Oolu Executive Blog Series - Doseke Akporiaye, Managing Director, Oolu Nigeria
Off-grid solar has the potential to help Nigeria achieve universal energy access and transition to net-zero. Here’s how.
Despite being the largest gas and oil producer in Africa, 77 million Nigerians (over 50%) still have no access to grid electricity and 80% of grid-connected consumers still require non-grid alternatives, such as diesel generators, to make-up for the frequent power shortages.
The Nigerian Government is committed to achieving universal energy access by 2030 and wants to transition to net-zero emissions by 2060. It also wants to encourage economic and income growth by meeting the rising energy needs of industry and a young, growing population. For a country heavily-reliant on hydrocarbons, it is a difficult balancing act, but one that can be achieved by maximising the potential of off-grid solar.
Off-grid solar for homes
Over 50% of the Nigerian population is less than 19-year-old and growing fast. By 2050, Nigeria is estimated to have a larger population than the United States, but it currently has less than 1% of its electricity generation capacity. The Nigerian Government aims to increase gas production as a way to boost generation and also as a ‘cleaner transition fuel’. Yet, while urban, peri-urban and industrial customers will benefit from increased gas production and a more efficient grid, most of the Nigerian poor are typically off-grid. Rural households, who already find current tariffs unaffordable, will require an affordable and easily deployable energy solution, which off grid solar can provide.
With over half of Nigerians without energy access - ranging from 79.3% in the South-West to 29% in the North-East - Nigeria has the world’s largest potential off-grid energy market. It is also located in the world’s solar belt with an average 6.25 hours of sunshine per day (around 5.25 kWh/m 2 /day of solar radiation).
Nigeria therefore has the ideal conditions for off-grid solar. Since Oolu launched its operations in Nigeria in 2018, the off-grid solar market has blossomed, increasing 22% per year over the past five years. In particular, innovation in the solar-home system market - from the emergence of PAYGo and micro-financing to last-mile delivery efficiencies and a wider range of solar products - has widened the availability and affordability for off-grid households, boosting the SHS market opportunity to $2 billion annually (out of a total $9.2billion for off-grid solar in general).
According to PowerAfrica, 195,000 SHS had been deployed to Nigerian households by May 2021, but with a recent SEforAll report showing seven million households have the means to pay for electricity through a SHS, the immediate potential is huge.
Off-grid solar for businesses
Powering off-grid homes is only one part of the puzzle. To achieve sustainable transition across the Nigerian economy, an off-grid solution is also needed to power small businesses, offices and factories.
As of Q2 2022, the national grid had collapsed at least six (6) times within the year. The unreliable grid costs the Nigerian economy $28 billion (2% of GDP) per year, but a new off-grid solar solution could claw that back. Commercial and Industrial (C&I) off-grid solar provides businesses with between 50kW to 5MW of clean energy via on-site solar photovoltaic (PV) installations, such as rooftop panels. Customised to a business's energy needs, it provides reliable supply at a competitive price and allows companies to cut costs and focus on growth. For example, the Head Office of Sterling Bank in Lagos has 3,000 solar panels with the potential to generate 500,000kWh of energy per year, while Oolu-owned West Solar’s C&I project in Kano will generate savings in excess of N600 million ($1.4million) over the next 15 years for Savcin.
What’s more, off-grid solar is currently 72% cheaper than diesel in Nigeria due to the global hike in diesel prices (which pushed up diesel prices by 181%). Power accounts for up to 40% of factories’ costs and therefore off-grid solar not only helps reduce the cost and reliance on diesel generators - estimated at $14 billion per year in Nigeria - but also cut co2 emissions and power clean growth.
A coordinated approach
The Nigerian Government deserves credit for recognising the potential of off-grid solar. From the Solar Power Naija initiative’s aim to electrify five million households with solar to NSIA investments and REA subsidies that encourage the rollout of solar home systems and renewable energy solutions, the solar focus is welcome, but could be enhanced.
For instance, reducing the taxes and duties on solar components - panels, batteries, chargers and inverters - would reduce the retail price and expand the affordability to more households. Subsidies for C&I would enable more businesses to take the first steps.
By focusing on the needs of distinct customer segments and taking advantage of Nigeria’s off-grid solar potential, Nigeria can show other sub-Saharan African countries that it’s possible to transition to clean energy and expand energy access at the same time. It’s time for Nigeria to lead by example.