The story in the online edition of The Guardian (International Edition) of 28th January 2021, that the United Kingdom’s renewable electricity outpaced its fossil fuel generation for the first time in 2020 must have rekindled Nigerian expectations of meeting her own renewable energy targets.
The breakdown of the UK’s electricity generation in 2020 revealed that renewable energy generated by wind, sunlight, water and wood made up 42% compared with 41% generated from gas and coal plants together.
Nigeria’s renewable energy ambitions are modest going by the targets set in the Renewable Energy Master Plan, REMP, released in 2014. It is sought, in the REMP, to increase the supply of renewable electricity—wind, solar, biomass and small hydro—from 13% of total electricity generation in 2015 to 23% in 2025 and 36% by 2030.
While in the UK it is wind turbines that make the single biggest contribution of renewable energy generation, providing almost a quarter of electricity in 2020, and with Britain setting an ambitious 40GW (forty thousand megawatts) 2030 offshore wind target, the biggest contribution of renewable generation in Nigeria will undoubtedly come from solar in the not-too-distant future. For, while the other RE resources are limited and fast depleting, solar is virtually inexhaustible, with very significant year-round insolation in most parts of the country.
Of course, the same thing can also be said to a lesser extent about wind energy resources, but as the example of Katsina Windfarm has proven, the rate of harnessing wind energy in Nigeria is snail-paced, to say the least. The project has been ongoing since 2007 and there is still no light at the end of the tunnel. Obviously, for its relatively small size, the 10-megawatt project is qualified for a place in the Guinness World Records for project duration.
But then, what percentage of Nigeria’s electricity is generated from solar today?
Quite significant, one would say, but actual percentage is unknown because virtually all of it is off-grid and unmetered, largely as photovoltaic, solar home systems (SHSs).
However, since the power industry privatisation in 2013, a lot of investors have shown interest in developing utility-scale, i.e., grid-connected, solar, and many have gone as far as obtaining the necessary licence from the Nigerian Electricity Regulatory Commission, NERC. According to NERC projects totalling 1,100MW capacity have been approved. However, so far, it is all sweat and no dice.
It does not appear that solar project developers appreciate that the challenges in large-scale application of solar are more daunting than in off-grid applications. These challenges are both of technical and economics nature. And for the nascent Nigerian electricity market, of commercial nature too.
But then, solar power developers were soon to come face to face with reality; cost of equipment was a serious economic challenge that rendered it less commercially viable, with the intermittent nature of solar adding a technical complication. This explains why the projects never made any good progress since.
The good news is that the cost of solar power has fallen substantially in recent years and looks set to continue doing so. In 2016, the cost of utility-scale solar in the United States was $1.06/W (dollar per watt) and by 2020, the cost of such installation had been forecast to be less than $1/W.
However, it should be emphasised that capital cost, i.e., cost per watt, is not a useful measure to assess the cost competitiveness of solar power. Whereas fossil-fuelled power plants can produce power at their rated capacity indefinitely, a solar panel can produce close to its rated wattage only under peak sunlight, around midday.
A better way to assess the economics of solar power is to compare the cost of the electric energy, rather than power, that it produces with the cost of the same amount of energy from other sources. The US investment bank, Lazard, calculated that the cost of utility-scale solar was in some cases lower than $50 per MWh (5 c/kWh) in 2016, comparable with the cost of electricity from the cheapest fossil fuel (natural gas). That, of course, is still not absolute because even a low cost per kilowatt-hour can fall short of making solar competitive if the cost of solar exceeds the value that it provides.
What does all this mean for utility-scale solar power development in Nigeria?
As people often say here, the laws of economics do not work in Nigeria. And it appears this time, the Covid-19 global pandemic has conspired with local conditions in the country to make sure that things stay the same economically, that is if they do not even become worse. Just when everyone thought the falling price of solar equipment worldwide would mean progress for the country’s quest for utility-scale solar, the economy went into recession. And as other economic indices improved, the naira exchange rate against other global currencies fell and counterbalanced any gain.
Perhaps this explains why there hasn’t been much progress on the approved projects, now at the stage of negotiations for power purchase agreement with the Nigerian Bulk Electricity Trading PLC, NBET; discussions appear to have stalled.
Looking at things holistically, the prospects are that as the price of solar power falls to competitive levels and below, it is technical considerations that will influence the development of utility-scale solar—one of those considerations, no doubt, will be the intermittent nature of solar which, in its standalone, photovoltaic configuration, doesn’t lend itself well to today’s system operation demands as well as commercial contracting obligations, unless, of course, if there is a suitable means of bulk energy storage.
Which is why some of the developers— in particular, the North South Power Company and Mainstream Energy Solutions—are taking advantage of their huge hydro reservoirs as storage for the solar energy they will produce and then offer customers a blend of hydro/solar energy. It is energy banking of sorts. This would seem the most feasible grid-connected solar power offering. It is also another means of subsiding “costly solar” with “cheaper hydro” in the circumstance.
What is the way forward?
Solar energy is there to be harnessed and each country should find the most beneficial way of doing so. The preponderance of expert opinion on the matter of electrification in general, and solar energy in particular, is to find an appropriate balance between off-grid/on-grid solutions. For example, if government maps out the areas where it is most feasible to extend the grid, while carving out regions that might more economically be served by off-grid solutions, then it can minimise the risk of competition between the two solutions.
And by clearly articulating technical standards for how to interconnect microgrids with the main grid, governments can help off-grid solar firms for eventual grid extension and thus prevent them from losing their investment.
The FGN has indicated clearly that this is the roadmap it intends to follow for harnessing solar energy.
The government said it planned to electrify 75 percent of the country by 2020 and is banking on off-grid solar to complement its grid extension efforts. The government is designating some areas—those that might be sparsely populated, hilly, or otherwise expensive to serve with new transmission lines—as optimal for stand-alone SHSs or isolated solar microgrids. It has designated other areas as targets for extending the central grid.
And finally, it has chosen some areas, such as those where a grid connection exists but is weak or unreliable, as best suited for microgrids to shore up electricity access in the near term, with the option for the government to eventually extend the grid and link up with the microgrids of the future.
Already, NERC has issued the enabling regulation—the Mini-Grid Regulation, 2016. People will be familiar with schemes like ‘The Nigeria Electrification Project’ and initiatives such as the Energizing Education Programme, the Energizing Economies Initiative, and such other initiatives that the Rural Electrification Agency, REA, is promoting as a means of executing the plan. These interventions have since provided much needed electricity to communities and selected institutions of higher learning and city markets around the country.
Although the REA, presently serves as the vehicle for implementation in the public sphere, the aim is to provide a level playing field for private developers to be active players in the microgrids market.
One would like to say government has taken the correct decision on this crucial issue, but the big question is, will this new policy direction by the FGN on harnessing solar energy in the country break the deadlock over the PPA negotiations between utility-scale solar developers and NBET? Only time will tell.