Off-The-Grid Thinking To End Nigeria’s Blackouts

Five years after the privatisation of Nigeria’s power sector, even the most luxurious Lagos hotels still suffer daily blackouts. The size of the gap between the country’s energy needs and current energy provision is daunting.
Although rich in oil and gas as well as hydro and solar resources, Nigeria’s power companies generate only about 4,000MW daily, according to the US Agency for International Development. That is less than a third of that required to supply its more than 190m citizens.
The gap has shifted the debate towards off-grid, distributed solutions, where smaller units are allowed to generate and distribute power locally rather than through centralised grids.
“Moving forward, what is already clear is having an off-grid future,” says Damilola Ogunbiyi, managing director of the Rural Electrification Agency, which was set up to provide access to reliable power to rural Nigerians.
“Half of my time is still spent on existing on-grid projects. It is going to take a few years to change that, but I do not allocate budget towards new [on-grid] projects.”
Power sector specialists are placing their hopes in mini-grids, independent solar panel systems of up to 1MW capacity — the threshold at which a developer must apply for a full-scale power generation licence — that can power up to a few thousand households.
The REA is aiming for 10,000 Nigerian mini-grids by 2023 with the support of a $350m loan from the World Bank. But this drive brings its own challenges. “It is a battle every day to convince government agencies in [the utility of solar],” says Ms Ogunbiyi.
Nigeria’s current state grid system is inadequate. Billing for utilities is patchy as most individual customers are not metered. A foreign exchange crisis two years ago rendered many of the power companies insolvent because they had taken out dollar-denominated loans.
“No one will pour a dollar into any project, even if it is adding just 100MW of capacity, if it’s on-grid,” says Wiebe Boer, chief executive of All On, a Lagos-based company that supports and invests in off-grid energy solutions. “But until about two years ago, the mindset used to be that centralised systems were the only way.”
The paralysis in Nigeria’s energy sector is evident in the absence of any utility-scale, on-grid solar projects. Since privatisation of its power sector, Nigeria has issued 14 licences for 1,125MW worth of on-grid solar-generation projects, but these have been held up because of disagreements over power pricing, according to local media reports and energy sector experts.
Instead, private entrepreneurs have stepped into the vacuum, proposing alternative solutions to Nigeria’s power grid.
One is Anayo Okenwa Nas, chief executive of solar energy company Nayo Tropical Technology, which sells both solar home systems and runs several mini-grid pilot projects.
Nayo Tropical is running a 100kW grid powering 750 households in one of the most remote corners of Niger state. When the grid was begun, regulation to support mini-grids did not yet exist, so Mr Nas built his project as far from existing transmission lines as possible. “We were shooting in the dark,” he says.
In 2015, policymakers introduced regulations allowing customers to buy power from independent grids, breaking the grip once held by Nigeria’s 11 energy distribution companies.
For Nigeria’s off-grid solar solutions to be successful, they must be able to adapt to both urban and rural areas, says Mr Boer. Only 55 per cent of urban households have access to reliable power, according to USAID. The number drops to 36 per cent in rural areas.
As a result, fully closed solar systems — where the generator and the end-user are the same — are being considered for those rural sites that even mini-grids cannot serve or as supplements to energy supplies for power-hungry urban households.
But it is not clear whether mini-grids and fully closed home systems are commercially viable. Nigeria’s existing mini-grids are still largely supported by government subsidies and international grants. Solar companies are poorly capitalised and must buy their panels in small batches at a time, making it hard to scale up. Overheads have also shot up after Nigeria imposed steep duties on solar panels earlier this year, adding to the taxes on storage batteries.
Providers must also contend with Nigeria’s attachment to diesel generators, whose loud hum still connotes social status and reliability in a way that solar panels do not. Years of discarded projects funded by international aid have fed suspicion of solar’s reliability. “The first movers [in solar mini-grids] need to get it right. The reputation of an entire industry is at stake,” says Mr Nas.
Mini-grids will need greater collaboration with on-grid providers or at least be prepared to consolidate to reap economies of scale.
The majority of small operators remain under 100kW of capacity, the threshold at which operators must apply for a basic permit.
“Home systems and mini-grids are a good stopgap,” says Mr Boer. “But the scale needed to address Nigeria’s energy needs means that their development will take a long time.”
Source: Financial Times

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