Renewable power sources are ascendant. China is leading the way, with a quarter of global solar capacity and a third of wind power output. Until recently, the cost of solar panels fell as economies of scale made each unit cheaper for the dominant Chinese manufacturers. But the unfolding trade war with America, which resulted in tariffs being imposed on Chinese-made solar panels, has added to costs. That is not stopping the rise of renewables. “In 2016, cumulative solar PV capacity reached almost 300 GW and generated over 310 TWh, 26% higher than in 2015 and representing just over 1% of global power output”, says the International Energy Agency (IEA).In 2016, “cumulative grid-connected wind capacity reached 466 GW (451 GW onshore wind and 15 GW offshore wind) and wind power accounted for almost 4% of global electricity generation.”
Given the prevailing trends, what are the prospects for renewable power in Nigeria, one of Africa’s most voracious energy consumers?“The prospect for renewable energy in Nigeria is quite enormous and there are opportunities for the development of grid-connected solar, wind, and geothermal power projects,”says Kayode Omosebi, energy analyst and head of research at ARM Investment Managers, a leading Nigerian investment banking firm.“Nigeria is endowed with abundant energy resources, both conventional and renewable, which provide her with immense capacity to develop an effective national energy plan,” Mr Omosebi adds.
More solar
In line with the government’s desire to have 25 percent of Nigeria’s power mix be via renewables by 2019 and about 40 percent by 2030, more than $20 billion of solar power projects are either planned or under construction. There is the $479 million 300MW Shiroro Solar Power project on the grounds of the Shiroro hydroelectric dam in northcentral Nigeria, and the $5 billion 3,000MW utility-scale solar photovoltaic (PV) projects by SkyPower and FAS Energy in Delta State in the Niger Delta region. In collaboration with Arrow Capital, an American firm, the University of Ilorin, located in the country’s middle-belt, is also constructing a 500MW solar power plant at a cost of $2.3 billion. Another is the $1 billion 1,000MW FirstGate solar power farm in Kogi State in northcentral Nigeria. There are numerous other projects on a smaller scale.
“Solar is a major renewable energy resource in Nigeria from a geographical perspective, and consensus projects that Nigeria has the potential to generate 600,000MW by deploying Solar PV panels from just 1% of Nigeria’s land mass,” says ARM’s Omosebi. “The high level of solar radiation in the northern part of Nigeria makes it easy to utilize solar power generation in the northern part of the country to steadily increase the power generation capacity in Nigeria.”
Regulation
The regulatory environment for renewable energy in Nigeria is favourable. And judging from the number of ongoing solar power projects, investors think so too. ARM’s Omosebi explains the specifics: “In terms of policies, [the] Nigerian Electricity Regulatory Commission (NERC) has recently issued a Regulation on Feed in Tariff for Renewable Energy Sourced Electricity in Nigeria (REFIT Regulations) passed in December 2015, which provides for the tariff framework for renewables…The REFIT Regulations indicate that the government has set an on-grid target for solar renewable generation of 380MW by 2018. This means that there is a deliberate drive by the government to ramp up electricity generation from solar sources.”
Hydro still main renewable focus
But for sometimes unpredictable and meagre rains, hydropower has proved reliable. Large dam projects can sometimes beunwieldy and take too long to complete, however. One such project is the longsuffering3,050MW Mambilla hydropower project in northeastern Nigeria; besieged by corruption hitherto. Now underway with a Chinese contractor, the $5.792 billion project is expected to be ready by 2023, if all goes according to plan. Other ongoing hydropower projects include 40MW in Kashibila, 30MW in Gurara, 700MW in Zungeru, and 29MW in Dadin Kowa. Wind power has not enjoyed as much enthusiasm, however. That relative to solar power, wind power systems require greater maintenance and are not so practical for residential use, are some reasons why. In this regard, there is only one major project: the 10MW Katsina Wind Farm in Rimi Village in northwestern Nigeria.
Make cheaper
Still, “renewable, except hydro, today can’t replace other sources of energy due to [the] intermittent [nature] and the high cost of storage. Storage will become cheaper but it’s not clear when wind and solar will serve as real alternatives both in terms of the amount of power available and the cost. It is also not clear that it will be able to properly serve dense urban areas without some form of grid, since the roof space per person is small you will need the solar panels or wind farms to be away from the households that they are serving,” says an experienced investor in the power sector.Yet judging from the trends thus far, solar power is likely to increasingly gain traction. Off-grid solar power would be a challenge in urban areas, however. But as it is ideal for rural and agricultural communities, it would free up the grid to serve more power-hungry urban areas via other power sources; which although not environment-friendly, would not be as harmful as less power would be needed from them. With government regulation in place, what would really drive renewable power sources like solar in Nigeria and elsewhere is if it becomes cheaper than other sources.
- An edited version was published by African Business magazine in October 2018
Rafiq Raji
Twitter: @DrRafiqRaji
