Oct. 2, 2020
Though the largest energy producer in Africa, each year Nigerians shell out USD60 billion on over 50 million small-scale diesel-based generators to power their homes, businesses, schools, and places of worship around the country. Worse, while the country has roughly 13GW of stored capacity (compared to 50GW in South Africa), only 3.5GW of that ever reaches end users, according to Ademola Adesina, CEO of Rensource Energy. On top of that, roughly 25-30% of all generated power is subsequently lost in distribution, transmission, a lack of metering, and theft.
Though the state is trying to do something to resolve the issue—it helped build the Azura-Edo power plant in Edo State, a 461-MW open cycle gas turbine power station that utilizes solar in addition to natural gas—that was its last major initiative. Worse, though generation occasionally improves, transmission does not. As such, many see the only solution to resolving the country's chronic energy deficiencies as lying in decentralization. “Building power resources for distinct communities is the only way Nigeria can solve the problem," Adesina told TBY.
How can Nigeria escape its dependency on small-scale diesel generators? On the one hand, generators provide a critically needed service: most people need energy they can pay for in small increments over time, which is precisely what generators allow them to do. The solution, then, as those like Adesina see it, is to develop a more decentralized system based on a healthier energy mix, as in one including solar and natural gas, that people can also pay for in increments. Enter the concept of micro-utility.
This is somewhat ironic, for Nigeria is already one of the most decentralized energy networks in the world. But what micro-utilities would do is create smaller bastions of competencies from the ground up and then centrally manage them under firms such as Rensource. Focusing on solar hybrid systems, a combination of solar, batteries, and a backup fossil fuel, Rensource has already built out six micro-utilities and has another 20 in the pipeline.
Firms like Viathan are also working hard to close the diesel-generator gap. As cofounder & CEO Habeeb Alebiosu told TBY, Viathan now has a combined installed capacity of 52MW and 150km of distribution assets across six power plants in Lagos and Ogun. Investing in compressed natural gas to help wean Nigerians off diesel, its goal is to provide 200MW in non-diesel energy across the country, including piloting Africa's first floating solar PV-farm.
The outside world is also chipping in. In 2019, the African Development Bank approved USD150 million in funding for rural electrification in Nigeria, while another USD3 billion from the World Bank should be confirmed by mid-2020 to improve the country's transmission and distribution infrastructure. It couldn't come any sooner.
In addition to estimated annual losses of USD29 billion due to power shortages, the country's deeply indebted distribution companies cannot afford to invest in maintenance or distribution improvements because too many customers, including the government, don't pay on time. Not that local actors aren't stepping up. In 2019, one of Nigeria's richest men, Tony Elumelu, announced plans to invest USD2.5 billion in power en route to doubling his company Transcorp's total energy capacity to 2,000MW, which comprises over 15% of the country's national capacity. The sooner he can do so, the better.