Nigeria: Examining Govt’s Solar Power Naija Scheme

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Emmanuel Addeh writes on the impact of the Solar Power Naija project, which was launched by the federal government to reach unserved and underserved Nigerians who are not connected to the national electricity grid.

It is no longer news that Nigeria has serious electricity supply challenges. Aside from the fact that millions of Nigerians have no access to reliable supply, power cuts, sometimes very lengthy, have become a recurring decimal in the everyday life of the ordinary and not so ordinary Nigerian.

Indeed, as recently as October last year, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, speaking at the Energy Sustainability Conference (ESC) hosted by the Energy Institute, Nigeria, in partnership with Department for International Trade, UK, said 85 million Nigerians still do not have access to electricity.

Describing the energy poverty level as devastating, in terms of energy consumption, he stated that Nigeria is still below 1kilowat per capita of electricity, which is very low, stressing that accessibility remains key.

Experts believe that if irregular power supply is taken away from business, indeed as much as 80 percent of Nigerian businesses would have solved their second biggest challenge after lack of access to finance.
Nigeria’s national grid power generation capacity, which consists of gas-fired and hydro-powered stations, is about 13,000 megawatts, but the electricity transmitted remains less than 4,000MW/hour, an abysmally low figure.

In fact, it is estimated that Nigeria, Africa’s largest economy, loses as much as $29 billion a year due to this, which is about 6 percent of its gross domestic product (GDP), according to the International Monetary Fund (IMF).

Interestingly, Nigeria’s location in the tropics offers the country an abundance of sunshine, a veritable source of solar power, all year round.

With over 2,600 hours of sunlight per year, about seven hours of sunlight daily, on the average, it is believed that the environmental conditions to tap into renewable energy power sources are just right for the country.

When fully harnessed, aside being far quicker to build than traditional power plants, solar energy has proven capability to plug the gaps in Nigeria’s energy requirements and remains a desirable alternative to generating sets that emit harmful greenhouse gasses and other air pollutants into the environment.

A BRIEF BACKGROUND

In response to the devastating impacts of the covid-19 pandemic, the Nigerian government developed an Economic Sustainability Plan (ESP). As part of the plan, the government launched the Solar Power Naija Programme (SPN) to achieve the rollout of 5 million new solar-based connections in communities that are not connected to the national grid.

This, it stated, is expected to impact the lives of about 25 million Nigerians through the provision of affordable, sustainable clean energy solutions to households and businesses in rural communities across the country. It is also expected to catalyze the creation of 250,000 new jobs in the renewable energy sector.

The initiative is a N140-billion long-term and low-interest credit facility to private sector developers in the business of deploying Solar Home Systems (SHS) and mini-grids in order to rapidly scale up deployments and make energy access more affordable. Raising debt financing has been a major stumbling block for private developers.

Put succinctly, the programme seeks to support companies raising the required upfront capital for investment in off-grid electrification. Additionally, the programme also supports the financing of upstream companies in the business of manufacturing and assembly of off-grid value chain components, such as solar panels, inverters, batteries, and other balance of system components.

This, the government says, is to increase the local content value chain and reduce the overreliance on fully assembled solar systems in Nigeria. The SPN is funded by the Central Bank of Nigeria (CBN) and implemented by the Rural Electrification Agency (REA).

TO WHAT END

The main objectives of the programme are to: expand energy access to 25 million individuals (5 million new connections) through the provision of solar home systems or a mini grid.

Added to that, it is meant to improve the local content in the off-grid solar value chain and further the local manufacturing industry in the country.

Furthermore, the programme is expected to create 250,000 new jobs in the energy sector, thereby reducing the unemployment rate in the country.

FOLLOWING THE MONEY

According to the forces behind it, the programme has disbursed a total of N7 billion to an approved beneficiary company – Asolar for a total connection of 100,000 systems.

This transaction, it explained, was made possible through a credit enhancement mechanism in the form of a guarantee provided by the Niger Delta Power Holding Company (NDPHC).

