In the 2014/15 Global Competitiveness Report which assesses the competitiveness landscape of 144 economies globally, Nigeria is ranked 134 in the area of infrastructure and a further 136 in electricity infrastructure. Each year, countries are assessed on national competitiveness to determine the level of productivity and in turn prosperity. Access to power is integral to the growth and development of any country. The availability or lack of energy has a direct impact on the socio-economic wellbeing of its people. With an estimated population of 170 million, Nigeria has proven fossil reserves and abundant renewable energy sources to meet its energy needs. In spite of this wealth of resources, Nigeria’s per capita electricity consumption is 168 kWh well below the sub-Saharan average of 535 kWh. Irregular and epileptic power supplies have ruined commercial ventures in the country as well as affected regular daily activities and business opportunities. The trend shows that the nation is highly dependent on energy as shortfalls in its supply have adversely affected the country’s GDP and business cycles in the financial sector due to economic fluctuations. Industry, commerce and private households are suffering from a severe shortfall in electricity generation.
In its 2015 edition of Doing Business report, the World Bank ranked Nigeria 187 out of 189 countries with regards to the ease of getting electricity. It takes an average of 260 days for a business in Lagos to obtain permanent electricity connection.
Enter captive generation. This is what we have always done at all levels of business in the country. The industrial sector has been heavily dependent on diesel generators with Nigeria being among the top 5 major importers of generators globally. Bobby the barber has a small generating set, XYZ bank has 2 heavy duty diesel generators which work almost non-stop during business operations. In the two instances, captive power generation is in operation, which simply means these businesses have found an alternative source of power which is entirely consumed by them. “Estimates suggest that between 8 and 14 GW of decentralised diesel generator capacity is currently installed in the country. About 86% of the companies in Nigeria own or share a generator and about 48% of their total electricity demand is covered by these private generators” [GIZ; Mar 2015]. Captive generation which is technically off-grid is ridiculously expensive when powered with fossil fuels. It basically threatens the survival of the businesses in Nigeria, no matter the size.
While large businesses and corporates have the ability and resources to easily expand, this may be more challenging for MSMEs as there are other obstacles they need to overcome in order to thrive. In addressing the cost of doing business in the country, captive renewable energy generation must be promoted and developed to meet the energy needs of companies, particularly with solar photovoltaic (PV) technology.
There is a common resistance about this from various quarters. People often see solar systems as expensive and an unpopular choice for captive power. This is however changing. For many commercial off-grid applications, solar PV is already competitive with small gasoline and diesel generators based on levelised cost of energy (LCOE). In its report on Low Carbon Development Opportunities for Nigeria (2013), the World Bank recommends that off-grid solutions be developed using renewable energy sources, commenting that “PV and hybrid systems are already economically competitive for many off-grid applications. Gasoline and diesel generators produce power at LCOE between US$ 0.23 and $0.42/kWh. The cost of electricity from PV and hybrid PV-wind diesel systems are in the range of $0.30/kWh and $0.22/kWh, respectively. As the costs of renewables continue down the learning curve, and fossil fuel prices in Nigeria revert to global market prices (“export parity”), the economic advantages of renewables will become ever greater.”
Renewable energy has been tested and proven to be a reliable source of alternative energy worldwide. We all recall between April and May this year when the shortage of petroleum products nearly shut down this nation. Businesses suffered, banks were shutting down and so were the hospitals too, however with renewable energy this would not have been the case.
Similar challenges of power have affected businesses in India. As a matter of fact, since 2010 there has been an estimated 7% decrease in turnovers from Indian companies because of power shortages. Captive solar systems have come to their rescue however. According to the Energy Alternative India, in July 2013, after solar PV power production was successfully deployed on some level, the LCOE production from small scale captive solar PV power production cost was about Rs8/kWh (N24) including batteries, and after subsidies and incentives had been factored in the calculations. This was against the regular cost of grid supply, which was Rs4-7/kWh (N12.04 – N21.07) and diesel, which was pegged at Rs13-18/kWh (N39.13 – N54.18). This doesn’t include O & M and the environmental costs associated with continuous emission of greenhouse gases into the atmosphere.
Captive generation comes with some distinct advantages for industrial consumers who can generate the power required for their operations and use electrical power optimally since theoretically there are no technical or commercial losses to be dealt with. There should be strong focus supported by policies to stimulate captive renewable energy generation and lower the use of diesel and other fossil fuels in the commercial sector for improved productivity and socio-economic prosperity.
On the prospects of large scale renewable energy installations in Nigeria, I visited the Feldheim Village, a 100% renewable energy community as part of a trade mission in July, 2015. This village has a solar farm with a total of 9844 photovoltaic modules which produces a total power capacity of 25.2 MWp and annual output of 2748 MWh, enough to cover the annual power requirements of around 600 four-person households; as well as a biogas plant that has an installed electric power capacity of 526 kW with annual biomass input consisting of 8,600m3 of manure, 8,700 tonnes of maize and 190 tonnes of cereal wholegrain all produced and supplied by the local agricultural cooperative within the village. With about 1% of its land mass covered with highly efficient PV modules, Nigeria has a potential for electricity production from solar PV in the range of 207,000 GWh per year.