Nigeria's energy sector is at a crossroads: A call for a renewable revolution

Nigeria's recent abolition of fuel subsidies has thrust its energy sector into turmoil. Yet, amidst the chaos lies an opportunity for a sustainable future. With millions lacking electricity access and fuel prices skyrocketing, renewable energy emerges as a beacon of hope. Solar Home Systems are gaining traction, offering affordable alternatives. Meanwhile, innovative initiatives like Distributed Renewable Energy solutions aim to revolutionize industries, promising lower costs and reduced reliance on fossil fuels. Nigeria stands at a crossroads, poised to lead Africa towards a greener, more prosperous future through renewable energy adoption.

Nigeria's Energy Sector is in the midst of an inevitable renewable revolution

Just a year ago, Nigeria made the bold move to remove its long-standing fuel subsidies, an action that plunged the nation into chaos. For over five decades, subsidized fuel had been the lifeblood of communities across Africa's most populous country, used not just for transportation but also for essential needs like lighting, heating, cooking, and irrigation.

Now, one year after the cancellation of this unsustainable practice, a troubling reality unfolds - the nation's energy sector is teetering on the brink of crisis. Once hailed as a beacon of opportunity with vast oil riches and untapped potential, Nigeria now grapples with the harsh glare of its energy woes. From chronic power outages that darken homes and stifle businesses to the looming specter of environmental degradation and economic instability, the shadows cast by Nigeria's faltering energy sector loom large over the aspirations of hundreds of millions.

The canceled subsidy may seem negative at first glance, yet it presents the country’s growing population with an opportunity for a more prosperous future. Let’s dive in.

Opportunity for sustainability

In 2021, Nigeria was dishearteningly recognized as the nation with the most significant population lacking access to electricity globally, with a staggering 86 million individuals constituting 42% of its populace (Statista) living in the dark. Most people were then using fuel to light up their homes through generators. But now, with fuel prices reaching their highest to date, using a generator is simply not an option, disproportionately affecting low-income households. Yet, it's not just the unconnected rural communities suffering the consequences. With the country’s electricity grid being unreliable at best, entire cities are also looking for a sustainable answer to meet their day-to-day needs.

Nigeria’s energy sector has long needed a change, but the cancellation of the subsidy and the grim reality that followed have cemented a dire urgency - one that the government cannot ignore and that local and global entrepreneurs find extremely promising.

Renewable energy, mainly in its off-grid sector, offers the most cost-effective, scalable solution. With tens of millions completely unconnected and tens more living with unreliable grid connections, Distributed Renewable Energy systems (DRE) are becoming a go-to solution for governments, the private sector, and individuals.

Across Nigeria, Solar Home Systems (SHS) have been slowly but surely rising as a go-to solution for both deep-rural communities that have never had electricity and city dwellers who are connected to the unreliable grid. Being the most cost-effective, scalable product in the current energy market, SHS also presents the most sustainable reality. Now, families are forgoing the use of the extremely pricey and highly polluting generators and moving to rely on solar power for their household needs, as affordable pricing schemes allow millions to enjoy power in their homes for the first time.

Recently, a 90kw solar hybrid mini-grid was installed in the North-East, powering 1300 homes, schools, shops, and clinics. It was added to a national project that has deployed 100 mini-grids and 1.6 million Solar Home Systems in the past couple of years.

Taking care of local communities should be a main priority, but it is not only the household private consumers that need to add some power to the challenged grid.

An industrial revolution

Nigeria’s manufacturing sector is dominated by the production of cement and building materials, food and beverages, tobacco, chemicals and fertilizers, wood, and textiles. The robust industry that contributes 31% to Nigeria’s GDP was badly hit by the subsidy cancellation. As the national grid provides only 20% of the nationwide demand, manufacturers relied heavily on fuel-operated generators to meet their daily needs, with entire factories being operated by heavy-set generators for large proportions of the day.

The industry needs a quick fix, presenting a void that has to be filled by smart, innovative, capable minds. Being part of Africa’s “Big Four” tech ecosystems (alongside Kenya, Egypt, and South Africa), sustainable solutions are springing up like mushrooms after rain.

The first utility-enabled DRE solution for Commercial and Industrial (C&I) purposes to be distributed in Nigeria will begin deployment this summer, set to lower energy costs by up to 50% through the combination of solar power and battery storage. This interesting project could, and should, be the start of a new movement towards renewables in the industrial sector, yet it might face substantial resistance from decision-makers who are not familiar with the vast capabilities of C&I solar solutions. One common misconception is that solar is not fit to meet the needs of large facilities, blaming limited sunlight and battery power. In reality, they couldn't be more wrong, with examples from all over the world, and even in Nigeria itself, including a 0.7 MW at a poultry farm and a 4 MW brewery project. Another misconception is that solar projects are complex. But while they differ significantly from the known formations of generators or grid connections, well-managed solar projects are not complicated and could result in much more cost-effective operations.

Africa’s C&I sector is on the brink of a sustainable revolution, with governments manifesting supportive legislation while private entities and brilliant entrepreneurs gain momentum. If done correctly, this could lead to a magnificent rise in GDP, more jobs, and less dependence on imports.

Pain leading to action

In the face of adversity, Nigeria now has the opportunity to lead the continent towards a greener, more prosperous future. By embracing renewable energy, the nation can will only address its immediate energy challenges but also pave the way for sustainable development and lasting prosperity for generations to come.