- Vendors need about N7bn funding amidst regulatory void
By Tayo Olanipekun
Solar and hybrid electricity will provide the country with about 24 megawatts of power through off grid and mini grid this year, it has been revealed through the USAID/Power Africa-funded Renewable Energy and Energy Efficiency Project (REEEP).
This is in addition to the roughly nine megawatts hours of electricity supplied by the Lumos’ lease-to-own Yello boxes in the houses and businesses of its 90,000 subscribers since commencing full operation last year—each box is capable of supplying 100 watts of AC and DC power.
The REEEP, which closed in Nigeria in February after four years, already enabled over 16,600 connections for 3,384 megawatts, after leveraging around N756m.
About N7bn in debt and equity is, however, required by 19 companies for the provision of solar and hybrid electricity that will mainly give connections to rural areas, agricultural villages and some small and medium scale organizations in the country.
As noted in the Resources Book of the USAID-Power Africa REEP, this funding requirement may be daunting, given Nigeria’s environment with “foreign exchange crisis, a lack of long-term funding, high interest rates of about 28 per cent and high collateral requirements of over 100 per cent.”
Nevertheless, Vice President, Marketing, Lumos Nigeria. Olufemi Ashipa, is optimistic about the strides of his mobile electricity company. He says the organisation will continue to innovate to meet the basic power needs of Nigerians.
According to Ashipa, Lumos is “here for the long time,” adding that based on the organization’s ambition, the conversation “is about sustainably contributing to energy self-reliance one Lumos Yello Box at a time.”
Femi Oye, whose company, Gosolar Africa, requires N1.1bn in debts and equity to create new 9.6 megawatts of installed generation at silo of 80 to 100 kilowatts minigrid system per project, is equally upbeat about the venture.
The deal flow, according to him, will be leveraged on the existing buckets of accessed and identified off grid villages, and Oye adds that “the entire investment and partnership ecosystem has been interesting and well accepted.”
Nigeria, with an estimated population of 180 million, generates 7,000 megawatts of electricity through the national grid but the distribution companies only have the capacity to make about 5,200 megawatts available to users, said the Minister of Power, Works and Housing, Babatunde Fashola.
According to USAID, the country has an installed capacity to generate 10,142 megawatts and 2,380 megawatts of electricity through thermal and hydro respectively. But 20 million households in the country are without electricity. In the rural communities, 64 per cent of the people do not have access to electricity.
Thus, for some decades, energy needs of most Nigerians have been met or complemented by gasoline and diesel-powered generator sets for businesses and household use. This is at the cost of about $14bn a year, according to the Managing Director of Rural Electrification Agency (REA), Damilola Ogunbiyi.
This brings up a fact that Oye agrees with, however. He believes that before a substantial success can be achieved in the renewable energy sector, there is bound to be a cold war with power generator plants and diesel merchants that have dominated the space for many years.
“For a sector that has been hugely dominated by the fossil fuel engines, there is need for more education, capacity building, policy support alignment and tough support for clean energy,” he says, as he notes emphatically that the days of “Fossil Fuel Generators are over.”
Ashipa has a different view on this as he says Lumos does not see any challenges or obstacles ahead since its “solution provides electricity for people living off the grid and complements the existing energy solution of those living on the grid and in the semi-grid situations.”
Hanna Kabir’s Creeds Renewable Energy, an Abuja-based company, will also be providing a range of one to five kilowatts Pay As You Go (PAYG) Stand-Alone solar-powered units for Small and Medium Scale business owners in the country this year.
Though still working on the finances, Kabir said it requires about N1.08bn ($3m) to produce about 1,000 units of the device. This she says is subject to fine-tuning according to business plan and the company seeks a 20 per cent equity to finance inventory and operations.
Hers is one of the 19 REEEP Investment Pipeline companies and 2018 is the set date for it to roll out about five megawatts of captive power and solar home systems.
An issue that is common to all investors, however, is the five to 10 percent tariff that the Nigeria Customs Service imposes on solar components, in defiance of government’s policy that zero levy should be placed on such imports to boost electricity distribution in the country.
According to an online petition raised by the ICE Commercial Power, CET code 8541.4010.00, a classification for import duty, excludes renewable energy from import duties but the activities of the Customs at various Ports have led to a situation whereby demurrage charges have risen for all solar energy suppliers as well.
This “only raises the price of reliable solar energy for customers,” says the petition already signed by 250 supporters since initiated three weeks ago.