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Power Podcast

Empowering SMEs: The Launch of the Universal Energy Facility in Nigeria

by aisi
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This episode of the Power Podcast series features Ruchi Soni, Programme Manager (Result-Based Financing), Sustainable Energy for All (SEforALL).

Ruchi joins us to discuss the recently launched Universal Energy Facility (UEF) programme in Nigeria and its Stand-Alone Solar for Productive Use (SSPU) component. She highlights the project’s objectives of electrifying and decarbonising small and medium enterprises (SMEs)in the country.

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The Implications of the ECT on Nigeria’s Energy Transition

by aisi
written by aisi

The Energy Charter Treaty (ECT) is an international framework that encourages cross-border collaboration in the global energy industry. Nigeria already plans to join the treaty’s existing signatories and contracting parties. However, what would the implications of the ECT on Nigeria’s energy transition plan be?

The Energy Charter Treaty signed and entered into legal force in 1994 and 1998, has fifty-three (53) signatories. These signatories include countries from Europe and Asia, alongside the European Union (EU) and the European Atomic Energy Community (Euratom). The ECT enables investments covering every energy source, including oil, gas, coal, nuclear and renewable energy.

Although one of the aims includes providing an enabling environment for energy investments across member countries, the implications of the ECT on the global energy transition are arguable. With the treaty supporting investments in fossil fuel projects and other controversial energy sources such as nuclear, it could be used against policies aimed at phasing out these fuels. This could be a hindrance to the global energy transition.

With the current global environmental policy targets, it is essential that the provisions of the ECT primarily encourage investments in clean energy. To achieve this, the signatories have moved for a modernisation of the ECT. The EU submitted a proposal for the modernisation of the ECT in May 2019, and on the 15th of February 2021, the Union submitted a proposal to address the fossil fuel carve out in the ECT.

So far, the modernisation negotiations have resulted in an agreement in principle from the Energy Charter Conference on the 24th of June, 2022. Suppose no signatories to the treaty object, the agreement in principle will be adopted as the modernised ECT at the Energy Charter Conference on the 22nd of November 2022. The modernisation aims to provide a flexible mechanism for investments in fossil projects. Through this, signatories can exclude policy protection for investments in fossil fuels according to their respective climate action goals.

Nigeria aims to reach net-zero emissions by 2060 and recently launched its energy transition plan. However, one might wonder about the implications of the ECT on Nigeria’s energy transition. In March 2017, the country declared its interest in becoming a signatory to the ECT by signing the International Energy Charter Political Declaration. The accession process, which is currently being led by the Energy Commission of Nigeria (ECN) in collaboration with the ECT secretariat, is to be concluded by the end of 2022.

Unless Nigeria signs up for the new flexibility mechanism, the ECT will, on the one hand, continue to protect investments in fossil fuel projects of all kinds. This will significantly affect the country in meeting its climate targets. On the other hand, the country’s plans to move away from oil toward gas and renewables will be soiled. This is because the ECT will protect existing and new investments in the country’s oil refineries. Hence, investors will rely on the provisions of the ECT to sue the country for policies rendering refineries stranded or unprofitable.

To achieve the objectives of its energy transition plan and reach its climate targets, the country needs sufficient funding to develop projects. However, despite possible investments in gas and renewable energy projects, are the other implications of the ECT on Nigeria’s energy transition worth it?

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Power Punch

De-Risking Investments in Energy Companies

by aisi
written by aisi

The Federal Government’s (FG) recent launch of the Energy Transition Plan (ETP) in Nigeria aims to usher in an increase in the development and adoption of renewable energy projects in the country. However, with access to funding still being a huge challenge to solutions developers, it is pertinent that there are strategies aimed at de-risking investments in energy companies.

For Africa, reducing energy poverty is just as important as achieving climate action goals. Vice-President Yemi Osinbajo stated this at the virtual launch of the ETP. Professor Osinbajo added that Nigeria would need about $410 billion, approximately $10 billion per year, to implement the plan fully.

The goals of the energy transition plan include bridging the energy access deficit and reducing emissions across five major sectors of the economy. These sectors include Cooking, Industry, Oil and Gas, Power and Transport. From the set frameworks, the ETP is expected to lift 100 million Nigerians out of poverty, encourage the adoption of modern energy services, enable an equitable energy transition in Africa that includes gas and create jobs.