Currently about 20,000 units are being deployed across all 36 states of the country as 4,750 Fan SHS units have been assembled in the country with the rest expected to be completed by March 2022.

An additional 15,000 local assembly kits have been shipped for further deployments, while another 60,000 units are expected to be deployed by the third quarter of 2022.

Additionally, the REA and SPN teams have been in discussions with potential investors interested in partnering or investing with off grid developers to provide energy access to the unserved and underserved.

So far, partnerships have been formed with the Nigeria Sovereign Investment Authority (NSIA) whose board recently approved the investment of a $20 million revolving fund for the deployment of 260,000 SHS units.

There’s also the Nigerian National Petroleum Corporation (NNPC), which has signed a Memorandum of Understanding (MoU) supporting three SPN initiatives to connect under-served Nigerians.

This transaction seeks to facilitate investments worth about N22 billion for a total connection of 215,000 households across the country through the provision of an estimated 30MW solar power to Maiduguri in order to help solve the current electricity crisis and 125,000 Solar Home Systems.

Also involved in the process is the Infrastructure Credit Guarantee Company Limited (InfraCredit), which seeks to act as a third-party guarantor for approved developers under the SPN programme. The guarantees provided by Infracredit will help to unlock additional capital for mini-grid companies, either through Bank of Industry (BOI) or commercial banks.

IMPACT

At least 20,000 SHS units are being deployed across 20 states in the country, including Abuja, Adamawa, Anambra, Bauchi, Benue, Borno, Cross River, Jigawa, Kaduna, Kano, Katsina, Kogi, Kwara, Nasarawa, Niger, Oyo, Plateau, Taraba, Yobe, and Zamfara.

Since its launch, the programme has worked diligently with developers and other stakeholders in the off-grid sector to make the sector more viable and attractive for new investments.

These efforts have yielded results with several new investment channels opening for the sector via NDPHC, NNPC, NSIA and InfraCredit so far with commitments for both additional funding and deployments of units which will result in increased connections for both the unserved and underserved communities in the country.

IMPLEMENTATION

The programme’s implementation plan for 2022 is focused on addressing the bottlenecks identified in the first year of the programme’s implementation, increasing the number of disbursements to approved developers and increasing the number of deployments and connections on the program.

The REA said that it will continue working with InfraCredit to finalize on the terms to provide guarantee and funding for mini grid developers to be considered under the SPN programme.

The REA, it was learnt, will also be working with the NSIA and SHS companies to enable developers access the board approved $20 million revolving fund and NNPC to ensure developers can access the NGN 22 billion investment.

In addition, the agency said that it continues to provide support to applicants on the programme to enable them to qualify and access all financing options available to them through the programme and its partnerships.

STAKEHOLDERS VIEW

The Solar Power Naija is also expected to create 250,000 new jobs in the energy sector in addition to the solar equipment manufacturers who will have the incentive to set up facilities in Nigeria thereby offering more job opportunities to Nigerians.

Some major actors within the system that have expressed excitement about the programme are the Vice President, Prof. Yemi Osinbajo and the REA helmsman, Ahmad Salihijo.

“The Nigerian government is committed to resolving the challenges and delivering the president’s objective to deliver efficient, stable, and reliable power to Nigerians and put Nigeria on the path to economic recovery,” said the vice-president, at the launch of the programme.

Also, the REA managing director expressed optimism over the determination of the federal government to transform the power sector in accordance with its “Next Level agenda.”

“This is a testament to our dedication and commitment to scaling the off-grid solar market through provision of long term low interest credit facilities to the Nigeria Electrification Project pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy developers and retailers in the country,” he stated.

WHAT NEXT?

For now, the scheme is open to all potential off-grid developers to provide energy access to the unserved and underserved peri-urban and rural communities in Nigeria.

To participate, developers are asked to visit the REA/NEP website on how to apply as only companies registered under NEP are eligible to participate in the SPN scheme.

If well implemented, it is believed that the programme has the capacity to markedly change the power supply dynamics in the country.

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