar supply chains.
What are the expected results?
The project’s impact is the scale up of PV generation at a national level, improving welfare outcomes
by making a significant contribution towards the electrification of public institutions, such as schools
and hospitals. The outcome is the delivery of clean and reliable energy services to currently
underserved communities in Northern and Lagos States, avoiding significant GHG emissions and
generating employment in the resulting supply chains.
The expected results are:


More than 47 MW of installed PV capacity;
Avoided emissions of 3.0 million tonnes CO2e from PV installations over their operational
lifetime, replacing kerosene and diesel use and grid;
Improved effectiveness of 200 secondary schools and 8 health super clinics through cleaner
and more reliable access to energy;
Improved welfare outcomes for more than 2.8 million people using domestic PV, with 190,000
school pupils and 4.7 million clinic patients benefiting from public institutions with PV systems;
36,000 additional Disability Adjusted Life Years (DALYs) averted in PV electrified clinics;
Improved effectiveness of institutional PV systems, with at least 95% operational after 4 years;
More than 3000 jobs supported across the PV supply chain;
Greater effectiveness of DFID’s other health and educational sector interventions in Nigeria;
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Business Case
I.
Strategic Case
A. Context and need for a DFID intervention
This project seeks to impact on two very different but inter-related sets of challenges in
Nigeria. The first is linked to climate change and the second is the very poor provision of
education and health services across the country.
Nigeria has one of the lowest levels of per capita on-grid power generation in the world. The
country’s population is over 160 million but at least 75 million people have no access to grid
electricity. Most businesses rely on expensive and polluting small diesel generators for most
of their power. Nigeria is the world’s largest market for these types of generator. Although the
Federal Government is, with DFID support, pursuing radical reform of the electricity sector, it
is widely recognised that the gap between supply and demand is so large that consistent 24
hour power supply is some years away even if these reforms succeed.
Lack of access to power severely impedes human development outcomes1, particularly in
Nigeria’s northern states. Over 59,000 Nigerian women die annually in maternity wards; 1 in
13 Nigerian women die due to pregnancy-related causes2. Among the country’s 70,000
primary schools and 23,000 health care facilities most in rural areas are remote from the grid.
Most have no power supply at all.
There is little practical prospect of improving rural health and education outcomes through
accelerating access to grid electricity. For the time being evidence suggests purchase of
generators will continue to out-strip capacity additions to the national grid. Diesel generators
continue to be among the largest and fastest growing sources of greenhouse gas emissions
in Nigeria. They are also expensive to operate. Giving schools and health facilities access to
reliable electricity derived from renewable sources would therefore lead both to a reduction in
harmful greenhouse gas emissions and an improvement in the provision of essential
services.
Several renewable energy technologies offer the technical potential to support off-grid
electrification. These include solar photovoltaic (PV), micro/pico hydropower and small wind
and biofuels. Selection of the most suitable technology in each situation tends to be a
relatively straight forward exercise. The primary consideration is availability and proximity of
the resource: year-round running water, consistent strong wind, and consistent strong
insolation. Resources for pico hydro in Nigeria are limited, particularly in Lagos: biofuels lack
scale and a reliable supply chain, particularly for remote locations; and wind resources are
generally less than viable.
The potential for PV power supply in Nigeria, by comparison, is considerable. Solar intensity
across the country is high. It ranges from an average of 3.5 kWh per m 2 per day in southern
states to as high as 7.0 kWh per m2 per day in northern states34. Assessed on the basis of
1
Wang L. Determinants of child mortality in LDCs. Health Policy. 2003; 65:277-299.
2
Bush, Christopher, “A Solar Solution to Save Women’s Lives in Nigeria”. Berkeley Health. Fall 2009.
3
HOMER solar design system data for Kano sourced from NASA
4
Nigerian Renewable Energy Master Plan http://www.iceednigeria.org/workspace/uploads/nov.2005.pdf
3
lifetime costs, off-grid power supply using PV is now cheaper than supply from diesel
generators in a broad range of applications. In northern Nigeria, diesel and petrol generators
supply electricity at Naira (N) 40-70 per kWh. PV systems can supply electricity for N35-53
per kWh if financing and market barriers are addressed5. Pay back periods are extremely
favourable for this type of technology.
Developments in the solar PV market
The international market for solar has changed dramatically in recent years, redefining what
is commercially viable. Costs of PV panels have fallen by 80% since 2008 and 20% since
2012. In addition, recent advances in Light-Emitting Diode (LED) lighting mean that lighting
applications now require just one third of PV capacity compared with Compact Fluorescent
Lights (CFLs), which have dominated solar over the past decade. The number of countries
with solar energy schemes has almost trebled in the last 10 years, from 48 to 127. India,
Bangladesh and Mexico have seen the biggest growth, and in India the industry is now
focussed on removing supplier constraints to meet exploding demand. The conditions that
have led to successful market growth are, in some cases, even stronger in Nigeria than
elsewhere.
The PV market in Nigeria however is still underdeveloped. The solar supply chain is
established but limited in capacity and reach. Imported products are brought in somewhat
above prevailing international prices and costs are increased by local tariffs. Multiple level
distribution chains (up to six levels between importer and rural user), poor inland transport
infrastructure and high margins add significantly to the consumer price. Consequently,
existing solar companies in Nigeria have struggled to scale up. There has been little activity
in the market for larger systems serving large business and institutional power users. These
conditions are not dissimilar to those in other less developed countries prior to effective
market scale up solutions being introduced.
The key barriers preventing PV going to scale in Nigeria are:
High up-front costs: PV systems are cheaper to run than generators but cost more to
buy. Many people cannot purchase systems unless the capital cost is spread over time.
Solutions to the capital cost hurdle include financing terms (loan or lease), rental, grants
or a combination of these.
Lack of access to finance: This has been a key factor in scaling solar in other markets.
Financing for solar in Nigeria is limited, particularly in rural areas, for both businesses and
households alike. Financial institutions are uncomfortable providing the long-term and
non-recourse finance necessary for investment. They seek a strong balance sheet or
security backing and only offer short loan tenors.
Poor reputation: PV power supply has acquired a poor reputation for performance and
reliability in Nigeria. Past efforts by government and sometimes donors have applied a
project based ‘supply and install’ model, with inadequate support for on-going
maintenance. This has resulted in higher failure rates, in turn reinforcing the view
amongst consumers and lenders that PV is unsuitable for the Nigerian market (Omisore
2011).
Lack of capable vendors: Solar markets scaled in other countries only when capable
sellers entered, took the risk and reached out to users to create the market (Miller 2009).
They require capital, business acumen and a willingness to pioneer the sector. Such
actors are hard to find in the existing solar sector in Nigeria.
5
NIAF project team calculations across a range of solar PV configurations and market segments for
Nigeria
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Potential for Solar PV in Lagos and the North
The balance between the delivery of climate change and social benefits from the same
intervention varies widely for different geographical locations, and depends on the extent to
which electricity is currently available and the means by which it is supplied:
The situation in Lagos
Lagos is the most populous city in sub-Saharan Africa, with population estimates at 20
million. It is the largest city in the world not to have a mass transit system (though work has
started on a first light rail line). Lagos is the driver of the country’s non-oil economy, being the
commercial capital and contributing around 65% of Nigeria’s non-oil Growth Domestic
Product (GDP) in 2012, according to the Governor, Babatunde Fashola6. Lagos is growing
rapidly, both economically and demographically, with average GDP growth estimated at
more than 10% this year. Most growth is private sector driven, and much of it is in the
informal sector.
Although poverty rates are lower and less concentrated in Lagos than in other parts of
Nigeria, Lagos matters as a market to drive poverty reduction elsewhere in the country. From
a climate change perspective, Lagos is a priority simply because it has one of the fastest
growing urban emission footprints on the planet. Rapid population and income growth in a
city without mass transit means more cars; and in a city with no power supply means more
generators. Recent DFID supported energy audits covering several areas of Lagos recorded
energy usage and needs for 13,800 premises, and found that they contained 17,000 small
generator sets. It has long been assumed that self-generation of electricity in Nigeria
exceeded grid generation, but this work reveals the extent to which this is true.
Rapid population growth has overwhelmed, to a significant extent, the Lagos State
Government’s ability to provide essential services to its population. An estimated 1.5 million
children go to private primary and junior secondary schools in Lagos. This means that the
private sector now educates two thirds of children. Recent research shows that the private
sector is now the main provider of education even for children from poor households, more
than half of whom attend one of around 18,000 private schools and pre-schools. This is a
growing trend with private schools absorbing much of the growth in school age children,
estimated to be eight per cent a year7.
In terms of energy provision, the state faces the same set of challenges as Lagos’
businesses. Most secondary schools and health facilities do use electricity, and most of it
comes from small diesel generators. An audit of secondary schools conducted in recent
months by LSEB for this project found 991 generators in use between 655 schools.
Electricity in Lagos can be supplied more cheaply using solar generation than from diesel
generators, but to date there has been very limited adoption of the technology. Getting
significant numbers of people in Lagos to switch from diesel to solar would bring large
climate change benefits. There are already a number of capable suppliers and the supply
chain could be strengthened through the introduction of industry standards and an externally
certified training regime. Demand in Lagos could realistically be increased by the
demonstration effect of providing prominent programmes, such as 24 hour health services,
with solar, and by helping overcome the higher up-front proportion of lifetime costs.
The situation in Northern Nigeria
6
Quoted in press reports of his speech at the closing ceremony of the 2012 Lagos International Trade
Fair
7
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Business Case for DFID’s Developing Effective Private Education Nigeria programme
Northern Nigeria provides a very different intervention context to Lagos. Around 80 million
people live in the North East, North West and North Central Regions. The North East and
North West have the worst poverty and human development indicators in the country, and
some of the worst in the world, as outlined in DFID Nigeria’s recent Country Poverty
Reduction Diagnostic (CPED)8. Five (Kano, Kaduna, Yobe, Zamfara and Jigawa) of DFID’s
seven focal States (along with Lagos and Enugu) are located in the North.
The North East is highly affected by conflict and three States are currently under a state of
emergency due to insurgency and military activity. It is estimated that the conflict has
resulted in more than 4,679 deaths in Nigeria in 2013, with the majority being in the North
East9, resulting in migration and the collapse of public services and much of the region’s
economic activity. Insecurity from terrorist bombings and kidnapping are also affecting other
areas of the North, including its largest city Kano.
The quality of health and education provision has been extremely poor across much of
Northern Nigeria for many years. Improved access to electricity is important for a number of
technology based approaches to improving teaching standards. Over the next academic
year, DFID Nigeria’s education team will be piloting the use of different technologies, all of
which will require a power source, in classrooms and schools in northern Nigeria:
-
Teacher development programme (TDP): piloting the use of the ‘Trainer in your
pocket’: providing additional training content and support for teachers via mobile
phones (Katsina, Zamfara, Jigawa)
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Discovery Girls Education Project: Piloting through learning centres the usefulness of
TV and radio content as instructional tools and in teacher training (Kano State only)
-
Education sector support programme in Nigeria (ESSPIN): Piloting the use of the
‘Lifeplayer’ – mainly as instructional tool for teachers in the classroom (Kano,
Kaduna, Jigawa)
By mid-2015, initial evidence about what works will have been generated and by 2017 the
impact on student tests scores will be known.
One of the biggest challenges in the North is getting qualified teachers, midwives and other
health workers to live in poor rural communities. Because this is such a major challenge to
improving service delivery, providing electricity to the houses of rural teachers and health
workers is equally important as serving the schools and clinics where they work.
The vast majority of schools and health facilities, particularly in rural areas, lack electricity
supply altogether. Even where generators do exist they tend to be used less than in Lagos
due to shortage of funds for diesel. The solar market is also much weaker and the
challenges greater than in Lagos. Supply chains for system maintenance, especially for PV
solutions in remote and dispersed schools and clinics, do not exist. Evidence from other
countries suggests that the private sector is unlikely to invest in the supply chain as long as
almost all demand is from government agencies, which are seen as corrupt and unreliable,
and where the density of demand is low. For this to work, it is necessary to first stimulate
household and business sector demand for supply chains, including the provision of financial
guarantee mechanisms, before developing publicly procured social service maintenance
contracts.
The North already has a history of failed publicly procured solar projects. The main causes of
failure are well understood and outlined in the Appraisal Case. To avoid repetition, detailed
8
DFID Nigeria CPRD, Quest reference 4419198
9
Armed Conflict Location & Event Dataset (www.acleddata.com)
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preparatory work with government counterparts on procurement and implementation
modalities will be necessary, in addition to strengthening the private sector supply chain.
Successful implementation in the less challenging context of Lagos would provide valuable
lessons for working in the North, including the refinement of technical standards and training
regimes already developed for Lagos.
Fit with wider DFID policy and programming as well as the wider donor
landscape.
Investing in solar power will contribute directly to the UK Government’s broader objective of
supporting developing countries to reduce emissions and move to low carbon development
pathways. It is consistent with DFID’s Future Fit agenda of demonstrating that low-carbon,
climate resilient and sustainable development is necessary and achievable, including
