Electricity access in Nigeria: Viability of off-grid photovoltaic system

Abstract

This study examines the viability of providing electricity to an un-electrified village in North-Eastern Nigeria using a mini-grid based off-grid solar photovoltaic system. The study employs the life-cycle cost to estimate a 25-year life-time cost of an off-grid electrification project using solar photovoltaic panels and compares with the cost of paying for grid-electricity within the same period. Comparing the cost of off-grid electrification with grid-extension is more appropriate; however, data on the cost of grid extension in Northern Nigeria are scarce. Thus, electricity tariff is used as a proxy since the Nigerian electricity market has been deregulated and the electricity tariff is expected to be market-reflective. The result shows that such project will not be economically viable at the prevailing commercial lending rate as it yields a negative net present value. However, the project becomes viable with adequate government support through the reduction in commercial lending rate for such projects and provision of start-up grants (as production subsidy). Such subsidy will not result in economic waste since the target is clearly defined. Apart from government financial incentives, creating necessary support mechanism in terms of legal and regulatory frameworks to encourage private investment will be necessary. In addition, engaging the community in the construction and maintenance of the project will ensure sustainability.