Let’s not kid ourselves, Nigeria’s on-grid power supply challenges are not going away anytime soon. As a matter of fact, only yesterday (15th January 2019) indications emerged of a possible blackout across the country as electricity Generating Companies (GENCOs) threatened to shut down their plants over what they described as ‘frequency decay due to inefficient grid management and associated costs’. Loosely translated, this means Nigerians must prepare to spend more on diesel/fuel to power generators should the GENCOS follow through on their threats.
This increase in the use of fuel/diesel powered generators will naturally be accompanied by a corresponding increase in noise and C02 pollution, two things whose unintended costs on the health and well-being of Nigerians are mostly ignored, but which no doubt contribute to high levels of irritability among Nigerians, as well as to a shameful low national life expectancy of 53.5 years.
During the official inauguration of the 85KWP solar hybrid mini-grid project, built at Gbamu-Gbamu Village, in Ijebu East Local Government Area of Ogun State in early 2018, European Union Leader of Delegation; Kurt Cornellus, disclosed that Nigerians spend an estimated $30 million yearly, to buy petrol and diesel to power generators for electricity supply purposes.
Similarly, in a report produced by the Rocky Mountain Institute in collaboration with the Nigerian Economic Summit Group (NESG), it was found that domestic and commercial consumers spend N13.4 million daily to power small scale petrol and diesel generating sets, due to insufficient power supply. This amounts roughly to an annual spend of N4.9 trillion to self generate 14 gigawatts (GW), as the country’s average 4 gigawatts (GW) electricity generation continues to be unable to meet the growing energy needs of its 189 million citizens.
Obviously, this is clearly not sustainable both from a financial and environmental perspective, so we must look to alternative (off-grid) forms of energy generation.
While the federal government’s body language through a number of off-grid energy policy pronouncements has been somewhat positive, given the foregoing challenges however, there is clearly an urgent need for more to be done especially by private sector players including financial service institutions, investors and property developers/owners.
For instance, one of the major stumbling blocks to the widescale adoption of solar home systems in a country with some of the highest irradiation levels in Africa, is the absence of consumer finance which is critical to absorbing the initial high upfront costs of procuring the systems.
While international investors are pumping millions in affordable (foreign currency) financing into the Nigerian renewable energy space, our local financial services institutions are apparently unable to see the massive opportunities in solar home systems and create appropriate financing packages for consumers. That way, money spent on buying fuel and diesel on a daily/monthly basis, can be converted into regular payments toward the ownership of cleaner, less noisy solar home systems.
Access to affordable project finance is similarly a stumbling block for property developers who are understandably unwilling to increase project costs by incorporating clean energy and energy/resource efficiency at the early stages (planning, design, construction) of their developments – when they are already preoccupied with finding the money to execute their projects as is. Uncertainty around finding buyers who appreciate the extra value and who are willing to pay the slightly higher sales prices associated with the incorporation of clean energy and energy/resource efficiency in the buildings is also another major consideration for property developers.
However, just by investing a little time to engage with the new global ‘climate financing’ architecture, and the emerging ‘Green Building’ agenda inclusive of the introduction of ‘Green Mortgages’ and Green Building Standards and Certification systems such as the IFC’s EDGE program, Nigerian financial services institutions, investors and property developers will find an over $100BN investment opportunity waiting to be tapped into, with solid business cases that allow for the clear communication and realisation of benefits for all parties, including home buyers who will enjoy significant (long term) utility savings and long term appreciation of the value of their properties.
Banks need data on the financial benefits of green buildings, but it is mostly missing in emerging markets such as Nigeria. There is analysis that exists in the U.S. and Europe that indicates builders command four to nine percent higher sales prices for green homes, which sell as much as four times faster. Green homeowners save 15 to 20 percent on utility bills and resell their properties at a four to 10 percent higher value than conventionally built homes. Banks enjoy a lower default rate of up to 33 percent from green homebuyers.
In a subsequent post, we will dive deeper into the concepts of climate finance, green mortgages and green buildings, the potential for green buildings to save property owners money in the long term; substantially reduce our collective dependence on fossil fuel driven power generation in Nigeria; and protect our collective human and environmental health by significantly reducing CO2 emissions.