generating energy using non carbon based methods. By doing so, it will promote sustainable
economic growth and protect the wellbeing and livelihoods of the poorest people. The
programme will also meet the ICF’s objective of piloting and demonstrating the potential for
climate-resilient low carbon growth, leveraging support from partner country governments
and the private sector.
Although climate change was not initially prioritised in DFID Nigeria’s current Operational
Plan (2011 - 2015), financial provision for some climate change activities was included in the
Plan’s outer years. Investing in renewable energy also fits well with the Plan’s other strategic
objectives of promoting wealth creation and improving health and education outcomes. DFID
Nigeria is already making substantial investments in health and education through
programmes such as ESSPIN (public primary education and DEEPEN (private schools) in
Lagos, and health (PATHS 2 (health systems), ENR (HIV) and SUNMAP (malaria). This
programme will therefore contribute to achieving the Plan’s headline indicators of increasing
the number of pregnant women and children under five with access to health services and
the number of children receiving [quality] education. Similarly, the programme will help
tackle two of the biggest binding constraints to economic growth in Nigeria, power supply and
access to finance. It will work alongside NIAF, which already has work streams addressing
power sector reform and climate change.
Two International Climate Fund concepts for solar PV in Nigeria have already been
approved: one for Lagos, where emission saving is a major driver; a second for the North,
where social benefits are the primary objective. These have been included in the CPRD as
prospective programmes for the next DFID Nigeria Operational Plan. All interventions will be
targeted at DFID’s 8 Focal States and consistent with the strategic objective of helping the
Government of Nigeria to use its own resources more effectively. In return for the provision of
power, participating states will commit to addressing the other factors: attracting capable
personnel to these remote facilities with better training, conditions and support (including
electricity to their residence); provision and maintenance of freezers to store vaccinations in
a viable condition; better communications and remote support; provision of other analytical
(clinic) and audio visual (school) devices.
The programme is consistent with Federal Government’s energy policy10. This has reform of
the country’s electricity grid and the privatisation of generation and distribution at its heart,
but also prioritises balancing future grid expansion with off-grid solutions and the introduction
of renewables into the fuel mix. The Federal Ministry of Power (FMoP) is strongly supportive
of increasing solar use, as reflected in the offer in principle to co-finance a programme and
the willingness to establish a Project Implementation Unit (PIU) reporting directly to the
10
7
Renewable Energy Master Plan, 2nd Edition – Energy Commission of Nigeria, 2013
Minister. Health and education policies are largely set at State level. The co-financing offer
from Lagos demonstrates strong buy-in there; there are no States in the North where
improved access to renewable energy would counter their policy.
A few other development partners are active in the renewable energy sector in Nigeria, with
both USAID and the World Bank looking at supporting solar and helping get the balance right
between grid expansion and increased use of off-grid access. The US Powering Africa
initiative considering increasing their activity in solar in Nigeria in future and DFID has
discussed this with them.
The LSEB is keen to replace generators in its schools and clinics with solar systems. It is
planning to transform primary healthcare provision through the opening of fifty seven 24 hour
area clinics across the State and to improve educational outcomes through e-learning. It has
not, however, been able to secure a capital allocation to do this in the face of competing
priorities. The Governor of Lagos has confirmed that the State will make £10 million of State
funds available to match a UK contribution. This is expected to increase to £15 million
following DFID approval.
Women and Girls – UK Gender Act; leaving no one behind
The programme will support health and educational benefits for both males and females climate benefits from the programme are not gender specific. Women and girls are however
likely to benefit more from e.g. the shift 24 hour primary healthcare facilities in Lagos. This
will in part be through improved access to natal and neo-natal services, particularly in rural
and riverine areas. The social baseline study and follow-up monitoring and evaluation will
identify beneficiaries on a gender disaggregated basis, and there will be specific gender
targets for educational outcomes in the programme logframe. Outcomes on maternal
mortality and girls’ education are very poor in much of the North, and any future extension of
social provision to the North would be substantially targeted at women and girls.
Partnership Principles
The planned intervention is fully compliant with DFID’s Partnership Principles. Support was
initially requested by the State Government, building on its own extensive data collection and
needs analysis. They have already installed pilot systems and UK assistance has specifically
been sought to roll out solar power at scale. Lagos State is widely recognised as having
made most progress in raising internally generated revenue and in convincing citizens that it
is using taxes in ways that benefit them. Taking each principle in turn:
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The intervention will contribute to poverty reduction by improving health and
education outcomes for poor people. LSEB has targeted rural and riverine
communities that are among the poorest in Lagos State to benefit from the initial
round of installations that is being co-financed through this programme.
Lagos State has a generally good track record of respecting human rights and other
international obligations. This intervention supports access to healthcare and
education which are widely seen as basic rights as recognised in the context of the
Millennium Development Goals (MGDs).
Public financial management is a high risk area for the whole of Nigeria, which is why
no UK funds will be transferred directly to the Nigerian Government for this project.
LSEB has, however, specifically requested DFID support for procurement oversight,
so as to ensure that not only UK funds but also Lagos State funds are used
transparently and that corruption risks are minimised.
Domestic accountability has been central to the Lagos Government’s approach in
recent years by demonstrating that taxes are being used to deliver real benefits to its
citizens. LSEB has performed strongly in this regard, by delivering large
improvements in street lighting and developing successful IPPs to ensure constant
power to key State facilities, such as the main hospital on Lagos Island, despite
continued poor supply from the national grid.
Theory of Change
The basic premise of this programme is that by starting in Lagos, where there is already a
committed and proven partner (LSEB) and where the solar market, although in its infancy,
has potential to grow rapidly, immediate social and commercial benefits from investment in
solar equipment can be achieved. Including a market development component alongside
social infrastructure provision will help develop industry standards and service delivery
models. As well as driving immediate private investment in solar in Lagos, this will provide
the learning needed for future investments in the North, under a follow on project, where
social provision will not be feasible without a functioning market, including the provision of
credit guarantees. Introducing a Northern component in the current project will help prepare
Northern State partners ahead of time. The project will therefore have three separable
components (Social – Lagos; Social - the North; Market Development – Commercial and
Small Systems). Each has its own theory of change, and there is an overall theory of change
for the way components combine to deliver more benefit collectively.
A major part of the theory of change is simply that, by providing matching funding, State
funds can be leveraged to achieve large climate benefits. The potential carbon savings are
large enough to justify the Lagos component even if the only change were the direct
substitution of renewable energy for diesel generation. The fact that many schools and clinics
have fuel for only part of the day means that there will also be direct educational and health
benefits in Lagos. ICF co-financing will encourage Lagos to invest in solar and continue to do
so if the programme is successful. Wider benefits will be realised through demonstration
effects and direct improvements to the supply chain for solar power systems. Putting in place
a substantial number of well installed and maintained solar systems will help to correct
negative public perceptions of solar reliability that result from a history of poorly procured and
implemented projects. This will increase the level of demand for solar systems from
household and businesses, and the standards and training regimes established will help to
improve the quality if installations they receive.
B. Impact and Outcome that we expect to achieve
The project’s impact is the scale up of PV generation at a national level, improving welfare
outcomes by making a significant contribution towards the electrification of public institutions,
such as schools and hospitals. The outcome is the delivery of clean and reliable energy
services to currently underserved communities in Northern and Lagos States, avoiding
significant GHG emissions and generating employment in the resulting supply chains. The
expected results are:
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More than 47 MW of installed PV capacity;
Avoided emissions of 3.0 million tonnes CO2e from PV installations over their
operational lifetime, replacing kerosene and diesel use and grid;
Improved effectiveness of 200 secondary schools and 8 health super clinics through
cleaner and more reliable access to energy;
Improved welfare outcomes for more than 2.8 million people using domestic PV, with
190,000 school pupils and 4.7 million clinic patients benefiting from public institutions
with PV systems;
36,000 additional Disability Adjusted Life Years (DALYs) averted in PV electrified
clinics;
Improved effectiveness of institutional PV systems, with at least 95% operational after
4 years;
More than 3000 jobs supported across the PV supply chain;
Greater effectiveness of DFID’s other health and educational sector interventions in
Nigeria
A. Appraisal Case
A. What are the feasible options that address the need set out in
the Strategic case?
The need identified in the Strategic Case is to both improve health and educational outcomes
and reduce the polluting effects of diesel and petrol generator use in DFID’s focal States.
The only feasible approach to achieving both goals is to replace the generators currently in
use with a cleaner energy source that will have lower operating costs than they do.
Several renewable energy technologies offer the technical potential to support off-grid
electrification. These included wind, biofuels, pico-hydro and solar.
Small wind has been well used in rural electrification but in specific settings only. Modelling
of various PV / diesel / wind hybrid generators has shown that the lowest lifetime costs (for
systems in the circa 10 kWp range) can often be achieved using a diesel / PV hybrid. The
cost impact of adding a wind generator is insignificant. Nigeria generally has a ‘low windspeed regime’. There are areas where speeds are higher, localised areas where speeds are
higher, and for small systems lower speeds can be viable. However, given the geographic
variability and uncertainty, and lack of compelling economic case for wind versus PV/Diesel
hybrids, wind presents a weaker option as an anchor for a scalable programme over diverse
geographies.
Biofuels is not a practical alternative for this intervention. There is no established liquid
biofuels market in Lagos. In relation to solid biomass (such as gasification of crop waste),
there is typically insufficient physical space on the school sites in Lagos to house such an
operation (source LSEB audits), assuming that a steady supply of fuels was readily available.
International experience with biomass for power is mixed. The most successful has perhaps
been Husk Power of India. Others have struggled either technically or financially. Similar
initiatives and capacity has not been established in Nigeria, and the challenge of establishing
this as small systems for institutions is a step beyond this experience.
Micro/pico hydro has been used in Asia11. The smaller the load, the closer the resource
needs to be in order to be practical and economical. Micro/pico hydro is only practical,
therefore, for clinics and schools where a reliable water flow is located nearby. No
hydrographic surveys have been conducted for Nigeria12, and in the absence of evidence to
the contrary, a starting assumption is that the number of situations where micro/pico hydro
will be the lowest cost solution will be limited. This makes it difficult to establish the viable
supply chain, particularly for remote locations.
PV, on the other hand, is well suited to Nigerian conditions. There are three main reasons:
PV offers a lower cost, cleaner, quieter and more convenient solution than diesel or
petrol. Costs of solar PV panels have fallen by 80% since 2008 and 20% since
201213. In addition, recent advances in LED lighting mean that lighting applications
now require just 1/3rd of the amount of PV capacity than the CFL lights that have
Examples include Vietnam (pico-hydro for single homes – various case studies), Sri-Lanka (small
village systems of around 15kWp)
11
12
NIAF Renewable Energy scoping study 2012, unpublished
PV Magazine, ‘Renewable energy support schemes now present in 127 countries’, 28 August,
2013,
viewed
at http://www.pv-magazine.com/news/details/beitrag/renewable-energy-supportschemes-now-present-in-127-countries--report-finds_100012528/#ixzz2nGbHNsfU
13
10
dominated solar over the past decade. This means that costs are further reduced due
to smaller system sizes.
Nigeria, and especially Northern Nigeria, receives high levels of solar radiation. This
further reduces costs by delivering a power output (per Wp of solar panel installed) up
to double that delivered in Europe.
PV systems are modular. This makes them suitable for small loads in remote places.
Unlike grid supply options PV systems do not incur high cost penalties related to
distance.
Various models for delivering solar PV have been considered, some of which have been
discounted as unfeasible. Direct funding to government is not an option because in Nigeria
DFID Nigeria the fiduciary risk is too high to put money through Government financial
systems. Conventional public private partnership models are not feasible as the targeted
social installations do not generate revenue and State governments are not sufficiently credit
worthy to guarantee future payment. A project based wholly on market development could
deliver emissions savings but no social benefits. Other approaches would deliver social but
not climate change benefits, and thus would not qualify for ICF funding.
Two remaining viable options form the basis of this Appraisal Case. The first is to only invest
in social solar installations in Lagos, where the market and partnership arrangements are
sufficiently well developed to guarantee success. This option would not deliver broader
market benefits and, most importantly, it would delay any preparatory work in DFID’s priority
Northern States. The second, and preferred, option is to proceed with the Social Component
in Lagos but to include a private market development component and a technical assistance
component to prepare for social investments in the North when the underpinning conditions
for success are in place.
These options are summarised below;
Figure 2: Options Summary
Option
Description
1
Social (Lagos only)

2
Provide electric power to rural secondary schools and rural super clinics in
Lagos State using PV
Social (Lagos) plus preparation for the north
As per Option 1, except that the Social (North) component would be phased:
preparation under this programme, followed by a separate and more robust
proposal and separate decision point prior to implementation of the Social (North)
component.




