Solar eyed to meet Lagos’ power needs

End of fuel subsidy driving market

A petrol generator retrofitted to run on gas at Ibeju Lekki in Lagos. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi

Generators are everywhere in Lagos, used by almost everyone in the Nigerian megacity to counteract crippling power outages.

Those living in upscale gated communities or working at big companies turn to massive, soundproof diesel generators when the electricity grid inevitably fails. There are the smaller, noisier gasoline versions for those who can't afford to maintain a diesel rig. And at the bottom of the generator hierarchy, found in countless shops and homes, are legions of less capable machines known in Nigerian Pidgin as "I-pass-my-neighbor generators." The derisive name mocks those who can't afford even a generator that puts out just enough juice to run fans, turn on lights and charge phones.

The lowest-end generators make up for their deafening roar and abundant fumes with the distinct advantage of portability, allowing users to plug in at home and work. These are the machines Femi Adeyemo has spent years trying to displace with equally flexible and affordable solar technology.

On a summer day when a package arrived from China, the staff at Adeyemo's decade-old company, Arnergy, huddled around his desk to examine the latest prototypes. The portable power station resembles an old-school boombox and can be plugged into solar panels. A screen shows how much power it has left, and outlets connect electronics.

Arnergy has already had success offering solar technology to high-income earners, and this is meant to be its first mass-market product. The company raced to get the prototype ready as quickly as possible after Nigeria's approach to energy suddenly changed.

Bola Tinubu, the country's new president, stood at a podium in May, dressed in his white agbada robe and a cap embroidered in green-and-white national colors, and veered far off script. "The fuel subsidy is gone," Tinubu declared in the middle of his 30-minute inauguration speech.

With that five-word decree, the economics of Nigeria's nascent solar industry changed at once. "The subsidy removal has thrown that market wide open," Adeyemo says. Fuel prices spiked 175% overnight, disrupting the economics of a generator-dependent nation. Prices have risen even further since then.

A lack of refining capacity means Nigeria imports virtually all its gasoline even though it's Africa's biggest crude exporter. The fuel subsidies, in place for more than three decades to keep pump prices low, recently cost the treasury as much as $522 million per month. In all, the country spent $9.7 billion last year on imported gasoline.

But that enormous expense has been considered one of the few widespread benefits of the country's oil wealth -- and it's been politically untouchable. When a previous government tried scrapping the subsidy in 2012, tens of thousands of Nigerians took to the streets and forced a partial reversal.

In Lagos, a city known for grinding traffic, the sudden end of the subsidy has cut the number of vehicles plying the roads. In Abule Egba, a northern neighborhood, you can watch a minibus driver turn off his engine to save fuel and hop out to push the eight-seater forward through gridlock. People across the city are adjusting to buying gasoline for more than triple the price of what it was only four months earlier. Morning news shows discuss workers being forced to sleep in their offices because they can't afford the commute home.

Yet pushback on the policy has so far been muted, suggesting higher pump prices might be here to stay this time. The new reality has prompted dramatic changes in Nigeria's solar outlook by putting the cost of electricity from sunlight on par with unsubsidized gasoline. Within days, energy researchers at BloombergNEF completely revamped their projections and put the country on a path to reach 1.6 gigawatts of solar capacity within a year -- about triple the previous forecast.

"This could be one of the first markets where off-grid solar begins to really build grid-scale volumes," says Jenny Chase, a solar analyst at BNEF.

Near the city's eastern border, Patience Johnson's fridge hasn't come on since the subsidy ended. The 45-year-old single mom used to pay $4.36 each week for 5.3 gallons of gasoline to run her small generator from 9 p.m. to midnight. That allowed her to charge phones, light up her two-bedroom home and run a fan to help her 16-year-old daughter, Favour, study on humid nights.

Now reading happens by candlelight, and Johnson charges her phone at work. She buys only enough food to eat within the day. "We haven't even smelled light in my neighborhood since the end of the subsidy," she says.

In Lagos, about 70% of households aren't connected to the grid. The lucky few with connections contend with blackouts lasting more than 12 hours a day. The national grid delivers only 1,000 megawatts to a city of 25 million people. By contrast, Shanghai, with roughly the same population, supplies more than 30,000MW at peak demand. Ghana's capital, Accra, another West African city of about 5 million people, uses about 800MW from its grid.

That's where all the generators come in. Researchers at Dalberg Global Development Advisors, a consultant in New York, estimated as recently as 2019 that Nigeria had a fleet of 22 million gasoline generators with a capacity below 4 kilovolt-amperes, including "I-pass-my-neighbor" generators. Collectively these low-power generators emit 51 million tons of carbon dioxide equivalent annually, roughly equal to all the emissions produced by New York City.

Johnson isn't sold on solar because most products on the market offer either too much or too little.

The higher-end solar home systems with panels, batteries and inverters can power a fridge, computer, television, water pump and multiple fans. Those carry an upfront cost of as much as $2,000, a year of Johnson's pay.

At the lower end, d.light (founded by two Stanford University MBA graduates), Sun King (a Kenya-based off-grid solar provider with operations in a dozen countries) and others have taken part of the market by selling solar products that produce just enough energy to charge phones and power a few lights. Their scaled-up products, which can run fridges or barber's clippers, have been much less popular.

Johnson decided to retrofit her gasoline generator to run on cheaper cooking gas. That temporarily allowed her household to use as much electricity as before. "But now even cooking gas is expensive," she says. Eventually she had to idle the generator.

Nigeria has an installed capacity of 14,300MW of power, but the grid can carry only about half of that. Then only half of that residual amount gets to customers because of a litany of issues including aged infrastructure and vandalism.

"The big market isn't working here, so the plan is to start small and then expand," Odusote says.

But the average Nigerian isn't thinking about their carbon footprint, and energy savings may end up being the strongest argument to change behavior. "Removing subsidies will focus greater attention on efficient sources of energy, because people now have to pay for it themselves," says Eluma Obibuaku, a senior vice president and head of power at the Africa Finance Corp. in Lagos. "Anything that's more efficient will win."

The country's nascent solar industry wants to supply that efficient energy. "The economics now make sense for microenterprises, big and small families," says Rotimi Thomas, chief executive officer of SunFi, a marketplace for solar providers and customers that provides financing.

A month after the subsidy removal, SunFi hosted solar vendors in its offices on a quiet street in Ikoyi, an affluent neighborhood whose towering trees have been felled to build luxury high-rises, broaden roads and create drainage as Lagos grows.

There was palpable excitement about the possibilities of reaching a wider market following the subsidy removal.

"The landscape has permanently changed in Nigeria for solar systems," Thomas said to an audience of about 50 solar providers. "Almost every customer that's using a petrol generator is fertile ground for solar now."

  photo  A portable power station for mass-market adoption. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi
  photo  A man using his phone as a source of light trying to switch on his generator set in Lagos, on 30 Sept, 2023. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi
  photo  Generators stacked and in use at a market in Yaba, Lagos. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi
  photo  Adeyemo, right, with a staff member. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi
  photo  Solar panels ready at the warehouse in Lagos. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi
  photo  Patience Johnson. MUST CREDIT: Bloomberg photo by Benson Ibeabuchi