One way to boost economic growth by reducing energy poverty and emissions is by providing clean energy solutions for businesses. According to the 2021 State of Entrepreneurship in Nigeria Report, Micro, Small and Medium Enterprises provide 49.8 per cent (%) of the country’s Gross Domestic Product (GDP).

According to the World Bank, the electricity access deficit in Nigeria leads to about $29 billion in losses for businesses. Hence, business owners must have clean energy solutions to run their businesses effectively. However, due to a lack of funding, how can solutions developers de-risk investments in their energy companies?

At the launch of the ETP, Prof. Yemi Osinbajo also announced the Universal Energy Facility (UEF) launch in Nigeria. The UEF is a result-based funding facility that aims to scale energy access for productive uses in sub-Saharan Africa. The facility is sponsored by Sustainable Energy for All (SEforALL) in collaboration with several international donors and provides incentives to companies that deploy renewable energy solutions.

The UEF, which already operates in Sierra Leone and Madagascar, initiated its first programme in Nigeria called the Stand-Alone Solar for Productive Use (SSPU). According to SEforALL, the main objectives of the SSPU programme include:

  • De-risking investments in solar energy companies by providing incentives that enable these companies to expand their services to Small and Medium Enterprises (SMEs).
  • Improving electricity access for Small and Medium Enterprises (SMEs).
  • Phasing out dirty energy sources such as fossil fuel generators.

The SSPU programme, which would pay 40 per cent of the Capital Expenditure (CAPEX) for each deployed unit, will ensure the provision of clean energy solutions for businesses to operate. This would go a long way in enabling solutions providers to access more funding.

De-risking investments in energy companies is just as crucial for Nigeria. This would boost the development of more renewable energy projects, help the country achieve its carbon emissions goal, create jobs and improve economic growth.

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Power Punch

FG’s Proposed Sale of Five NIPPs

by aisi
written by aisi

In a bid to improve power generation in the country, the Nigerian National Integrated Power Project (NIPP) was established in 2004. The programme was an intervention that aimed to improve government funding in the critically ailing electricity sector. However, 18 years past the project launch, there are contending conversations surrounding the Federal Government’s (FG’s) proposed sale of five NIPPs.

Insufficient electricity supply has always been an issue in Nigeria, inhibiting the development of the country’s industries and overall economic growth. In 2004, President Olusegun Obasanjo’s administration launched the NIPP to address the challenge of power generation specifically. The project’s objectives also included curtailing the immoderate gas flaring from oil exploration.

In order to achieve this, the Niger Delta Power Holding Company (NDPHC) was incorporated under the Companies and Allied Matters Act as a limited liability company to hold the NIPP assets. This limited liability company has three shareholders, the federal, state and local governments. Hence, through the NDPHC, the federal government holds 47 per cent, while the state and local governments own 53 per cent of the NIPPs.

To initiate the launch of the NIPP, the National Assembly, alongside the National Council of State (NCS), approved $2.5 billion in seed funding from the Excess Crude Oil Account (ECOA). As of 2022, the NIPP had gulped about $7.875 billion.

The original mandate of Phase 1 of the NIPP aimed for the power plants to collectively add 5,000MW to the country’s generation capacity. The plants were also to be privatised, with the profits reinvested into the NIPP Phase 2. The plants are namely:

The second phase of the NIPP, which commenced in 2020, sought to develop new solar and hydropower projects in parts of the country without oil, especially the North. So, if the privatisation of these plants helps raise funding to be reinjected into the sector, why is there so much kick against FG’s proposed sale of five NIPPs?

Through the Bureau of Public Enterprises (BPE), the federal government announced its decision to privatise five NIPP plants against the House of Representatives’ directive to halt the sale. The five power plants include Geregu, Omotosho, Olorunshogo, Calabar and Benin-Ihovbor. According to the BPE, the FG, which has previously shortlisted 16 companies at the Investor Pre-bid Conference, is assessing the pre-qualified bidders.

On Monday, electricity consumers also opposed the sale of the NIPP assets. Although the House of Representatives’ reason to pause the sale was the FG’s adamance in selling the plants without the consent of the state and local governments, the electricity consumers had other reasons.

The president of the Nigerian Consumer Protection Network (NCPN), Kunle Kola Olubiyo, stated that this was not the best time for the assets to be sold. The statement added that the considering the country’s current political clime, the funds could be diverted rather than reinvested.

