• Thursday, July 25, 2024
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Market determined electricity tariffs, higher fuel prices make hybrid mini-grids competitive

Nigeria hikes electricity tariff again for bigger consumers as complaints pile

Rising petrol prices, the introduction of service-reflective electricity tariffs and unreliability of the national grid are making solar hybrid mini-grids competitive for both residential and commercial industrial applications.

Hannah Kabir, chief executive officer of Creeds Energy, a professional solar energy services and solutions provider, found that in 2009 and 2010 despite the benefits of clean energy, hybrid systems were still cost-prohibitive for urban households compared to the grid and fuel generators due largely subsidised electricity tariffs and petrol.

However, with the Federal Government’s recent push to let markets determine prices, opportunities are opening up in Nigeria’s off-grid, mini-grid space. There are vast applications for solar photovoltaic (PV) applications ranging from electrification with solar PV systems and mini-grids, commercial captive power generation, agriculture and agro-processing.

These can be complementary within urban, grid-connected locations or decentralised power sources in off-grid, rural locations. The off-grid solar PV opportunity for standalone systems and mini-grids is estimated at between $10 billion to $13 billion (according to IFC Analysis on Climate Investment Opportunities in Emerging Markets, 2016).

With a growing population and over 40 percent of Nigerian populace living without access to electricity, and failing grid supply, renewable energy, particularly solar PV technologies and applications would play an important role in electrification.

Read Also: Global energy transition presents Nigeria with mixed fortunes

“I don’t see other sources, even fossil fuels as competition or a choice of either-or. In terms of achieving sustainable energy access targets, Nigeria, like other countries, would have to determine and leverage on the best mix of energy sources and resources to achieve desired targets and growth trajectories,” Kabir said.

Nigeria, Ethiopia, and Kenya are also emerging as dominant markets for mini-grid developments in Africa, alongside Tanzania and Uganda.

Off-grid renewable energy options, notably standalone systems and mini-grids are projected to see strong sustained growth in the coming decade, in response to demand for energy in areas unlikely to be serviced by national grids, according to the latest African Energy Outlook 2021 report released by the African Energy Chamber.

Towards 2030, standalone systems and mini-grids could provide almost 50 percent of the new electricity access as this represents the least cost solution to connect about 450 million (41 percent of the population) people on the continent. In Nigeria over 40 percent of its 200 people have no access to the conventional grid.

“The mini-grid and standalone generating systems is a multibillion-dollar market in Nigeria. This is because there are areas where it is neither economically nor financially feasible to extend the national transmission lines to,” Ayodele Oni, energy partner at Bloomfield Law Practice said. “Pricing remains a major challenge though and electricity distribution companies also weaken the expansion of mini-grids in Nigeria.”

In Africa, mobile connectivity, coupled with the use of mobile money, has created opportunities to improve electricity access by leveraging the mobile internet of things (IoT).

At present, providers of electricity via solar home systems and micro-grids leverage mobile IoT for accurate metering and billing of consumers as well as collecting data about power supply and demand.

The use of mobile IoT is likely to grow as millions gain access to electricity towards 2030. Although many African countries acknowledge the importance of modernising the grid and improving system flexibility through smart grids, the high costs and degree of market development will be a barrier in the next decade.

Washington-based Energy Information Administration (EIA) estimates indicate that annual energy investment needs in Africa will have to increase by 100 percent from the current $60 billion per annum (1.8 percent of the continents gross domestic product, GDP) to $120 billion (2.4 percent of GDP) in order to attain universal access.