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Nigeria to extend renewable electricity production tax credit to investors

*Promises to break ‘deadlock’ in electricity market structure

Nigeria has said that it would implement far-reaching reforms in its renewable energy market, to enable investors make more investments and returns in renewable energy production.

It also said the reforms would attempt to restructure and perhaps displace years of structural ‘deadlocks’ in its electricity market, thus creating a level playing ground for all sources of electricity generation to operate and pivot.

Acting President, Yemi Osinbajo, stated this during a recent renewable energy roundtable organised by the ministry of science and technology; Nigeria Economic Summit Group (NESG); and Heinrich Böll Foundation Nigeria, in Abuja, the country’s federal capital.

Osinbajo, explained that parts of the reforms to encourage improved investments in Nigeria’s renewable electricity market would include the introduction of Power Production Tax Credits (PTCs) – usually a federal incentive that provides financial support for the development of renewable energy facilities.

Through PTCs, firms that produce electricity from wind; solar; and other renewable energy sources facilities are typically eligible for a federal PTC, which could be some percentage tax incentives on every kilowatt-hour (kWh) of electricity produced for a specified period.

Osinbajo, however said: “We’ll also continue to implement critical elements of our policy that will promote private sector investment in renewable energy such as one; Power Production Tax Credits (PTCs) to electricity generation companies which is aimed at incentivising the adoption of renewable energy.

“Then, we have the Feed In Tariffs (FIT) which typically incentivizes the electricity producers by offering more favourable pricing for electricity produced through renewables.”

While emphasising the need to explore other electricity generation options to create a healthy competition for the country’s electricity market, he said: “It’s also important for us as we go forward that we break the deadlock of the electricity market structures by exploring the options to transform the competition for markets approach.”

“We need a framework that brings together all stakeholders towards ensuring that renewable energy becomes a real engine of growth for the Nigerian economy,” the acting president added.

He equally informed that the government would scale its solar homes systems programme managed by the Niger Delta Power Holdings Company Ltd (NDPHC); and Azuri Power, to cover up to one million homes across the country.

The government had earlier in the year installed solar home systems in an off grid rural community, Wuna, on the outskirt of Abuja.

Osinbajo however recalled the experience he had when he commissioned the project, and stated that the government was committed to putting out more of the solar home systems to rural homes currently without electricity supplies.

According to him: “I was in Wuna to see it for myself. For the first time in their existence, the village now has running water, solar powered. The school has power and the school hall is now used as a community hall in the evenings. Each home has four points of light.

“Children can now stay up and do some studying at night. Many of Wuna’s women can now process their millet and yams at night. New jobs have been created, solar installers, maintenance, payment systems and so on.”

He further explained: “One guy has lost his business in Wuna, the phone charger. Every household can now charge their phones. But he now charges phones of residents of other villages.’’ he said.

He said the government would back the use of mobile money for solar home system payments to provide access to lighting and electric power for small devices, adding that: “The Wuna home solar project is an example of how we can creatively and aggressively provide power to our people by this pragmatic approach to our energy mix.

“We are convinced that renewable energy probably offers us the most sustainable means of increasing energy access to those who have no electricity and have no immediate hope of being connected to the national grid.”

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Offgrid Nigeria is a web-based publication of developments in Nigeria’s renewable energy sector. It provides reliable information on the country’s RE market, policies, projects implementation and their impacts.

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