By Adewale Sanyaolu
The story of Nigeria’s power sector has been that of movement without motion, leading to poor economic indices as represented by the continuous slide in the per capita income, Gross Domestic Product (GDP) rating and weak exchange rate.
Prior to the privatisation of the power sector on November 1, 2013, many thought that the entrance of the new investors would bring about the much desired improvement. But the situation of the sector had not recorded the much improvement for an economy regarded to be the largest in Africa.
According to statistics obtained from the website of Independent Energy Watch Initiative, average generation as at November 26, was 3,746MW as against available generation capability of 6,890.9MW.
According to worldometers.info, the Nigerian population is above 183 million and about 55 per cent of the population has no access to grid-connected electricity while access to electricity in the rural areas is about 35 per cent and about 55 per cent in the urban areas.
It has been estimated that developing economies would need about 1,000MW per million people to meet their electricity demand. Invariably, Nigeria would require more than 160,000MW to achieve the desired electricity generation capacity.
Financial Nigeria, in a publication titled, ‘‘Opportunities for off-grid Solutions in the Nigerian Power Sector’’, posited that Nigeria projects that by 2020, the country’s generation capacity would be in excess of 40GW (40,000MW), and the energy mix will constitute 69 per cent thermal generation; 17 per cent hydro; 10 per cent coal and about 4 per cent of renewable.
The on-grid constraint
On-grid generation refers to a system of power generation evacuated through the national grid to off-takers, which may be the Bulk Trader (Nigerian Bulk Electricity Trading Company Plc.) who, through vesting contracts, supplies the power to Distribution Companies (Discos) or directly to eligible customers, as may be declared by the Minister of Power.
Presently, the installed power generation capacity in Nigeria is 12,522MW out of which 10,592MW is gas fired and 1,930MW is from hydro. It is worth noting that out of the total installed capacity, the maximum peak generation by power plants in December 2015 was 4,810MW.
Most of the power received by Nigerian electricity consumers is on-grid power supplied by the Discos. On-grid power generation has, over the years, has had its constraints, some of which include unavailability of gas, weak transmission and liquidity issue.
The off-grid solution
Off-grid generation can be described as stand-alone power generation systems or mini-grids, which typically provide smaller communities (e.g. rural areas; industrial clusters or residential estates) with electricity through independent electricity distribution network systems.
Notwithstanding the total off-grid electricity generation capacity as approved by the Nigerian Electricity Regulatory Commission (NERC) is still less than 500MW. Considering Nigeria’s plans to increase generation capacity in the coming years and the low level of access to electricity in the rural areas, there is need for significant investments in off-grid generation.
Bangladesh is one of the world’s most densely populated countries with a population of over 158 million and has made a success story from implementing off-grid power solutions. The government of Bangladesh initiated the Solar Home System (SHS)-based rural electrification programme in 2003 through Infrastructure Development Company Limited under a micro-credit scheme.
In 2002, only 7,000 Bangladeshi households used solar panels but as of today, the programme has installed about two million SHS in the country. Also, since 2010, about four mini-grids have been installed and nine others are to be installed in off-grid locations of Bangladesh.
FG provides soft landing
Minister of Power, Works and Housing, Mr. Babatunde Fashola, had in October, announced that the Federal Government has approved tax waivers and other forms of incentives for companies engaged in renewable components manufacturing in the country.
Fashola unveiled government’s plan to stimulate growth of the renewable energy sector at the launch of a book titled, Solar Electricity Generation for Off-Grid Communities in Nigeria authored by the Managing Director of Eko Electricity Distribution Company, Mr. Oladele Amoda.
He explained that the Nigerian government, in a bid to encourage investment in solar and other forms of renewable energy, has revised its pioneer status eligibility to include SHSs, batteries and all components necessary to delivering solar panel systems.
‘‘It is better to invest in solar because it helps to reduce pressure on infrastructure if everyone can afford to have his or her own system. So for those who are still thinking whether or not to come and manufacture or not, the policy support for you to enjoy pioneer status for solar and all of the components that are necessary to do it is already in place,’’ he said.
Fashola explained that Nigeria’s energy production has grown from 2,700mw in 2015 to 7,000mw now, while its wheeling capacity has equally increased to close to 7000mw, adding that what the sector needed to do now was to knuckle down and expand the distribution capacity.
But he also admitted that even if all of the capacity is put together, it won’t be enough because it is only those on the grid system that will benefit from such power as grid extension and expansion is a very capital intensive business.
“And this is where solar becomes the real energy of today to help us quickly close up the communities where it is much more expensive to connect and more difficult to try to connect,” Amoda said.
The Minister said the country was targeting to deliver about 30 per cent of its energy mix and make it deliverable through renewable sources as contained in the energy mix and investment document launched in Kaduna last year.
Private investor takes the lead
Meanwhile, All On, an independent impact investing company, recently made its first set of transactions aimed at facilitating increased access to affordable, reliable and sustainable energy sources for low income households, Small and Medium Enterprises (SMEs) and communities.
Seeded with funding from Royal Dutch Shell, All On works with partners to increase access to commercial energy products and services for under-served and un-served off-grid energy markets in Nigeria, with a special focus on the Niger Delta.
“This initial set of transactions demonstrates our commitment to utilising a market-based approach to making a sustainable impact in the off-grid energy sector in partnership with global and local market leaders. It is just the beginning of our investments towards improving access to energy in Nigeria for the tens of millions of off-grid households and SMEs across the country,’’ CEO of All On, Dr. Wiebe Boer, said.
The initial investments include an equity investment in Lumos Global BV, the fastest growing “distributed utility” in West Africa, and a grant to renowned Nigerian tech ideation incubator, Co-Creation Hub, to launch a challenge to engage Nigeria’s technology innovation ecosystem in the access to energy space.
All On has also entered into a grant agreement with Solar Nigeria, a UK aid-funded project implemented by Adam Smith International, for the receipt of grant funding to further de-risk investments made by All On in the SHS space.
The firm is also currently in the latter stages of negotiations for an equity and debt investment in Green Village Enterprises (GVE), the award-winning indigenous mini-grid operator in Nigeria headquartered in Port Harcourt. Commenting on the proposed investment, Managing Director of GVE, Ifeanyi Orajaka, said, “we at GVE are excited about this relationship with All On. An investment from a world-class organisation such as All On further validates our position as one of the leading and most innovative indigenous clean energy solutions providers in sub-Saharan Africa. We are very optimistic and look forward to achieving our medium-term target of impacting two per cent of Nigeria’s 180 million population through this partnership.”
On his part, the Chief Executive Officer of CCHub, Bosun Tijani, explained that the organisation was proud to partner All On to support Nigeria’s early stage clean energy entrepreneurs.
“Matching our expertise, identifying and supporting innovative startups with All On’s seed capital, we hope we can unearth amazing enterprises to meet the energy needs and aspirations of Nigerians.”