11
Social (Lagos) component – provide electric power to rural secondary
schools and rural super clinics in Lagos state using PV;
Commercial component – develop the private market for solar PV by
focussing on mobilising finance at commercial scale;
Small Systems component – develop the private market for small PV
systems targeting rural households in the north;
Prepare the Social (North) component – prepare to the point of a separate
funding proposal to power rural schools and clinics in northern states with
PV
B. Assessing the strength of the evidence base for each feasible
option including delivery routes
The quality of evidence for both options is rated as limited to medium.
Option 1: Social (Lagos only)
Social Component
1. Assumption: Electrification of clinics can improve health outcomes for patients (Medium)
Reliable power in primary health care centres (clinics) can contribute to improved health
outcomes. It enables better lighting, more effective communications, better storage of
vaccines, and the operation of electrical equipment that is important in the provision of care
and diagnosis14. Importantly, reliable power in associated residences can be a significant
factor in attracting skilled personnel to operate remote rural clinics. However, while it is clear
that electricity is a key enabler for improvements in health services, the role of power is
secondary to other factors such as staff attendance and drug availability, and its contribution
to outcomes is difficult to quantify (GVEP, 2013).
The relationship between energy access rates in health facilities and people’s health status is
subject to many factors. For example, electricity access rates in Kenyan health facilities
increased from 62 per cent in 2004 to 74 per cent in 2010. In the same period the number of
facilities with incubators for new-born babies increased from 38 to 6215, and the neonatal
mortality rate (probability of the baby dying in the first 28 days after birth) dropped from 40 to
28 per 1000 births16. It seems clear that access to energy contributed in some part, enabling
incubators to operate.
Electrification can increase patient attendance at health clinics. In Benin an annual rise in
attendance of 10% was reported after electrification of 17 rural health centres (AfDB, 2011,
Benin). Another, often less considered, aspect is communication. For example, mobile
phones and VHF radios are critical to ensure there is sufficient support during emergency
situations and enable better treatment decisions by connecting to specialists from referral
hospitals17.
Energy also assists in the prevention of disease with vaccines and immunizations. Vaccines
lose their potency permanently when exposed to temperatures outside their storage range,
and so need to be stored in a powered refrigerator. Health centres with functioning
refrigeration facilities can provide vaccinations as part of routine service delivery, as well as
treatment of diseases such as HIV and AIDS, measles, and polio. Refrigeration also enables
storage of blood, medicines and testing reagents. Unreliable electricity connections with
frequent power shortages contribute massively to wastage; it is estimated that almost half of
all vaccines delivered to developing countries are ruined due to poor cold chain services
(Vaxess, 2012). However, in contrast, strong evidence indicates that the presence of power
does not affect immunization rates (World Bank , 2008)18.
GVEP/UKAID, 2013; Practical Action (2013), Poor People’s Energy Outlook; European Commission
(EC) (2006); World Bank, 2008; Wang, 2003; Harsdorff and Bamanyaki, 2009; Vaxess, 2012; AfDB,
2011, Benin;
14
15
From Practical Action (2013), citing NCAPD Kenya et al., (2005, 2011),
16
From Practical Action (2013), citing WHO (2004, 2012b).
17
Musoke, 2002
18
World Bank / IEG, 2008, The Welfare Impact of Rural Electrification: A Reassessment of the Costs
and Benefits
12
2. Assumption: Electrification of schools can improve welfare outcomes for children (Medium)
Reliable electricity in school facilities can enable improvements in educational outcomes.
Power aids the effectiveness of education in several ways:



teaching and learning (vocational tools and equipment and use of information
computer technologies);
physical infrastructure (lighting, cooking facilities, space heating and cooling, water
pumping and purification);
human resources and governance (improved conditions for staff through use of
modern technology, training, management of records).
Empirical evidence that attributes outcomes specifically to electrification of school facilities is
limited. However a number of studies demonstrate links between electrification in general
and improvements in educational outcomes through correlations, anecdote, hypothesis and
opinion.
There is strong evidence that electricity in schools can improve the conditions for learning in
a range of ways. These include;








It is easier to attract teachers and retain them in rural schools;
Reduction in teacher absenteeism (Kanagawa and Nakata 2008);
It is easier for teachers to prepare for classes (Kandker et al. 2009; Kanagawa &
Nakata, 2008);
Increase in evening adult education (National Geographic, 2011);
Fans improve the comfort of students and teachers, improving focus on learning and
attendance: Extremely warm conditions can also exacerbate illnesses such as
dehydration, fatigue, and heat stroke. Space cooling can be important to keep rooms
and offices at a comfortable temperature for staff and students – low-power electric
fans can make all the difference;
ICT technology (such as television and computers) improves learning significantly
(Kanagawa and Nakata 2008), but a challenge is that most government schools in
Nigeria lack this equipment;
Water can be more readily pumped;
Electric lighting allows schools to operate outside daylight hours, extending the
working hours for students, adults, and teachers. For schools with too many pupils,
longer classroom hours can allow additional classes to accommodate more students
and/or reduce class sizes. Students without electric lighting at home can stay at
school to study and complete homework, leading to better grades. Evening classes
can also be run for other members of the community. Teachers can prepare for
lessons, mark homework, conduct staff meetings and carry out administrative tasks.
Energy access is not only important for primary schools; secondary schools, higher
education institutes, and vocational centres, benefit equally from having power. For example,
experience and confidence with computers is increasingly important in jobs markets;
computer classes not only interest school students but also attract adults looking to gain
extra skills. Access to internet is essential for higher education institutes to conduct research
and communicate with international colleagues. Vocational training centres teaching
carpentry, welding and manufacturing require a good quality energy supply and high-power
machinery.
3. Assumption: PV Electrification is a viable way to electrify clinics and schools (Medium)
Solar PV is viable technically and financially across a wide range of scales. It is now used in
millions of locations globally and in remote rural areas, driven by lower lifetime costs in many
cases than the alternatives (IRENA, 2012). Since 2005 more than 35,000 social
infrastructure institutions and small enterprises in 18 countries have been benefiting from
13
access to modern energy services19. The World Health Organisation and the UN Foundation
have recently launched a High Impact Opportunity under SE4ALL initiative on rural clinic
electrification, particularly with a view to improving maternal health outcomes.20
Nevertheless, there have been many cases of solar in remote public institutions failing
prematurely. The causes of failure have been well documented and relate not to the
technology per se but primarily to inadequate provision for on-going maintenance of systems
(issues of both supply and demand gaps).
The proposed LSEB education intervention is focussed on impacts such as enabling elearning, where evidence of impact is still quite limited. The LSEB health intervention will be
part of a package of changes to move to 24 hour provision in a smaller number of better
equipped facilities. Again, evidence of providing PV in this context is limited. As such, the
basis for estimating the likely benefits in Lagos will depend to a significant degree on
assumptions. Equally, however, there is considerable scope for improving the evidence base
through this programme and the evaluation component should provide findings of significant
value for project design in other countries.
4. Assumption: Improved public procurement for PV in clinics and schools is possible in Nigeria
(Limited – Medium)
Programmes in Nigeria that have relied on public supply and installation of PV systems have
been disappointing. None has been sustainable and none has extended installations beyond
donor funded procurement. Equipment prices have generally been higher than international
market prices, driven largely by lack of transparency in procurement. Equipment has been
supplied and installed but the supply chain for this has been transient and has not provided
for an enduring market. For the most part, the systems supplied have ceased operating21 .
Better structuring of procurement can reduce failures due to poor equipment and inefficiency
due to bribes. Paying suppliers to provide maintenance is an essential step. But supplier
incentives would quickly dissipate once all output-based payments had been received.
Sustainability then would depend on two factors. Firstly, a continuing stream of donor funded
procurements to sustain the availability of technical skills. Secondly, the ability and
willingness of health clinics and schools or their local or state government - to pay for
maintenance after the programme ends.
Lagos is creditworthy and LSEB is known for meeting its payment commitments. It has a
capable team with expertise in implementing projects with the private sector, and in solar
technology. It is committed to establishing strong standards, transparent procurement, and
on-going operation of the systems after installation. LSEB has also developed several IPPs
supplying State facilities from large hospitals and the government secretariat to street
lighting. These have all been successful. The same is true for a market lighting project cofinanced by NIAF.
How Lagos has planned for success
In the case of Lagos, prospective recipients have a strong interest in power supply. Most of
the public institutions already have some power and appliances but are frustrated by
intermittent supply due to unreliable grid and budget constraints limiting generator use.
19
Energizing Development (2013)
20
Sustainable Energy for All – 2013-15 Strategic Work Programme (April 2013)
21
Such procurements have been funded by the Japan International Cooperation Agency, Solar
Electric Light Fund, Canadian International Development Agency, United Nation Development
Programme, the World Bank/International Development Agency and the World Health Organization.
14
LSEB will budget for maintenance and establish structured contracts and oversight for its
provision. LSEB is also committed to running a transparent procurement process, with
oversight by NIAF. Product standards and specifications are being developed that will ensure
only high quality components and competent service providers are sourced. This includes
pre-qualification of suppliers, and training and certification requirements for all technicians.
Batteries will be protected from over-use with a maximum discharge controller not accessible
to users. The system will be protected with an overload trip switch not accessible to users.
The evidence base from previous DFID funded projects is strong-medium.
Option 2: Social (Lagos) plus preparation for the north
Social (Lagos) Component
This component is identical to Option 1 above.
Preparation for the Social (North) Component
The situation in the North is unquestionably more challenging than in Lagos. The
weaknesses of procurement and implementation are evident in many Federal and State
Government projects in the North. The FMoP has been a key counterpart in Nigeria’s high
profile power sector reforms, and the privatisation processes are considered to have been
much more transparent than previous exercises in Nigeria. These have not involved direct
procurement, however, and at this stage the evidence that better systems can be developed
for a Northern component remains weak. For this reason, it is still considered premature to
seek approval for funding of a Social (North) Component.
1. Assumption: Implementation of a successful programme in Lagos can improve the prospects of
replication and sustainability in the north (medium)
In the context of Nigeria (and developing nations more broadly) successful and sustained
operation of the PV power systems provided under the Social (Lagos) component would be
significant. It would demonstrate to Nigeria’s Federal and State leaders that such projects
can succeed and that political benefits can accrue from implementing transparent and well
managed procurement. It may also encourage donors to support the replication or extension
of similar such projects.
While a successful programme in Lagos would not on its own deliver change elsewhere, it
would open the door for DFID (and/or others) to prepare the conditions for success in the
North. This would include adapting lessons from Lagos, engaging key stakeholders such as
FMoP and focal States. The project would help them to prepare systematically and avoid
rushing; conducting asset audits, ensuring stakeholder buy in, allocation of State co-funding
and maintenance commitments, and assessing and developing capacity.
2. Assumption: Establishment of a stronger private market and supply chain for solar in Nigeria
will improve the prospects for success of the Social (North) component (medium)
A pre-requisite for the effective operation of a Social (North) project is the existence of a
supply chain with sufficient capability and scale. For this to happen the business case for
solar must be commercially viable (Martinot 2001, 2002; IFC 2007, WB 2008). The
establishment of a stronger private market (which operates under commercial conditions) is
therefore essential and can be supported via two components: Commercial and Small
Systems, as discussed below.
Commercial Component
The Commercial Component aims to improve foundations for the Social (North) component
by enabling the commercial market for solar in Nigeria to scale. Commercially viable scaling
would result in the private sector investing in and developing a much greater capability and
15
so be better placed to support the more challenging nature of the Social (northern)
component.
1. Assumption: Access to finance is a significant barrier to Nigerian Solcos (medium)
Access to finance is not sufficient alone to make a solar market happen. However, when
other conditions are conducive, lack of finance is a barrier. Nigeria has other conditions that
are conducive: many commercial users of generators in Nigeria today would enjoy a cash
payback of 3 years and could be cash-flow positive immediately with finance22. Solar is a
good financial investment but finance is limited23. The Indian experience provides a good
case study for Nigeria. The financial savings available in India to commercial users are about
the same or slightly better today than in Nigeria24. The Indian market has grown rapidly. Yet
industry discussions are dominated by the constraints Solcos face in getting access to
sufficient finance to meet demand25.
2. Assumption: Risk sharing facilities are attractive and can stimulate lending to Solcos (medium)
While there is limited evidence for Risk Sharing Facilities for solar specifically, evidence for
the effectiveness of Risk Sharing Facilities (RSF) more broadly is strong. The IFC has
extensive experience in operating these. This includes over $120 million related to energy
efficiency programmes in Asia and Eastern Europe. Older programmes tended to achieve
utilisation rates of around 80% but default rates are now low and most programmes have
incurred no pay out obligations. The highest pay out to date is 3% of the fund under the
CHUEE facility with the Bank of Beijing. A summary of the IFC’s RSF portfolio for climate is
in Error! Reference source not found., in the Quested supporting documents paper (Quest
Reference: 4547042).
A DFID supported Partial Risk Guarantee Facility with the Asian Development Bank for solar
in India was recently cancelled due to lack of take-up. While this presents lessons it does not
necessarily mean that under different circumstances such a facility cannot serve a purpose.
A formal evaluation is being commissioned together with the AsDB, but the types of
problems encountered were:



