Dr. Uche Isiugo, Managing Director of Infraenergya US-based developer of solar PV and energy storage systems, explained why solar energy penetration in Nigeria has remained relatively low despite its huge potential to address the country’s energy challenge.
Isiugo, who spoke in an exclusive interview with THE WHISTLERestimated that electricity tariffs in the country are very low and do not reflect the real cost of electricity used by consumers.
He said that due to the “artificially low” tariffs offered by electricity distribution companies in the country, Nigerians do not see solar power as a cost-effective and sustainable source of energy.
When potential solar energy customers compare tariffs with the cost of solar equipment and installation, the disparity turns them off, Isiugo said.
According to him, this trend is hurting distribution companies as they lose money trying to keep electricity tariffs low.
“The tariffs we pay to our electricity distribution companies are below the real market rate, so they do not reflect costs. Businesses could make more money and repay their capital if they charge prices that reflect costs. So I think the rates should be higher.
“Think of it like this, you buy a car and you have a $300 monthly payment plan but you send $50 a month, the car dealership isn’t going to make any money. This is what happens in Nigeria, the tariffs are artificially low. If you compare our rates to those of other countries, you will find that our rates are much lower
“Because tariffs are artificially low, solar is not as competitive as it could be now, but it would be even more price competitive if utilities and tariffs were where they should be” , did he declare.
Isiugo said the low tariffs are affecting the ability of distribution companies to make money, although the low prices can also be attributed to inconsistent electricity supply in Nigeria.
“We could partly attribute the low tariffs to the fact that we consume less energy than countries of a similar size and even have similar sized per capita economies. This is largely due to the fact that the distribution companies do not even distribute not enough power so if you don’t have light for 12 hours your rates can’t be high Automatically distribution companies can’t even make a lot of money because they don’t supply a lot energy at the outset. So it’s a mix of supply and price,” he explained.
Isiugo added that Nigerians doubt the sustainability of solar energy as a source of electricity supply.
“I think people doubt that solar energy is a resilient source of energy and we have to clear them up because people who use solar energy and love it really love it,” he said. .
He explained that this could be because when people started switching to solar power, they were scammed by suppliers who sold them cheap products at high prices. Products would eventually malfunction after a few years and customers would be disappointed.
“So the problem is that most people who buy solar, like a few years ago, bought cheap materials and it was probably because the installer wanted to achieve a high profit margin, so they sold them the cheapest products on the market and charged them at a price where they could make a profit.
“Because of that, a lot of these systems would stop working in a few years and I’ve heard a few horror stories. But I think now we’re at a certain phase where people who buy solar are getting the right products and they see it actually works,” he said.
He further stated that the biggest competitor to solar power today are generators, especially diesel generators.
“I think the biggest competitor to solar is diesel, generators in general, and we’re heading towards a sort of tipping point where, in the long run, diesel prices are going to rise significantly.
“When it comes to the oil and gas industry, the oil reserves are also not increasing, it costs more money to drill for oil, and these oil and gas companies don’t have as much access to capital as they do. before, so the cost of capital will increase.
“So not only will we have higher costs, but we will also have lower reserves, which means lower supply. This, in theory, would mean that the price of refined products would increase, over a long period of 10 to 20 years.
“With these market forces happening without solar power being in the equation, it adds more competitiveness for solar power and people would then flock to the solar space for solar solutions,” he said. he declared.
Meanwhile, according to a 2019 World Bank report, only around 43% of Africa’s population has access to electricity despite a growing population that is expected to double to almost 2.4 billion by 2050.
