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29 Mar, 2025
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Why Govt Should Invest More In Alternative Energy
@Source: independent.ng
…Cost-Effectiveness Driving Innovation — Researchers …Energy Transition Plan Requires Injection Of $10bn To Kick-Start Process Nigeria’s rural communities often exist in literal and figurative darkness. Aside from the lack of light, a lack of reliable electricity stifles education, limits economic growth, and prevents access to critical healthcare. But a bright future is on the horizon: solar energy is providing a powerful solution to Nigeria’s energy crisis, promising to illuminate these underserved communities and unlock a wealth of untapped potential. Report by ROLAND OGBONNAYA and TITILOPE JOSEPH For Nigerians living in rural communities, darkness is more than just the absence of light; it is also the absence of opportunity. Children are struggling to study after dusk, businesses are unable to extend their operating hours, and healthcare facilities are unable to provide essential services. However, there is a glimmer of hope in Nigeria’s landscape: the promise of solar energy. While the country faces an energy crisis, innovative solar-powered solutions are emerging to illuminate the shadows and unlock rural Nigeria’s potential. Nigeria’s ambitious Energy Transition Plan (ETP) reveals both the scope of the challenge and the vision for a sustainable future. To achieve universal energy access and transition to a cleaner energy mix by 2060, the plan estimates a staggering $410 billion investment. The urgency is palpable, with the ETP requesting an immediate $10 billion injection to jumpstart the process. This ambitious plan acknowledges the critical role of renewable energy, particularly solar, in closing the energy gap and promoting inclusive growth. The stark reality is that millions of Nigerians in rural areas remain disconnected from the national grid. The cost of extending that grid to remote villages is often prohibitively expensive, making alternative energy solutions not only desirable but also necessary. Connecting each village to the national grid costs around $1.2 million. When compared to a solar energy project, which is estimated to cost around $83,000 per village, the economic case for distributed renewable energy becomes stronger. This cost-effectiveness promotes innovation and attracts investment. A recent initiative, focused on isolated off-grid renewable energy projects, successfully raised $64 million in domestic institutional capital to build 30 MW of projects in 580 underserved communities across 32 states. This is a tangible example of how targeted investment can bring light and opportunity to previously underserved communities. Nigeria has a huge potential for solar power. Estimates suggest a capacity of 427 GW, far exceeding the current total generation capacity of only 5 GW. Harnessing this untapped resource has the potential to transform the nation’s energy landscape, but it will require strategic planning, supportive policies, and significant financial investment. The estimated annual market opportunity for supplying Distributed Renewable Energy (DRE) technologies, such as green mini-grids and solar home systems, is $9.2 billion. This represents a lucrative opportunity for investors, entrepreneurs, and local communities. The expansion of this market has the potential to not only provide clean and reliable energy, but also to create jobs and stimulate economic activity in rural communities. Nigeria’s Renewable Energy Roadmap emphasises the critical need for significant investment to ensure a reliable power supply and improve electricity access. However, achieving this will require more than just government funding. The ETP emphasises the importance of a strong public-private partnership, projecting N49.7 trillion from the government and N298.3 trillion from the private sector. This collaborative approach is critical to realising the full potential of the renewable energy sector and ensuring the long-term viability of these projects. The Rural Electrification Agency (REA) is playing an important role in promoting renewable energy solutions. The REA is actively working with various stakeholders to facilitate investment and development in the sector, including initiatives promoting solar home systems and mini-grids. Their efforts are contributing to a more enabling environment for private sector participation and ensuring that renewable energy projects meet the specific needs of rural communities. The benefits of using solar power go beyond simply lighting homes. Solar-thermal and solar photovoltaic (PV) technology can significantly reduce national fossil fuel consumption while increasing availability and sustainability. This change not only lowers Nigeria’s carbon footprint, but it also frees up valuable resources for exports and other critical sectors. However, achieving a solar-powered future for rural Nigeria is not without challenges. Securing the necessary funding is a significant challenge. While the ETP sets lofty investment goals, attracting both domestic and international capital necessitates a stable regulatory environment, open procurement processes, and a track record of successful projects. Another challenge