States, private investments offer quick path to electrifying underserved communities

Nigeria’s electricity market does not guarantee commercial returns because power is priced below the cost of production. Therefore market operators do not get the full value of their invoices.the grid is fragile and susceptible to collapse so over 80million Nigerians lack access to power, hence the recourse to alternative sources of energy is a necessity.

The Federal Government has been paying subsidies for grid-connected power. Since 2015, it has spent over N1.75trillion to defray this shortfall. Crude oil sales which pay for this subsidy is no longer flowing as much as once did. Prices have fallen on account of lower demand due to the coronavirus and dispute among producers and now oil producers are forced to lower their output.

However, Nigeria’s constitution has empowered state governments to generate, transmit and distribute electric power, and some are investing in renewable energy as well as private companies many funded by grants and it is increasingly looking like Nigeria’s best option to deepen energy access for large swathes of tits population without power.

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The Federal Government has stated an intention to ramp off-grid energy in the country. In the recent Nigeria Economic Sustainability Plan, the government set a target to deliver five million solar home systems (SHS) across the country by local manufacturers and assemblers.

Ahmad Salihijo, MD/CEO REA said the agency wants new private players to come in, in line with the executive order on local content. “This is a space that private sector developers should look out for as we roll out the renewable energy fund,” he said.

To sustain the renewable energy projects in rural communities, Salihijo says the agency established renewable electricity users’ cooperative society, in every community. It is a structured mechanism where community members play a key role in securing the deployment of systems, enlightening community members, and ensuring payment of light bills. The agency said it is working with Discos too and gathering data to help with innovation.

But state governments who are constitutionaly empowered to act must play an active role in the sector.

Habeeb Alebiosu, a non-executive director at Viathan Engineering Limited at a recent Businesday conference said one of the states’ role in setting up Independent Power Plants is revenue assurance. The other is contractual offtake, with the state as an anchor tenant. Other areas include licensing, Environmental Impact Analysis certificate, and identifying load centres.

“For instance in Ogun State, the government has metered all government parastatals and agencies to ensure they are adequately billed. Lagos has guaranteed contractural offtake,” Alebiosu said.

In Kano, 10 megawatts (MW) solar project has been built on a 24-hectare parcel of land provided by the state government. This is a project that is happening as a result of the collaboration between the Nigeria Sovereign Investment Authority (NSIA) and the Kano state government.

“COVID-19 has slowed down the progress of the project. However, we are getting all the necessary licenses, working on the engineering, procurement, and construction (EPC) contracts and by the fourth quarter of 2021, the solar project would be fully operational,” Aisha Abba Kyari, vice president, Renewables, NSIA said.

The NSIA has an ambitious target of 500MW of renewable energy capacity but achieved incrementally. In addition to the enabling conditions investors expect from states as listed earlier, Kano solar project shows additional conditions such as the provision of land, resolution of land ownership disputes and compensations.

“States need to commit and be excited. They need to provide access to industrial clusters, this will in turn boost economic activity,” Abba Kyari said.

Joel Abrams, executive director Konexa, an integrated power company said there is a real case for an integrated distribution network, thanks to the growing liberalisation of the power sector.

Abrams also said that a booming diesel-fired generation in Nigeria shows there is a latent large market of underserved and unserved customers. Diesel generation is many times costlier than on-grid electric power, yet the largest supplier of energy for Nigerians.

Koxena started operations in Kaduna in because of the state’s large industrial base and mass non-industrial customers. Both Kaduna and Kano have a large peri-urban population, which Koxena has a robust business case for.