Nigeria’s $12bn petrol market creates opportunity for solar solutions – study

An effective substitute for over 22 million fuel generators used to power households and business in Nigeria are solar systems can tap into a $12 billion-a-year petrol market in Nigeria if they are made more affordable, a study has found.

Solar alternatives to fuel generators exist in Nigeria but they are at least 20 times more expensive that small generators. The report by Access to Energy Institute (A2EI), a non-profit R&D institute said that technically viable solar products that meet these needs do exist and can be used to run the same appliances.

“However, they are currently a lot more expensive which means they are not available at scale. A typical 1.5 Kva gasoline generator cost $150 while a 1.5 Kva solar system cost $2,500,” the report said.

This means that it will take at least 8 years before the total costs of a solar system will fall below those of generators. Petrol generators enjoy lower upfront costs, government subsidy and have lower maintenance cost in their 5-year lifespan.

Yet the use of small generators come with serious problems. Toxic fumes released by generators cause illness and death. The continued fuel generators will prevent Nigeria from achieving its emission reduction targets under the Paris Agreement. This will adversely affect Nigeria’s ability to achieve the Sustainable Development Goals.

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In view of this, Access to Energy Institute (A2EI), who are dedicated to supporting the transition from soffil fuels to cheaper, cleaner solar substitutes says it has installed more than 150 smart data meters on gasoline generators to collect data and build reliable evidence on generator usage patterns. “Preliminary data indicates the average generator load factor is 22 percent, implying that gasoline generators could be replaced with smaller solar systems that can still effectively power the same appliances,” the report said.

The report found that if upfront costs of solar systems can be reduced to around $1,500, they will become cheaper than generators after five years. this can be achieved through better product design and by being able to replace generators with smaller solar systems given the average generator load factor is less than 100 percent  would reduce the breakeven from 8-9 years to 4-5 years.

“Such a change could be a key driving force in accelerating the mass-substitution of Nigeria’s 27 million gasoline generators for cleaner, healthier solar alternatives,” the report said.

The study also found that accelerating the switch to solar systems requires improved affordability, concessional financing for emergent players, an enabling policy and regulatory environment.

These collaborations would improve user affordability through reduced costs and better access to finance, supporting emergent firms with the concessional capital needed to jumpstart the sector and creating the right policy and regulatory environment to enable the sector to grow, the report said.