Agreeing contracts with participating financial institutions who did not want to
acknowledge that loans were guaranteed by AsDB. They did not intend passing on
the interest rate reduction, and were concerned about clients discovering this.
Ultimately the banks didn’t think it worth the effort; paperwork for the facility was quite
onerous and they were giving MSME loans anyway.
Transaction costs not only to access the guarantee fund, but heightened costs from
making unfamiliar loans, additional effort, and risk of passing on the interest rate –
were also put offs.
This proposal, while not without risk, is very different. Guarantees will be implemented
following a model and structure IFC has applied with significant success. In addition, IFC in
Nigeria has strong existing relationships with over 10 private banks, which include equity,
debt and advice. IFC is confident that if the solar market opportunity and demand arises,
then the mechanism has good prospects. Considerable TA is needed to help to develop and
22
Modelling by NIAF project team
23
See Appendix on interviews with Banks and Solar Companies. Quest reference: 4547042
24
Market assessment and modelling by Vial of Indian market segments in 2012
25
Bridge to India, 2012, Bankability and Debt Financing for Solar Projects in India
16
channel this demand. Finally, the complication of a concessional interest rate, which was one
of the barriers with the AsDB model, is not a feature of this proposal.
3. Assumption: A stronger commercial market for solar in Nigeria (with improved access to
finance) will result in a stronger supply chain capability in the north (limited)
The Commercial component will support the solar market nationally. Nevertheless, it is
probable that early momentum will arise in the south, and in particular around Lagos. This is
to be expected given the size of Lagos’ industrial base, including for solar companies. From
Lagos, it is expected that an ecosystem of companies would emerge with the confidence and
capacity to offer a much wider and more readily available range of financing solutions for
solar. Just as Lagos today provides a base and gateway for solar nationally, it is to be
expected that the wider capacity for financing commercially viable solar opportunities would
also then expand out into more difficult markets, including the north.
In relation to solar markets the literature provides little direct consideration of this
assumption. A useful parallel can however be drawn from experience in how the markets for
solar developed in both Sri Lanka and India after 200126.
Shell Solar entered the Sri Lankan market on the back of a World Bank / Global Environment
Fund programme that provided a small grant to sellers for each system sold. The key
challenge was to get financiers to enter the market. Initially one credit provider SEEDS
entered the market. This enabled sales to scale firstly around the capital Colombo. After one
year the business grew to establish teams in 10 regional towns. By the third year the market
was in full swing: Six solar sellers were active; Shell had expanded to over 20 towns; And
three financiers had entered the market.. Importantly, all of them had moved from just
serving the villages close to the regional centres to moving out – typically up to 25 kilometres
– into the more rural areas all directions27.
India offers a wider range of solar market segments but its progression has followed the
same pattern as in Sri Lanka. One example is provided by the markets for solar water
heaters. These began in the major southern city of Bangalore in the 1990s. The market
expanded first from Bangalore to other major regional centres in Karnataka and to the two
neighbouring states of Maharashtra and Andhra Pradesh and was established in these by
the mid-2000s. In recent years it has begun to take hold on a larger and more commercial
scale in other States28.
Small Systems Component
The Small Systems component aims to improve foundations specifically for the Social
(North) component by enabling the private market for small solar systems in the north to
develop, leading to an increase in capacity and reach into the rural areas of the north. In
addition, this component will directly deliver extra welfare benefits.
Vial – drawn from direct personal experience in a range of solar markets. This included as Global
Marketing Manager (remote power) for Shell Solar from 2000-2004. He guided strategy in multiple
countries including in-depth in-country assessments of India & Sri Lanka (where Shell was market
leader). Since 2007 he has guided strategy for a leading Indian solar marketer, Orb Energy, winner of
the 2012 Zayed Future Energy prize in recognition of its effective direct-to-consumer business model
across India covering a range of solar market segments and solar technologies.
26
27
As above
28
As above
17
1. Assumption: Output based aid is an effective way to build rural supply chains for small scale PV
(Strong)
OBA has been used successfully to scale up PV supply chains in a number of markets. OBA
was an important feature of the Sri Lanka Solar Home System (SHS) programme29, a
pioneer of the model. A subsequent programme in Bangladesh used OBA to promote more
than 2.7 million systems. Commencing in 2003, sales continue to increase each year. Other
similar programmes have succeeded in China and India30. One of the most interesting
demonstrations of this approach is the UNEP / Shell Foundation programme in India. Grants
of just $1 million in one targeted district attracted several sellers and several small financial
institutions. Some eight years after the intervention ended, the market in the project area
remained strong and continued to grow: one of the financial institutions was heading towards
sales of 20,000 units in a year in the original Districts targeted by the project31.
The provision of OBA allows Solcos to overcome the market barriers in a way that is simple,
certain and low risk. It does not burden the Solco with pre-commitments of volume, or
impose capital demands they cannot meet (a difficulty with fee-for-service and leasing). It
also offers flexibility. Each Solco can apply the grant in the way it considers most effective.32
Overwhelmingly the international experience for such small scale systems in private markets
in rural areas has been sale on credit33, or sale on cash. After many years of attempts,
models based on leasing/renting are now beginning to show signs of viability at scale.
However the early cases relied on very high subsidies (South Africa34, Morocco). More recent
models using smaller solar systems and high efficiency lights (LEDs) are showing early signs
of progress but have not yet reached the stage where other such models stumbled35 (for
example, IFC’s Solar Development Group and Soluz in Central America36).
2. Assumption: Grants provided to small finance institutions are an effective way to expand access
to credit and scale rural markets for small scale solar (Strong)
Evidence that increased access to finance can lead to dramatic scaling of solar markets is
strong. Providing support to credit providers, including grants for each loan provided, can
provide the required increase in access to finance. Markets for small solar PV systems in
rural parts of developing countries have been scaled successfully many times. On each
occasion it was the provision of access to consumer finance that unlocked the market.
Typically a small grant to credit providers was provided, along with a range of other inputs.
Examples include:
29
References include Vial - unpublished assessments of the market and businesses (2001, 2003),
and programme reviews; Miller (2009).
30
A mix of published and Leigh Vial unpublished evaluations.
31
Vial – personal experience in Shell Solar during the implementation; interviews with MFI in 2010
32
Vial – personal experience guiding strategy and internal reviews for the market leader – Shell solar
33
IFC, 2012, Energy Access
Vial – personal experience: unpublished assessment of the Shell/ESKOM JV business in 2000;
review of the Shell supported operator in Morocco;
34
35
Miller, D., 2009, Selling Solar: Describes from a commercial perspective why the fee-for-service
models in the 2000’s were by their design difficult to scale, difficult to operate viably, and much higher
cost than partial grant OBA programmes.
36
IFC, 2007, Selling Solar
18



Bangladesh Solar Home Systems – 2.7 million systems37 mostly on credit. While a
small capital grant reduces the purchase price, the larger factor in access has been
the provision of micro-credit, supported by a small grant per loan to credit providers.
The market exploded from almost nothing in 2002 before the programme
commenced. The growth is shown in Figure 3: Bangladesh Solar Home System
Installations
Sri Lanka Solar Home Systems, 128,000 systems38 mostly on credit. This was a precursor to the Bangladesh market. The market in 1999 was around 20 units per month
from a single entrepreneur. Credit became available and sales grew consistently to
the rate of 500 per month by 2003. With additional credit from the World Bank, the
market grew to an installed base of 100,000 by 200639. A key factor in increasing the
provision of consumer credit was an early move by Shell Solar to provide the entire
grant per unit sold to the credit provider SEEDs40.
Other cases from the rural experience are well described elsewhere41.
Figure 3: Bangladesh Solar Home System Installations42
37
www.idcol.org, accessed 8 February, 2014
38
Ali-Oettinger, 2010
39
Miller, 2007
Vial – market assessments and Shell Solar Sri Lanka strategy and business plans, (unpublished),
2001, 2003
40
41
IFC Selling Solar 2007; Miller Selling Solar 2009;
42
Shariff, 2013
19
3. Assumption: PV electrification of households can improve welfare outcomes (Medium – Strong)
Access to electricity in the home contributes to a range of welfare benefits. The impacts of
renewable energy on indoor air quality, health, and knowledge, and fertility reduction are
quantifiable and significant.43
Access to electricity in the home is correlated with higher incomes. Mobile phones, for
instance can be charged from solar lanterns, which leads either to reduced costs or
increased productivity. The strength of evidence is however only medium because most
analysis lacks sufficient control to demonstrate causality.
Reliable power in the home may contribute more improved health outcomes than reliable
power in the clinics (GVEP, 2013). Stronger empirical evidence exists to support this claim
along with by anecdotal evidence supporting causal chains. The mechanisms most
mentioned include:





Reduced burns from kerosene lanterns
Reduced poisoning by removing the kerosene
Reduced inhalation of black particulate matter that occurs when in close proximity to
kerosene lanterns
Reduced inhalation of noxious gases emitted by kerosene fumes
Improved education of women on family health from better access to outside
information from TV and radio. These have been shown to be important sources of
education on contraception, malaria and other health matters.
An impact evaluation of health outcomes in Bangladesh (World Bank, Internal Evaluation
Group, 2005) found a significant impact of household electrification on mortality. One
possible channel for this effect is that access to media improves health knowledge (ESMAP
2005).
Access to electric light in the home leads to an increase in the time spent reading and
studying in the evening. The increase is typically around one hour per day. This increase in
study time is assumed to result in improved educational outcomes. The benefits provided are
estimated to range between £150 - £520 per annum (World Bank / IEG, 2008). The evidence
is considered medium to strong.
The welfare benefits of electricity in the home are broad. Several attempts have been made
to quantify those benefits for households with modest demand in low income countries.
These tend to show that benefits are in the range of $10 - $70 per month per household44.
Much of this value can be applied to households receiving even modest levels of electricity.
International experience of providing even grid access to the rural poor is shows that its main
use is to power 2 lights, followed by some TV (Barnes, 2008; Lighting Africa, 2012; World
Bank, 2005 – Philippines). Electricity is rarely used for cooking among the rural poor (World
Bank, 2008), as this would typically double the household cost of energy compared with
alternative cooking fuels. Studies on energy use in Africa support this expectation of highest
value in the first 2 lights (Lighting Africa 2012). This means that there are diminishing returns
on the value of the electricity provided. The first lamp has a higher value than the third lamp.
Modest levels of electricity, such as a single solar lantern, can deliver disproportionate
benefits. The assumption is that a bright lantern (not a dimmer low-end lantern) delivers the
bulk of the benefits allocated to light, TV and radio (ESMAP 2008) while also providing power
43
World Bank (2008)
44
ESMAP, 2008
20
for mobile phones, the value of which is significant and is not captured by the values derived
from ESMAP (2008).
C. For each feasible option, what is the assessment of local
capacity? Is the intervention likely to strengthen capacity in a
durable manner?
Option 1: Social (Lagos only)
Lagos is the hub of Nigeria’s solar PV industry. Yet the scale of this programme will exceed
the capacity of the current manpower in the industry. The Social (Lagos) component will
address these limitations by establishing a stepped increase in the capacity of the industry in
Lagos. This will be achieved through the following activities;





