How Nigeria is expanding its solar footprints

_{A mini solar grid installed in Edo state, Nigeria by Arnergy. (Arnergy)}

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Solar power generation which seemed neglected is now receiving huge attention, forming the center of many power generation-focused conversations in Nigeria. Power problems in the country mirror that of many energy markets in Africa. Nigeria’s power ministry estimates that about 40,000 MW of electric power is required to satisfy the country’s industrial demand but Nigeria only has about 12,000 MW of installed generation capacity,  of which  around 3,500 MW are supplied by gas-fired plants and hydro power systems. The majority of the gas-fired power plants are now burdened by problematic gas supplies, arising from pipeline vandalism by militant groups operating in the gas producing region of the Niger Delta.

The Renewable energy program of the Nigerian government says “about 600,000 MW of electricity can be generated from just one percent of Nigeria’s land mass.” This implies that Nigeria can procure 100 percent of its power from a renewable source such as solar. The government is now poised and willing to take advantage of its solar resource endowment by supporting investments in utility-scale solar power projects. This ambition helped spur the recently signed Power Purchase Agreement (PPA) with 14 utility-sized solar power developers, which will add about 1,200 MW of solar capacity  to the grid.

Nigeria has the potential to lead in utility-scale solar power in Africa, given its well-structured regulatory frameworks, the standard of which is mostly absent in many other African countries.

Solar power investors are also optimistic about the Nigerian opportunity. Justin Woodward is the Chief Development Officer and Co-Founder of Canadian JCM Capital, which is one of the 14 solar power developers now operating in Nigeria. Mr. Woodward believes “Nigeria has the potential to lead in utility-scale solar power in Africa, given its well-structured regulatory frameworks, the standard of which is mostly absent in many other African countries. From the good structure of the bulk trading company to the transmission company and the independent Distribution Companies (Discos), all of which combine to provide a level of operational clarity that investors require.” JCM Capital has recently commenced the development of an 80 MW solar plant in the Nigerian northern state of Katsina.

This renewed interest in solar power does not interest only utility-scale projects but also mini-grid solar power plants. The Nigerian government plans to generate about 2000 MW of electricity from renewable sources by 2020, according to the power ministry. In addition, government is exploring a competitive tendering process that will attract more solar power investors.

The Nigerian government plans to generate about 2000 MW of electricity from renewable sources by 2020.

Despite the appetite for solar power investment being still high,recent macroeconomic crisis in Nigeria could become a hurdle that may limit the realization of the country’s potential. Mr. Woodward believes that Nigeria’s economic recession could slow the pace of further solar investments and with respect to the proposed tendering process he says that “unless the economy improves in the medium term, investors may not be willing to negotiate lower than the present tariff in a bidding exercise.”

For Nigeria’s renewable mini-grids systems generating less than 30 MW, there will be a dedicated new regulation, which came into place in 2015, known as the Renewable Energy Feed-in-Tariff (REFIT). The benefits for projects that function within the REFIT framework includes: market stability through guaranteed long term power pricing schemes, quick access to the grid, streamlined licensing procedures and government’s obligation to purchase power generated by the renewable plants.

The Ministry of power says REFIT is designed to “reduce the transaction costs associated with negotiating and signing a PPA for a small renewable generator (and) the feed-in-tariff is accompanied by standardized PPAs for projects of up to 30 MW”. Improving the regulations that govern solar power projects in Nigeria has further enhanced that country’s attractiveness to investors and the achievements to be recorded in terms of ongoing and planned projects is expected to have more knock-on effects, since Nigeria’s solar irradiation is already enormous and the required policies are increasingly being put in place.

However, challenging areas for solar power developers still exist in Nigeria. Some developers and observers have mentioned the poor state of transmission and distribution infrastructures as a major barrier to development and a source of significant risks to investors. Mr. Woodward says “while accelerated investment and regulations can increase solar power generation, the poor wheeling capacity of the transmission infrastructure in the country is still a major constraint.” In actuality, Nigeria’s transmission infrastructure can only handle 6000 MW in its current state.

In actuality, Nigeria’s transmission infrastructure can only handle 6000 MW in its current state.

The successful completion and operation of these ongoing projects is expected to motivate some established utilities in Nigeria (who at the moment generate power with little or no renewable resources) to consider the incremental inclusion of technologies such as solar power into their generation mix. This will help fast track Nigeria’s journey to the status of a nation that predominantly uses clean energy and a leader in solar power development within the Sub-Saharan Africa region.