Solar Home and Pico Systems

Abuja Zuma Rock

Off-Grid Solutions

Introduction
Solar Home Systems (SHS) are standardised off-grid PV systems that are generally self-contained and offer a cost-effective way to generate electricity for households and small businesses. Pico Solar Systems (PSS) are mainly portable lighting systems, typically below 10 Wp, such as lanterns, flashlights, etc., which may or may not include access ports for charging cell phones and radios. Both solutions are essential in rural areas without grid connections, as they provide consumers with electricity to meet their basic needs in a sustainable manner without incurring intensive operating and maintenance costs.

Safe And Cost-effective Energy Supply For Households And Small Businesses

With a per capita energy supply of only 144 kWh, Nigeria has one of the lowest energy consumption rates per person in sub-Saharan Africa. The household sector is the largest consumer of electricity, accounting for almost 58% of the electricity supplied by the national grid. However, up to 80% of households use additional electricity from generators that run on diesel or gasoline or are solely dependent on them. 

According to the National Bureau of Statistics, Nigerians experience an average of 5.9 power outages per week, with each outage lasting 11.6 hours. To close this power-supply gap, a considerable part of the country is supplied by small self-producing plants. For rural areas that are not supplied by the grid and are severely undersupplied (approx. two hours of grid supply per day), the small amount of electricity needed to light homes is provided by battery-powered flashlights and kerosene lamps. These pose health and environmental hazards. 

Solar Home & Pico Solar Systems (SHS AND PSS) offer an alternative that is cost-effective, environmentally friendly, and does not endanger human health. In addition to supplying electricity to private households, these systems are also installed to generate electricity for health centres to improve the provision of health services, especially in remote areas of the country.

Average Hours of Electricity in One Week 

Regions 

National Grid

Generator

Number of Hours Available per Day

Number of Hours Available Between 6-10 p.m.

Number of Hours Available per Day

Number of Hours Available Between 6-10 p.m.

North-Central

7.0

2.2

5.7

2.7

North-East

7.5

2.9

8.8

3.1

North-West

6.8

2.5

5.2

2.3

South-East

4.4

2.3

4.3

2.9

South-South

6.4

2.2

8.2

3.4

South-West

8.0

2.0

2.8

1.8

Urban

7.0

2.2

4.3

2.9

Rural

6.2

2.3

7.0

3.1

Nigeria (Total)

6.6

2.3

6.3

3.1

Source: NBS GHS Panel Survey Report 2019

Market Potential

The significant decrease in the cost of components for SHS and PSS has created a market opportunity for off-grid renewable energy solutions for households and micro/small businesses. This can help meet the critical electricity needs of some 27.9 million households and 10.6 million small and medium-sized enterprises.

Electricity consumption for the household sector in Nigeria is estimated at 40 to 58 TWh of electricity per year. Of this, only about 14 TWh of electricity per year can be supplied by the grid. As a result, at least 26 TWh of electricity could potentially be supplied by renewable energy technologies such as SHS. Currently, this energy-supply gap is filled by petrol and diesel generators at an average cost of $0.45 per kWh, which means that Nigerians spend about $14 billion a year on their own power generation.

More than 80 million Nigerians in underserved and severely underserved areas cover their electricity needs by using battery-powered torches, paraffin lamps, and inefficient small-scale power generation, mainly to recharge mobile phones. These Nigerians are spending $1.5 a week on these technologies, a total of $6.5 billion annually. This provides a significant opportunity for off-grid alternatives such as PSS.

factsheet_8_figure_1

Legal Framework

Suppliers and installers of SHS and PSS are obliged to obtain certification by the Nigerian Electricity Management Services Agency (NEMSA), especially if they need access to state subsidies. The NEMSA law provides that any person carrying out electrical installation work must be duly certified by NEMSA.

NEMSA certification is becoming one of the mandatory requirements for contractors wishing to bid on energy projects in Nigeria. All projects planned by the Rural Electrification Agency (REA) within its mandate under the Electric Power Sector Reform Act (EPSRA) require contractors to provide proof of registration with NEMSA as a licensed contractor in the energy sector. 

Suppliers of systems and kits must have their equipment certified by the Standardisation Organisation of Nigeria (SON). The standards for renewable energy systems, IEC 62257-9-8, which have been adopted by SON, were developed by the IFC Lighting Global program to improve the quality of products imported into the country. 

