The Current Market
Currently, Nigeria’s solar energy market is dominated by solar stand-alone systems (solar home systems and solar lamp systems). As of December 2018, the total installed capacity of solar stand-alone systems in Nigeria was 4.47 megawatts with 3.99 megawatts accessed through a Pay-As-You-Go (PAYGO) model and the remaining 0.48 megawatts accessed through cash sales.
As for the grid subset of the market, solar mini-grid has the highest potential for growth but currently has very minimal penetration. According to estimates by GIZ, there are 30 solar mini-grids in Nigeria with an aggregated installed capacity of 1 megawatt serving over 6,000 customers. Of course, these are underwhelming numbers. For market potential analysis, however, A mini-grid market opportunity assessment conducted by the African Development Bank (AfDB) for Nigeria in 2018 projected a total mini-grid market size of about $994 million in annual revenue with 92% of the mini-grid market found in northern Nigeria. While the solar stand-alone system subset of the solar energy market in Nigeria is largely business-to-customer (B2C) in its business model, the grid subset is largely business-to-business (B2B).
Per Nigeria’s Rural Electrification Agency (REA), 10 mini-grid projects in the country were audited and it was found that they actively serve 2000 households and 250 commercial businesses - prior to these solar mini-grid projects, beneficiaries of these projects used kerosene lamps, wax candles, and torchlights as their lighting sources.
Overall, the estimated potential for concentrated solar power and photovoltaic generation in Nigeria is put at 427,000 megawatts. For context, that is 6 times the electricity France consumes on average, yearly.
Evidently, Nigerians already spend just as much on diesel, and premium motor spirit (PMS) powered electricity generators as they would hypothetically spend on electricity from a solar source. This is hinged on the statistics that posit that Nigerians spend approximately 3.5 trillion naira yearly on petrol (Diesel and PMS) to run their 14 Gigawatts capacity decentralized generators. Thus, the willingness of Nigerians to pay for accessible solar energy if reliability is assured and price competitiveness is proven should not be put in question. The numbers are even more convincing when the average cost per unit of energy generated by electricity generators in Nigeria is $0.50kWh while that of renewable energy is $0.26-0.50kWh, according to estimates by the International Institute for Environment and Development (IIED).
The table below aggregates the key players in Nigeria’s current solar energy market.
Prospects for the Market
Despite receding income for a vast majority of Nigerians, the prospects for a demand-side surge for solar energy in the Nigeria electricity market are promising. This is largely due to the inadequacy of electricity supply in Nigeria coupled with high demand. Electricity from a solar source is proving competitive enough for the electricity market in Nigeria for a variety of reasons; the dwindling costs of solar energy equipment like panels and inverters, higher capacity of solar panels, high population growth, continued unreliability of mainstream energy, and more flexible financing models for accessing solar energy.
With the costs of diesel in Nigeria and even that of PMS reaching decade-level highs, and with the costs of solar energy equipment reducing by the months, solar energy in Nigeria will continue to be attractive, thus, enabling further growth of Nigeria’s solar energy market. Not only are the prospects for Nigeria’s solar energy market looking good, but Nigeria’s prospects for climate resilience also look positive. Solar PV systems installed in residential buildings have the potential to help Nigeria meet its GHG reduction targets in the same way that annual GHG emissions in Nigeria might be reduced by 31.24 kgCO2eq to 7456.44 kgCO2eq the more these PV systems are used in homes.
This brief dive brings to the fore the most important numbers that highlight not only the solar energy market potential in Nigeria but also the current energy consumption trends of Nigerians - the obvious conclusion is that there is a high propensity for Nigerians to embrace solar energy due to prospects of price competitiveness and supply-side inadequacy from the national electricity grid. The propositions to take full advantage of this potential solar energy market growth in Nigeria are almost inexhaustible; here are a few:
- public sector reforms to increase the ease of doing business for solar energy investors in the market,
- engaging in local manufacturing to help further reduce the costs of solar equipment and
- investments in more business-to-business solar energy products for increased profitability.