By Daniel Agbor
About eighty million Nigerians (40 per cent of the population) have no access to grid electricity. Those with access to the grid often experience unreliable and irregular supply. Many have to rely on other sources of private power generation. While this alternative source has majorly been fossil fuel generators, for the most part, cleaner options like solar power are increasingly being embraced by consumers.
Unconnected communities and economic/business communities are adopting solar-powered mini-grid systems to provide their energy needs. While the environmental advantages of solar power are well-known, the major factor which determines consumers’ choice has been the economic cost.
We will be comparing the costs of power for a grid connection, fossil fuel generators and a mini-grid system.
Grid Power
Essentially, the cost of electricity incurred by the end-user is dependent on:
- The tariff rate in ₦/kWh which varies with the DisCo supplying electricity and the customer tariff classification. There are 11 DisCos which supply power to different states and regions in Nigeria.
- Under the tariff order, residential (R1) consumers pay ₦4/kWh, while residential (R2) consumers pay between ₦22 – ₦32.65 /kWh. The current average cost of grid electricity in Nigeria ₦36.6/kWh (naira/kWh).
- Data obtained from the Nigerian Electricity Regulatory Commission (NERC) showed that Nigeria would record a tariff shortfall of ₦545 billion in 2020. This initiated the plan to increase electricity tariffs, which has been postponed until next year.
- The quantity of electricity consumed by each consumer in kWh. The typical consumption in residential households’ ranges from about 50 – 100 kWh for the “poor”, with monthly expenditure ranging from ₦200 for R1 consumers, and ₦2200 – ₦3265 for those with low-paying jobs.
Generators
The epileptic nature of electricity supply in Nigeria seems to have primed generators to fill the gap. Many businesses depend on generators to run. Many entrepreneurs spend around 3,000 – 5,000 naira on gasoline for generators. Many businesses and individuals spend about $12 billion yearly on fuelling generators.
Some estimate shows that it costs a home about ₦37,000 to operate a portable gasoline generator for 6 hours and about ₦157,000 for businesses to operate a 20kVA diesel generator for the same time.
Mini-Grids
.Mini-grids offer an alternative to costly grid extension and are an emerging cost-effective solution to rural electrification challenges in Nigeria. The tariff of mini-grid projects ranges from ₦120 – ₦300/kWh, with typical residential consumption ranging from 15 – 67.5 kWh, and monthly expenditure between ₦4, 050 – ₦10,935.
Which Alternative is Best?
While universal grid connection would be cheaper due to economics of scale. it is necessary, meanwhile, to invest in alternatives which are both cost-effective and can fulfil current energy demands.
Many are against the planned increase in tariff but do not see that they spend far more on generators that they would on-grid electricity if tariffs were increased. Many consumers spend a significant amount on generators when a lesser amount can pay for mini-grid services.
It would seem more expedient to invest in mini-grids, rather than generators, which offer long-lasting solutions, are clean, and are increasingly becoming cost-effective when compared to fossil fuel generators over time.