Solar in the Spotlight

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Erratic power supply is arguably Nigeria’s Achilles heel. As recently as May 2015, the economy was nearly brought to a halt as airlines, banks, manufacturers and telecommunications companies struggled to fuel their operations due to petroleum product shortages.

In 2016, the power picture did not look any better as incessant militant attacks in the Niger Delta curbed gas supply.

Nigeria’s reliance on generators, premised on the unreliability of its power supply, makes the economy extremely fragile.

The question is can renewable sources of energy like solar alleviate this problem and at the same time diversify the country’s energy mix?

To understand how solar power fits into Nigeria’s power supply mix, we need to look at how the current system operates.

Power supply consists of three phases: generation, transmission, and distribution.

Power is generated through power plants across the country. Next it is transmitted through a network of lines and transformers that make up the national grid.

Finally, it is de-livered to consumers by distribution companies.

Power outages occur either when too little power is generated or the grid cannot transmit electricity properly. Nigeria suffers from both problems.

Under optimal working conditions, domestic power plants can generate a maximum of 12,500 megawatts (MW), but due to poor maintenance, obsolete equipment and irregular sup-ply of natural gas and coal, the country’s highest recorded generation is 5,500MW, with the figure falling to as low as 2,600MW.

More recently, in the past 5 weeks, power produced from the national grid has averaged 3,600MW.

To put this in context, the average Ghanaian consumes three times more power than the aver-age Nigerian, while the average South African consumes 31 times more electricity.

Bear in mind that Nigeria’s population of 180 mil-lion is more than double Ghana’s and South Africa’s combined population.

Nonetheless, even if all plants ran optimally, the grid itself suffers from structural issues as it is hampered by faulty lines and an overloaded corridor.

Faced with these challenges, the case for solar electricity systems becomes more compelling.

A solar powered system needs neither natural gas, diesel nor coal to function, and could even operate outside the national grid.

Fortunately, Nigeria is blessed with high levels of sun intensity, particularly in the Northern region.

Privatizing the power sector in 2015 created room for companies like Nemoante, to win projects.

The Lagos-based solar developer signed a 120MW power purchase agreement with the government in July 2016 and expects more opportunities.

This is a positive indication of the current administration’s commitment to harness renewables and diversify the energy mix.

Furthermore, a Paris-based independent power producer, GreenWish Partners, is set to invest $280 million to build solar power plants in Nigeria and bring 200MW on the grid by the first quarter of 2018.

According to GreenWish Partners President, Charlotte Aubin-Kalaidjian, 200MW represents electricity access for 2.5 million people, 1.5 million tons in CO2 reductions, and the creation of over 2,000 jobs.

Certainly, 200MW is significant considering our current production, but this number is easily dwarfed by the 30,000MW the country needs to achieve a 10% GDP growth rate by 2030.

To add to the 200MW promise, several companies are now offering Nigerians standalone solar photovoltaic (PV) systems.

The intent is to end the self-powering market. The diesel generator market alone is estimated at $21.8bn.

However, while the long-term benefits of solar energy are potentially significant, upfront costs are expensive.

In 2015, the aver-age cost of installing a 4-KW solar PV system for a three-bedroom house was just under N2 million.

Current economic conditions have not helped this cause. According to industry experts, the weak naira has led to a 25% increase in the cost of system components, which are largely imported.

The recession presents an additional challenge as potential customers are more risk-averse and less willing to undertake costly investments in the face of an economic downturn.

All hope is not lost. Companies like Solar Kobo provide platforms to allow payments for PV systems in installments, and while solar PV providers still seem overwhelmingly focused on residential customers, commercial clients could help the sector stay afloat.

Businesses tend to have more inelastic demand for electricity as they need to maintain operations, whereas households can usually find ways to manage.

It is worthwhile to look at the bigger picture, lest we myopically portray solar PV systems as a one-size-fits-all solution. While it may be logical for Nigerian firms to adopt solar technology, it is because alternatives remain unreliable or costly.

The fact remains that countries such as South Africa are able to generate much cheaper electricity using fossil fuels.

If a foreign firm were to choose between locating a factory in Nigeria and South Africa based on electricity costs alone, South Africa would be the obvi-ous choice.

The perfect example is the recently concluded ‘Big Brother Naija’ that was filmed and located in South Africa rather than in Nigeria.

An executive of DSTV cited Nigeria’s epileptic power supply amongst other reasons for making South Africa the preferred location to film the reality TV show.

Source: ProShare

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