Power shortages continue to stifle growth and are regarded as the primary drawback for operations across all company sizes (Good Morning Nigeria, 05 April 2019). The FGN has produced a national renewable energy action plan. It targets energy contribution from renewables to account for 16% of total energy generated by 2030, with hydropower accounting for 7.1% and solar energy 5.9%. Access to reliable, cost-effective and sustainable energy could have a multiplier effect on development.
- Grid expansion is difficult in rural areas due to non-commercial viability as well as high technical losses. This reality creates vast opportunities for off-grid renewables alternatives to penetrate the rural economy.
- In an attempt to encourage the renewable energy sector, the FGN has made certain incentives available in the form of tax reliefs for electricity generation, including renewable projects.
- Companies involved in independent power generation using renewable energy sources can be conferred with pioneer status, which exempts them from payment of income tax for between three and five years.
- Furthermore, there are also incentives for importers focused on energy-efficient appliances through exemption from excise duty and sales tax as well as customs duty rebate for two years on the importation of equipment used in renewable energy projects.
- Based on data from the TCN, power generation from the three hydropower generation companies (Kainji, Jebba and Shiroro) account for c.30% of peak energy generation. There was increased traction with hydro-power through the construction of the 3,050MW Mambilla hydroelectric plant. However, it seems the project has been paused due to funding constraints.
- There has been growing interest in energy generation projects via solar, particularly amongst private sector participants. Nigerian Breweries recently announced the installation of a 650kW solar plant at its Ibadan brewery. The solar plant will be operated by a renewable energy firm as part of a 15-year solar services agreement.
- In contrast, the biodiesel and wind segments are still hugely untapped. For biodiesel, the conversion of oil waste (such as recycled restaurant greases) should drive down the cost of self-generation via fuel dependent generators. Additionally, Nigeria’s aviation sector also stands to benefit from a booming biodiesel industry as it can be an alternative to aviation fuel.
- Although still in its infancy in Nigeria, improved energy supply through renewables will stimulate business activities, particularly among SMEs which contribute as high as 50% to the country’s national output.
