Nigeria’s eleven electricity distribution companies (DisCos) may soon discover that a vast number of their customers have abandoned them, going by the sheer number and size of offgrid projects being initiated around business clusters, banks, universities and even residential estates across the country.
Off-grid generation is a stand-alone power generation system or mini-grid, which typically provides smaller communities with electricity, through independent electricity distribution network systems, and the energy could be sourced through renewable energies mainly solar, or through gas fired plants.
In the last two years, manufacturing companies within the Ikeja industrial hub have initiated six different embedded generation projects of between 30 and 50 megawatts, according to the Manufacturers Association of Nigeria Power Development Company.
Over 426 petrol stations across Nigeria will soon switch from grid connected source and rely solely on solar energy, when current solar projects are completed across the fuel stations in the country, BusinessDay learnt.
“This project will reduce the amount of downtime that is currently experienced by petrol stations as well as check damage to equipment due to power fluctuations. It will also reduce cost by more than 70 percent,” said an official involved in the project, who did not want to be named, as he has no authorisation to speak on the transaction.
In a further blow to the distribution companies, Nigeria will begin the deployment next month, of an off grid solar power system to 20,000 homes under the first phase. The project is being executed by Azuri Technologies, under a scheme in which the Federal Government pays a part of the cost while the beneficiaries will pay the balance over a period of 12 to 18 months. Vera Nwanze, Azuri’s general manager for West Africa, told BusinessDay that the equipment for the installation have started to arrive the country and that each home will have a panel on its roof with four light points, including a television set to be supplied as part of the package. The states benefitting under the first phase include Kano, Katsina and Taraba.
Besides industrial clusters, 40 federal universities in Nigeria will soon quit the national grid, as the government’s plan to build solar farms capable of generating between six and 10MW off-grid power per campus begins to gain traction.
Based on an agreement with the German government under the Nigerian-German Energy Partnership Project signed last year, the solar power farms would take the universities and their campuses away from the national grid when completed.
BusinessDay investigation at the University of Nigeria, Nsukka, University of Ibadan and the University of Lagos, which are among the pilot universities, indicate the project is on course. Already the University of Port Harcourt is operating on an efficient power system, provided by Total Support Energy. The University of Benin also has off-grid power.
“While the project is on-going, I can tell you that some of our hostels and lecture halls and offices are now running on solar,” said Ike Mowete, a lecturer at the University of Lagos.
Informed sources have told BusinessDay that some banks are planning to link their branches across the country to offgrid power, as the cost of diesel generated power gulps a bulk of their revenue. Cost of diesel sourced power ranges from N70 to N100 per kilowatt hour, while offgrid generation costs between N38 to N45 per kilowatt hour, depending on energy source and cost of installation.
Many households and small businesses now rely on rooftop solar because Africa’s largest economy can only provide less than 4,000MW of power. Nigeria’s telecommunications firms, which power their base stations, generate over 6,000MW through diesel generators. Meanwhile, South Africa provides over 40,000MW for its citizens.
A recent study by All-On, Shell Nigeria renewable energy unit and Dalberg, a strategy and policy advisory firm, found that 14.2million households and four million small businesses in Nigeria have no access to grid electricity, indicating huge market potential for off-grid power.
Yusuf Sulaiman, managing director of Blue Carmel Energy, a renewable energy firm, based in Abuja said, “I have clients now, who do not even want grid connected power.”
Increased preference for solar power and improved funding and technology are driving down the cost of solar panels, batteries and other accessories. A new McKinsey report found that battery-pack costs are down to less than $230 per kilowatt-hour in 2016, compared with almost $1,000 per kilowatt-hour in 2010.
Operators say with N2million to N8 million, a building can provide itself between 20KVA and 30KVA power to run home appliances including air conditioners and water pumps. The cost becomes insignificant in less than five years when compared to the huge costs of diesel and threat to the environment.
Experts say this trend will grow. “Any business that wants to reduce cost and be efficient, now looks to offgrid and more people will take that option,” said Godwin Aigbokhan, renewable energy market adviser at the National Competitiveness Council of Nigeria.
The Association of Alternative Power Suppliers of Nigeria (AAPSN), a pressure group for alternative power generation, is pooling resources, skills and technical know-how, to provide 10,000 mw to different kinds of customers.
Femi Omotayo, MD and CEO of AOS Orwell and President of the association, told BusinessDay about their plans, “the mini grid regulation is allowing us to play in the sector. Our project is pretty simple, 10,000 Nigerians, 1MW each. We are developing the financial model, creating the legal framework and providing access to funding. We are talking to bankable anchor tenants, whether they are businesses or estates.”
The Nigerian Electricity Regulatory Commission (NERC) has approved a Mini Grid Regulation which encourages offgrid investors to charge cost reflective tariff and provide up to 1MW power without recourse to the DisCos or obtaining a licence as an electricity generation company.
Long fed up with the poor service delivery and crazy billings by the DisCos, the ministry of power, works and housing, is getting bullish about securing alternative energy sources for Nigerians. Babatunde Fashola, who heads the ministry, recently made a pronouncement on eligible customers allowing power producers to sell directly to customers who need up to 2MW.
The DisCos have been outraged over this development. BusinessDay exclusively reported last week that they are considering declaring force majeure on their operations.
Power distribution assets were handed over to core investors on November 1, 2013 and the five-year period they were supposed to meet the Aggregate Technical, Commercial, and Collections Loss (ATC&C) targets in their sales and performance Agreements expires October 31, 2018. However, analysts say the DisCos have failed to meet the targets.
“The DisCos still operate with ATC&C losses up to 60 percent, as they have not made significant investments to improve collections, including metering,” said Odion Omonforman, energy consultant and the CEO of New Hampshire Capital Ltd.
ISAAC ANYAOGU
