Localising manufacturing and assembly of solar home systems and mini-grids is an essential path to follow for Nigeria to create jobs, increase social and economic wellbeing and build a solar supply chain resistant to external shocks.
Nigeria has a population of more than 196 million, with an estimated 85 million people lacking access to electricity and 176 million people without access to clean cooking fuels or technologies.
To solve this challenge the government launched a solar power naija project aimed at providing energy access to 25 million people through connections to mini-grids or Solar Home Systems; develop local content in the off-grid solar supply chain; strengthen the local manufacturing industry; and create 250,000 new jobs within the domestic energy sector.
“Under the Nigerian Electrification Programme, grants and various forms of concessionary debt financing are available but the question remains how do we scale? How do we localise manufacturing and assembly? It is worrisome that prices in Nigeria are not dropping as quickly as elsewhere in Africa. We need bigger solar-based projects,” said Damilola Ogunbiyi, CEO of Sustainable Energy for All (SEforALL), and Special Representative of the UN Secretary-General for Sustainable Energy for All and Co-Chair of UN-Energy.
Preliminary studies by Sustainable Energy for All (SEforALL), an international organisation working in partnership with the United Nations, leaders in government, the private sector, financial institutions and civil society based on geospatial data show seven million Nigerian households ready for immediate deployment of solar home systems (SHS) in six geopolitical zones. All On, an investment company with a focus on renewable energy was also a part of this study.
Evidence shows that the least-cost approach for achieving universal access in Nigeria involves an integrated mix of grid, mini-grid and solar home systems (SHS); 7.5 – 7.8 million connections are best served using solar home systems and 1.3 – 4.7 million mini-grid connections in densely populated areas far from the grid.
For Nigeria to meet this demand for solar-based connections, developing a sustainable local supply chain in Nigeria is indispensable to making solar accessible to Nigerians but scaling is required.
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“The devastations wrought by the coronavirus pandemic have demonstrated how global supply chains and economies could be disrupted. This has made a strong case for building resilient local supply chains,” Wiebe Boer, CEO All On said.
Although the Federal Government of Nigeria (FGN) has done a remarkable job so far establishing the policies for the enhancement of the renewable energy sector; a laser focus on key enablers is the next step in energising the solar sector. This was the focus of a recent webinar titled Achieving Economies of Scale in the Nigerian Solar Value Chain, organised by SEforALL and All On at the weekend.
SEforALL has proposed a phased systematic approach to addressing the identified industry challenges in line with the FGN’s Solar Power Naija Programme. In the short term, that is (about nine months) there would be accelerated importation of characterised by imports of SKDs (semi-knocked-down kit) while the status quo is maintained.
Benefits can be derived from quick deployment of systems to the target market and discounts attributed to large purchases from foreign manufacturers or assemblers. This is a precursor to local assembly and manufacturing.
In the short to medium term, about 10 to 22 months, the focus would be on the local assembly of key solar systems components such as photovoltaic (PV) and batteries. This facilitates extended opportunities to create an enabling environment for sustained employment and empowerment of women. This will trigger increased upstream activity and lay the foundations for an export enabled Nigeria.
The third phase and long term view of 22 – 36 months will be characterised by the manufacturing of key components of a solar system such as silicon cells and investment in raw materials required for large scale production of components.
This will also involve investment in research and development (R&D) through tertiary institutions. It will also comprise investment in the re-use of petroleum by-products for PV production and enable Nigeria for exports.
“We are more data-driven now than ever and are committed to rapid deployment of solar-based solutions. Last year, we powered four isolation centres with solar and have a pool of N200 billion to provide concessionary debt financing for solar projects,” Ahmad Salihijo, managing director, Rural Electrification Agency said.
Solar power naija program will create more financing opportunity
In terms of funding, Experts at the webinar event say the through implementation Solar Power Naija Programme will create better access to funding for local developers, increase electrification and localization of the upstream value chain in Nigeria’s renewable energy sector.
Chucks Umezulora, chief operating officer at Auxano, a solar company, sees Solar Power Naija as a thoughtful move towards localisation and holds that the 10-year single-digit concessionary debt financing available at the Central Bank of Nigeria is helpful.
However, access to foreign exchange from the Central Bank of Nigeria through the investors and exporters window and import duty waivers are the most critical enablers. “Government has to de-risk the upstream.”
“Solar power naija program, if well implemented, will address most of the critical challenges affecting the localisation of the value chain, most especially access to funding,” said Umezulora.
He noted that since the launch of the program Nigeria’s solar market has seen lots of excitement.
Yewande Olagbende, CEO, Solad Power, an independent energy distribution firm and an investor in Off-Grid and Hybrid energy projects in Africa, said more support from local banks for solar projects and targeted fiscal incentives such as value added tax (VAT) and import duties waivers are required to accelerate local manufacturing.
She noted that developing the right energy infrastructure is critical in boasting localization of the value chain.
Shagun Jain, Commercial Director at Rural Spark, a Dutch company that develops smart grid solutions that enable rural villagers to generate and sell energy said if the solar power naija programme is well implemented it will reduce lots of stress on the value chain and make price more competitive locally.
Suleiman Babamanu, Project Lead of REA expressed optimism over the determination of the Federal government to see a thorough implementation of the project.
“This is a testament to our dedication and commitment to scaling the off-grid solar market through the provision of long term low-interest credit facilities to the Nigeria Electrification Project pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy developers and retailers in the country,” Babamanus said.
He explained that REA is close to the first disbursement of funds for firms in the downstream sector which “might happen next week.”
According to REA, the implementation of solar power naija programme will require an investment of N140 billion, the equivalent of $367 million which the World Bank will finance 20percent of the initiative through a grant.
The CBN will also make funds available for private solar energy companies involved in the manufacture, assembly, installation and maintenance of solar systems at rates ranging from 5 to 10percent. At least 250,000 jobs will be created under the project.
In order to encourage more firms to get more involved in the value chain, Gail Warrander, economic development team leader at Nigeria UK Foreign Commonwealth & Development Office advised the government to be more flexible in its regulation and create more clarity about local policy.
“We see a lot of opportunities in the sector; however, most firms need capital and loans with lower or achievable interest rates,” Warrander said at the webinar.
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