Why Your Nigerian Solar Power + Blockchain Smart Meter Startup Could Fail

Why Your Nigerian Solar Power + Blockchain Smart Meter Startup Could Fail

You have this great idea: build a solar farm and use blockchain to take Africa to the new age of electricity distribution and retailing. Congratulations for being ahead of the technology curve, in the continent. But I have a hard news for you: that project will fail in most African countries.

Why? It turns out that in places like Nigeria, for example, only the distribution companies (discos) can install meters. So, if they do not like your meter, there is nothing you can do about it. The electricity sector is bundled which means startups cannot just have access to the national grid unfettered. You have to go through one link to connect to the grid, and that is the disco. That is the regulation today. And when you go, you have to pay them. The government does not have any template on that revenue distribution. Technically, you are at a disadvantage in negotiating any contract with the discos.

So, before you begin to pitch investors on energy projects and how you can revolutionize Africa with solar and blockchain, check the regulation on what it can allow you to do. Electricity supply is terrible in Nigeria, and our entrepreneurs understand the opportunities in the sector. They can provide solar and some other supporting technologies to serve customers. But there is one problem:  if they serve customers, they will need to grow and scale. But to scale, the present regulation must be changed or updated to give them access to the national grid.

Use of blockchain in smart metering is used in some countries. But regulations may affect adoption in some African countries (image credit: Indigo)

 

While you can have solar power in each home, the value will come when you can use solar to support a village or community. To have the capacity to do that, you will need to pipe the electricity through the national grid and meter it appropriately. (I do think you will not like to build new poles and connecting wires.) But the discos, knowing that they have no challenger, may not cooperate with your plans. Without the meter, which only discos supply, with specifications largely defined by government, you have no business. And right now, there is no specification that a smart meter can be powered by blockchain. Largely, discos may not be sold to that idea. They have no motivation to innovate because the territory is assigned to them.

In Nigeria, there are few of these discos spread regionally. Unless you can work with them and convince them, knowing that they have minimal incentive to innovate, do not waste your time.

It is only a new regulation that can change the situation. Simply, government has to unbundle the electricity sector so that entrepreneurs can help improve it. The biggest challenge today is not technical, but regulation, for entrepreneurs. We do hope they will lead there as they promised during the election. Perhaps, the entrepreneurs can lobby government to change the regulation. They need to find a way for discos and small players to co-exist for small competition to happen.


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