Nigeria is eyeing 30 per cent renewable energy by 2030. But, despite having bountiful renewable energy resources, the country has not made any significant addition from renewables to achieve the target and boost electricity supply. To analysts, the government’s weak commitment to proposed renewable energy policies and dearth of investments, among others, are curtailing the march towards renewable energy. Assistant Editor CHIKODI OKEREOCHA reports.
Nigeria has never hidden her intention to change the outlook of her Electricity Supply Industry (ESI) by exploiting opportunities in renewable energy. With about 85 per cent of all power generation coming from gas-fired turbines, successive governments have articulated a number of policies and targets aimed at diversifying the country’s power generation mix via renewable energy sources.
This was in the hope of significantly boosting electricity supply to homes and businesses. The whole idea was to latch onto such strategic policies and targets to move the country away from its age-long over-reliance on fossil fuels as the primary source of electricity generation.
Consequently, the Federal Government put the right foot forward, at least, at the level of policy pronouncement, when it unveiled the National Policy on Renewable Energy and Energy Efficiency (NPREEE).
The policy was developed by the then Federal Ministry of Power in 2014. Expectedly, it raised hopes of a robust ESI powered by an increased share of renewables in the national energy mix.
For instance, under the policy, Nigeria targeted a total of 8,188 megawatts (MW) from Renewable Energy (RE) by 2020 on a medium term. The long term target was on the realisation of 23,134 MW by year 2030.
Nigeria’s targets for renewable power capacity, The Nation learnt, include bio-mass, 50 MW by 2015; 400 MW by 2025; hydro-power (small scale), 600 MW by 2015; two gigawatts (GW) by 2025; solar photovoltaic (solar PV) (large scale, >1MW) 75 MW by 2015; 500 MW by 2025; wind power, 20 MW by 2015; 40 MW by 2025; Concentrated Solar Power (CSP), 1MW by 2015; 5MW by 2025.
While re-stating government’s commitment to changing Nigeria’s power outlook by exploiting opportunities in renewable energy, the Minister of Power, Works and Housing, Mr. Babatunde Fashola, (SAN), at a recent summit in Abuja, with the theme: Energy Option in a Low Cost and Low Carbon World, said that in all government targeted 30 per cent renewable energy by 2030.
One of the renewable energy projects that held promises of a new dawn in the ESI was the signing 14 solar Power Purchase Agreement (PPAs) with 14 developers with the potential to deliver over 1,000 MW of solar power.
There is also the Wind Plant in Katsina State. Government also started building the 700 MW Zungeru Dam. At least, 17 small and medium hydro power plants are also being developed across the country.
While solar energy refers to the energy stemming from the light and heat harvested from the sun through photovoltaic cells or solar thermal concentrators, RE in the form of wind energy uses the airflow through wind turbines to generate electric power.
But as ambitious as some of the proposed projects as well as previous renewable energy projects targeting solar and wind energy are, the Federal Government’s lack of political will and commitment to drive them is said to be responsible for why there hasn’t been any significant addition of renewables to the national grid to boost power supply.
For instance, the Zungeru 700 MW hydro power plant now has a new completion date of 2019, according to Fashola. This was after the problems that stalled work on the project were resolved. The wind plant in Katsina State has also run into a hitch, following the kidnapping of the French national in charge of the project.
The project was said to have been 97 per cent completed before it ran into a glitch. This is despite the fact that Nigeria boasts of vast opportunities for harvesting wind for electricity production particularly in the northern states, where wind is abundant throughout the year.
For instance, Jos in Plateau State and Katsina in Katsina State have a lot of wind velocity to support wind-powered electricity. To further underscore government’s weak commitment to RE, especially solar energy, nothing has since been heard after the flag-off and commissioning of Operation Light-up Rural Nigeria projects in three rural communities of Abuja, namely Durumi, Shappe and Waru.
While residents in these villages, who hitherto had never seen electricity, marked uninterrupted solar power supply for one full year, plans to replicate the projects in hundreds of communities across the country, while also encouraging the private sector to key into it for wider spread, are yet to bear fruits.
