Economic outlook

February 28, 2019

How off-grid devt ‘ll rescue Nigeria power sector

How off-grid devt ‘ll rescue Nigeria power sector

Minister of Power, Works and Housing, Mr Babatunde Fashola

By Ediri Ejoh

Development of off-grid power distribution solution, otherwise, known as standalone power system will open up the power sector to more investment opportunities from within and outside the country, thereby contributing to economic productivity and Gross Domestic Product (GDP) growth,a n investment banking firm, Emerging Africa Capital Group, has said.


Minister of Power, Works and Housing, Babatunde Fashola

In a latest Report on the Nigeria’s energy sector, the firm lamented that the desire for sustainable power supply is presently shrouded in uncertainty owing to current operational model of gas-to-power (on-grid) in the power sector and noted that off-grid power solution has the capacity to provide power to outlying rural communities and businesses which are not served by traditional transmission infrastructure.

Off-grid or mini-grid generation is described as a standalone power system that serves small clusters or communities such as rural areas, industrial clusters and housing estates among others, providing them electricity through independent electricity distribution network systems.

Currently, Nigeria’s total off-grid electricity generation capacity approved by the Nigerian Electricity Regulatory Commission, NERC, is about 500Megawatts, MW. In light of Nigeria’s projections to increase power generation capacity in urban and rural areas, investing in off-grid generation is the prudent way to begin.

The Report said: “Countries similar to Nigeria have successfully implemented the off-grid solution. For example, Bangladesh, with a population of over 150 million has successfully implemented the off-grid power solution via the Solar Home System, SHS, based rural electrification programme.

“As at 2002, only 7,000 Bangladeshi households had solar panels, but today, about 2 million SHS have been installed in the country. Further, since 2010, about four mini-grids have been installed, and nine others are to be installed in off-grid locations of Bangladesh.”

ALSO READ: FG, lack of commitment fuelling gas flaring – Operators

Opportunities in off-grid sector

According to the Report, off-grid segment of the power sector offers an exclusive combination of transformative potential and attractive investment opportunity. “With the inadequacy of electricity supply to a larger demographic of the Nigerian population, and continued reliance on generators by organisations and households, off-grid power distribution solution will become a sustainable avenue to solves power challenges, contributing to economic productivity and ultimately improving GDP growth.

“The use of mini-grid and off grid renewable energy solutions also has the potential to become a game-changer in providing power to outlying rural communities and businesses which are not served by traditional transmission infrastructure,” the Report added.

The report further noted the high penetration of generators to businesses and consumers’ willingness to pay for sustainable electricity, saying that “This creates opportunities across the entire power sector value chain as it enhances the end-to-end productivity of all player within the sector.”

It added that fulfilling the country’s economic and social promises and by extension, Africa, depends on the ability of the government and investors to develop the continent’s huge electricity capacity.

Moreso, it identified some key areas of the economy as well as the sector which investment in off-grid and mini-grid development would accomplish. These included “opportunities to develop industrial clusters and small cottage industries; opportunities to expand and refurbish distribution networks of the Distribution Companies (DISCOs); opportunity to collaborate with state governments; access to other fuel alternatives; considerable insulation from the issues with the Nigeria Electricity Supply Industry (NESI) and opportunity for rural electrification.

Also, while these power system may be a breathtaking development to the sector, the Report called on the federal government to, as a matter of urgency, address issues such as uncertainty in regulation, objections to monopolies, gas constraints, licensing limitations, lack of technological expertise and financial constraints.


Meanwhile, the report also noted that “To encourage further investments in off-grid solutions, it is important that the government ensures that the environment is welcoming enough to elicit tax support from the government in terms of tax reforms.

It argued that Nigeria cannot attain the results it desires in the power sector without employing the help from bodies like the World Bank, NGOs and other institution that encourage national development.

“All tiers of government should be able to implement off-grid projects to make it faster for the country to attain its long-term plans of sustainable power supply.” Currently, the regulations guiding off-grid solutions are clouded in uncertainty. It would help if these regulations are clear for everyone to know and understand. The area of licensing off-grid projects should be clear and easily understood.

“In the event that some plants with captive power have excess power, there should be regulations established by NERC to make it possible for them to sell to DISCOs.

“There should be regulations guiding the possible acquisition of the franchise by the DISCO in such a way that the off grid operator (the original owner) makes back some money from the trade off and the DISCO also inherits the customers attached to the business. The NERC should be the driver of this by creating appropriate guidelines for the split.

“Also, there should be adequate technical training for the staff employed to handle the off-grid operations to ensure that there are no lapses,” the Report said.

The report, however, stated that projects for rural electrification should be adequately funded to ensure that the projects remain attractive enough to be acquired by the DISCOs, adding that the Rural Electrification Agency, REA, should be able to come up with strategy to ensure sustainable growth in the projects.