In the heart of Nigeria, a groundbreaking study is shedding new light on the economic viability of off-grid energy projects, particularly solar mini-grids. Led by Benneth C. Oyinna, a specialist at the Nigerian Electricity Supply Corporation in Bukuru, Plateau, this research leverages the FINPLAN model to evaluate the financial health and sustainability of a 20.46kWp solar mini-grid project. The findings, published in the IEEE Access, could reshape how we approach electrification in remote areas, offering a blueprint for investors and policymakers alike.
Off-grid energy solutions are not just about bringing light to the darkest corners of the world; they are about igniting economic growth. Oyinna’s study delves into the nitty-gritty of financial indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), and Break-even Point (BEP). These metrics are crucial for understanding the long-term viability of such projects. “The FINPLAN model allows us to conduct detailed cash flow analysis and risk assessments under various scenarios,” Oyinna explains. “This is essential for making informed decisions about capital expenditure, operational costs, and subsidy frameworks.”
The case study focuses on a 20.46kWp Solar PV-Battery Energy Storage System (BESS) project, highlighting the impact of key financial parameters like interest rates and inflation on project returns. The results are promising. An additional equity investment of 189.06 million Naira is needed for procurement in 2025 and early operational costs in 2026. However, the project boasts a positive Net Present Value of 15,497.33 million Naira and an equity Internal Rate of Return (IRR) of 27.66%. These figures indicate a strong potential for profitability and sustainability.
The study also reveals a range of financial ratios that provide a comprehensive view of the project’s health. The Working Capital Ratio (WCR) varies between 1.35 and 4.0, while the exchange risk ranges from 0.1 to 15. The break-even point value is greater than 0.8 between 2026 and 2036, and the Debt Service Coverage Ratio (DSCR) fluctuates between 0.3 and 1.2 over the same period. These ratios are critical for investors looking to gauge the project’s financial stability and risk profile.
In the best-case scenario, the project shows an even more balanced financial outlook with no flow from the stand-by facility, a positive NPV of 17,805.71 million Naira, and an Equity IRR of 26.96%. These figures underscore the potential for significant returns on investment, making the project an attractive proposition for both public and private sector stakeholders.
The implications of this research are far-reaching. By adopting the FINPLAN tool, energy sector players can conduct more accurate and detailed financial appraisals of off-grid energy projects. This could lead to more informed investment decisions, better risk management, and ultimately, more successful electrification initiatives. As Oyinna puts it, “The FINPLAN model provides a robust framework for evaluating the financial viability of off-grid energy projects. It’s a game-changer for the energy sector.”
The study, published in the IEEE Access, translates to “IEEE Open Access” in English, underscores the importance of financial planning in the success of off-grid energy projects. As the world continues to grapple with energy access issues, particularly in remote and rural areas, such research is invaluable. It offers a roadmap for sustainable development, economic growth, and a brighter future for communities living off the grid. The energy sector is on the cusp of a new era, and financial tools like FINPLAN are leading the way.