Nigeria has also not fared better in biomass. Although, the option is increasingly becoming attractive as an alternative energy source, successive government’s promises to ride on the huge waste generated in major cities across the country such as Lagos, Kano, Port Harcourt, Enugu, Kaduna and Ibadan, among others, have not been kept.
The plan, according to experts, was to aggregate these huge wastes and put more power plants here and there, and feed them directly to the country’s distribution network, which is embedded in generation and distributed power. But, unfortunately, government has failed to match its plans with actions.
The challenge is that government has not demonstrated the political will to make investment into renewable energy more attractive to private investors. And two issues stand out in this regard namely, cheaper financing and lower taxes.
For instance, the current Central Bank of Nigeria (CBN’s) benchmark lending rate of 14 per cent and commercial bank lending rate of 20-25 per cent are considered too high for investors who require capital to startup businesses such as in renewable energy.
In contrast, the rates are substantially lower in other countries that have moved far in the development and usage of renewable energy such as China, US and India. While it is about 9.45 per cent per annum in India, for instance, the lending rates are at average of 4.3 per cent per annum in the US and China.
The Renewable Energy Manager/Acting Manager, Bank of Industry/United Nations Development Programme (BoI/UNDP) Access to Renewable Energy (AtRE Project), Mr. Lawal Gada, noted that renewable energy finance is almost non-existent in Nigeria, adding that banks’ funding for renewable energy projects was inadequate.
The BoI/UNDP AtRE is an intervention project aimed at expanding energy services for rural and peri-urban Micro, Small and Medium Enterprise (MSMEs). Its aim was to facilitate investment in renewable energy options and linkages for enterprise development. BoI is the implementing agency for the project.
The lack of finance must have been why those pushing for increased uptake of renewable energy argue that since government has made some concessions, which enabled cheaper financing to sectors such as agriculture and manufacturing in order to encourage their growth, it should consider offering similar lower rates to power sector investors, particularly for those who are investing in renewable energy.
However, apart from funding, Gada identified other challenges to include lack of standard for renewable energy products, technical know-how of industry players, awareness on positive impacts of renewable energy and sustainability of the projects.
Why RE is a compelling option
From a strategic and investment point of view, as well as from a technological and environmental perspective, renewable energy sources are acknowledged globally as viable option to diversify power generation mix and significantly boost electricity supply.
This is particularly true for Nigeria, where a vast, but largely untapped potential in renewable energy resources such as solar, coal, wind and biomass has strategically positioned the country to leverage on the opportunities in renewable to tackle her persistent electricity crisis.
Besides, RE bodes well for Nigeria’s desire to diversify her energy mix to reduce its natural gas dependence. At present, almost all of Nigeria’s energy consumption comes from non-renewable energy sources such as natural gas and oil, which is finite. About 85 per cent of power is said to be generated by gas fired plants.
But the snag is that issues of pipeline vandalism and securing gas to power the thermal plants have become a herculean task. The nation’s unreliable gas supply infrastructure and pipeline vandals are said to have continued to compromise the distribution of gas to various plants across the country.
From an investment point of view, RE also holds promises. Although, most renewable energy technologies have high up-front capital cost compared to conventional energy alternatives, renewable energy sources have low operational and maintenance costs; they are also more easily replenished.
In other words, turning to RE might be expensive in the short term, due to the huge up-front capital investments and the transfer of technology and knowledge. But the consensus is that the long-term benefits far outweigh its short-term disadvantages.
More importantly, with little service improvements to show for the handover of the power utilities to private sector operators under a privatisation exercise, the imperativeness of RE comes into bold relief.
Recall that the power sector was privatised on November 1, 2013, with the formal handover of six generation companies (GenCos) and 11 distribution companies (DisCos) unbundled from state-owned Power Holding Company of Nigeria (PHCN) to private investors.
Expectedly, there was high public expectation that the new owners would bring a rapid end to frequent power outages in Africa’s largest economy. But, five years down the line, electricity consumers are still agonising over the persistent poor electricity supply across the country.
