Interview: Femi Adeyemo
What are the biggest constraints to investment in Nigeria’s power generation sector?
FEMI ADEYEMO: I see the lack of a cost-reflective tariff, policy back and forth, and over-regulation as the biggest obstacles to the take-off of Nigeria’s generation sector. Even its privatisation has not enabled the industry to overcome these issues. The sector needs to be less regulated, innovative, decentralised and market based.
According to the Nigerian National Bureau of Statistics, in the 2010 Roadmap for Power Sector Reform, self-generation from diesel and petrol generators was set at a minimum of 6000 MW, about 150% higher than the nationwide peak daily energy generation in the second quarter of 2017, which stood at 4079 MW. With more than 500 MW of off-grid licences issued by the Nigerian Electricity Regulatory Commission, I believe fewer bottlenecks in off-grid power would ensure a near-term increase in generation capacity. Better implementation of the Electric Power Sector Reform Act is currently being pursued, under which eligible customers buy power directly from generation companies, or independent power producers (IPPs) maintain a ring-fenced distribution network and sell power to interested buyers at a market rate.
How can changes be made to the regulatory framework to further incentivise private participation?
ADEYEMO : The focus should be on correct implementation of the existing regulatory framework, including those aspects neglected by previous administrations. The Federal Ministry of Power, Works and Housing should concentrate on encouraging a large scale rollout of decentralised power between interested buyers and/ or IPPs. It comes as no surprise that several off-grid customers in gated communities and rural micro-grid energy customers are currently paying cost effective kilowatt per hour tariffs. Adapting such successes to the framework will act as an incentive for more investment in off-grid IPPs from new and existing investors alike.
What potential do you see for renewable energy?
ADEYEMO : Nigeria receives 4-7 KWh per sq metre per day from the sun, with the highest yields to be found in the north. A significant part of the country is powered by hydro during the rainy season, while in the north there are good prospects for wind energy. In some areas of the country, such as the rice mills of Ebonyi, biomass could be used as a feedstock. Overall, solar power has the greatest potential in Nigeria since most parts of the country have enough irradiation to generate significant amounts of electricity.
Over the next four years the government plans to build 400,000 homes. If solar panels were deployed on these, they would provide an installed off-grid power capacity of 800 MW, generating 3200 MWh of electricity daily. Nigeria must be wary of over-regulating renewable energy technologies and applications. Import duties are currently being charged on solar power balance of system components, and value added tax (VAT) is still being charged on sales of solar panels and accessories. Enacting a zero tax regime for all renewable energy components will fast-track private sector participation and consumer adoption of renewable technology, in particular solar.
Is there potential to increase domestic manufacturing of power generation equipment?
ADEYEMO : The potential for the local manufacture and assembly of solar panels, batteries and inverters, as well as capacity expansion for existing cable manufacturers, is significant. As in other countries that have seen a huge uptake in solar power generation, the government has provided a very conducive environment for its implementation. Full-blown pioneer status, zero VAT and tax holidays could jump start the industry in the export of renewable energy products and diversify revenue streams away from oil-based income. This in turn would create employment opportunities for thousands of unemployed youths in Nigeria’s labour force.
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