is ensuring that solar energy solutions are affordable and accessible to low-income communities. Subsidies, microfinance schemes, and innovative business models are required to make solar home systems and minigrids available to those who require them the most. Furthermore, developing local capacity for manufacturing, installing, and maintaining solar energy equipment is critical to the sector’s long-term viability. Investing in education and training programs can create jobs and enable local communities to take part in the solar revolution. Despite these challenges, the potential benefits of adopting solar energy are enormous. Solar power has the potential to unlock the economic potential of rural communities, improve access to education and healthcare, and create a more sustainable future for all Nigerians. The $410 billion required by 2060 is a significant sum, but it represents an important investment in Nigeria’s future. The initial $10 billion investment required in the first year of the ETP is a critical step towards achieving this vision. Nigeria can illuminate the shadows and spark a rural renaissance by prioritising solar energy, fostering public-private partnerships, and empowering local communities. The time has come to seize this opportunity and transform Nigeria into a shining example of sustainable development. Nigeria, a country with enormous potential, is still dealing with a chronic electricity crisis. High electricity costs, frequent outages, and inadequate maintenance have slowed economic growth and had a negative impact on ordinary citizens’ lives. In response, experts and stakeholders have emphasised the importance of alternative energy sources, particularly solar and private power generation, as a viable solution to the energy deficit, particularly in underserved rural areas. This push necessitates a thorough assessment of the current impact of alternative energy investment in Nigeria, as well as the development of strategies to increase investment in this critical subsector. Professor Francis Ibikunle, an esteemed engineering professor at Hensard University, correctly emphasised the importance of understanding current investments and projects in Nigeria’s alternative energy sector. Understanding the baseline is critical for determining the true impact and identifying opportunities for improvement. While comprehensive, publicly available data on all alternative energy projects is still fragmented, he says several notable initiatives provide a glimpse into the progress made thus far. These, he added, include numerous off-grid solar projects that provide electricity to rural communities and are frequently supported by international development agencies, private companies, and non-governmental organisations (NGOs). These range from solar home systems (SHSs) for individual households to mini-grids that serve entire villages. The Rural Electrification Agency (REA) has played a key role in driving these projects, such as the Nigeria Electrification Project (NEP), which aims to provide electricity to millions of Nigerians through off-grid solutions. Several utility-scale solar farms have been commissioned or are currently in development. These projects, which typically range from a few megawatts to tens of megawatts, add to the national grid and supplement the current power supply. Companies such as Genesis Energy, Lumos, and Rensource are actively developing and operating solar farms. Many businesses and industries, according to Prof. Ibikunle, have invested in captive power generation systems that use natural gas, solar, or other renewable energy sources to ensure a consistent power supply for operations. “This is especially prevalent in industries such as manufacturing, telecommunications, and healthcare, where uninterrupted power is critical. The Nigerian government has implemented a number of policies and programs to encourage alternative energy adoption, including tax breaks, import duty waivers for renewable energy equipment, and preferential tariffs for renewable energy generators.” Despite these initiatives, alternative energy investment has yet to reach its full potential. Renewable energy sources continue to make a small contribution to the national energy mix when compared to traditional fossil fuels. Financing challenges, regulatory hurdles, infrastructure limitations, and awareness gaps continue to impede wider adoption and impact. Professor Ibikunle emphasised the importance of promoting alternative energy investment as a strategy for diversifying the Nigerian economy. Nigeria’s economy is currently heavily reliant on oil revenues, leaving it vulnerable to global oil price fluctuations. Investing in alternative energy provides several significant benefits in terms of diversification. “The alternative energy sector has the potential to create a large number of jobs throughout the value chain, including manufacturing, installation, maintenance, project development, and research. This is especially important given Nigeria’s high unemployment rate. Promoting local manufacturing of solar panels, batteries, and other renewable energy equipment can boost domestic industries while reducing reliance on imports. This promotes economic growth and opens up opportunities for local entrepreneurs. “Transitioning