On the forgotten side of electricity policy

How much electricity does Nigeria generate? The popular answer to that question is typically a very low number, much lower than South Africa for instance. According to the Nigeria Electricity Regulatory Commission, 83,665GW was generated and distributed via the grid on Tuesday the 9th of May, equivalent to a capacity of about 3486GWh. This compared to 21,295GWh generated and distributed on average in South Africa. The numbers look even worse when we adjust it taking population into account. Adjusting the same numbers, Nigeria officially produced about 18KWh per person, compared to South Africa who produced 354KWh per person on average. The numbers look really bad for Nigeria.

One question frequently pops up though. Do the official generation numbers truly capture electricity generation in Nigeria as a whole? Nigeria is peculiar in the sense that a decent amount of electricity generated each day is generated off-grid and for personal use. This is a situation very different from other countries such as South Africa which Nigeria is frequently compared to. To put that in context, according to the UN Comtrade data, Nigeria imported about $350m (or about N70bn) worth of electricity generators in 2015. A rough calculation puts that at about 5MW capacity in just one year. We don’t know exactly how much electricity is generated independently by businesses and households but given the trend in generator imports, it is likely to be a lot.

The idea of independent power generation is something that is catching on in many parts of the world too, mostly associated with the push towards renewable energy. Germany recently announced that for the first time ever, 85% of the electricity generated in Germany was generated from renewable sources, partly using solar panels. What was not announced was that a large chunk of that electricity was generated in small number by households. In 2015, 70% of electricity generated via solar panels were generated by households and small businesses with plants less than 500KWh. On one day in 2012, a record 22,000MW of electricity was generated via solar panels.

Why are households able to generate and contribute so much electricity in Germany? Part of the reason is policy. A big part of the financial sustainability story for household generation is the ability to sell excess electricity generated to neighbours via the grid. The ability to recoup some of the costs by selling excess electricity means that, for many households, investment in domestic generation is not seen as a necessary evil due to the absence of grid supplied power, but as a wise investment decision, lowering overall energy costs.

The idea of selling excess generated electricity to neighbours via the grid is not one that is unique to Germany either, it is done in many parts of the world. In some places, it takes the form of neighbourhoods generating enough power for self-use and buying or selling from the grid as needed. In fact, many housing estates in Nigeria mimic this type of set up, generating electricity independently for the estate and buying from the grid when available. The missing link however is selling excess energy to neighbours via the grid. A framework for that is not currently available. This means that for most, household or neighbourhood generation remains inefficient with excess generation wasted.

A lot of the policy discussion on energy is top-down, focused on large mega plants generating mega electricity and feeding that electricity into the grid for distribution. However, the lessons from Germany, and other countries, show there is room for bottom-up energy policy. Policy that allows households and small businesses to become more efficient and be seen not just as energy consumers but as potential energy suppliers too. Most people do not care if their electricity is generated from a 3000MW plant 300km away or from a 100KW plant down the road. All they care about is that they have consistent electricity supply. A mega 10,000MW plant is almost identical to 10,000 smaller 1MW plants, and it is not difficult to imagine Nigerians building that many small plants. After all, our strength is in our numbers. As we discuss policy for mega electricity projects, let us not forget that small scale generation can have just as big an impact.

Nonso Obikili is an economist currently roaming somewhere between Nigeria and South Africa and tweets @nonso2. The opinions expressed in this article are the author’s and do not reflect the views of his employers.