Monday, April 08 2019 09:00 AM / by FBNQuest Research
Power shortages continue to stifle growth and are regarded as the primary drawback for operations across all company sizes. 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 custom 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.