to cleaner energy sources lowers carbon emissions and mitigates the negative effects of climate change. This is critical for Nigeria, which is extremely vulnerable to climate-related disasters like flooding and desertification. Access to reliable electricity in rural areas can boost economic activity, improve education and healthcare outcomes, and slow rural-urban migration. This promotes balanced and inclusive development. A thriving alternative energy sector can attract significant foreign direct investment (FDI), bringing capital, technology, and expertise to help the industry grow. Ebube Ebisike George, an experienced investment expert, emphasised the need for increased FDI in the Nigerian alternative energy sector, recognising that current levels are significantly lower than the country’s potential. Addressing this shortfall necessitates a multifaceted approach: George correctly emphasised the need to simplify and expedite regulatory processes such as obtaining permits and licenses. Complex and bureaucratic procedures frequently deter investors. Streamlining these processes, reducing bureaucratic bottlenecks, and establishing clear approval timelines are critical to attracting foreign direct investment. A one-stop shop for investors looking to navigate the regulatory landscape could greatly simplify the process. “Investors expect a consistent and predictable policy environment. Frequent policy changes and uncertainty can increase risk and discourage investment. The government must ensure policy consistency and set a clear long-term vision for the alternative energy sector. Fluctuations in Naira’s value can pose significant risks to investors, particularly those involved in capital-intensive projects. The government must take steps to stabilise the currency and mitigate currency risks. “Adequate infrastructure, including transmission lines, distribution networks, and transportation infrastructure, is required to support alternative energy projects. Investing in infrastructure development is critical for attracting foreign direct investment and enabling sector growth. Furthermore, the government can provide financial incentives, such as tax breaks, subsidies, and loan guarantees, to encourage investment in alternative energy. These incentives can help reduce project upfront costs and make them more financially viable, as well as provide a strong legal and contractual framework, which is critical for protecting investor rights and ensuring contract enforcement. Strengthening the legal system and addressing issues of corruption and transparency are critical for attracting FDI. George also stated that PPPs can be an effective mechanism for leveraging private sector capital and expertise to develop alternative energy projects. The government must create a favourable environment for PPPs by establishing clear guidelines, transparent procurement processes, and risk-sharing arrangements. “The government should actively promote Nigeria as a desirable location for alternative energy investment. This can be accomplished through international conferences, investment roadshows, and targeted outreach to prospective investors. “While attracting FDI is critical, domestic investment in the alternative energy sector must also be encouraged. This can be accomplished through government policies that prioritise local content development, encouraging domestic manufacturers to produce solar panels, batteries, and other renewable energy equipment. Investing in education and training programs to create a skilled workforce in the alternative energy sector is critical. “SMEs play an important role in the alternative energy sector, especially in the installation and maintenance of solar systems. Providing SMEs with financing, training, and technical assistance can help them grow and contribute to the sector’s development.Aside from traditional bank loans, innovative financing mechanisms like crowdfunding, green bonds, and microfinance can help raise funds for alternative energy projects,” he affirmed. Activist and lawyer, Mr. Femi Aborisade criticised the approach to alternative energy investment in Nigeria, He said while private investors should not be prevented from exploring alternative energy sources suitable for Nigeria, government collaboration at the federal, state, and local levels would be more effective. He argued that the privatisation of Nigeria’s electricity sector has demonstrated the private sector’s reluctance to inject capital, with their main focus being the capture of public resources. Citing the recommendation of the APC’s committee on the privatised power sector, which called for a review due to the failure of privatisation, Aborisade urged the government to take the lead in renewable energy investment. He emphasized that public funds should be directed towards hydro, solar, and methanisation energy projects, tailored to the specific needs of different regions in Nigeria. Mr. Kabir Akingbolu, a human rights activist and lawyer, emphasised the importance of encouraging alternative energy investments as a means of diversifying Nigeria’s power supply. He acknowledged the potential of alternative energy, but noted that the government’s current stance on the sector stifles its growth.
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