High initial cost presents barrier to renewable energy adoption in Nigeria

Off-grid and solar home systems have emerged as one reliable and environment friendly way to improve access to electricity for Nigerians, but a barrier to making this happen is the high cost storage, that is, batteries.

The cost of purchasing a solar power system varies with the capacity of each component and also the location. A 200-watt solar panel cost between N38, 000 – N95, 000; while 300watt costs between N62000-N200, 000. This is already above Nigeria’s proposed minimum wage of N30, 000.

Although, the initial cost of purchase is high, benefits derived from using a solar system such as low operational cost, reduced, no electricity bills for consumers and solar panels durability of 30 years with minimal maintenance cost are factors worth considering.

“The cost is too high and I cannot afford it. It is a very good solution for the electricity challenge in Nigeria but if only solar companies can reduce their prices,” John Okafor, a Lagos businessman said. This was a similar complaint received from 8 out of 10 people who would want to purchase solar panels but may not have the ability.

However, BusinessDay’s analysis showed that with an average of N12, 000 spent on fuel for a big generator monthly, about N144, 000 is used yearly. This excludes other generator maintenance cost which will include the cost of changing generator oil and other service costs.  At the end of 1 year, over N300, 000 is spent on a generator. This excludes electricity bills for a year.

According to the World Bank, nearly 1.5 billion people are estimated to lack of electricity supply in the world, half are in Africa. Nigeria alone is estimated to have over 90 million people living without electricity supply. This is the potential market for solar home systems.

Yet, Nigeria is endowed with solar power, which is energy derived from the sun with an average sunlight of eight hours, and more hours in the northern parts using photovoltaic (PV) cells or solar cells in a solar panel. Yet, few homes and offices make use of solar power system while the majority see it as a dream.

The components of solar power system includes solar panel, power inverter, deep cycle batteries, solar charge controller, and cables, fuses, and meter.

“I spend about N12000 monthly to purchase fuel for my generator because of the light issue in my area (Egbeda),” David Okoro, an Egbeda-based businessman said.

Solar panels may be expensive to install and maintain, especially for the battery as it entails a change of battery after a period of time; or a change of distilled water in the battery (for lead-acid batteries) and so it is tagged as “for the rich” as they possess the ability to purchase.

BusinessDay’s research shows that the high cost of installing solar power is mostly due to the 10 percent duty tariff imposed on solar panels by the Nigerian Customs Service which the government initially approved to be duty-free.

From 1999 to 2015, Nigeria spent N2.7 trillion to improve power supply in the country, Godknows Igali, former Federal Ministry of Power said in a statement.

Nigeria has an average installed capacity 12,522 megawatts (MW). According to a report from Advisory Power Team, Office of the Vice President sent by email to BusinessDay, the country generates average electricity of 3,500 MWh per hour which is less than the installed capacity.

Apart from the cost, the majority of Nigerians in different states are ignorant of solar power system and its benefits. There are over 200 solar companies in Nigeria with an untapped market.

“In the next 5-10 years, I believe there will be a significant increase in the deployment of decentralised renewables in Nigeria and Africa especially in the off-grid areas ravaged by energy poverty. There is a huge market with a lot of economic potentials” Adesoji Adejolu, creative director at Ultrashot, a media production and event streaming company said on TweetChat under the aegis of #GridlessAfrica.

Access to finance is one of the major limitations to the rapid development of solar energy in Africa. But while traditional methods of obtaining project capital can be very limiting. Today’s world of micro-investors on platforms such as Kickstarter and Indiegogo has paved the way for new platforms like SunExchange.