The statement further read, “We are not saying that the plants would not be sold at the appropriate prices and time in the future but not now when Nigeria is seriously battling challenges of deliberate load rejection by the Distribution Companies (DisCos) and deliberate low energy dispatch by the Transmission Company of Nigeria (TCN). The House of Representatives should look into the challenges and help in the overall public interest to avert needless chaotic energy crises that may come with sales of the five NIPP/NDPHC power plants by BPE.”

Although valid, are these reasons objective enough to stop FG’s proposed sale of the five NIPPs?

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The Launch of Nigeria’s Energy Transition Plan

by aisi
written by aisi

Professor Yemi Osinbajo is to launch Nigeria’s energy transition plan today, 24th August, by 14:00 WAT.

The increasing detrimental effect of fossil fuels on the environment led to countries updating their climate action goals at the 26th United Nations Conference of Parties (COP26) in Scotland. Nigeria was not left out as President Muhammadu Buhari pledged that the country would attain a net zero emissions rate by 2060. For this, organisations, agencies and stakeholders have eagerly awaited the launch of Nigeria’s energy transition plan.

The use of fossil fuels to generate energy has adverse disadvantages. Among these, the effect of fossil fuels on the climate is of great concern to the global community. When fossil fuels such as coal and crude oil are burnt for energy, they emit greenhouse gases such as carbon dioxide and methane. These greenhouse gases largely contribute to global warming, leading to deforestation, rising sea levels, food scarcity, and changing climates.

Despite Africa contributing approximately 3 per cent (%) to the global emissions rate, the region is the most vulnerable to the effect of greenhouse gases. Furthermore, the continent’s energy poverty which inhibits socio-economic growth drives this vulnerability. According to the International Energy Agency (IEA), the Corona Virus (COVID-19) pandemic worsened Africa’s energy security. The agency stated that 25 million more people are without access to electricity than before the pandemic, with most of them in Nigeria.

Nigeria’s huge energy access deficit encourages citizens to generate energy through alternative sources such as generators, firewood, or coal. These alternative energy sources release greenhouse gases that are harmful to the environment.

However, the launch of Nigeria’s energy transition plan aims to reduce energy poverty and improve the country’s energy mix to become cleaner and more sustainable. Some of the objectives of the energy transition plan include:

  • To attain carbon neutrality and end energy poverty to drive economic growth.
  • To raise awareness of the need for intra-continental data-driven transition plans to ensure a clean and just African energy transition.
  • To attract investors by laying-out projects that align with the transition goals and create viable market opportunities.
  • To improve the productive use of energy by increasing access to funding for solar energy companies from the Universal Energy Facility.

Today, the virtual launch of Nigeria’s energy transition plan by the federal government hopes to showcase the routes and actions that will be taken to ensure the country meets its climate action goals.

Click HERE to register to attend the launch.

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Power Punch

Exploring the Adoption of Solar Energy Projects in Nigeria

by aisi
written by aisi

According to the latest World Bank data, 44.6 per cent (%) of Nigerians still lack access to electricity. This reason, alongside the global move towards climate action, means the country must ensure an increase in the development of clean energy projects. However, the country’s huge solar energy potential has led to energy industry stakeholders exploring the adoption of solar energy projects.

The 2022 edition of Tracking SDG 7: The Energy Progress Report shows that out of the over 200 million people in Nigeria, 92 million lack access to electricity. To close the access deficit over the years, the federal government has collaborated with development agencies and other international organisations to explore the adoption of solar energy projects in the country.

For example, the Nigerian government launched the Nigeria Electrification Project (NEP) in 2019. The project, which was funded by the World Bank ($350 million), the Africa Growing Together Fund ($50 million) and the African Development Bank ($150 million), aimed to improve electrification through solar power. So far, the project has successfully connected 3.8 million Nigerians.

Also, the event of the Corona Virus (COVID-19) pandemic brought the need for more renewable energy deployments in the country. To explore the adoption of solar energy solutions, the federal government introduced the Solar Power Naija (SPN) project as part of its COVID-19 recovery strategy. The SPN initiative is worth $619 million and aims to install solar home systems for 5 million households across the country.

Furthermore, the Central Bank of Nigeria (CBN) introduced the solar intervention fund to encourage off-grid solutions developers. The fund which aimed to cushion the pandemic’s effects, provides developers the opportunity to obtain loans of up to ₦500 million.

