By Ifeoma Malo and Daramfon Bassey
On the 4th of April 2018, on a beautiful evening in the heart of Kaduna, a number of top personalities in the country braced the hot weather to witness the launch of a new Solar Plant and Training Academy. The Solar Plant is the brain child of Blue Camel Energy and the first of its kind not just in Kaduna state but all over the North. Similarly six weeks earlier, ASTEVEN Group also pulled an impressive crowd of policy makers and business people to the launch of it’s ASTEVEN Renewable Energy Academy and Centre of Excellence. The launch which opened the academy’s world class training center was “built primarily and structured in line to support rapid developing markets for renewable energy and energy efficient industry”. This has been heralded as a great win in the advancement and adoption of renewable energy solutions in the country with the potential to greatly boost the economy and improve youth employment in the country.
Similarly, there is a sudden increase in investment portfolios for the Decentralized Renewable Energy (DRE) sector kicked off by the recent portfolio investments announced by ALL-ON; an impact investor into three DRE technology companies. The beneficiaries of the ALL-ON investments includes Green Village Electricity (GVE) reputed as the largest Mini-Grid provider in West Africa – with an equity and debt funding that enables GVE expand its Mini Grid solutions into the Niger Delta region. Other investments include Lumos Global BV, which received a debt facility to expand its Solar Home Systems (SHS) offering in the Niger Delta; and Cold Hubs – a Solar Powered Cold Storage Food facility who received a convertible debt facility to enable it expand its solar-powered marketplace cold storage business in the Niger Delta as well. This investment amongst others, has sent a lots of positive signals that the Nigeria’s DRE sector is slowly coming of age.
This is all coming on the heels of strong efforts by the Nigerian Rural Electrification Agency (REA) to address the huge electricity deficit across Nigeria through its Energizing Economies and it’s Mini Grid strategy as part of its multi-pronged approach to meet the needs of 96 million un-electrified Nigerians. The REA’s Mini-Gird strategy came on the heels of the much heralded Action Learning Event which it co-hosted with the World Bank and the Rocky Mountain Institute in December 2017 where the projected investment for the Mini-Grid sector was put at $9.2bn USD. This event was followed up by a three day Mini Grid design Charette hosted by the Rocky Mountain Institute and the REA with the goal of getting critical global and local stakeholders in the industry to create a roadmap to reduce the costs of mini-grid projects and services by over 60 percent, “by addressing items such as system costs, demand stimulation, and enabling policy”.
Some of the immediate benefits includes not just the growing confidence in DRE as a more viable and accessible option to grid based power; the benefits are also evident in the projections (and in some cases launch) of new Mini-Grid projects across the country. We also have companies emerging with innovative business and financing models that allow customers purchase systems on installmental, rental or PAYG with the ability to enable collections across different channels and platforms including bank cards and transfers. And Nigerian companies are expanding and diversifying in much more aggressive ways. With A-Steven group of companies launching in Sierra Leone on March 2nd, 2018 and expanding into Liberia and Ghana. We also have SOSAI Renewable Energy launching its new experience center in Kaduna on 6th April 2018, as a way to bridge the DRE knowledge gap and building an interactive feedback loop through virtual technologies. This experience center allows clients and customers get a first hand view of products through the center’s solutions explorer screen and also provide training facilities for clients and employees of the company.
From investments; to new and evolving business models; to new and improved technologies and to world class training centers; it is clear that the DRE sector in Nigeria is on the rise. And with this rise comes several other energy dividends associated with energy access. It is no secret that Nigeria has a bulging youth population and for a couple years has battled high unemployment, amidst worsening security and increasing crime. The promise of DRE is tied directly to the ability of creating opportunities and hope for millions of Nigerians especially the youth. This is why the growing focus on training and skills development in the Decentralized Renewable Energy sector which is slowly gaining traction amongst industry players must be supported.
However, all these giant strides will be in vain if the government fails to create the enabling environment for the DRE sector to strive. The imposition of a newly introduced 10% tariff on solar panels coming into the country is capable of undoing all the great strides been made in the DRE sector, and if not changed, it will put the Nigerian government on the wrong side of history, The impact on technology providers and users is already proving to be quite grievous and potential for capital flight and investments in the sector is eminent. All-On estimates that so far millions of dollars worth of potential capital from a variety of local and international investors that would have come into the sector has been put on hold because of the uncertainty caused by this new development. It should be clear that Nigeria does not have the luxury of loosing foreign investment of this magnitude especially as the country continues to recover from the recession of the past 3 years.
At a recent DRE taskforce meeting, convened by Power For All in April 2018, a number of DRE companies lamented that they have their solar panels and other products stuck at the ports accumulating demurrage due to the fact that several of them were taken unaware of the reclassification of the Nigerian Customs HS Codes. The amount needed to clear these goods have become ridiculously high and for those with pipeline projects with orders on the way, the story is no different as it has affected all their financial modeling and cost recovery mechanisms on such projects. There is a clear and present danger in this new policy shift by the Nigerian government particularly at a time when efforts are geared at accelerating the DRE market; increase DRE penetration and connections and expand the number of players in the market, that some of the smaller companies might be forced to re-organize their business operations. In addition to this, international private investors are now developing cold feet in investing in the DRE sector. But perhaps the most affected will be the millions of citizens in Nigeria that will still not have access to power because these DRE solutions will now be priced far above their reach.
A reoccurring conversation around development and socio-economic growth in Nigeria revolves around the prevalent energy poverty which limits productivity and amplifies the lack of opportunities especially for her burgeoning youth population. As a global campaign with country level focus, Power For All believes in the “fierce urgency of now” which requires that we address policy issues, as well every other aspect of the eco-system; by preparing Nigerians for the emerging DRE energy architecture and it’s opportunities. It is equally paramount that we address the human capital resources that can accelerate DRE penetration in Nigeria. There is a growing cottage of solar assembly plants springing up across the country that might eventually be the precursor to local manufacturing of DRE components including panels. There is also a growing DRE educated populace unwilling to wait for the grid or depend solely on it. There is however the need for government to complement these efforts by creating an enabling environment for supply to meet the growing demands for DRE technologies and solutions for today.
With the current evolving energy paradigm shifting rapidly in favor of DRE solutions, it is not surprising that several companies in Nigeria are beginning to take advantage of local capacity needs to reduce their operating costs and create new markets for their organizations across the continent. Despite all of the recent progress which indicates a positive tipping point in the Nigeria DRE industry; there is certainly still a lot to be done. Nevertheless from the ongoing activities highlighted previously, we can confidently assert that the ground work has started already.
Ms. Ify Malo – is Nigerian Country Director – Power for All
Mr. Daramfon Bassey – is Nigerian Lead for Civil Society and Sustainability – Power for All