• Friday, July 12, 2024
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Solar adoption in Nigeria is a socioeconomic game changer

How Africa’s entrepreneurs are handling the continent’s challenges: New book

The Nigerian solar off-grid market is among the fastest-growing in Africa, increasing at a 22 percent average annual rate during the past five years. A combination of factors has contributed to accelerating this trend.

These factors include the need to compensate for inadequate and unreliable conventional power grids and recent government fiscal and electrification policies that favour solar installations as a new, more reliable alternative. In addition, corporations are increasingly adopting solar energy to reduce their carbon footprints. Further, investment capital is flowing into photovoltaic (PV) panels and other renewables advances in Nigeria, which, along with gains in global manufacturing scale, are driving solar energy costs down. And add to this mix solar industry players are introducing flexible payment models that make purchasing solar products easier for small businesses and low-income households.

Still, despite the healthy growth, Nigeria has underperformed its peers in Africa in penetration of off-grid solar – and has a long way to go before its solar market could be considered robust. Nigeria’s installed PVs per capita amounts to only about 1 watt compared to an average of 8 watts in similar emerging market countries, indicating a big opportunity for further solar growth in the country. Given the dynamics favouring solar deployment in the country, Nigeria’s PV per capita could reach 5 –8 GW by 2030.

Despite the socioeconomic benefits that solar deployments have provided in Nigeria, there are still several challenges inhibiting the widespread adoption of solar energy in the country

To assess the developmental benefits that Nigeria has already realized from its limited solar installations and what impact could be achieved from scaled deployment, BCG and All On analyzed the impact of solar energy implementations on six different user groups across five socioeconomic dimensions – Health, Education, Food Security, Environment and Commercial Activity. To do this, we conducted consumer surveys, interviewed solar experts and specialists, and researched industry reports. Our findings were extremely revealing; namely, solar is not just a new way to get electricity, but rather in an emerging market like Nigeria it provides tangible benefits throughout society that could serve as the foundation of significant progress.

Examining these socioeconomic dimensions, we found:

Health: Nigerian Primary Health Centres (PHCs) with solar electricity witnessed a 60% to 70% improvement in antenatal care coverage and a 40% to 60% reduction in vaccine waste. PHCs surveyed said that before solar deployment, equipment downtime due to insufficient power supply was one of the major challenges limiting their ability to provide antenatal care. We estimate that installing solar in 18,000 PHCs that do not otherwise have access to reliable power could increase antenatal care coverage from current levels of 50% to 70% of pregnant women and with improved refrigeration vaccine wastage would be reduced by as much as 20%.

Education: At Nigerian public boarding secondary schools that have installed solar equipment, student study hours increased by over 200% and the number of Information and Communications Technology (ICT) teaching hours rose by 30%. Currently, 60% of public schools with ICT facilities lack a reliable source of power, according to BCG’s survey, which results in a heavy reliance on generators that most schools can’t afford to maintain. In addition, 50% of public boarding school students do not have access to electricity for night-time study resulting in use of kerosene lanterns and lamps, which are not very conducive for study. Providing solar to about 1,200 public boarding schools would increase average student study hours across the country from about 8 hours to 18 hours per week and improve ICT teaching hours by as much as 60%.

Food security: Farmers that adopted solar-powered cold storage reduced post-harvest loss (PHL) for perishable goods by up to 30%. This is an important improvement because Nigeria PHL outpaces peer countries with losses as high as 80 million tons of food annually along the post-harvest value chain, equivalent to 9% of the nation’s GDP. Solar-powered cold storage is less expensive than traditional diesel-powered equipment due to lower rental charges and the cost of electricity. Based on current solar-powered cold storage adoption data, by electrifying 600,000 Nigerian farmers who currently don’t have cold storage facilities, PHL could be slashed by as much as 60%, producing enough additional food to feed 6.5 million people annually.

Environment: Around 500,000 Nigerian households (1.25% of total households) use solar energy, which has resulted in upwards of 160,000 tonnes of CO2 emissions being avoided. Improving on that is essential since Nigeria ranks second to only South Africa among Sub-Saharan Africa countries in greenhouse gas emissions. Assuming solar penetration among households in Nigeria reaches a peer nation average of about 30% by 2030, an additional 5 million tonnes of CO2e can be avoided as emissions from households would be reduced by nearly 30%. Beyond reducing carbon footprints, increased solar adoption would result in reduced air and noise pollution and fewer fire incidents.

Read also: How solar powered cold storage can cut Nigeria’s perishable food waste by 30%

Retail trade: Micro, Small, and Medium Enterprises (MSME) in markets are critical to the Nigerian economy, contributing some 90% to national retail sales volume. However, more than 50% of Nigeria’s MSMEs identified inadequate power from the electricity grid as the biggest business constraint that they face. We found that markets powered by PVs had a 20% to 40% increase in operating hours and avoided the substantial inventory and sales losses resulting from fires caused by generators. Deploying solar to around 15 to 20 million MSMEs in markets without reliable grid electricity could increase income at these companies by $7 billion to $10 billion, some 40% of annual MSME earnings.

Despite the socio-economic benefits that solar deployments have provided in Nigeria, there are still several challenges inhibiting the widespread adoption of solar energy in the country and hindering the solar industry from achieving its full potential. On the financial front, there is insufficient availability of low-cost financing for developers and consumers, in part because many financial institutions feel that they don’t have enough data to understand how the market operates and are hesitant to participate in it. Moreover, the lending channels that do exist are often marked with delays in the disbursement of concessional funds.

In addition to the impact of sparse capital, demand in Nigeria is held down by limited consumer awareness of the benefits of solar products and insufficient enforcement of quality standards resulting in an influx of low-quality products in the market. Without widespread adoption of solar, creating scale for viable use cases is impeded.

And among solar developers and manufacturers in Nigeria, challenges range from a fragmented value chain, inadequate worker skills and complex importation processes that drive up costs.

Clearly, these obstacles are significant, but they can be overcome, allowing Nigeria to fully experience the socioeconomic benefits of solar energy. For that to happen, though, improvements must be made in these four crucial dimensions:

1) Access to capital: Additional financial support for solar developer programs and easier credit for consumer solar purchase purchases as well as reducing red tape to simplify funding processes.

2) Institutional strengthening and skills development: Standardized training programs focused on improving capabilities required across the solar value chain, greater efficiency in payment collections from customers, and simplifying import policies to reduce solar equipment trade costs.

3) Customer awareness and acquisition: Promotional campaigns educating consumers about the benefits of solar power and about how to adopt quality solar systems and also mechanisms for aggregating demand from various customer segments to create scale and reduce solar energy acquisition costs.

4) Technical and regulatory reforms: Fiscal incentives to attract investment into the solar sector as well as regulations to enforce solar equipment quality standards and to drive PV demand.

Oyekan is a partner at BCG