By Dr. Emmanuel Ogbonna
The vast majority of the over 1 billion Sub-Saharan Africa population, of which over 200 million reside in Nigeria, live without reliable electricity. Nigeria has the largest energy access deficit in the world, with about 43% of its population without access to grid electricity (World Bank, 2021). However, of those already connected to the grid, the quality of the service is often low and unreliable. It is common for homes and businesses in Nigeria to suffer unplanned, unpredictable power outages, and sometimes complete grid collapse.
Imo state is not spared of this electricity epilepsy. The lack of access to reliable power is a significant constraint for citizens and businesses. It is more than just powering homes; it has negative impacts on people’s health, livelihood, and educational opportunities. Due to the lack of access to reliable electricity people inhale black fume emanating from the exhaust of power generators, especially, “I beta pass my neighbor” generators. Millions struggle to keep up with the demands of their daily activities and businesses, and children are not able to study at night.
Renewable energy is a viable solution for closing the lingering electricity gap. There are different sources of renewable energy in Nigeria, including solar, wind, hydro, tidal, geothermal, and biomass. These resources need to be harnessed to chart a new energy future for Nigeria. However, the high uptake cost, lack of skills and government policies are known factors that hinder the implementation of renewable energy projects in Imo state.
This article aims at providing an insight into solar energy and how it can empower people across Imo state. In addition, it highlights five different business models, the electricity gap they were designed to fill, and the possible challenges that could be faced to implement them as well as some solutions to the identified challenges.
Solar Energy
Solar is the most abundant source of energy in Nigeria. Its potential is high to provide clean electricity to the un-served and underserved citizens and businesses. It is estimated that solar energy can produce about 427 GW of electricity (US International Trade Administration, 2021), compared to the current total electricity generation of about 12.5 GW, excluding millions of self-generation efforts.
Solar Power Technology
All the models discussed in this piece require Solar PV system, but some may need battery bank, a low-voltage single-phase/3-phase distribution network, and possibly a gas powered electricity generator as backup.
Customers, including household consumers and business clients, could be billed through mobile money or through prepaid vouchers. In addition, some models may require a remote tracking system to enable monitoring of electricity generation, consumption and operation.
Business models
The five models of investing into solar power projects are discussed below:
Model 1: Pay-As-You-Go (PAYG) Consumer Financing
This is a stand-alone consumer financing model that utilizes mobile money systems for payment. The model is suited for low-income earners for general lighting, with TV and phone charges. Remote monitoring and control of solar PV systems is used to incidentally disconnect a system in the event of default. The model offers flexible customer repayment options and enables the business to easily and effectively manage a large portfolio of dispersed borrowers. Ownership of the system is transferred once the customer finalizes their repayments, with repayments typically ranging from 6 months to 3 years.
Model 2: Consumer Financing (via Partner Financial Institution)
In this model the entrepreneur is in partnership with a financial institution. The entrepreneur provides PV products and associated services while the financial institution provides the consumer financing and collects repayments. This model is suited for the middle class people and small and medium-sized enterprises (SMEs) that have the ability to access finance, but cannot pay outright for the solar PV system.
Model 3: Mini/micro-grid
This is intended to bring reliable and clean grid electricity to communities with the aim of boosting the economic capacity of the locality. This model guarantees stable power and will enable people to conduct their business activities round the clock. It will also provide an environmentally friendly power source that prioritizes the sustainability of the environment.
When a potential customer expresses an interest to be connected with power, they would be required to make a formal application. The expected maximum consumption is worked out based on the projected peak load of the prospective customer, when all the electrical appliances are powered on. The wiring of the premises is then evaluated for compliance and followed by a single-phase or 3-phase connection as the case may be.
The main advantage of mini grids over stand-alone solar systems is their ability to empower connected customers to increase their energy consumption without having to invest in additional capacity. They are technically most effective when a large number of customers can be connected within a short radius.
In addition, mini/micro-grids can provide the spectrum of electricity services at a lower cost than other business models. However, they can only be implemented in locations with high a population density.
Model 4: Fee-for-Service
This approach is based on customers paying a monthly fee in exchange for electricity services, similar to a utility model, but using stand-alone systems. Ownership of the system is not transferred to the customer with the business responsible for maintenance. This model is well suited to providing electricity to dispersed communities, where large distances between customers make mini/micro-grids unviable, especially where income levels are very low and customers cannot afford outright purchase of a solar PV system. However, a significant upfront cost has to be borne by the business and the payback period is relatively long.
Model 5: Community Solar Energy Cooperative Society
The community solar energy cooperative society model is one where the community contributes towards the development of the project and afterwards become responsible for its operation and maintenance.
To facilitate this model, an energy cooperative society will need to be registered with the Corporate Affairs Commission (CAC). This becomes the main vehicle to raise funding through members’ contribution and donations from relevant parties.
This model can work well where there is a multi-disciplinary non-for-profit network, including engineers, social scientists, business and financial experts, and other partners such as the Rural Electrification Agency (REA) and the Imo State Government. These partners would provide technical and financial support to the project.
The power generated from this system is distributed through a mini-grid to consumers within the confines of the locality where it is situated. The system should have a backup gas powered generator in the event of a breakdown of the solar energy system.
Besides selling electricity, the cooperative can engage in other income generating activities that will bring some needed services to the rural community. They can harvest water from solar powered boreholes, store it in tanks and sell to the community. This will help to ease the water problem while earning some income for the cooperative.
Challenges
The models discussed above are not devoid of challenges. Some of the major challenges that could be faced include:
- Access to finance – This includes shortage or lack of capital for investment or scale. This could be addressed through the injection of capital from personal savings, credit facilities, soft funding, and donor funding.
- Technical capacity – This involves the lack of qualified human resources to set-up or operate the systems. This challenge can be overcome through capacity building initiatives that could be organised by the government, project initiators, donors and NGOs.
- Government policy framework– Without a commitment from the government to execute the energy policies and framework, investors will not be willing to invest as there is no guarantee that their investment will yield returns in the least possible time. It is expedient for government to show commitment and follow through with the renewable energy framework with evidence that the interest of the investors is protected even in the event of a change in government.
A robust regulatory and legal framework will increase investors’ confidence in the renewable energy sector and this will translate into individuals willing to commit their time and resources into the development of solar energy projects in the state.
The government should also consider granting tax rebates, energy credits and other incentives to solar energy investors since the project is capital intensive. Bureaucracy around energy permits and approval should be reduced, if not completely eradicated. This will encourage a number of start-ups to venture into solar power generation. And this will be a major win for the State and the people.
Conclusion
It is undisputable that the lack of access to reliable electricity in Imo state has adverse implications on citizens and businesses. However, it presents huge opportunities for investors/entrepreneurs. Renewable energy, especially solar energy, has the potential to provide lasting solution to the energy access deficit. There are different business models that could be explored to tackle this problem, but these are not without their peculiar challenges. Therefore, there is the need for synergy between investors, entrepreneurs and the government to overcome these hurdles.
References
1. World Bank, 2021: Nigeria to Improve Electricity Access and Services to Citizens.
Accessed online at Nigeria to Improve Electricity Access and Services to Citizens (worldbank.org)
2. International Trade Administration, U.S. Department of Commerce, 2021: Electricity and Power Systems; Nigeria – Country Commercial Guide.
Accessed online at Nigeria – Electricity and Power Systems (trade.gov)