Malo: Decentralised renewables can rapidly accelerate energy access

Ify Malo is the Campaign Director for Power For All in Nigeria and Co-founder of the Clean Tech Hub. In this interview with EMEKA ANUFORO, she spoke of a neglected potential for improved electricity access in Nigeria.

With the threat posed by militancy, to what extent can renewable energy fill the gap?
In May 2016, the National Bureau of Statistics reported that Nigeria’s youth unemployment, which actively represents almost half the country’s labour force, has risen to 42.24 percent, with as many as 15.2 million young people unemployed. In addition, with the recent drop in commodity prices, direct correlation can be drawn between the increasing lack of electricity across the country due to the increased militancy on oil and gas pipeline.

The clean, reliable and quickly available power sources provided via renewable energy cannot come soon enough for Nigeria as a whole, especially for the young and growing population for whom economic opportunities are becoming much more limited. The lack of reliable grid power occasioned by the increased militancy means that already in Nigeria, 80 percent of enterprises rely on fuel-based backup generation to cover gaps in supply, with an estimated 100 million diesel generators in operation. When diesel or petrol is available, it can cost around four times the amount of grid power, limiting a company’s competitiveness. Self-generation accounts for a significant portion of most businesses’ recurrent expenditure.

We certainly think that renewable energy is the way out of this quagmire and that renewable energy can certainly complement the electrification gaps currently experienced in Nigeria, provide jobs, increase a number of social and community activities, particularly in rural areas and be an engine of growth in the current recession climate the country is experiencing.

For instance, in late April and May 2015, when the national grid was greatly affected by frequent outages, most businesses were shutting down, including schools and hospitals, but health centers powered by renewables in Lagos state, under the Solar Nigeria programme were the only ones staying online, when grid power was unavailable for weeks at that time.

One of the greatest fears about renewable energy is cost. Many quickly dismiss any discussion around renewables, especially solar, for this reason. Are you worried about this?
Although decentralised renewables have an upfront cost, the systems are smaller, making them not only faster to deploy, but more affordable. Different decentralised technologies are bought and paid for in different ways. However, across the technologies, innovative payment mechanisms are being established that make these affordable to customers. For example, following an initial deposit, many rooftop solar systems are paid for in installments, enabling customers to buy the system over time at affordable price. And of course, once a customer owns the system, the running costs are free. It is important to note that economy of scale reduces costs.

The knowledge base for renewable exists in Nigeria and is growing. We have cheaper labour in Nigeria than we would get elsewhere. There are millions of Nigerians already paying high cost for self-generation of power and who will be willing to pay the cost to be electrified, using renewable energy at the right price. What we need now is a clear path, direction and bold leadership. Even the expensive components that need to be imported can be done at a reasonable price, when you have the bargaining power of importing items in bulk to serve millions.

In the case of Nigeria, renewable energy, such as solar is cheaper than running generators. We know of solar installations that have been running from four to 18 years now and these companies have achieved cost recovery between 18 to 30 months. Meanwhile, batteries and associated components can last another five to eight years and panels 21 years before starting to drop in efficiency. Some companies are working with small and medium enterprises (SMEs) to displace their fuel generator use by providing solar solutions to barbers on a rent-to-own business model and cost is recovered between 18 to 24 months through shifting expenditure on fueling generators to solar rentals. Clearly, distributed renewable energy is the quickest way to electrify Nigeria.

Some stakeholders have called for the establishment of a fund to stimulate investors in this area. Is this something you support, and how should this be best worked out?
For commercial scale activities to be realised in the sector, there is need for support, particularly to local firms currently servicing the market. Accessing large, low-cost sources of capital could ultimately facilitate the leap-frogging of decentralised renewable energy (DRE) companies and accelerate their products to market and address the energy deficiency in Nigeria. I think this is one way a fund such as suggested by investors will definitely help the market.

Another way of financing renewable energy companies is to consider securitising solar and energy efficiency loans as is done in more developed countries, to allow greater levels of investment in alternative power sources. Securitisation in this sense involves pooling loans to create consolidated securities that investors can purchase. A recent example is the securitised $54.4m (in loans) by SolarCity for solar photovoltaic installations. Also, the Green Jobs – Green New York programme has achieved a high bond rating for securitised energy efficiency loans.