Through these initiatives and more, there has been a recent slow and steady increase in the adoption of solar energy projects in Nigeria. However, the scaling of these energy projects must be accompanied by supporting frameworks. For example, the Renewable Energy Master Plan (REMP) 2005 conceptualises Nigeria’s renewable energy goals and attempts to find factors that determine the achievement of these goals.

Also, there is the National Renewable Energy Efficiency Policy 2013. This policy was developed by the Federal Ministry of Power (FMoP) to enable energy efficiency and overcome challenges affecting the deployment of renewable energy in the country.

However, many challenges still exist when exploring the adoption of solar energy projects in Nigeria, one of which is access to finance. Development agencies and the government create funding initiatives such as international and local grants and partnerships to ease finance sourcing for developers. Although, there is another way the federal government can support the scaling of solar projects in the country, reducing the cost of production for developers.

Developers have to import solar panels and other renewable energy equipment that are unavailable domestically. However, the CBN’s restriction on foreign exchange at official rates for goods and services, which is cheaper for importers, does not cover solar panels. Developers are charged foreign exchange for solar equipment at the official CBN rates, increasing the cost of the products and affecting affordability.

The federal government could approve a complete tax waiver for renewable energy equipment to support the industry. This would enable growth and healthy competition in the country’s renewable energy space.

Solar energy is a dominant alternative energy source in Nigeria because of the country’s abundance of sunshine. Although adoption of the energy source is increasing, more can still be done in terms of frameworks and investment funding. With these adequately implemented, solar energy could be the key to closing the country’s electricity deficit gap and meeting its climate action goals.

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Accelerating Access to Off-grid Financing in Nigeria

by aisi
written by aisi

The electricity access deficit in Nigeria is a huge contributor to the poor development witnessed across the various sectors of the country’s economy. This deficit is majorly caused by the cost of connecting communities with low energy demand to the grid and the already existing poor grid infrastructure. This situation presents renewables as the most sustainable and affordable means of closing the deficit gap. However, with the development of off-grid projects in the country majorly challenged by funding, what assurances are there for accelerating access to off-grid financing in Nigeria?

Over the years, the federal government has implemented numerous initiatives to boost the adoption of off-grid energy sources in the country. The Rural Electrification Agency (REA) is the federal government’s implementing agency to ensure the electrification of the country’s unserved communities.

The REA’s dedication to encouraging the development of off-grid projects has led to the deployment of mini-grids and solar home systems under the agency’s programmes. These programmes which provide grant funding to off-grid solutions providers include the Nigeria Electrification Project (NEP), the Rural Electrification Fund (REF) and the Energising Economies Initiative (EEI).

For example, the NEP aims to increase private sector investment in off-grid deployments in the country. The programme is funded by the World Bank ($350 million) and the African Development Bank (AfDB) ($200 million). So far, the NEP has successfully connected 3.8 million Nigerians.

However, the onset of the Corona Virus (COVID-19) pandemic urgently highlighted the need for increased off-grid deployment. This translated into a demand for more efforts to accelerate access to off-grid financing in the country. This need was critical to bridge the energy access deficit and support the ailing healthcare industry. Therefore, as part of its COVID-19 recovery strategy, the federal government introduced the Nigerian Economic Sustainability Plan (NESP). The plan worth $5.9 billion (₦2.3 trillion) was approved in June 2020.

Among the key projects of the NESP is the Solar Power Naija (SPN) initiative. The $619 million commitment aims to install solar home systems for 5 million households in unserved communities across the country. Earlier this year, the Nigeria Sovereign Investment Authority (NSIA) provided $24 million in funding for the SPN programme.

Despite these interventions, the off-grid sub-sector in Nigeria still faces numerous challenges, including access to finance. According to a Power Africa Nigeria Power Sector Program (PA-NPSP) report, unlocking financing for off-grid projects remains challenging. To address this, local financing from commercial banks would be advantageous in scaling off-grid project development. This would protect developers from foreign exchange risks. The Central Bank of Nigeria (CBN) can introduce de-risking measures such as the credit facility provision under the SPN to encourage commercial banks.

The already existing initiatives in the Nigerian power sector have come a long way in boosting off-grid solutions deployment in the country. However, a lot more policies and incentives directed at accelerating access to off-grid financing in Nigeria would improve electricity access for citizens and boost the economy.

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