For instance, a team of experts at professional services firm PwC led by Utilities, Mining and Resources Leader, Pedro Omontuemhen, and Tax Partner, Moshood Olajide, observed that “end users in the power value chain are expressing an increasing sense of desperation for a sustainable solution to their power challenges as the euphoria of the privatisation exercise dissipates.”
The experts were quick to point out that “Power is a key driver of Nigeria’s industrialisation aspirations, hence the success of Nigeria’s planned economic and growth recovery is substantially hinged on improvements within the power sector.”
Nigeria’s installed power generation capacity is put at 12,000MW. But as at December 26, 2018, the actual output stood at over 5,207.57MW, according to the Executive Secretary, Association of Power Generation Companies (APGC), Dr. Joy Ogaji.
Fashola was more generous in his assessment of the ESI. Hear him: “We are producing more power than what we met; we are transmitting more power than what we met, and we are distributing more power than what we met.”
According to him, his ministry met 4,000MW, but has added 3,000MW more, which translates to 1,000 MW per year. “We have improved on what we met, and that is unarguable and unimpeachable,” Fashola insisted, when he appeared on a television programme last week.
The minister, who admitted that government has not gotten to its destination yet, however, said the agenda his ministry set for itself in 2015 to achieve incremental power was already yielding results. He added that based on government’s off grid and mini-grid policy, “…I see a very clear path to solving this problem (electricity crisis).”
OPS, other consumers disagree. While Fashola may have come across as an incurable optimist, not a few consumers and business owners refused to be swayed by the minister’s claim of an improved electricity supply. They insist that the envisaged improvement in electricity supply has yet to manifest.
For instance, the Director-General of the Lagos Chamber of Commerce & Industry (LCCI), Mr. Muda Yusuf, said the power situation continues to pose severe challenges to private sector operators, impacting adversely on productivity.
He said throughout last year, the Chamber received complaints across sectors about high energy costs especially high expenditure on diesel, higher cost of and scarcity of gas, and payment demand by DisCos for power that was not supplied.
“These continue to take its toll on the bottom line of investors. Small and Medium Enterprises (SMEs) and some real sector companies reported that they spend as much as 20-25 per cent of their total operating cost on provision of alternative power supply and payment to DisCos,” he said.
While stating that the provision of power remains at the heart of the ease of doing business in Nigeria, Yusuf, however, noted the government’s efforts in addressing the perennial power supply shortage and deeper commitment to alternative sources of power including off-grid initiatives.
Nigeria’s $9.2b mini-grid market beckons
A recent report brought the enormous investment opportunities in RE nearer home. The report titled, Mini-grids in Nigeria: A Major Investment Opportunity, said Nigerians spend as much as $14 billion annually on off-grid power from small self-generators, which are inefficient and expensive ($0.40 kilowatts per hour (kWh) or ¦ 140/kWh or more).
The report was an independent assessment of the Nigerian mini-grid market. It was the result of a partnership between Rural Electrification Agency (REA), the World Bank (Energy Team), and Rocky Mountain Institute (RMI).
The report, which was accessed by The Nation, noted that a significant amount of the economy is powered largely by small-scale generators (10–15 GW) and that almost 50 per cent of the population has limited or no access to the grid.
Consequently, there are high densities of power use, large latent demand, and a strong willingness to switch to more-effective alternatives.
The report, therefore, said developing off-grid alternatives to complement the grid creates a $9.2 billion a year market opportunity for renewables, mini-grids and solar home systems that will save $4.4 billion yearly for Nigerian homes and businesses.
Mini-grids, according to the Nigerian Mini Grid Regulation, are stand-alone power generation systems of up to 1 MW capacity that provides electricity to multiple consumers through a distribution network.
Mini-grids offer an innovative, yet practical solution to rural electrification challenges. They can circumvent many of the problems with electricity from the centralised grid, while providing cost-effective power.