So, ultimately, securitisation through the asset-backed market is a crucial way to achieve large-scale investments for renewables and get the secondary market to scale up in order to reach national and state solar power and energy efficiency goals. Once this process is proven to work, it would be easier to get even cheaper, better capital over time.

Are the national energy policies friendly enough to support renewable energy?
There are a number of policies and regulations that have come into focus or are in the pipeline, which would greatly help the renewable energy sector, as well as, help decentralised renewable energy achieve scale. One of the pipeline regulations is the Mini-Grid regulation by the Regulator that is now undergoing public hearing. There is the Captive Power regulation, as well as, the Feed In Tariff (FIT), all introduced by NERC, to accelerate investments in renewable energy.

These are laudable, but government needs to consider tax waivers and incentives for renewable energy companies to enable them meet the unique challenges associated with the initial high capital expenditure for off-grid renewable energy technologies, particularly considering that the goal is to get more end users, including the rural poor, for whom affordability might be an issue. There are national policies, such as, the Nigerian Renewable Energy and Energy Efficiency Policy of 2015, which came to life under the last administration to address gaps in the sector.

Decentralised renewables are increasingly recognised by decision-makers, as a critical tool for enabling energy access to the 96 million Nigerians currently living without clean, modern energy services. We have a great opportunity to catalyse this sector with more supportive policy measures. Low duties and charges and a good regulatory framework for rooftop solar, micro-hydro and other distributed renewables in countries such as Bangladesh, Kenya and Tanzania mean that these technologies are already improving the lives and livelihoods of millions of people.

Should power generated from renewable energy source be distributed through the national grid?
It would be great to not only get the importance of planning, which enables grid integration (mini-grids, including FiTs and others) into the answer, but to also talk about the benefits of decentralised renewable energy, as it does not need to wait for the grid. Decentralised power does not need to be connected to the national grid, allowing customers to have freedom in their energy choice, and the flexibility to power their homes and businesses without waiting for large-scale infrastructure expansion.

However, we are also seeing the importance of ensuring there is an integrated approach to on and off grid energy planning to achieve the optimal performance and sustainability of all different energy sources.

The Minister of Power, Works and Housing recently said government would rather look to the private sector to drive investments in renewables.
How does it work in other countries that are doing well in this area?
Could you use Bangladesh and Nepal examples, where buy-in across government, multi-lateral, CSO and private sector stakeholders have catalysed two of the biggest DRE markets in the world?  Let’s consider also how in East Africa, specifically Kenya and Tanzania, where private enterprises have played a leading role that supportive government policy has been a clear factor in enabling growth, and CSOs have helped to reach most remote regions?

However, in much more developed climes, governments have played and are playing active and catalytic roles to ensure comprehensive policies and programmes, as well as, provide clear directions that allow for renewable energy providers and company to make these investments.

What advantages do decentralised renewable confer?
Decentralised renewable energy is more rapidly deployable. Power plants can take a decade to come online, but rooftop solar systems can be installed within days or weeks, and mini-grids can be installed within weeks or months. By 2050, Nigeria is likely to be the third largest country in the world. With a rapidly growing population and increasing energy deficit, the speed of energy access is critical in Nigeria. Decentralised renewable systems are also more affordable, more sustainable, and provide homes and businesses the flexibility and freedom to have their own power supply.

How many megawatts could be generated in the next few years and what level of investment would be required?
Estimates suggest that 734MW of small hydro-power have been identified in Nigeria, and under the Nigerian Energy Support Programme, 115MW of decentralised solar capacity, including mini-grids and single home systems, has already been installed. However, decentralised renewables are best measured by the energy services they provide, rather than by MW.

For example, in partnership with the Lagos State Electricity Board, the Solar Nigeria Programme supplies electricity to 172 schools and 11 health centres and helped support the private sector to distribute solar lighting or power systems to 92, 000 homes and businesses in the first six months of this year. With more investment, decentralised renewables can rapidly accelerate energy access.