People & Money

Nigeria’s Move to Bridge Electricity Gap Through Solar Power

During his recent visit to Nigeria, billionaire entrepreneur, Bill Gates took a tour of the manufacturing facility of Arnergy, a solar power service provider in Lagos. He noted during his visit,

“I see a huge energy transition opportunity where distributed solar solutions like Arnergy’s displaces gasoline generators for millions of SMEs in Nigeria given the recent fuel subsidy removal.”

Also Read: African Countries Must Take a Balanced Approach to the Energy Transition

Arnergy is one of the beneficiaries of the Bill Gates-led Breakthrough Energy Ventures’ $1 billion fund. The company has secured approximately $9 million in equity funding, enabling it to provide an extensive array of energy solutions catering to various consumer categories. These solutions span residential apartments, housing estates, commercial buildings, and even telecoms base stations.

Despite the rave behind Arnergy, the company is just one of the players in the budding clean energy ecosystem in Nigeria. Nigeria’s energy poverty has worsened due to a combination of factors: a rapidly growing population and a rising energy demand that surpasses the inadequate energy supply from the central grid. It is estimated that approximately 43% of Nigeria’s population remains disconnected from the electricity grid. Thus, alternative energy initiatives such as solar power are becoming more mainstream.

Those who stay connected to the grid receive less than seven hours of electricity per day on average. Due to this situation, businesses and households are compelled to rely on generators, which leads to a higher demand for petrol and diesel. Nigeria leads the African continent concerning imports of power-generating sets. A report from the International Renewable Energy Agency noted that 84% of Nigerian households utilize a backup power supply system, while 86% of businesses either own or share a generator.

Also Read: South Africa Hits Worst Ever Electricity Crisis

Considering the amount spent on petrol or diesel generators plus the inability of the electricity sector players to sort out Nigeria’s electricity deficiency, the private sector and the government are turning to solar. For example, the ex-President, Muhammadu Buhari commissioned a 10 MW solar power plant at the Challawa Industrial Area in Kano State, Nigeria. The plant which is fully owned by the Federal Government, the Kano State Government and the Kumbotso LGA in Kano State is the largest grid-connected solar power project in Nigeria.

Also, the Energizing Education Programme by the Rural Electrification Agency was tasked with establishing 37 universities in the country with off-grid uninterrupted electricity. In the first phase of the programme,

  • A 7.1 MW solar power plant was built at Bayero University, Kano (BUK).
  • A 2 MW captive hybrid solar power plant was also built at the Nnamdi Azikwe University, Awka (UNIZIK).
  • A 2.8 MW solar hybrid power plant was built at the Alex Ekwueme Federal University, Ndufu-Alike Ikwo (FUNAI).
  • An 8.25 MW solar plant at the Federal University of Agriculture, Makurdi (FUNAM).

The programme underscores the approach the past administration took in providing electricity for universities, which is solar power. Apart from the universities, the government through the Rural Electrification Agency of Nigeria (REA) has been undertaking a lot of solar mini-grid projects at different locations such as Oloibiri in Bayelsa State, Akipelai in Bayelsa State, Rokota in Niger State, Shimankar Community in Plateau State, etc. The efforts by REAN were augmented by the $350 million concessionary loan provided by the World Bank to the agency for solar off-grid projects.

Outside the government’s approach, there is increasing private capital funding for businesses in the solar power sector. Apart from the Gates-led Breakthrough Energy Ventures in Arnergy, the oil giant Shell also acquired Daystar Power Group, a power service provider based in Lagos.

In an interview with the Financial Times in July, the outgoing CEO of Shell, Ben van Beurden stated that Shell plans to persist in selling off oil assets and utilize the funds to finance additional energy transition ventures. Noting that the company aims to prioritize acquisitions of firms with established portfolios of renewable customers.

Initially, investments in the solar sector were primarily in the form of grants provided by multilateral organizations like the World Bank and philanthropic foundations. However, industry experts indicate a shift towards a hybrid investment model that combines grants with loans on favourable terms.

Speaking with Financial Times, the CEO of Clean Technology Hub, Ifeoma Malo, noted,

Also Read: Nigeria’s Arnergy Among Bill Gates’ $1bn Breakthrough Energy Ventures Beneficiaries

“There has been a focus on getting electricity to rural communities. And this is where a lot of investors in the solar mini-grid sector have come from and even a lot of renewable energy technologies. We’ve seen investment in wind too.”

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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