20 July 2016, Abuja – The recent signing of power purchase agreements between the federal government and 12 firms for the construction of solar power plants in eight states that will generate 975MW of electricity is a good development for Nigeria’s energy mix, given the incessant disruption of gas supply to thermal power stations by militants. Chineme Okafor reports
Faced with frequent disruption of gas supply to power stations by militants, the federal government recently unveiled plan to create enabling environment for investors willing to generate electricity with renewable sources, particularly solar.
In this regard, the government through the Nigerian Bulk Electricity Trading Company Plc (NBET), which statutorily procures bulk electricity for resale to electricity distribution companies (Discos) across the country, signed power purchase agreements (PPA) with 12 firms for the construction of solar power plants to be built in eight states.
The proposed solar plants, when completed, will generate additional cumulative 975 megawatts (MW), some of which would be fed into the national electricity grid.
According to the government, the development was part of its larger plan to diversify Nigeria’s electricity generation mix which if implemented well, could give the country some level of security in her energy supplies.
As explained by the NBET during the PPA signing ceremony, up to $2.5billion would be invested into building the 12 solar plants in Enugu; the Federal Capital Territory, Abuja; Nasarawa; Kaduna; Katsina; Sokoto; Bauchi and Plateau States.
Also, the development comes just days after the Minister of Power, Works and Housing, Mr. Babatunde Fashola hinted at a function in Abuja that the government had resolved to fast track the diversification of Nigeria’s electricity mix.
Fashola in decrying the impacts of the current spate of bombings on oil and gas assets by militants in the Niger Delta over identified grievances with the government on the country’s electricity system, declared that the government would commence a journey of diversification and electricity security for Nigeria
“It is a journey that would ensure that in future it will be impossible to hold this country to ransom by controlling any particular source of fuel for electricity,” he said.
Fashola noted that irrespective of the huge contributions of gas to Nigeria’s electricity production – the country generates up to 80 per cent of its electricity from gas-fired power plants situated in the south, while just about 14 per cent is generated from hydropower stations in the north – the expansion was necessary to tap into energy sources that exists in the country, as well as decentralise generation sources.
He further hinged this on how bad electricity supply has gone since incessant destruction of gas-pipelines by militants began early in 2016. Nigeria which reached an all-time generation mark of 5075MW late in 2015, has managed to sustain her overall power generation which has halved since February.
The impact of proposed solar PPAs
Saddled with the task of executing the PPAs, NBET’s acting Managing Director/Chief Executive Officer of NBET, Mr. Waziri Bintube, said seven northern states are to host most of the solar power plants because of the high solar radiation in the region, while one of the plants would be located in Enugu State.
He reiterated the commitment of the government to the development, saying: “This is a revolution that is aimed at diversifying the energy mix of the country, especially to resolve the lingering power crisis in Nigeria.”
“It is something that is critical at this point in time because of the disruptions to gas supply. For as you know this country is about 86 per cent dependent on thermal gas power plants for its electricity needs, while about 14 per cent is from hydro power plants,” Bintube added.
He further stated: “We don’t have nuclear nor solar, so this will be the first renewable energy coming from the national grid and we are committed to delivering on it once the projects reach financial close.
“Therefore, our target is that within 12 to 18 months we would have delivered the projects. We have about 12 foreign developers and this is a mark of confidence in the Nigerian economy, as the projects will bring in foreign direct investments into the country.”
He provided a clearer background to the choice of the projects’ sites saying: “These projects that we are signing today are going to be based in about eight states. Without any prejudice, we know that solar radiation is higher in the northern part of the country.
“So we have one in Enugu, one in Bauchi, one in Nasarawa, about three in Katsina, one each in Jigawa, Sokoto and Plateau. Also, Kaduna has two.”
As stated in Nigeria’s renewable policy document which the government signed off in 2015, the country lies within a high sunshine belt with solar radiation fairly well distributed across board.
This as credibly reportedly by stakeholders in the solar business indicates that with an annual average radiation of 12.6 mega joule/square meter (MJ/m2-day) in the coastal latitudes and 25.2MJ/m2-day in the far North, solar still has an immense potential to contribute vibrantly to the country’s energy mix.
Bintube in this regard, explained that the PPA would serve as a partial risk guarantee (PRG) to the investors. He said its signoff would enable them get loans from their lenders based on the fact that they have a guaranteed buyer or off-taker of whatever quantum of electricity they generate from their various solar power plants.
He noted the NBET will be the guaranteed buyer of power generated from the plants, thus indicating that the previous burden associated with best endeavour transactions for solar power will have to give way for a willing-seller-willing buyer regime.
On the monetary worth of the solar power projects, the General Manager, Power Procurement and Power Contracts for NBET, Mr. Yesufu Alonge, stated that the investors would invest a total of about $2.5 billion during the 12 to 18 months gestation period of the projects.
Alonge said: “For the 12 projects, the total cost is between $2 billion to $2.5 billion. The economic impact which the projects will have cannot be overemphasised, as it would create thousands of jobs for citizens of Nigeria.”
He also noted that the government, through the Nigerian Electricity Regulatory Commission (NERC) had been able to work out plans that would ensure steady and continuous reduction in the tariffs for solar generated electricity.
According to him, once the solar plants become operational, power consumers would pay 11.5 cent per kilowatt-hour as the kick-off tariff. This price, he added would continue to fall as more solar power projects come on stream.
“With time the cost of solar will be cheaper than that of gas, but you just need to start first and the cost is 11.5 cent per kilowatt-hour,” Alonge stated.
He added that after the promoters achieve their financial close by year ending, construction and completion of the plants is expected to happen within 12 to 18 months.
Also, power generated from the plants will on completion be evacuated into the national grid through substations that will be built at some of the sites.
With the Bulk Trader acting as intermediaries between Generation companies (Gencos) and Discos, it is understood that the generated electricity will be fed first into the Discos where the plants are sited to boost their supplies, and the excess given out through the grid.
One of the firms, Nigeria Solar Capital Partners said it was building a 135MW plant in Ganjuwa LGA of Bauchi State at the cost of $200 million. Its Managing Director, Joel Abrams said the 15-month project will create 1,000 jobs in the state when the site work starts by June 2017.
Another promoter, AfriNigeria also stated that it was going to build 50MW in Garaku town of Nasarawa state at the cost of $100 million.
Industry experts, who reviewed the development, posited that it stood the chance of changing the reputational damage that had been done to the solar power market through the wave of failed sponsored solar projects in the last decade, along with some questionable small solar technologies and product.
They added that beyond the shift from large reliance on gas, the development would as much as possible restore the abandoned potential that best practice solar projects could bring in helping Nigeria light up the homes and offices of more than 50 million of her citizens.
- This Day