Why renewable investors are in early 2021 rush for Nigeria’s market

In a bid to solve the energy challenge facing Africa’s biggest economy, some investors are beginning to take early 2021 positions with a series of investments aimed at developing renewable energy capacity.

Power inadequacy is a major impediment to growth in Africa’s largest economy, where four in every five people in the over 200 million population lack access to grid electricity and those that have are often at the mercy of perennial blackouts.

That has opened up a gap in supply and created an opportunity for a number of solar power firms, which are launching various renewable energy initiatives to bridge the shortfall and earn huge cash.

With the overall cost of wind and solar installations having fallen sharply on lower raw material prices, investors are betting big on renewables to increase electricity access.

“We have seen a more than fiftyfold increase in power-as-a-service revenue over the last two years,” Daystar’s CEO Jasper Graf von Hardenberg said in a statement.

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Nigeria, seen as the largest potential market for mini-grid in West Africa, has received at least $374 million in the past ten years from international donors for mini-grid development.

“Private sector players command solar hybrid development in the majority of the region, garnering financial support from development finance institutions and receiving at least $374 million in the past decade from international donors for minigrid development,” Bloombergnef said in a July 2020 report.

In less than 15 days into 2021, Nigeria-based Daystar Power, which supplies solar energy to businesses in West Africa, announced it has raised $38million in funding to expand its operations in Nigeria and four other African countries while Starsight received a second $10million financing injection from Scandinavian investment funds Finnfund and Norfund to supply solar energy to businesses in Nigeria and Ghana.

In addition to increasing installed power capacity to 100MW from its current 23MW, Daystar aims to aid in Nigeria’s energy transition by replacing high-emission diesel with clean and reliable solar power while Helios-backed solar power solutions firm, Starsight plans to scale up its generation capacity and services in the Nigerian and Ghanaian markets.

Other stakeholders say the infant stage of the Nigerian renewable energy market makes it a haven for investors and new energy companies.

Africa’s largest economy has small-grid capacity of 2.8 megawatts as of 2019, with 52 of the 59 projects solar-powered, according to Bloombergnef.

Only 55percent of the nation’s population is connected to the national electricity grid and those experience frequent power cuts of up to 15 hours per day.