Investment Promotion

When network-independent solutions become scalable and commercially viable in Nigeria, a huge market opportunity will open up. For this reason, the REA, which is charged with developing the Nigerian off-grid electricity market, has developed the Off-Grid Electrification Strategy, which aims to improve access to electricity in Nigeria. 

One of the flagship projects of the REA is the Nigerian Electrification Project (NEP). The NEP is a federal government initiative, supported by the private sector, which aims to provide households and micro, small and medium-sized enterprises in off-grid communities throughout the country with access to electricity through renewable energy sources. 

One such renewable source is SHS, where the REA, in partnership with the World Bank and the African Development Bank (AfDB), will provide market-based incentives and technical assistance to SHS developers and installers to help millions of unserved and under-served Nigerian households and businesses. 

For the SHS component, assistance will be provided through the Output Based Fund (OBF), which provides fixed incentive payments per installed SHS system, and the Market Scale-Up Challenge Fund, which provides lump-sum grants for the strongest business plans and other investor co-financing for rapid scale-up.

The World Bank's Lighting Africa project in Nigeria, a programme designed to help millions of people, provides technical assistance to manufacturers of PSS in the areas of market intelligence, quality assurance, access to finance, consumer education, and business development.

Other opportunities for installers and suppliers of SHS and PSS include the Bank of Industry's ₦6 billion solar (US$15.5 million) fund where installers can access low interest rates and receive up to 90% financing of total project cost. (REA, Lighting Africa, BOI).

Business Models

Due to the high cost of purchase, individuals and households in Nigeria are still very reluctant to adopt SHS and PSS. Business models must therefore apply appropriate strategies for financing and project implementation. 

The typical business model for SHS is a lease-to-own model, which allows a user to purchase a system by paying for it over a certain period of time agreed with the installer/supplier, who in this case acts as a leasing company.

factsheet_8_figure_2

Lease to Own model for Solar Home Systems 

The typical business model for PSS is the dealer-credit model, which allows buyers to purchase Pico products through microfinancing from a bank or other licensed financial services company.

factsheet_8_figure_3

 Key Performance Indicators

Indicator 

Range Of Site Characteristics 

Population 

80,000,000 (without access to electricity)

Household Energy Use

Electric Bulbs, Electric Fans, Television Sets, Radio Sets, Mobile Phone Chargers

Health Centre Energy Use

Lighting, Refrigeration For Vaccines And Other Medical Supplies

Local Cost Of Petrol

₦150 - ₦300 (US$0.41–$0.86) per litre

Local Cost Of Diesel

₦180 - ₦300 (US$0.46–$0.86) per litre

Average Cost Of Energy From Petrol and Diesel

₦170 (US$0.45) per kWh

System Size For SHS

>10 Watt peak – 350 Watt peak

System Size For PSS

<10 Watt peak

Energy Export

0.02 kWh/day – 1.4 kWh/day

Risks

Technical Barriers - The biggest technical barrier to the use of SHS and PSS systems is local technical expertise in the installation, maintenance, and repair of SHS and PSS systems. There are growing efforts by development finance institutions in Nigeria to improve technical capacity within the country. One of these efforts is the clean energy certification scheme under the GIZ-NESP programme, which aims to certify the installers of these systems. In addition, through its Lighting Africa project, the International Finance Corporation (IFC) trains technicians in all Nigerian states to install, maintain and repair PSS. 

Creditworthiness -The ability to repay the loans for the SHS and PSS solutions is a risk for many investors. However, the economic advantages of SHS and PSS over traditional energy generation is an incentive for users. In addition, available financial support for SHS is available under the NEP, which further facilitates repayment for users and thus reduces the risk for suppliers and installers.

Data Availability - The main support for the private sector is in reducing development costs by providing pre-development assistance such as relevant market data. This is market information that is specifically collected and prepared to provide a well-informed analysis of market opportunities to promote the Nigerian SHS and PSS markets. Some sources of easily accessible data include the Nigerian Off-grid Market Acceleration Program and the Lighting Africa Project. 

Success stories

Lumos Global

In 2016, Lumos Global signed a partnership with MTN Nigeria to gain access to MTN Nigeria's mobile payment infrastructure and retail distribution network.