With a high demand for power supply that cannot be met with on-grid supply, Tunji Adegbite posits that the future of renewable energy in Nigeria is auspicious if only she’s ready to create it.
Access to energy or the lack of it, significantly affects an individual’s ability to live above the poverty line. Power supply is ubiquitous to the basic needs of humans, such as food, housing, education and even income; limited access to electricity and clean cooking facilities characterises energy poverty. According to the World Bank, with 85 million (43%) of Nigerians lacking access to grid electricity, it is unsurprising that 40 per cent of Nigerians live below the poverty line per the country’s latest living standard survey by the Nigeria Bureau of Statistics (NBS).
With Nigeria’s peak generation capacity being 5,300 MW and daily power demand estimated at 17,520 MW, the on-grid electricity supply is insufficient to meet the demand. Less than 51 per cent of Nigerian households report having electricity most of the time in their homes. This lack of reliable power is a significant constraint for citizens and businesses, resulting in an annual economic loss estimated at $26.2 billion (N10.1 trillion), equivalent to about two per cent of the Gross Domestic Product (GDP).
According to the 2020 World Bank Doing Business report, Nigeria ranks 171 out of 190 countries in getting electricity and electricity access is one of the significant constraints for the private sector.
Amid such deficits, the country has untapped potential to become a significant player in the renewable energy sector. Given the abundance of the natural resource of solar radiation in Nigeria, Solar Photovoltaic (PV) systems offer a cleaner viable solution for individuals and businesses as a source of primary and backup power generation instead of fuel-powered generators.
The government introduced renewable energy into the National Energy Policy in 2003. In 2006, the government created the Renewable Energy Master Plan (REMP); and successful implementation should result in enough wind, solar PV, solar thermal, and hydroelectricity sources by 2025 to provide the equivalent of the total grid capacity in use today.
Nigeria has the potential to access various renewable energy sources: Hydrothermal, Wind, Biomass, and Solar, with the latter two sources being the main areas of rapid off-grid energy solutions development. The country’s solar energy subsector has taken off and is one of the fastest-growing solar markets for solar globally.
In 2019, about $150 million worth of solar devices were imported. Nigeria’s market for solar home systems and mini-grids is estimated at $9 billion annually, with a $2 billion value in the solar home system market alone. Through the Rural Electrification Agency (REA) and private non-profit organizations like Shell-backed AllOn, IFC and The Rockefeller Foundation, significant financial investments have been dedicated to developing and expanding solar energy solutions in Nigeria. REA deployed over 6,000 solar home systems and seven mini-grids to rural communities in 2020.
In partnership with The Rockefeller Foundation in 2019, AllOn Hub provided impact investment through a $3.5 million grant to off-grid energy entrepreneurs at ideation, growth, and market entry stages to scale their businesses. This year, both organizations, in partnership with the U.S. African Development Foundation (USADF) through the Nigeria Off-Grid Energy Challenge, provided $50,000 angel stage funding for Nigerian off-grid energy businesses to reach communities not served by existing power grids.
Despite these significant strides, the solar energy sector remains nascent, with only 28MW cumulative installed capacity for solar energy. The high upfront financial investment is a significant challenge renewable energy technology faces.
In a country where there are many competing demands for available financial resources, the low purchasing power of citizens prevents renewable energy from thriving. The cost of solar home systems was so high in the early stages that two solar vendors interviewed by the author of a 2012 SUNGAS report admitted that they did not have solar systems installed in their own homes because of the expense.
However, the average cost per MWh to build utility solar has dropped drastically in the last decade and is now lower than wind, natural gas, coal, and nuclear energy. In smaller solar homes systems, the cost-to-savings can be recouped in 3-5 years. Still, at an industrial scale, because of the system’s capacity required, especially for agro-allied farmers, it could take up to 15 years to recoup the investment. Currently, microfinance banks with support from IFC provide loans for the acquisition of solar products. Other companies have used PAYG models to break down the costs into smaller, more affordable amounts.
While financing solar purchases is an excellent short-term solution, there is also the need for more indigenous renewable energy solutions. Currently, the local assembly of solar panels can only meet 10 per cent of demand, and the market relies heavily on imports.
Local production capacity must ramp up in the value chain to reduce the cost of moving to greener energy solutions. Opportunities beyond the growing local solar manufacturing industry must be explored to do this.
In addition, waste from oil palm and other crops grown in Nigeria can be used as biomass. An example of an African farm/agro-processor leading the innovation of zero waste locally produced energy systems is Songhai Center in the Benin Republic. At the farm, all waste is recycled and reused to power its operations. It manufactured its biomass power generator, and the entire institute runs on green energy with little to no grid support.
Renewable energy in Nigeria has been a multi-decade quest with minimal breakthroughs, although, with all indications, the nation should be performing much more than it currently is. Nigeria will not record any significant success in renewables if other locally sourced renewable energy methods or low-cost solar home systems are not developed at scale.
From our research, the average low-income Nigerian home or MSME spends about N2,000 to N5,000 weekly fuelling and maintaining generators.
Nigeria is one of the better-positioned countries to record massive breakthroughs in renewables, with a combination of natural resources and a high demand for power supply that cannot be met with on-grid supply. The future of renewable is auspicious, and we would see that future only if we are all ready to create it.
- Adegbite writes from Lagos