Establishment of high technical standards for the design, installation and operation of
PV systems: to include a detailed standards and installation guide that will form part
of the tender documents and be adopted as a State guideline;
Design and provision of training for installation and maintenance teams: training will
continue beyond this programme;
Establishment of a certification process for Solcos and technicians working on
installation and maintenance contracts;
Training of end users in how to get the most out of PV systems: how to balance loads
and the benefits of efficient equipment;
Provision of long-term service contracts, allowing Solcos and technicians certainty
and continuity of income, keeping the skills fresh and in the industry.
Option 2: Social (Lagos) + prepare for the north
Social (Lagos) component
As above.
Preparation for the Social (North) component
Capacity of the PV market in the North is nascent. The focus on supporting the development
of the solar market through the Commercial and Small Systems components aims to do
create demand for social and private solar PV technology.
Commercial Component
Solar PV today offers significant financial savings to many users reliant on generators for
reliable power. The Commercial component will address capacity issues in the following way:


Provision of partial risk guarantees to make banks comfortable with lending to Solcos;
Provision of technical assistance to build the commercial pipeline of solar business
opportunities. The programme will bring together creditworthy solar projects and
financiers, supported by the guarantees.
Small Systems Components
Supply of solar PVC services is reasonably available in the largest cities in the North,
although with limited skill and manpower and operating with insufficient capital45. Supply to
45
Vial - Personal inspections and interviews with solar actors in Kano, 2013
21
more remote rural areas is largely absent. The Small Systems Component will address these
capacity constraints through the following activities;


Market awareness building programme to inform users of PV costs and benefits;
OBA payments to financial institutions for each small solar system they support
through finance.
D. What is the likely impact (positive and negative) on climate
change and environment for each feasible option?
Categorise as A, high potential risk/opportunity; B, medium/manageable potential
risk/opportunity; C, low/no risk/opportunity; or D, core contribution to a multilateral
organisation.
Figure 4: Climate and Environmental Impact summary
Option
Climate change and environment risks Climate
change
and
environment
and impacts, Category (A, B, C, D)
opportunities, Category (A, B, C, D)
1
C
B (Opportunity)
2
C
B (Opportunity)
Will the success of the intervention be affected by climate change or the environment?
The intervention is unlikely to be impacted by climate change or other environmental factors.
Solar insolation is unlikely to change dramatically in Nigeria over the lifetime of installed
equipment, and the risk of severe climatic events is not likely to impact upon the functioning
or efficiency of PV systems. The sustainable impact of the intervention is however
dependent on National and State governments continuing to view low carbon generation as a
preferred source of electrifying public institutions, rather than extending and improving the
stability of the grid.
Will the intervention contribute to climate change or environmental degradation?
The intervention will seek to reduce and avoid 4.1 million tonnes of CO 2e through the
displacement of kerosene for lighting and diesel generation. This will be across a range of
market segments including public institutions (clinics and schools) and others such as large
commercial, households, and micro, small and medium sized enterprises (MSMEs).
Diesel/solar hybrid systems may be a viable compromise solution, but these will normally
displace existing diesel systems.
The impact and cost of contributions to climate change mitigation vary by option. The
greatest impact and value of CO2 abatement comes from the private market based
components, and in particular the market for commercial applications which features in
Option 2.
Figure 5: CO2 Emissions Avoided
Option
22
CO2 Avoided (tCO2e)
1
58,254
2
3,044,420
Could the intervention help tackle climate change or build resilience to it; could it help
improve the environment or its management?
Getting solar markets working in the North will help build climate resilience among a range of
communities currently underserved in terms of energy provision. The geography and
topography of northern Nigeria is characterised by arid and semi-arid areas liable to
ecosystem and forest degradation, resulting in a high level of drought and desertification.
The desert, which now covers about 35% of Nigeria’s land mass, is advancing at 0.6km per
annum. At least 35 million people in the 10 Northern states are facing desert encroachment
onto arable lands. Impacts of increasing temperatures, reduced rainfall, drought and extreme
heat events are many. These include:






Degradation of natural resources (in particular forest and agro-ecosystems);
Increased desertification and loss of biodiversity and eco-systems
Increased heat related and vector borne diseases;
Reduction in livelihood opportunities;
Food security issues
Migration from marginal areas, often resulting in land conflict;
Analysis indicates that, in the absence of adaptation, climate change impacts may result in a
loss of between 2-11% of Nigeria’s GDP by 2020, and may rise to between 6-30% of GDP by
2050. This loss is equivalent to US$100-460bn. (DFID/ERM 2009)
Strengthening health outcomes through electrification of clinics will help address climate
related stresses, such as changes in disease patterns and increased heat related illnesses.
Improved education outcomes will allow communities to develop and diversify economic
activities away from subsistence agriculture.
Climate and Environment Assurance Note
A summary of the ‘Climate and Environment Assurance Note’ is as follows:
Figure 6: Climate & Environment Assurance Note
Intervention Details
Title
DFID: Building Public and Private
Solar PV Markets in Nigeria
Home Department
DFID Nigeria
Budget
£37.1 million
Responsible Officers
Title
Project Owner
Climate Change and Environment
Advisor
Name
Keith Hammond
Isabel van de Sand
Department
DFID Nigeria
Climate and Environment Dept.
Appraisal
Success Criteria
Sensitivity Analysis
The BC success criteria include tCO2e avoided or
reduced
Climate & Environment Category
Risks & impacts
C: No / low potential impact
All options were assessed for tCO2e avoided or reduced
Opportunities
B: Medium Opportunity
Management
Risks and opportunities defined
Describe briefly what are the risk
and opportunities that were
23
Climate & Environment
Measures agreed
Describe briefly what
actions were decided upon
Climate & Environment Measures in
log-frame
Answer whether any actions were
included in the logframe to mitigate
identified in the BC C&E
assurance note
Risks
The BC does not present any
significant risk to climate change.
The BC is not susceptible in a
significant way to environmental
conditions.
A second tier environmental risk
emerges from the BC due to a
proportionately small increase it
will cause in the number of lead
acid batteries distributed within
Nigeria.
Opportunities
Opportunities to mitigate climate
change and its impacts are
inherent to the BC. That is the
primary purpose of the BC. The
opportunities are significant in
proportion to the activities of the
intervention, although
insignificant at a global scale.
That is, they will displace a
substantial proportion of CO2
emissions at sites targeted by the
project but in aggregate this will
have no detectable impact on
global climate conditions.


24
Scale-up public markets for
solar PV in Nigeria, avoiding
or replacing emissions of
CO2 from petrol and diesel
generators and from
kerosene wick lanterns.
Improve community resilience
to climate change impacts by
enhancing incomes,
education, and health.
to mitigate any
environmental impacts
C&E impact or maximise opportunities
and, if yes, describe what these are.
No mitigation required for
climate change risks as
none emerge from the BC.
Yes: All logframe indicators either
directly or indirectly relate to mitigating
C&E impact or maximising
opportunities.
TA during implementation
will include evaluation of
the current and future
possible ways to manage
the incremental waste
stream of lead acid
batteries arising from the
project.
The primary C&E indicator is;
 Net annual avoided/reduced
greenhouse gas emissions as a
result of ICF support - tco2e
Indicators of indirect or secondary
relevance to C&E include;
 Number of users of public
institutions (schools and hospitals)
receiving welfare benefits from
cleaner and more reliable energy
in a given year as a result of the
programme activities
 Number of direct jobs created as a
result of ICF support (ICF)
 # secondary schools with
efficiently operating PV systems in
Lagos State in a given year
 # health clinics with efficiently
operating PV systems in Lagos
state
 % of PV systems in school and
clinic systems installed still
operating effectively in given year
E. If any, what are the likely major impacts on social development?
Does the intervention sufficiently target poor people?
This programme has a combination of pro-poor and climate change benefits. Poor people in
Lagos will benefit from better health and education services, and the State is prioritising poor
rural and riverine populations within the State. Evidence shows that critical services are
poorer in these areas than in most high density areas of Lagos46.
Even in Lagos, public health and education programmes are under enormous stress, as
reflected in the high share of both health and education services delivered by the private
sector in the State. The poorest are inevitably less able to access private provision than
those on higher incomes, and often have to rely on public services that are lower standard
(DFID’s DEEPEN programme shows that attitudes to private schooling are complex).
Improving the quality of public education will, therefore, benefit poor people more than those
with greater choice.
F. For fragile and conflict affected countries, what are the likely
major impacts on conflict and fragility, if any?
Conflict: Detailed design of programs with States will ensure electrification of clinics and
schools is not provided preferentially, ethnically or by faith or location of communities.
Where opportunities arise in agreed peace and reconstruction processes the intervention will
explore how program coverage can help reinforce confidence and collaboration among
parties. There has been discussion with the federal government about including Islamic Al
Majeri schools under any future Northern component. This would depend on implementation
of a separate Government of Nigeria programme focussed, with the support of mainstream
religious leaders, on increasing the focus of Islamic education on economic and life skills.
This could significantly impact on one of the deep drivers of conflict in the North of Nigeria.
G. What are the costs and benefits of each feasible option?
Identify the preferred option
For the purposes of the economic appraisal, three options are considered. These are



Social (Lagos): Support for PV in rural schools and hospitals in Lagos state
Social (Lagos) plus preparation for the Social (North) component
Counterfactual ‘Do Nothing’ scenario. Under this business as usual scenario, some
level of investment in PV is assumed.
Option 1: Social (Lagos only)
Costs
Under Option 1, ICF would provide £17.8 million. A further £15 million would be leveraged
from the Lagos state government. Figure 7 provides an overview of expected investment.
Figure 7: Option 1: Costs and Sources of Funds
46
2010 MATERNAL MORTALITY STUDY IN LAGOS STATE, NIGERIA. Presentation by The
Campaign Against Unwanted Pregnancy, Lagos
25
Option 1: Social (Lagos)
Funding ( £ million)
Soft Sources of Funds
ICF
17.8
Notional Target
Total Funding
Components
Social
North
15.0
0.0
Lagos
State
15.0
15.0
MoF
0.0
Northern
States
0.0
Total
32.8
0.0
0.0
0.0
0.0
30.0
0.0
School
Clinic
Private & Commercial Sources of Funds
Internat Nigerian
ional Investor
Consume
IFC
Investor
s
FI Debt
rs
0.0
0.0
0.0
0.0
0.0
Total
Total
0.0
32.8
0.0
0.0
30.0
0.0
0.0
0.0
Lagos
School
Clinic
Small Systems
15.0
15.0
0.0
30.0
13.0
2.0
15.0
0.0
0.0
0.0
28.0
2.0
0.0
0.0
0.0
0.0
HH / OBA
Commercial Market
0.0
0.0
0.0
0.0
28.0
2.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2.8
0.0
Guarantee Facility
Commercial Capital
0.0
Programme Implementation
2.8
0.0
0.0
0.0
30.0
2.8
Option 2: Social (Lagos) plus preparation for the north
Costs
Under option 2, ICF would provide £37.1 million. This would leverage an additional £15
million from the Lagos state government, £90 million of private sector funds and £12 million
from households and MSMEs, with an envisaged additional £15m in equity expected from
private sector investors. The costs are set out in Figure 8: Option 2: Costs and Sources of
Funds.
Figure 8: Option 2: Costs and Sources of Funds
Option 2: Social (Lagos) plus preparation for the Social (North)
Funding ( £ million)
Soft Sources of Funds
Total Funding
Components
Social
North
ICF
Lagos State
37.1
15.0
15.0
0.0
15.0
Private & Commercial Sources
0.0
Northern
States
0.0
0.0
0.0
0.0
0.0
MoF
School
Clinic
Lagos
Total
52.1
IFC
0.0
International
Investors
10.0
Nigerian
Investors
5.0
Total
FI Debt Consumers
75.0
12.0
30.0
0.0
0.0
0.0
Total
102.0
154.1
0.0
0.0
30.0
0.0
0.0
0.0
15.0
15.0
0.0
15.0
0.0
0.0
0.0
0.0
0.0
30.0
28.0
2.0
0.0
13.0
2.0
Small Systems
3.0
0.0
0.0
0.0
3.0
12.0
12.0
HH / OBA
3.0
3.0
12.0
12.0
15.0
Commercial Market
12.0
12.0
Guarantee Facility
Commercial Capital
12.0
12.0
School
Clinic
Programme Implementation
7.1
0.0
0.0
0.0
7.1
0.0
30.0
28.0
2.0
15.0
0.0
10.0
5.0
75.0
90.0
102.0
0.0
10.0
5.0
75.0
90.0
12.0
90.0
0.0
0.0
0.0
0.0
0.0
7.1
0.0
Incremental benefits
Quantified and monetised incremental benefits are identified below for each option. It has
not been possible to quantify some benefits due to lack of robust enough evidence, therefore
the quantitative VFM assessments should be treated as potential underestimates of the full
range of benefits generated by the intervention.
For the table below: I – Identified, Q – Quantified, M – Monetised
26
Figure 9: Programme benefits identification by option
Option 1
Option 2
Reduced and/or avoided carbon emissions due to substitution
of more carbon intensive technologies both currently and in the
future
Q&M
Q&M
Costs avoided by replacing fossil fuel (diesel and kerosene) and
grid use with PV
Q&M
Q&M
Welfare benefits accruing to households from rural
electrification, such as improved education, health and
communication
Q&M
Q&M
Improved education outcomes among students attending
schools receiving PV systems
Q&M
Q&M
Improved health outcomes for patients in clinics receiving PV
systems
Q&M
Q&M
Direct jobs created in the PV supply chain to workers in rural
regions
Q&M
Q&M
Energy security and reliability strengthened, helping to relieve
an important constraint for business.
I
I
Strengthening of supply chains for PV, increasing supply and
economies of scale for PV
I
I
Increased economic activity (including generating indirect jobs)
particularly by MSMEs, and consumer surplus due to increased
take up of PV technology47
I
I
Improvement in air quality In institutions due to reduced use of
diesel generators, and resulting health benefits
I
I
Learning effects within market participants from the deployment
of new technologies
I
I
The following broader macroeconomic (non-monetised) benefits are also identified:



