Clean energy solutions have expanded from an isolated industry to one that is viewed as effective in providing electricity to millions of underserved people across the world. This growth has been championed by advances in technology, the need for decarbonising energy sources and the ease of deployment. Solar mini-grids present rural communities not connected to the grid with access to electricity.
These improvements are not without challenges. Technological advancement has resulted in a decrease in the price of solar components globally. However, for customers in Nigeria, deploying solar solutions remains comparatively high.
Financing Barriers Faced by Developers
Notwithstanding the rise in the adoption of off-grid solar solutions across the country, the absence of institutional finance for developments, especially for infant industry players, has stalled growth. Financing has largely been via foreign grants, convertible debts, and foreign development institutions. These options are seldom not available for smaller and newer developers. Burgeoning developers lack the collateral needed, nor can they afford the high rates provided by commercial lenders. These developers also often do not qualify for grants and equity debts, exempting them from the investment portfolio of foreign financiers. These difficulties have affected the price of clean energy solutions for consumers.
Financing Barriers Encountered by Consumers
For their part, these solutions are often quite expensive as only a few consumers can afford the upfront installation costs. With no financing scheme or acquisition plans for consumers, several are left with no choice but to utilise fossil fuel generators to meet their energy demands.
What can be done?
Tackling the funding barrier of clean energy solutions requires sector-wide cooperation. Firstly, the government needs to implement policies that reduce the cost of solar components. Introducing tax reliefs, import duties and subsidies are ways the government can assist in reducing the cost of obtaining components from consumers. Secondly, financiers can adopt flexible models to fund renewable energy purchases for developers and consumers. Initiatives such as the Demand Aggregation for Renewable Technology (DART) Program – implemented by All On, the Global Alliance for People and Planet (GEAPP) and Odyssey Energy Solutions – will help reduce equipment/component costs for developers.
Furthermore, developers can employ innovative deployment models tailored to consumers to ensure affordability. In communities with low energy demands, end-use demand stimulation via low-interest loans for productive use appliances and essential equipment is necessary to increase capacity development and the overall economic development.
In all, financing is essential to developing the renewable energy sector. It could accelerate electrification across the country and aid in economic development. With this, the clean energy transition will be underway.