Removal of excise duties, tax relief may increase solar energy investments

Removal of excise duties on solar components, reducing value added tax, creating policies that will enhance access to consumer finance for solar infrastructure and listing solar energy industry as priority sector to access foreign exchange are practical actions the Federal government can take to in the short-term encourage solar energy investments, stakeholders have said.

For long-term solutions, they charged the government through policy to encourage building solar farms and setting up solar component manufacturing plants and building capacity for production and installation of solar components.

Solar batteries and other solar components are subjected to 20 percent excise duties and players in the sector pay a 5 per cent value added tax (VAT) on solar components. While the petroleum sector is listed as priority area for allocation of scarce foreign exchange, solar components are now included.

Experts in the sector believe that if these conditions are in place, it will reduce the cost of solar energy infrastructure and installation by about 30 percent and provide alternative to off grid electricity generation and distribution both at utility scale and solar to home solutions.

Yusuf Sulaiman, MD/CEO, Blue Camel Energy said: Batteries are the more expensive component of every solar installation but batteries attract 20 percent custom duties while solar panel at 5 percent. If energy is critical to the nation and the government is really serious about solving Nigeria’s electricity crises, it should remove duties on solar energy and make it zero percent.”

“Also if energy is that critical to government’s plan, why should we be paying Value Added Tax (VAT) for solar energy why the other sources of energy that is detrimental to the environment like PMS is subsidized?”

“There is a very simple way of doubling our energy generation within two years. Install 6okw to solar infrastructure to one million households in Nigeria; you will have added 6000mw simple as that. It does not require rocket science.”

Segun Adaju, Lead Consultant, BlueOcean Nigeria canvassed for consumer finance to tackle the challenge of initial high cost involved in solar infrastructure. “Through this option you can spread the cost over a few years. Banks finance cars; they can also set up a scheme to finance solar energy projects. The government can assist by providing enabling environment and incentives in this direction.”

Nigeria’s electricity generation and distribution have worsened in recent times reaching levels as low as less than 3000 megawatts on account of weak transmission lines, vandalism of pipeline infrastructure, leading to gas shortages to power plants and weak regulation.

Sustainable energy is one of the top goals of the United Nations development goals, and experts believe that solar energy is the surest path to achieving it. Many countries are currently pushing for investments in solar energy saying it reduces costs in the long term, does no harm to the environment and it is the best off-grid alternative especially for rural areas.

Germany currently leads in the ranking of countries with the highest installed capacity of solar power generating over 38,000 megawatts of power. China follows with over 28,000 megawatts of solar power while Japan has close to 24,000 megawatts of solar power.

 

ISAAC ANYAOGU