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Investors seek to scale barriers as Nigeria eyes 20GW of electricity from solar

In roughly 12 years’ time, Nigeria hopes to be producing a consideration portion of its power from renewable energy sources. Besides increasing the quantity of electricity on the national grid, it will curb emission and address the impact of climate change.

De-Risking Renewable Energy NAMA

Participants at the two-day Grid-connected Renewable Energy Investors’ Forum in Lagos

This is the overall objective of a somewhat ambitious initiative being embarked upon by a team of stakeholders, who have commenced the implementation of a five-year demonstration project to that effect.

Titled: “De-Risking Renewable Energy NAMA (Nationally Appropriate Mitigation Action) for the Nigerian Power Sector”, the project aims at assisting the Nigerian government in achieving a transformation in the electricity mix such that at least 20GW of the nation’s electricity is generated from solar PV by 2030.

The United Nations Development Programme (UNDP) and Global Environment Facility (GEF), in collaboration with the Energy Commission of Nigeria (ECN), Federal Ministry of Environment (FMEnv), Federal Ministry of Power, Works and Housing (FMPW&H), and other stakeholders are implementing the project, which is utilising the internationally recognised De-risking Renewable Energy Investment (DREI) methodology in addressing barriers and risks hindering private sector-driven and grid-connected RE business in Nigeria.

The project was launched in June 2017.

The DREI methodology was the focus of discussion as project promoters along with the Nigeria Electricity Regulatory Commission (NERC), Federal Ministry of Finance (FMF), Nigeria Bulk Electricity Trading (NBET), Transmission Company of Nigeria (TCN) and Independent Power Producers (IPPs) met in Lagos from July 24 to 25, 2018 the “Grid-connected Renewable Energy Investors’ Forum” to deliberate on issues and challenges hindering their progression to financial close, equipment procurement and construction, as well as recommend ways the de-risking project can be structured to minimise the barriers.

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Prof Eli Jidere Bala, Director-General/CEO of the ECN, in a welcome address, disclosed that Nigeria got the promoters’ support for the project because the nation lies within a high sunshine belt and thus has enormous solar energy potentials.

According to him, the mean annual average of total solar radiation varies from about 3.5 kWhm-2 day-1 in the coastal latitudes to about 7 kWh-1 2day-1 along the semi-arid areas in the far North. On the average, the country receives solar radiation at the level of about 19.8 MJm-2 day-1, he added.

Prof Bala added: “Unfortunately, the inherent risks in large-scale renewable energy development in Nigeria has made it difficult for policy makers in the sector to reach some agreements with prospective private investors willing to exploit this huge renewable energy resources in the country. With regards to financing opportunities, domestic financial sector is not financially buoyant to provide low cost local capital for renewable energy investments.

“Therefore, IPPs now depend on international Development Finance Institutions (DFI), who require partial risk guarantee (PRG) from Federal Governments. As we speak, none of the utility-scale pipeline projects have secured DFI financing.”

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The ECN boss noted that the UNDP-GEF project is geared towards the implementation of policy and financial de-risking instruments aimed at identifying and addressing barriers hindering large-scale renewable energy development in Nigeria.

“Tackling these barriers will result in building a successful first ever IPP solar PV project in Nigeria connected to the national grid to serve as a demonstration project that will enable us evaluate the technical, institutional and economic viability of on-grid renewable energy projects in Nigeria. It will also help in building local capacity to foster rapid adoption and replication of grid~connected solar projects,” Prof Bala emphasised.

Senator Oluremi Tinubu, Chairman, Senate Committee on Environment, in a goodwill message, underscored the opportunities and benefits that renewable energy sources provide toward economic development and environmental quality of nations.

She said: “It has been shown to be cheaper and more sustainable with a much lower environmental impact than conventional energy technologies. These environmental effects, in turn, negatively impact health and wellbeing of the people. Therefore, as law makers, we remain committed to enacting, amending subsisting Acts and adopting appropriate policies that would help to reduce environmental pollution and achieve a cleaner and greener economy.

“I must commend the United Nations Development Programme and Global Environment Facility as well as other collaborating stakeholders for organising this forum and putting together such a wonderful platform for deliberation.”

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Apart from creating awareness among stakeholders on de-risking renewable energy for the Nigerian power sector and establishing the current status and challenges of on-grid renewable electricity generation in the country, Okon Ekpenyong of the ECN stated that the two-day forum also sought to analyse the financial framework for renewable electricity generation plants in Nigeria.

At the close of the event, he said: “The Investors’ Forum has been able to bring together the investors themselves, the policy makers and various organisations, and were able to speak to one another frankly on the things that are bothering them, and they have been able to frankly make recommendations on what they think going outside the box of government that they and the officers handling these issues with the UNDP can sit down together and discuss on the ways to remove those barriers. I believe this programme has been able to bring out the issues and the way forward. Going forward, we are now going to be meeting at sub-groups level with these same people, together with the investors. With this programme, the stakeholders now know themselves, which wasn’t the case before.”

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