Analysis: Why Nigeria’s presidential election matters for solar in West Africa

“The question is whether this same person, General Buhari, will still think this is a usable technology or not,” said Anthony Ighodaro, chair of the African Renewable Energy Alliance.

With access to electricity estimated to be as low as 41% in Nigeria, leaving 100 million people lacking, according to the African Development Fund, the case for solar in Africa’s most populous nation is clear.

It is uncertain how much solar capacity had already been installed in Nigeria prior to the election, but most industry representatives agreed that there are no utility-scale installations and none above 1MW capacity, despite the region being consistently cited as having massive potential due to strong levels of irradiation and abundant sunlight throughout the year.

There have been several false starts with plans for large-scale PV installations being announced, including the deployment of up to 500MW of solar power across nine states in a joint programme with the German government in October 2013, but none of these plans have been realised.

Buhari’s election manifesto does involve a pledge on power, albeit vague. It states: “I will generate, transmit and distribute electricity on a 24/7 basis whilst simultaneously ensuring the development of sustainable/renewable energy, by 2019.”

Abiodun Olusegun Aina, senior investment officer at International Finance Corporation, said the mention of electricity in the manifesto is positive, but there is not enough detail. He added that in the last two months several solar power developers have tried to get into the Nigerian market due to the dramatic fall in PV panel prices and the excellent solar resources in the North and North-East regions of the country.

South Korean-backed firm Solius NGDC, for example, is planning to build a 100MW solar plant to feed to the Nigerian national grid. Ike Okechukwu, Nigerian managing director of Solius, said: “Nigeria has been able to establish more confidence in the past one week with investors than it has been able to for some time now, because of the way the incumbent president handled the election. He resigned from the race even when the votes were being counted and that established a lot of confidence in investors.”

In another case, global energy developer New Generation Power International (NGPI) signed a memorandum of understanding with the Federal Government of Nigeria to deliver 1,200MW of utility-scale PV projects within the country last November. Nisha Joshi, NGPI president of international operations and growth, said: “The level of support from the current administration has been very encouraging so far.”

New policy?

But on whether Buhari’s tenure will signal any fresh policy as regards solar power opinion is divided. Solius’ Okechukwu said it was unlikely not, but Ighodaro was more optimistic: “Under Buhari there will definitely be serious attention given to solar energy and other renewables. I also fully expect they will have a lot more political will than under the previous government.”

Professor Abubakar Sani Sambo, chairman of the Nigerian Member Committee, World Energy Council (WEC), said that despite solar being in its infancy in the country, the Energy Commission of Nigeria has been undertaking pilot projects and is beginning to procure some solar technology, but the level is far lower than what the WEC would like.

He said: “Sooner rather than later, solar energy is going to bounce in the entire Africa region. All that is required is to get the political will of our leaders to go in the direction of the deployment – otherwise we will remain with only pilot and donor agency projects.”

In Nigeria there is already a five-year pioneer tax regime exempting power developers and owners from corporate income tax for the first five years of operation, but this does not only apply to renewables. While there are no specific government subsidies in place, Sambo said a draft for a feed-in tariff (FiT) policy, prepared by the Nigerian Electricity Regulatory Commission, has been circulated to stakeholders for comment. He said that if FiTs are adopted, the case for solar will escalate.

Most industry representatives cited a lack of a regulatory framework to aid investors and developers in renewable energy as a major barrier. They are looking to the new administration to address this. They also suggested setting aside large areas of land for solar, bundling federal, state and local regulations together to make investments easier, and following Ghana by introducing a petroleum surcharge of 2-3p per litre to fund renewables.

Ighodaro said a consistent and credible framework is the key so that regardless of which political party is in power, it will be possible to make 20-25 year investments.

He added that privatisation of power distribution companies during the term of previous President Goodluck Jonathan paved the way for a FiTs policy; however, many privately owned transmission companies face challenges raising capital for their own operations and are not keen to encourage paying out high prices for FiTs.

Traditionally the Nigerian government has paid a subsidy for electricity, which encourages power from conventional sources and undermines renewable investments. Such funding issues for renewables go alongside problems of manned availability, theft, vandalism, transmission grids unsuited to intermittent power, multiple taxation in certain locations and a lack of guarantees.

However, Joshi said that to mitigate political risk, investors can now work with multilateral institutions such as the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, or the African Development Bank to receive a counter-guarantee on their investment.

She added: “Nigeria simply just needs more energy and less energy reform. They need a stronger grid, better distribution and an increase in power generation.”

Terrorist threats from rebel group Boko Haram also represent a major barrier for solar deployment. Aina said that in any parts of North-East Nigeria where many Boko Haram insurgencies have taken place recently, it is likely that a PV developer would ask for a premium for security. If Buhari’s pledges to crack down on the insurgency are successful, then that premium would come down and translate into a lower tariff for the average Nigerian reliant on PV plants in that area.

Although Buhari’s intentions for solar and renewables overall are unclear, it is the manner of the election that instils most hope for the industry across all of West Africa. Aina said it will signal to the sub-region that it is possible to have relatively free, fair and peaceful democratic elections. Indeed, with Nigeria representing around 40% of the West African economy, if its power sector is not on firm footing, it affects the whole region.

Sambo concluded that Buhari is a “no-nonsense” person who is likely to clearly realise the advantages of solar energy:

“His winning the election is a good omen for the solar industry”

The opportunities and challenges for solar in West Africa will explored at Solar & Off-Grid Renewable West Africa in Accra, Ghana, on 21-22 April. Organised by PV Tech's publisher, Solar Media, the event will feature top-level speakers from industry and governments across the region. Further information on the event are available here.