avoided lock in to a high carbon growth path for the economy;
greater carbon finance inflows into the economy;
greater knowledge, information and learning within the regional institutions to
strengthen policy on renewables technology.
Assumptions for modelling
47
Due to spillover effects from improved supply of PV (through strengthened supply chains) and
increased demand for PV (through demonstration effects)
27
Costs are derived from projected programme costs and estimated public and private
leverage. It is standard practice in social cost benefit analysis (CBA) to account for all costs
(including private investor costs), not just financial costs of the programme. The CBA does
not consider any costs or benefits that might flow from donors choosing to replicate the
intervention with follow-on funding. All costs and benefits are discounted at a rate of 10%,
with the exception of CO2 benefits, which are discounted at 3.5% declining as per ICF
guidance. Benefits are derived from the impacts set out in Figure 9 above.
Figure 10: Valuation assumptions for modelling
Valuation
Evidence
Reduced
carbon
emissions due to
substitution
towards PV from
more
carbon
intensive
technologies both
currently and in the
future
Value of CO2 given as a
schedule over 25 years,
starting at £3.49 per tonne
in year 1 and rising over
time
DECC - Central case scenario Traded sector
(Update 2013)
Cost savings on
alternative fuels
Calculated on the basis of
displaced
kerosene
(lighting),
diesel
(generators) and grid
electricity.
Estimates for current use and potential PV
displacement from project team.
Costs of
alternative fuels taken from current local market
prices (Nov 13)
Welfare benefits of
rural electrification
of households
Assume household level
benefit of £260 per year
for SHS and £115 per
year (3Wp) for Solar
lantern
with
mobile
charging
Evidence based on WB study on benefits of rural
electrification (2008). Range of benefits provided
from £150 - £520 per annum.
Improved
education
outcomes
from
attending schools
that have been
electrified with PV
£3.33 per annum benefit
per year of PV electrified
primary
school
and
£49.25 per year of PV
electrified
secondary
school in Lagos
Benefit per year of schooling estimated at 2.5% for
primary school and 4.9% per annum for secondary
school based on private returns from schooling
(Private Wage Returns to Schooling in Nigeria:
1996- 1999 Aromolaran October 2002)
Wages estimated as per capita GDP. Average
national per capita GDP used for the north. The
Lagos per capita GDP was increased from the
average by a factor of 1.8. A comparison of
estimated per capita GDP (PPP) between states
shows Lagos at 3.6 times higher than the national
average. However, that is based on the census
population figure for Lagos (10 m) when it is
generally accepted (including by the Lagos state
government) that it is probably above 20 million.
This reduces the factor to 1.8 times.
Additional benefit of electrification on daytime
education activity based on project team
assumptions of 8% uplift (equivalent to 1 month
additional per year) for northern primary schools
and 16% uplift for Lagos secondary schools.
28
Higher level for Lagos is due firstly to secondary
rather than primary, secondly based on the greater
level of electrical appliances and upcoming
programmes to use the power (LSEB school
audits), and thirdly because the total hours of
power usage are expected to double from 3.5 to 7
hours per day.
Additional benefit of electrification on night-time
study out of school hours is based on a range of
complementary actions by the Lagos government.
The eLearning programme – in addition to helping
with the daytime study effectiveness (factored in
above) will provide tablets for effective study after
hours. Another programme being planned is to
provide lanterns to be charged at school to enable
better light for home study – and for this there is
good evidence of improved educational outcomes.
These additional programmes would initially be on
the fringe but may grow over time. An additional
welfare benefit of £260 pa was assumed for those
who had these supports (similar to the factor used
earlier for light only) with 20% of students gaining
access to these enhancements.
Improved
health
outcomes
from
patients attending
clinics that have
been
electrified
with PV
£10,000 per small rural
clinic receiving a PV
system in the north, and
£586,878 per rural super
clinic in Lagos.
Direct jobs created
in the PV supply
chain
Assumed
created are;
48
Based calculations of DALYs averted on 4 key
parameters – Malaria, HIV, TB and others (based
on WHO choice model).
Uplift assumes 1
additional hour of operation per day, with pro-rate
uplift in benefits.
DALYs valued on basis of per capita GDP
man-years
 0.04 per Solar Home
system sold
 0.009
per
SHS
maintained
 0.02 per lantern sold
 0.052
per
small
institutional
system
installed
 0.073
per
small
institutional
system
maintained
 0.095 per large clinic
system installed
 1.0 per large clinic
system
maintained
and operated
 3.0 per MWp of
Projects supported by DFID dealing with large ongrid PV installations: range of 7 to 36 direct jobs
created
in
project
implementation
and
commissioning and up to 2.5 for maintenance. All
other data drawn from practical commercial
experience implementing the various solar system
sizes, applications and business models 48. Per
capita income used as annual wage - Weak
Vial – guided by actual internal labour metrics from client solar businesses evaluated - unpublished
29
Commercial
scale
solar
 Earnings
due
to
employment valued at
GDP
per
capita
(£1,666)
Outputs and outcomes
The key outputs for each option are shown below. These are outputs that arise as a direct
result of project funding and leveraged finance. They have been generated from a CBA
model.
Figure 11: Gross programme model outputs
Option 1
Option 2
Social (Lagos)
Lagos + Prepare
Lagos + north
Gross outputs
tCO2e avoided or reduced over project lifetime
Number of school PV systems installed
Number of children benefiting over equipment lifetime
58,254
3,044,420
200
200
2,878
191,828
191,828
2,655,789
Number of health clinics PV systems installed
Number of patients benefiting over equipment lifetime
3,118,612
8
8
670
4,794,199
4,794,199
17,474,679
Number of households systems installed
-
564,516
564,516
Number of people benefiting from domestic systems
-
2,822,581
2,822,581
Number of commercial firms benefiting over equipment lifetime
-
382
382
MW installed after 5 years
MWh produced over equipment lifetime
6
47
51
133,234
1,268,579
1,392,251
Counterfactual (Additionality)
The counterfactual assesses what proportion of these outputs would have occurred under a
business as usual (BAU) scenario. This is done to ensure that only the incremental benefits
are attributed to the intervention. To do this a number of assumptions are made:
Northern clinics and schools: It is considered very unlikely that the Northern States would
embark on a programme of electrification of clinics and schools in the absence of the
programme. Full additionality is assumed.
Lagos clinics and schools: LSEB has stated that the Lagos school and clinic components
would not be funded under a business as usual scenario. Under a BAU scenario both are
considered 100% additional.
Small Systems: OBA Solar lanterns and Solar Home systems (North): It is unlikely that a
strong market would develop in the absence of OBA based support in the targeted regions.
We assume strong additionality at 90% of volume.
Commercial systems: The market would likely develop, but with lower volumes (50%) and
with a 3 year time delay. Based on the discount rate, this equates to 62.5% additionality.Net
of the BAU scenario, the outputs and outcomes can be used to estimate a value of
programme benefits. Also Included in the table below is an illustrative CBA of including
social system investments in the North as part of the current programme (though considered
unfeasible):
Figure 12: Programme model net benefits by option (Discounted $GBP millions)
30
Option 1
Option 2
Social (Lagos)
Lagos + Prepare
Lagos + north
Net costs (discounted)
ICF funding
£15,760,473
£29,307,413
£43,848,495
Public (soft) funding leveraged
£13,512,397
£13,512,397
£40,206,696
£0
£69,990,376
£78,866,981
£29,272,870
£112,810,185
£162,922,173
Private funding leveraged
Total costs (NPV)
Net benefits (discounted)
Value of CO2e avoided/reduced
£1,726,785
£59,157,849
£61,464,163
Value of cost savings from other fuels
£1,582,057
£103,220,786
£107,906,714
Value of welfare benefits – households
£0
£200,713,595
£200,713,595
Value of welfare benefits – education
£18,948,393
£18,948,393
£34,152,250
Value of welfare benefits – clinics
£20,630,860
£20,630,860
£71,028,201
£55,058
£3,664,508
£3,617,793
£42,943,153
£406,335,992
£478,882,715
1.5
3.6
Value of employment benefits
Total benefits (NPV)
VFM
BCR
2.9
Preferred Option
The cost benefit analysis indicates that Option 2 - Social (Lagos) plus preparation for the
North - is the preferred option, with a BCR of 3.6
Sensitivity analysis for preferred option
The following sensitivity analysis tests which assumptions are most important to the VFM
analysis:
Scenario 1 – assumes significantly higher counterfactual assumptions, i.e. a higher
proportion of activities and associated benefits would occur under business as usual in the
absence of the programme. On average, we assume that an additional 50% of benefits
would occur without the programme being implemented.
Scenario 2 – assumes doubling the discount rates used. The broad discount rate is
increased to 20%, with the discount rate for CO2 increased to 7%
Scenario 3 – looks only at the fuel saving and CO2 benefits of the intervention. The recent
update of the UK Department of Environment and Climate Change (DECC) carbon price
series has significantly lowered the short-medium term forecast for the traded carbon price
from earlier estimates. As a result, the CO2 benefits on their own are only estimated to
account for 57% of the overall programme costs. Cost savings in terms of reduced fuel bills
outweigh the costs of the intervention (103%).
Scenario 4 – assumes a significant increase of annual failure rates for PV systems installed
(assuming that they are not repaired following failure). Under the baseline scenario,
domestic systems are assumed to fail at 2% per annum and commercial systems at 1% per
annum. These are assumed to increase to 8% and 4% per annum under the sensitivity
scenario.
The VFM indicators resulting from the cost benefit analysis are shown below.
31
Figure 13: Sensitivity of model net benefits for preferred option
Baseline
Option 2
Sensitivity 1
Sensitivity 2
Sensitivity 3
Sensitivity 4
Combined
Higher
Counterfactual
Assumptions
Discount rate
@ 20% (7% for
CO2 benefits)
CO2 and cost
saving benefits
only
Increase in PV
failure rates by
400%
Net costs (discounted)
ICF funding
£29,307,413
£29,307,413
£24,120,137
£29,307,413
£29,307,413
Public (soft) funding leveraged
£13,512,397
£13,512,397
£12,291,667
£13,512,397
£13,512,397
Private funding leveraged
£69,990,376
£69,990,376
£50,042,438
£69,990,376
£69,990,376
Total costs (NPV)
£112,810,185
£112,810,185
£86,454,242
£112,810,185
£112,810,185
£59,170,220
£30,145,474
£32,196,468
£59,170,220
£36,883,280
Value of cost savings from
displaced fuels
£102,910,760
£52,069,086
£49,216,079
£102,910,760
£85,655,003
Value of welfare benefits –
households
£200,713,595
£100,356,797
£103,050,195
£165,577,728
Value of welfare benefits –
education
£15,109,759
£15,109,759
£6,528,940
£12,450,715
Value of welfare benefits –
clinics
£20,630,860
£10,315,430
£10,521,963
£16,836,998
Value of employment benefits
£3,657,222
£3,657,222
£2,110,460
£3,249,328
£402,192,416
£211,653,768
£203,624,105
3.6
1.9
2.4
Net benefits (discounted)
Value
of
avoided/reduced
Total benefits (NPV)
CO2e
£162,080,980
£320,653,053
VFM
Benefit Cost Ratio
1.4
2.8
Against all these sensitivities, the programme still delivers positive benefit cost returns.
H. Theory of Change for Preferred Option
The Theory of Change, as developed in the Strategic Case, is summarised in the diagram
below.
32
Figure 14: Theory of Change of Proposed Intervention
33
I. What measures can be used to monitor Value for Money for the
intervention?
The following value for money indicators will be utilized in the intervention log frame.
Indicators will be refined during preparation.
Progress will be monitored through
implementation:
Tonnes of C02 reduced or avoided. Emission reductions will be calculated in line with
CDM methodology AMS.I.F and incorporated in the monitoring outputs. PV companies may
seek to subsidize equipment costs by collecting and marketing emissions reductions. Any
sales of CERs or VERs will not be counted towards abatement achieved through the
intervention.
Populations benefiting from services provided using low carbon energy. The number
of PV systems installed and operating in health facilities and schools will be tracked.
Samples of average attendance will enable estimation of the total populations benefiting from
the intervention.
Number of jobs created for women and men in low carbon development. An outcome
essential to sustainability of the intervention is that a Nigerian market for PV systems should
be established. The numbers of persons directly and indirectly engaged in supplying,
installing and maintaining PV systems will be tracked through sample surveys 49.
Percentage of PV installations remaining in operation: Value for money in previous PV
initiatives has been undermined by poor performance and high rates of equipment failure.
The percentage of PV systems operating at each anniversary of their installation will be
tracked. This will gauge success of the approach to sustainability through supply chain
establishment.
Amounts of funding mobilized for PV equipment acquisition and retailing: Leveraging
institutional and commercial funding through the intervention is essential to achieve amounts
of business sufficient to sustain a supply chain among market entrants. Investment
leveraged per £ grant will track progress towards multipliers achieved in PV market take-offs
in other world regions.
Cost per KWp installed. The capital and installation costs of PV systems will be tracked. It
is expected that in public sector markets (clinics and schools) these costs are likely to fall
considerably due to improved procurement processes. For private sector markets, price
improvements are also expected due to improved supply chains and scale;
Price per kWh: Presently the cost of PV power in Nigeria is a multiple of prices in
international markets. This obscures the competitive advantage of PV relative to generators.
Price per kWh will be tracked across a range of applications to assess how the intervention
drives down prices through private sector procurement and market disciplines.
Management costs. The project management costs are projected to be 3.4% of the cost of
the intervention. A significant portion of this is the estimated fees to be paid to financial
intermediaries for disbursing funds, which may reduce following negotiation. They will be
tracked through project accounts.
J. Summary Value for Money Statement for the preferred option
The comparative assessments strongly suggest that option 2, the ‘Combined Option’, will
49
Projects supported by DFID dealing with large on-grid PV installations indicate a range of 7 to 36
direct jobs created in project implementation and commissioning and up to 2.5 for maintenance.
34
provide best value for money in relation to target impacts and outcomes. The option has
superior prospects to leverage additional concessional funding for further PV installations in
clinics and schools. Plus the option has potential to scale commercial applications of PV,
maximizing CO2 emissions reductions from displacing petrol and diesel generators.
II.
Commercial Case
Delivery through a third party entity (multilateral organisation; civil
society organisation or support to government)
A. Why is the proposed funding mechanism/form of arrangement
the right one for this intervention, with this development partner?
Arrangements with LSEB, and choice of LSEB as a partner
DFID works with many Federal and State entities in Nigeria, and implementation capacity is
a major challenge. Prudential risk is also generally high in Nigeria, as a result of which it is
UK government policy not to put UK funds through Nigerian government (whether Federal or
State) systems. Against this backdrop, LSEB is a strong counterpart and this is one of the
factors that this project can be successfully implemented. DFID has implemented several
smaller projects with LSEB through NIAF in recent years, including:



The development of five Independent Power Projects (IPPs) to run important State
facilities, including a major hospital on Lagos Island and the State secretariat as
Alausa. These were LSEB’s own projects, with no UK capital funding and only limited
TA. The Island IPP was the most rapidly implemented in Nigeria, and, as with the
other IPPs, it has been very successful.
A project to provide lighting to two markets in Alimosho Local Government Area in
Lagos. This involved co-financing of capital on a very similar basis to that proposed in
the current project. The project was completed on time and within budget, and has
been technically successful. NIAF concluded that the procurement process was both
technically sound and transparent. There is also good evidence that the intervention
has improved security, with particular benefit to women and girls.
An information base on electricity usage and demand, for the benefit both of LSEB
and the incoming purchasers of Lagos’s two power distribution companies. The audits
were financed jointly by LSEB and DFID, with NIAF providing technical support. The
audits required substantial organisation by LSEB, and the quality of the outputs was
highly regarded by NIAF experts. LSEB subsequently carried out a similar audit on all
the State’s junior and senior secondary schools to assist in developing their funding
proposal for this project (to the State Government as well as DFID), using their own
resources.
This strong track record of transparent procurement and effective delivery means it is
appropriate to work with LSEB and alongside their systems. For safeguarding purposes,
DFID funded consultants will be involved in all stages of the procurement process.
B. What assurance has been obtained on capability and capacity to
deliver?
LSEB
As well as determining LSEB’s record of successful project implementation, the NIAF solar
and procurement experts have assessed the LSEB’s technical capability and dedication to
delivering a robust and sustained outcome. The state of Lagos has robust procurement law
35
and oversight which helps to mitigate key risks.
IFC
The IFC is one of DFID’s core multilateral partners. It was rated as ‘good’ in the DFID 2011
Multilateral Aid Review (2011) and was assessed as having made some progress in the
Multilateral Aid Review 2013 update. The structure of this programme builds upon
substantial experience the IFC has developed in a range of PV market start-ups through its
Sustainable Energy Finance Program. In China, a first phase of the program which closed in
2012 succeeded to scale $1.8 billion in 178 projects against total program investment and
lending of $ 783 million. A second phase, for $200 million will focus on leveraging market
entry for smaller Energy Supply Companies. In Russia, the program has supported 270
energy efficiency and PV projects for $242 million and in the Philippines 87 projects for $379
million. In each country, IFC’s financial engagement has been successful in engaging
lending institutions and commercial banks through provision of risk management and credit
enhancement for market entrants.
Federal Government of Nigeria – Programme Implementation Unit (FGN-PIU)
In relation to the later roll-out of the Social (North) component, the FMoP will establish an
autonomous implementation unit. DFID, through NIAF has worked very closely with the
FMoP on Nigeria’s high profile power sector reforms and privatisation process. Support to
the privatisation has included NIAF consultants being part of both the pre-qualification and
technical bid evaluation processes. There has been wide acceptance that the privatisation
has been far more transparent than previous similar exercises in Nigeria. The current
Minister of Power has a strong reputation for integrity, and he has been a chief ally in
ensuring transparency in sector reform. The Ministry has much less technical capacity in the
area of solar PV, and no strong track record of managing transparent procurement
processes. This is one of the reasons for including TA to work with the MoP to develop
robust plans for a Northern roll-out.
NIAF
As well as working closely with LSEB and the FMoP, NIAF has provided extensive support to
a range of Federal Government of Nigeria Ministries, Departments, and Agencies (MDAs).
This includes implementation of programmes and oversight of procurement and investment
activities. Examples include the FGN Subsidy Reinvestment and Empowerment Programme
(SURE-P), an initiative of the Nigerian Presidency. It aims to accelerate the delivery of
infrastructure while improving financial management and transparency by providing oversight
of programmes. Another is the Nigerian Sovereign Investment Authority, charged with
managing the Nigerian Sovereign Wealth Fund.
In the proposed later roll-out of the Social (North) component, NIAF would similarly extend
full-time support to the FGN-PIU. Three advisors would be provided and located in the FGNPIU and also within the relevant finance function. Ideally these advisors would oversee the
FGN-PIU in total, the procurement activity specifically, financial administration and M&E. In
addition, an advisor would be established in each operating state to coordinate M&E and
auditing. The advisers would assist the FGN-PIU to implement the project, targeting health
clinics and schools in the north. Main functions of the advisers would include:



36
Oversight of procurement to select suppliers of PV systems for clinics and schools,
including RFP, pre-qualification, tender, bid evaluation and negotiations.
Verification of submitted payment certificates against pre-agreed performance and
payment criteria.
Overseeing arrangements by the selected financial institution to make payments to
the final beneficiaries (winning suppliers in respect of the procurement of systems for



clinics)
Overseeing timely disbursement to the Intermediary of federal and state co-financing
associated with the Social (North) component
Issuing instruction to the ICF Trust Fund administrator to disburse specific amounts to
the payee financial institution in respect of the Social (North) component
Managing the procurement and implementation of technical assistance associated
with the Social (North) component
C. Is there an opportunity to negotiate on anticipated costs?
IFC’s management costs will be negotiated directly between DFID and IFC. This is expected
to be a percentage of funds managed and to be in line with past arrangements between the
parties.
The FMOP is expected to cover the internal costs of the FGN-PIU.
Procurement costs: The costs of PV systems procured for supply to rural health clinics and
schools will be set by market competition (potentially using a 3rd party agent or direct to
international suppliers).
Service contract costs: Contracts to install and maintain PV systems in clinics and schools
will be sourced through competitive tender from a list of pre-qualified bidders.
The costs of technical assistance and program management services through NIAF will be at
rates agreed by DFID for NIAF 2, which was established through a competitive tendering
process that stated the contract value would be for an initial £50 million and could increase to
a maximum of £100 million. The primary reason for providing TA through the existing NIAF
programme is that existing relationships with key counterparts for the solar programme
increase the probability of delivering results, but there is also little reason to believe a new
tender for £4 million of services would result in lower rates.
III.
Financial Case
A. Who are the recipients of all proposed payments?

Procurement Grants: ICF funds for PV procurement will be channelled through the Crown
Agents Bank. They will be released to equipment suppliers on instruction from DFID,
following confirmation by NIAF that they are in line with the contract. OBA grants for other
sectors: ICF grants, representing a percentage of capital costs or fixed price per Wp, will
be paid to Solcos or financing organisations for each eligible product delivered into a
given trade area using credit or other financing mechanisms for the end user (e.g. lease).