Mini-grids can provide reliable and affordable energy to help factories manufacture, students study, and the Nigerian economy reach its full potential. And today, thousands of communities in remote regions can be cost-effectively served by mini-grids while providing investors a good return on investment.
The mini-grid report, which highlighted Nigeria’s potential as the biggest and most attractive off-grid opportunity in Africa, projected that installing several hundred mini-grids can reduce costs by around 60 per cent in 2020.
Although, Fashola said government has approved the mini grid regulations to guide registration and licensing for small consumers and off-grid developers to produce up to 100 kilowatts, the challenge of dearth of investments in the RE industry remains.
Some of the factors identified as being responsible for this include lack of access to micro financing, high interest rates, poor business development skills by renewable energy system vendors and unsupportive climate for investments.
Experts, therefore, say that government must prioritise policy options that can attract foreign direct investment into the country, as this not only encourage the production of energy from RE sources, but also create jobs and enhance the transfer of technology and knowledge to the local partners.
RE in other countries
Coal makes up to 30.3 per cent of the global energy primary needs and is used to generate over 42 per cent of the world’s electricity. The resource constitutes 93 per cent of the fuel used by South Africa to produce its electricity.
The Rainbow nation is currently generating far above 40,000MW for a population of about 50 million people. At the time Nigeria launched its power sector road map in 2010, South Africa was already generating 40,000MW.
It has since moved a notch higher, adding a little over 600MW to the existing 40,000MW. Wind power was responsible for producing 2,126 GWh of South Africa’s electricity in 2016, following the construction of a number of wind farms, most notably the Jefferys Bay and Cookhouse sites in Eastern Cape.
South Africa’s Government also recently reaffirmed its commitment to renewable energy, with its Department of Energy signing agreements with 27 independent power producers (IPPs), effectively unlocking R56 billion that will be invested in renewable energy projects across the country, predominantly in rural areas.
In all, South Africa envisages that by 2030, it will have an energy sector that promotes economic growth and development through adequate investment in energy infrastructure. The plan also envisages that by 2030, the country will have an adequate supply of electricity and liquid fuels to ensure that economic activities and welfare are not disrupted, and that at least 95 per cent of the population will have access to grid or off-grid electricity.
The plan proposes that gas and other renewable resources like wind, solar and hydro-electricity will be viable alternatives to coal and will supply at least 20,000 MW of the additional 29,000MW of electricity needed by 2030.
Countries in the Middle East and North Africa (MENA) region are also increasingly shifting their focus towards renewables (solar and wind resources) as a means of diversifying their power generation mix.
According to a recent International Renewable Energy Agency (IRENA) report, the MENA region is anticipating renewable energy investment of $35 billion per year by 2020. It also predicted that RE prices will compete with fossil fuel by 2020.
Indeed, declining renewable energy prices and increasing energy demand in the region are said to have provided lucrative opportunities for stakeholders to increase renewable energy production, invest in long-term competitiveness and energy security.
The report, which was accessed by The Nation, said among the MENA countries, Morocco has emerged as a role model for the entire region. It said the government’s target of 2GW of solar and 2GW of wind power by 2020 is progressing smoothly with the commissioning of Nour-1 solar project.
Jordan and Egypt are also making steady progress in the RE sector. According to APICORP, currently, 2.4 GW of nuclear power facilities in MENA are complete, of which only 1 GW is operational, 5.4 GW is under construction, and a further 8 GW is planned by 2030.
Will Nigeria borrow a leaf from these countries that have prioritised investments in RE? Will the authorities create the enabling business environment that will open the floodgate of investments into the RE development and usage? Will she provide the incentives to encourage states and local governments, as well as private sector operators to invest in the industry?
While answers to these remain matter of conjecture, the consensus is that until and unless Nigeria exploits her RE potential, power output will remain below optimal. And this sub optimality will remain a significant constraint to economic activities in the country.
More importantly, the realisation of the Federal Government’s 2017-2020 Economic and Recovery Growth Plan (ERGP) may be scuttled as a result of inadequate and unstable power supply in the country.
