Feasibility Study for a Solar PV (Hybrid) Mini-grid System for Small Businesses in Lagos, Nigeria

Abstract

Small and medium-sized Enterprises (SMEs) have been recognized to be the cornerstone of every developing economy; for their contribution to national GDP growth and as a great employer of labor. In Nigeria: as at April 2019, the Nigeria Cooperate Affairs Commission (CAC) have in their records a total of 457,767 registered MSMEs. As at 2013, the National Bureau of Statistics reported that MSMEs in Nigeria employs 84.02% of the total labor forces in the country – making it the highest sub-sector annual GDP contributor with about 80.76% contribution to the growth rate. Regardless of the huge significance of SMEs to national development and GDP growth rate, small businesses are still facing numerous challenges; among which is poor electrification access. This has led most businesses – over 85% of businesses in Nigeria to rely completely on stand-alone generators for electricity generation. For a fact, reliance on gasoline generator and its attendant high cost of operation lead to the failure of many of these businesses and causes low return on investment for those with forbearance to survive among them. This research, investigated the techno-economic feasibility of solving the electricity challenge affecting small businesses in Sub-Saharan Africa using Nigeria as a case study location, with solar PV hybrid mini-grid system. A cluster market (plaza with estimated 200 shops) in the Computer Village District of Lagos, Nigeria was used as the SME case study for this research. Survey data was collected through in person and group interviews of the shop owners and the feedbacks used to inform on the consumption pattern and behavior of the shop owners. The education level, age and average weekly revenue data was also collected to help understand the end-user’s ability to pay (ATP) and willingness to pay (WTP). The daily energy load demand data is then modelled using the HOMER Pro software to determine the feasible system for the case location. A Solar PV and Generator hybrid mini-grid system was found to be the most suitable for the shop owners with an initial Capital Cost (CAPEX) of ₦61.8M, total Net Present Value (NPC) of ₦245M ($674,705.50) and an effective Levelized Cost of Electricity (LCOE) of ₦21.73 ($0.06) per kilowatt hour. At an estimated daily peak consumption of 1055kWh/day, the shop owners will be saving an average of ₦150,000 ($413.09) monthly – resulting to an average increase in monthly profit of ₦750 ($2.07) for all of the shop owners by switching to this recommended system. The new system will also reduce CO2 emission by 44% from the previous system in place in the plaza.