In the last twelve months, Egypt has executed two big projects that will ramp the proportion of renewables in the countries energy mix, indicating a path for Nigeria to grow the contribution of renewables to Africa’s most populous nation’s energy mix.
One of the projects, the Benban solar park is a power complex of 41 solar power plants being developed in Benban, located in the Aswan governorate, Egypt. Benban has potential to become the biggest solar photovoltaic park in the world, upon completion.
State-owned New and Renewable Energy Authority (NREA) is overseeing the 1.80 gigawatts (GW) project, which includes a number of small solar power plants being developed by different companies at a total cost of $4 billion.
The project is a part of Egypt’s Nubian Suns Renewable Energy Feed-in Tariff (FiT) programme announced in September 2014, which is in line with the Egyptian government’s Sustainable Energy Strategy 2035 that aims to produce 20 percent of electricity from renewable sources by 2022.
The first phase of the solar park included Infinity Solar’s 50 megawatts (MW) solar power plant, which commenced operations in March 2018. The entire solar park is expected to be completed in 2019.
The other big project in Arab’s most populous country is its first private and largest wind farm, which started operations six weeks ahead of schedule thanks to the support of its off-takers the Egyptian Electricity Transmission Company (EETC) and a consortium of partners. This is a feat Nigeria is failing to achieve despite the country’s abundant wind supply.
People familiar with Nigeria’s renewable space say the sector’s growth has been hindered by stifling regulation.
“Nigeria has a fairly developed regulation for the off-grid market but the challenge is that due to many regulatory hurdles, many people are operating under the threshold of 1MW that does not require regulations,” Dolapo Kukoyi, partner at Details Commercial Solicitors said at BusinessDay’s recent conference on power.
In the off-grid sector, there is over $1 billion financing available from private investors, development finance institutions and multilateral organisations in the form of concessionary debt financing and low-interest loans. New investments are being recorded in the on-grid space including Transcorp’s acquisition of Afam Power.
Despite the availability of funds, Nigeria’s renewable energy is yet to get robust regulatory shot in the arm to propel towards exponential growth. “These less than 1 megawatt projects are not large enough to scale, so it is best to pull these smaller projects together,” Daniel Mueller, head, origination and structuring at InfraCredit Guarantee Company, said.
Mueller said the market is now ripe for relatively larger capacities of between 20MW and 100MW in different cities as there is now willingness and ability of the Nigerian customer to pay for power but a lack of currency stability could discourage investors from taking long-term financing decisions.
This is all the more urgent because Nigerians spend an estimated $14 billion annually on small scale diesel generators to offset poor or non-existent grid supply.
Over 80 percent of Nigerian businesses cite electrification challenges as the most significant obstacle to doing business with erratic power supply resulting in more than $25 billion in annual losses to the economy, more than 6 percent of gross domestic product (GDP), according to Nigeria’s Power Sector Recovery Programme.
According to Rural Electrification Agency (REA), developing off-grid alternatives to complement the grid creates a $9.2 billion a year market opportunity for mini-grids and solar home systems that will save $4.4 billion for Nigerian homes and businesses.
STEPHEN ONYEKWELU
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