Renewable Energy as Viable Solution to Nigeria’s Electricity Crisis

Sterling Bank Plc and Stears Data in a new report on Nigeria’s electricity crisis, advocated the adoption of renewable energy as a viable solution to complement domestic and commercial supply, Oluchi Chibuzor presents excerpts of the report

As Nigeria looks to several sources to end its intractable power supply crisis, stakeholders are working out solutions that if adopted by the federal government, will help solve the problem.

As part of their contribution towards solving Nigeria’s electricity crisis, Sterling Bank Plc and Stears Data recently released a report, which advocated the adoption of renewable energy as a viable solution to complement domestic and commercial supply

The report entitled, “Powering Nigeria: How solar energy can become a sustainable electricity alternative,” is divided into five parts namely: Nigeria’s electricity problem; the impact of Nigeria’s problem; the case for solar energy in Nigeria; limitations to solar adoption in Nigeria, enabling Nigeria’s energy market and conclusion.

The report showed that despite the privatisation of Nigeria’s electricity industry, the country still has one of the lowest electrification rates in the world as 43 per cent of its population have no access to grid electricity, an indication “that 85 million Nigerians are not connected to – and cannot receive electricity from – the Nigerian transmission grid.”

The report in a comparative electrification rate analysis noted that Ghana has electrification rate of 84 per cent, Kenya 70 per cent, South Africa 85 per cent, sub-Saharan Africa 47 per cent, India 98 per cent, Europe 100 per cent, global 90 per cent and Nigeria 55 per cent. It noted that while Nigeria’s electrification rate is above the sub-Saharan Africa regional average of 47 per cent, it lags significantly behind its peers across the continent and the global average.

Grid-supplied electricity

According to the report, Nigeria’s grid-supplied electricity is grossly insufficient, thereby making the country to have the largest electricity access deficit in the world. Nigeria’s electricity supply value chain is broken into generation, transmission and distribution. The entire value chain used to be controlled by a state-owned facility, National Electricity Power Authority (NEPA) from 1972 to 2005, until the Power Holding Company of Nigeria (PHCN) was formed to transition to unbundling and privatising components of the power supply companies and form successor companies that will handle distinct parts of the value chain: generation, transmission and distribution with the aim of creating smaller, nimbler and more efficient corporations.

“However, unbundling NEPA into specialised, privately owned companies left the state company’s legacy of deteriorating infrastructure, energy losses, energy theft and non-cost reflective tariffs in the sector intact. And while the new structure was intended to address these problems, underlying issues have kept the sector in the same spot—or moved it backwards as some might argue,” the report said. The report concluded that, “the Nigerian electricity sector is stuck in an unproductive cycle.”

According to the report, Nigeria does not generate enough to meet its energy demand. The current generation potential is around 12,522MW with average output of 4,000MW. With estimated demand between 8,000MW and 17,000MW, there is a shortfall of at least 4,000MW.

Under transmission and distribution, the report noted that, “Only a small fraction of the generated energy actually gets to the end user. Installed transmission capacity or the maximum amount of electricity that can be transmitted under ideal conditions is 8,100MW, and the peak transmission has been 5,459MW.

“Further, only a quarter (3,100 MW) of our current generating potential reaches the end user, signs of a highly inefficient value chain. On top of these inefficiencies, the transmission grid’s outdated and worn infrastructure makes it highly prone to frequent system collapses.”

According to the report, “MSMEs reported a 50 per cent reduced monthly spend on lighting (from N9,406 to N4,738) as well as increased working hours and better yields when they went from having no access to grid supplied electricity to using solar energy solutions.”

Besides this, “The knock-on benefits are also well documented. Businesses enjoy increased productivity and efficiency, not hampered by rationing their electricity usage. Given that MSMEs report that electricity is their highest spend and one of the biggest threats to their businesses, providing them with reliable and affordable electricity is a key way to enable the growth of businesses in Nigeria.”

Solar solutions can deliver larger capacities and meet more complex energy needs, powering devices from 500w (including many small household appliances like laptops, small fridges and televisions) to 10kW, which powers most heavy duty household items such as air conditioners. It is unlikely to be suitable for industrial or heavy commercial use.

Also, solar energy can power commercial structures and ventures, community and the entire country with heavy investment in mini-grids in the long-term. Although innovations, falling prices, and increasingly unattractive electricity alternatives have driven the adoption of solar in Nigeria, the country still has a long way to go. Per capita, solar capacity remains at 1Wp (watts peak)—the maximum power that can be generated from a solar panel. In Ghana and Kenya, per capita capacity is at 3Wp and 2Wp respectively.

Despite the emergence of many payment models, price remains the most significant inhibitor in the growth of the market, a symptom of other prevailing market issues. These problems can be examined by the costs tacked on at each point of the solar supply energy chain.

They include manufacturing and assembly of the products outside the country with the associated costs of importing them into the country under a high tariff regime, informal taxes and levies the importers have to pay to clear their goods, logistics and transportation challenges which makes distribution to rural areas difficult and expensive, thereby making the solar solutions even more expensive and unaffordable to many Nigerians in the long-run.

The report also noted that energy production is a capital-intensive venture that requires investment in equipment, manufacturing, distribution and financing depending on the business model, adding that this makes the ability to access sufficient and adequate funding a make-or-break factor for providers of solar solutions in Nigeria.

It listed some financial institutions providing funding for providers of solar solutions in the country to include the Federal Government, development financial institutions, specialised debt providers, strategic corporates, crowd-funding and commercial banks like Sterling Bank, among others.



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