First Loss Facility: IFC will establish PRGs with financial institutions backed by the FLF.
FLF funds for each tranche of PRG will be disbursed by ICF into the IFC Trust Fund. In
the event of default, IFC will draw down the appropriate amount from the trust. In the
event of FLF funds not being used, these will be re-allocated to other components of the
programme.
Eligible Participating Companies
A range of entity types will be eligible to participate in the PV installation and maintenance,
the OBA grants and to benefit from the Partial Risk Guarantee. The programme may provide
this finance to any entity incorporated in Nigeria. Examples of eligible ownership and funding
structures of the registered companies include (but are not limited to);
1. 100% Nigerian shareholding and ownership
2. 100% foreign ownership (Nigerian law does not impose minimum local ownership)
37
3. Joint ownership between foreign and local shareholders (JVs)
4. Joint ownership by all Nigerian shareholders (JVs)
5. Special Purpose Vehicles (SPVs) formed under any of the above structures
Unincorporated applicants will not be eligible. Examples of ineligible structures include;
1. Sole proprietors
2. Partnerships
3. Unincorporated Joint Ventures
Eligible Systems
Eligible systems will include ‘PV based energy systems that do not feed energy back into the
grid’. The focus is on rural communities and in the North in particular. Almost by definition
these communities are presently remote from the grid and are generally not expecting the
grid to arrive soon. When grid supplies are not available, PV would displace (new) demand
for diesel generators. When grid power is available PV supply will lower demand on the
supply-constrained grid, thereby extending grid supply somewhere else and reducing diesel
self-generation in that locality.
Eligible End Beneficiaries
End beneficiaries (owners and users) of the power systems will not receive payments
directly.
B. What are the costs to be incurred directly by DFID?
DFID spending will amount to £37.1 million over 6 years, with £15 million of capital
expenditure falling in 2014-15, and £12 million to support an IFC First Loss Facility, £3 million
of grants for small systems and £7.1 million of technical assistance and monitoring and
evaluation expenditure being spread up to 2020.
ICF costs will be used for:





£15 million of direct equipment purchase for the LSEB programme electrifying
schools and health centres in Lagos;
£2.8 million of TA for the LSEB programme electrifying schools and health centres in
Lagos;
£4.4 million of TA and management for development of a Northern programme and
private solar markets;
£3 million of OBA grants to support the provision of credit for small solar systems to
private consumers;
£12 million First Loss Facility to be called upon only in the event of actual losses. This
will support the provision of Partial Portfolio Credit Risk Guarantees by the IFC for
commercial lending for solar. Projected losses are based on IFC experience in other
markets, and will be capped at this amount. If losses are below £12 million, this
saving will be reallocated to other programme components.
C. What are the costs to be incurred by third party organisations?
LSEB will contribute £15 million of matching funding for the Lagos Social Component. The
FGN, Northern States and the IFC will all make significant investments if a programme goes
ahead in the North, and exact amounts in each case will be included in any Business Case
for approval of capital investment in the North. IFC will incur internal staffing costs to provide
38
TA and to operate the IFC Partial Risk Guarantees, although the total cost of these has not
yet been determined.
D. Does the project involve financial aid to governments? If so,
please define the arrangements in detail.
No financial aid is being provided to the Federal Government of Nigeria or to state
governments.
E. Is the required funding available through current resource
allocation or via a bid from contingency? Will it be funded through
capital/programme/admin?
Funding for 2014-15 is in line with DFID Nigeria’s existing country programme allocation. £15
million will be for capital and £2 million for recurrent expenditure. There is still some
uncertainty around the treatment of ICF allocations for future years, and decisions on this will
be one factor in developing a financing plan for a Northern roll-out subject to further
Ministerial approval.
F. What is the profile of estimated costs? How will you work to
ensure accurate forecasting?
The estimated profile of costs is shown below in Figure 15: Profile of Costs for Preferred
Option.
Figure 15: Profile of Costs for Preferred Option
Budget Spend
GBP million pa
Non Management Costs
Social
Small systems
Commercial
Management & TA Costs
Total Spend
Year
2014-15
15.0
2.0
17.0
46%
2015-16
0.0
0.6
1.4
2.0
5%
2016-17
0.5
3.6
1.3
5.3
14%
2017-18
0.8
3.6
1.2
5.6
15%
2018-19
1.0
4.2
0.6
5.9
16%
2019-20
0.8
0.6
1.4
4%
2020-21
2021-22
-
0%
2022-23
-
0%
0%
Total
15.0
3.0
12.0
7.1
37.1
100%
G. What is the assessment of financial risk and fraud?
Exposure to financial risk and fraud will vary between components. Even though LSEB are a
strong counterpart, opportunities for financial losses exist at nearly every step in the process
of procurement, installation, maintenance and payment. The management structure and
provision of embedded personnel at key points across the PIU activity will provide strong
mitigation, closing most potential avenues for fraud.
Procurement practices will be reviewed by NIAF procurement experts already working with
LSEB. An embedded consultant within LSEB will be actively involved in each step of the
procurement process. Prequalification of bidders and transparent evaluations will reduce the
scope for biased selection. Physical loss of equipment during transfers in the supply chain is
possible and detailed hand-over controls will need to be designed. It is anticipated that infield performance of installers and maintenance contractors will be monitored via an
automated biometric and GPS controlled process. This process and systems is currently
being piloted (with NIAF support) within the FGN SURE-P programme. A beneficiary
feedback process will be added. ICF funds will be approved for payment to contractors only
39
after each of these controls and checks is deemed satisfactory by the NIAF embedded
consultants.
H. How will expenditure be monitored, reported and accounted for?
Project accounts will be established and maintained by the PIUs and audited annually.
I. Are there any accounting considerations arising from the
project?
It is envisaged that contracts will be tendered to cover both the supply and installation of
complete PV systems. The UK contribution to these contracts will be wholly allocated to
equipment purchase, and will therefore be treated as capital expenditure and accrued at the
point of equipment delivery.
IV.
Management Case
A. What are the Management Arrangements for implementing the
intervention?
Project implementation will be via three separate PIUs, namely:



LSEB-PIU - will implement the Social (Lagos) component with support and oversight
from NIAF.
IFC-PIU - will administer the ICF Trust Fund holding the grant funds for the Small
Systems market development. It will lead TA for the Commercial market
development. It will also manage parts of the TA for the Small Systems market
development in collaboration with the Lighting Nigeria team. The IFC – Advisory
Services function will operate the PIU (subject to internal IFC approval) under the
Sustainable Energy Fund – West Africa, an initiative supported by the Swiss
government.
NIAF-PIU - will oversee the Lagos (Social) procurement, oversee the disbursement of
OBA grants under the Small Systems market development, lead preparations for the
Social (North) work, and will provide Technical Assistance to all components.
Arrangements for each component are summarised in the following diagrams.
Figure 16: Management Structure: Social (Lagos)
40
Figure 17: Management Structure: Partial Risk Guarantee
Figure 18: Management Structure: Small Systems Market Development
41
B. What are the risks and how these will be managed?
Key risks have been identified separately for each component of the programme. Mitigating
measures are identified and the residual probability and impact are rated. Risks are
summarised in Figure 19 to Figure 22 . The overall risk rating for the programme is Medium.
Figure 19: Risks - Programme Wide
Risk
Mitigation
Unfulfilled grant pledges from
LSEB
Funding commitment has been confirmed in
writing by the Governor of Lagos State, and
timing of release agreed with the Lagos Ministry
of Budget and Economic Planning.
Schools, Clinics and Small Systems: Status of
local battery recovery & recycling activity is
unknown. PIU TA will include an assessment of
the status and options which may require
enabling the development of a local recycling
and recovery market as a separate initiative.
School/Clinic programmes will include recovery
of old batteries as part of process for
replacement.
Clinic/school systems will be expertly designed
based on a needs audit and will be oversized.
Commercial systems will face due diligence for
financing ensuring effective needs audit and
Environmental impacts of used
batteries
Incorrectly sized PV systems
42
Residual
Probability
Low
Residual
Impact
Medium
Medium
Medium
Medium
Low
sizing.
Sizing in small systems market is typically driven
by consumers’ constraint on ability to afford
rather than by technical design.
Figure 20: Risks – Social: Lagos Clinics and Schools
Risk
Mitigation
Financial loss and fraud
Lack of transparency and
appropriate processes in
procurement
Lagos State has a public procurement law based
on World Bank guidelines, and the process will
be overseen by the State Public Procurement
Agency. All steps of procurement planning and
implementation process will also be overseen
by NIAF solar and procurement experts.
LSEB is currently developing and implementing
a programme to assess, certify and train solar
technicians in Lagos. It is expected this
programme will provide a large pool of well
skilled maintenance technicians.
Systems will have a current overload cut-off
switch and batteries will have a depth of
discharge limiter, in both cases not accessible
by users. The entire system will be housed
within a locked portacabin.
Managed: LSEB will replace batteries as
required under budgets from Lagos State
Government. We regard LSEB as a strong
counterpart, capable of taking over the funding.
We cannot mitigate this risk fully without
reducing sustainability.
Programme will pay the maintenance costs.
Inadequate local skills for
maintenance
Batteries, Panels and Cables
destroyed prematurely through user
abuse
Batteries fail near end of
intervention and are not replaced:
Lagos Clinics and schools
State does not pay for maintenance
during the programme
State does not pay for maintenance
after the programme
Programme requires up-front contribution from
state prior to commencement as an indication
of commitment. Consider some written or legal
obligation for future budgeting?
A high profile large program in so many schools
would be more politically difficult to abandon
than other projects.
Residual
Probability
Medium
Residual
Impact
Medium
Low
Low
Medium
Medium
Medium
Medium
Low
Low
Medium
Medium
Residual
Probability
Medium
Residual
Impact
Medium
Figure 21: Risks - Small Systems Market Development
Risk
Mitigation
Lack of access to financing (beyond
the program grants) will prevent
implementation
Solar companies can participate at the level
their financial capability allows. The FLF may be
used to support financing for either the Solcos
or consumer sin the small systems market.
43
Inappropriate allocation of grants
Batteries, Panels and Cables
destroyed prematurely through user
abuse
Inadequate local skills
PIU to oversee eligibility and certification of
eligible equipment and participants. Escalating
levels of verification and audit. Enabled by
individual identification and GPS location
evidence for each system.
Significant user training. Systems that are
procured by private users with their own money
are less susceptible to the problems of
premature failure that have been a symptom of
programmes that provided things for free.
Private buyers and sellers have strong
incentives to keep equipment working.
The local PV industry in the north includes
experience at different levels of proficiency.
Much latent capacity exists.
The programme will establish local skills
development and certification to boost the
supply as needed.
Medium
Medium
Medium
Medium
Medium
Medium
Figure 22: Risks: Commercial Market Development
Risk
Mitigation
Lack of access to project financing for
solar companies and/or end users
prevents the market from scaling
Partial credit risk guarantee facility will
underwrite risks. Dissemination of information
on actual default/loss rates experienced in solar
financing.
PIU must provide substantial TA to develop
project pipeline, educate and entice Solcos,
educate FIs.
Significant engagement with the local and
international market including solar specialists
in projects and leasing.
Include information on the commercial
opportunity for both off grid and on-grid solar.
Underused technical skills exist nationally for
the Commercial market. These will be boosted
by the LSEB training programme in Lagos.
International commercial Solcos would be
expected to bring in their own internationally
experienced skills for design, installation and
training.
Evidence of financial viability is required for
solar companies to be eligible to participate in
the programme.
Partial credit risk guarantee will help support
cash flow constraints.
The FLF and TA are intended to deliver a
successful scaling.
Lack of provision of debt finance for
commercial market under guarantee
facility
Lack of solar providers, financiers and
investors in the market
Inadequate local skills
Solar companies go bankrupt
The market fails to scale after the
intervention ends
44
Residual
Probability
Medium
Residual
Impact
Medium
Medium
Medium
Medium
Medium
Medium
Medium
Medium
Medium
Medium
Medium
C. What conditions apply (for financial aid only)?
None
D. How will progress and results be monitored, measured and
evaluated?
Monitoring
The monitoring strategy will cover the following aspects of performance management:
1. Financial: A bi-annual report will assess PV systems installed using the following
metrics: (i) £ investment leveraged per £ grant; (ii) Reductions in PV system costs;
(iii) End-user repayment rates; and (iv) Management costs as a percentage of the
cost of the intervention.
2. Physical: The intervention will conduct inspections to ascertain: (i) Numbers of clinics
and schools electrified; (ii) The proportion of PV system components meeting
technical specifications; (iii) Installations completed to specifications; and (iii)
Numbers of PV systems failing post-installation.
3. Emissions reduction: A baseline survey will be conducted to estimate off-grid GHG
emissions by main types of users of diesel and petrol generators. Figures will be
used to estimate GHG emissions reductions following installation of PV systems.
4. Development: Whenever possible publicly available information will be utilised to
monitor impacts from the intervention (e.g. number of jobs created and cost per
installed watt of PV capacity.)
5. Development (2): In cases where public information is inadequate to provide
meaningful assessments a supplementary data collection exercise will be
undertaken.
Evaluation
A review of the program will be undertaken annually and conducted jointly with the IFC and
the FGN agency concerned. Conducting these collaboratively will underpin ownership of
findings and facilitate remedial actions.
Independent reviews will be conducted to validate results and to provide learning for the
benefit of other programmes. These will include an initial baseline and socio-economic
conditions study and review of the monitoring design, annual review of results, and a full
socio-economic study again on project completion. Thorough tracking and monitoring within
the programme will provide a foundation of information for the benefit of the independent
review.
An initial review will be conducted 6 months into implementation to provide early feedback on
design of the intervention. This will assess implementation of systems in health clinics and
schools and outputs achieved. It will also assess whether there is faster uptake in
commercial applications of PV as a result of increased capital investment. A third objective
will be to assess if the monitoring systems are properly set up.
A final independent evaluation will be conducted at the end year 6. This will gauge outcomes
being achieved from electrification of health clinics and schools and the displacement of
generators in commercial applications of PV.
Logframe
45
Quest No of logframe for this intervention: 4550809
Quest No of Cost Benefit Analysis: 4551019
46