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With power supply falling to abysmal levels of 2,000MW in the beginning of 2017, Nigeria has every need to give renewable energy sector emergency room-style attention instead of the mere tokenism it gets currently.
Vice President Yemi Osinbajo, at a January 31 ceremony to distribute 20,000 solar-powered lighting systems for rural communities in Wuna village, a rural community in Gwagwalada in the suburbs of Abuja, said it had become imperative to provide alternative power sources that would be off the national grid to power the rural communities in the country, an estimated 70 million households.
With a mere 40 percent geographical coverage and transmission capabilities of about 6,500MW, Nigeria’s transmission infrastructure is inadequate to wheel all the power generated. However, Nigeria’s 2017 budget spending plan does not show there is plan to diversify into more off-grid solutions.
The Federal Government plans to procure and implement about 19 different solar power-related projects collectively worth N2,898,173,485.
The projects include solar street lighting, micro grid solar power generation, solar-powered water boreholes, as well as other solar power-related infrastructure, which would be procured for deployment to different parts of the country.
Analysis shows this is not deep enough compared to Nigeria’s peers.
Ghana’s new president, Nana Akufo-Addo, plans to build solar parks through investment tax credits to owners of commercial, industrial, and utility scale solar photovoltaic (PV) systems to take a one-time tax credit of qualified installed costs.
Apart from promoting adoption of distributed solar for all government and public buildings worth millions of dollars, Ghana is planning to create a renewable energy industrial zone to enable local supply of solar panels to meet the requirement of policy proposals, where the private sector would be supported to build factories.
This year, along with other initiatives, Kenya plans to launch a $150 million project to bring solar electricity to markets, schools, shops and homes in poor, off-grid areas without existing power access with support from the World Bank.
And these are just recent initiatives.
In 2015, King Mohammed V1 committed Morocco to increasing its share of renewable energy electricity generation to 52 percent by 2030, with ambitions to install around 10 gigawatts (GW).
South Africa, where coal provides 86 percent of the country’s energy needs, is taking practical actions to ramp up renewable energy.
Industry practitioners say the Federal Government’s spending plan and policy initiative as it concerns renewable energy do not show it is committed to the sector.
“A big problem is that government does not see it as a priority and they are supposed to see it as one,” says Anita Nana Okuribido, president, Council for Renewable Energy, Nigeria (CREN).
Renewable energy operators decry a lack of enabling environment in the sector which has hampered investments.
Sector operators have not benefitted from any intervention funding as the Central Bank has twice allocated to the power sector with little results.
Government has not taken seriously several appeals from stakeholders to grant waivers for duties on renewable energy products, especially batteries.
Government has also not created any policy that will encourage renewable energy plants to be established in Nigeria through tax holidays or granting pioneer status to investors in the sector.
Okuribido told BDSUNDAY that fiscal policies, like tax holidays for renewable energy companies who are mostly start-ups, as well as intense advocacy campaign, should complement any effort in this direction.
“That is how it is done abroad. In Germany, for example, they are always having tax holidays. Components like batteries should be duty-free or reduce the rate to allow for increased adoption or renewable energy,” she said.
Yusuf Sulaiman, CEO of Bluecamel, a solar firm based in Abuja, said, “Various groups like the CBN, Nigerian Customs and others sat down with us to talk about why we are not enjoying any form of consideration and blames were traded between the Customs and Finance Ministry.”
The classification of batteries, the most expensive component of renewable infrastructure, is fixed through the West African regional agreements; hence they are not considered for duty waivers.
“This makes it quite difficult for the Customs to change the code unless there is some sort of policy readjustment from top authorities like the CBN and Ministry of Finance, and perhaps the legislature, because we did not see the impact of this when we ratified and signed this agreement,” Sulaiman said at an industry event.
Batteries under the harmonised system (HS) code are different from other solar components like the PVs and are billed at 20 percent, while solar PVs and cells are 5 and 0 percent, respectively.
Godwin Aigbokhan, renewable energy market adviser, National Competitiveness Council of Nigeria, said the cost of batteries has become prohibitive due to foreign exchange differentials.
“Batteries that cost about N60,000 last year have jumped to N160,000 and that’s for small batteries; huge ones are just too expensive,” Aigbokhan said.
“Customs says a waiver on battery will lead car battery importers to claim waivers too; hence they won’t do it, but it is simply a matter of changing the classification, a simple matter,” he said.
But simple problems have a way of defying simple solutions in Nigeria. In October 2016, Nigeria’s Electricity Regulation Commission (NERC) released a Draft Mini Grid Regulations 2016, a new regulation that would give investors licences to use mini-grids to accelerate electrification across the country.
The policy has not been ratified, though Chikwerem Obi, chief of staff to the chairman/CEO of NERC, who is tasked with aggregating views of stakeholders on the draft mini-grids policy, confirmed to BDSUNDAY that the delay in appointing commissioners for NERC stood in the path of the policy. He is, however, optimistic that it may scale through in this first quarter of 2017.
The fate of the 14 Power Purchase Agreements (PPAs) – commercial terms for power contracts – solar energy developers signed with government-owned Nigerian Bulk Electricity Trader (NBET) on July 2016 for 1,200MW hangs in the balance as $2.5 billion required to build the solar plants is stalling take-off of the project.
Developers who are obligated to handle upfront costs of sizing, procuring and installing the solar PV system now have to contend with rising foreign exchange and inflation which have pushed the cost of solar infrastructure above initial projections.
Since July when the agreement was signed, the naira has taken a beating having slumped close to N500/$ in January 2017, from around $305/$.
Most of the projects slated to commence in 2017 do not look as if they may actually get on track due to dearth of capital to execute the projects and the possibility of charging cost-reflective tariff.
Nigeria is also currently missing out on the massive growth being witnessed in the world energy storage industry as it is projected to reach $250 billion by 2040, according to a Bloomberg New Energy Finance study published in June 2016.
The study finds that batteries capable of storing power at utility scale will be as widespread in 12 years as rooftop solar panels are now, revolutionising the way consumers use energy.
Already a $100 billion market, it is expected that 25 gigawatts of the devices will be deployed by 2028, about the size of the small-scale photovoltaic industry now.
“Batteries will get a boost as costs drop and developers see the chance for lucrative new revenue streams,” said Julia Attwood, storage analyst at BNEF.
The study states that the trend will pose challenge to the traditional utility business model, where power generation and distribution are monopolised in a single company or through a controlled value chain as it is in parts of Africa.
“A main drawback to renewable energy penetration is that like wind, it is an intermittent energy source. Off-grid requires costly storage but technology should make that much cheaper,” Victor Eromosele, chairman board of trustees, SolarBrite, told BDSUNDAY.
Therefore, millions of Nigerians currently off-grid provide an untapped market for renewable energy if only government matches intentions with pragmatic policy.
