How Much Does Solar Cost In Nigeria?
Solar power is an increasingly important source of electricity in Nigeria. As of 2022, solar power accounted for 50 gigawatt hours of Nigeria’s electricity generation, supplying electricity to homes, businesses, and communities across the country (Statista, 2022). Understanding the costs of solar power systems is crucial for Nigerian homeowners, businesses, and policymakers looking to expand solar capacity and increase energy access.
With frequent power outages on the national grid, many Nigerians are turning to solar to provide reliable electricity. Solar costs help determine the affordability and competitiveness of solar versus conventional grid electricity. Assessing current solar costs, factors that influence costs, and projected future costs provides key insights for driving further solar adoption in Nigeria.
Current Costs of Solar Panels
The average cost per watt for solar panels in Nigeria ranges from $0.75 to $1.44 (45,000 – 84,000 Naira), although prices vary based on system size and type of panels. Residential solar panels in Nigeria typically cost around $1 per watt, while utility-scale panels may cost $0.75 to $1 per watt due to bulk discounts. Mono-crystalline panels are more efficient but carry a higher price tag of $1.25 to $1.44 per watt, compared to $0.87 to $1.06 per watt for poly-crystalline panels.
Solar panel prices in Nigeria have been steadily decreasing over the past decade due to improvements in manufacturing and economies of scale. According to market research, solar panel prices have declined by around 75% since 2010 and are projected to continue falling by 5-10% annually as technology advances.
Other Solar System Costs
In addition to the solar panels themselves, there are other components and costs associated with a complete solar PV system installation. These include:
Inverters – Inverters convert the DC electricity from the solar panels to usable AC electricity for your home or business. Inverters account for around 10-15% of the total solar system cost.1
Batteries – Batteries store excess solar energy for use when the sun isn’t shining. Adding battery storage adds significant cost, with batteries making up 15-25% of total system cost depending on capacity.2
Wiring and mounts – Wires to connect the panels, inverters, batteries, and grid tie-ins can account for around 15% of system cost. Rooftop solar also requires mounting hardware, which adds another 5-10% to costs.
Labor – Professional installation of a solar PV system typically adds 10-15% to the total cost, including contractor fees, permits, and inspections.
Taken together, these other system components can account for 50-65% of total solar installation costs, in addition to the solar panels themselves.
Factors Influencing Solar Costs
Several key factors influence the cost of solar power in Nigeria:
Import duties and taxes significantly increase costs. Most solar components are imported, and high import tariffs ranging from 5-20% are applied in addition to a 5% VAT on imported solar products (Source). These taxes and duties can account for 30-40% of total solar system costs.
Logistics and transportation add expense due to the large size and weight of solar components. Transporting materials long distances over poor roads leads to high fuel and vehicle maintenance costs that drive up pricing (Source).
Low oil prices in Nigeria reduce demand for alternative energy sources like solar. With oil being a major part of Nigeria’s economy, lower oil prices mean less incentive to invest in other energy technologies (Source).
Lack of financing options is a major barrier, as high upfront costs deter potential customers. Limited access to loans and other financing mechanisms restricts growth of the solar market and economies of scale that could lower costs (Source).
Government Incentives
The Nigerian government has implemented several incentives to spur the growth of solar power and make it more affordable for consumers and businesses. One of the biggest incentives is import duty waivers on renewable energy equipment like solar panels, inverters, batteries, and more. According to Nigeria’s Renewable Energy Master Plan, all devices, components, and accessories for solar power generation are exempt from import duties (Solar Buy, 2023). This makes the equipment significantly cheaper to purchase from international manufacturers.
Other solar incentives offered by the Nigerian government include tax credits, grants, and low-interest financing for solar projects and businesses in the solar sector. For example, private companies receive a tax credit on every kilowatt of renewable electricity produced, up to five years (Solar Quarter, 2023). The government also provides grants and loans through agencies like the Bank of Industry and the Rural Electrification Agency to support small-scale solar installations and off-grid rural electrification projects.
These incentives have succeeded in lowering the costs of solar power. One analysis found that import duty waivers alone reduce the cost of a typical solar system in Nigeria by 15-20% (Renewable Energy World, 2021). Coupled with other incentives, solar power has become price competitive with grid electricity in many parts of the country.
Cost Comparison to Grid Electricity
The average cost of grid electricity from the national utility in Nigeria is quite high compared to solar. As of September 2020, the average grid electricity tariff for residential customers was increased to around ₦66.60 (~$0.15 USD) per kWh 1. On the other hand, rooftop solar PV in Nigeria can cost as little as ₦40 (~$0.10 USD) per kWh over the lifetime of the system 2.
This means solar power can provide over 60% savings compared to purchasing electricity from the grid. The more energy usage and higher the tariffs charged by the utility, the faster the payback and return on investment from a rooftop solar system. With solar, there is also the benefit of being cushioned from future utility rate hikes.
Return on Investment
When considering solar power, an important factor is how long it takes to recoup your initial investment and start realizing savings. This is known as the payback period. For a residential solar system in Nigeria, the typical payback period is 4-6 years.
After the payback period, a solar system will continue generating electricity for 20-25 more years. This results in considerable lifetime savings on your electricity bills. Over 25 years, a 5 kW solar system can save a household over ₦15 million in electricity costs.
Solar also provides a return on investment via the equity in your home. Installing solar increases your property value, so you can recoup some of the upfront cost when you sell. Studies show home buyers are willing to pay a premium of about 4% for a property with solar panels.
Overall, solar delivers excellent returns. With incentives and net metering, the ROI ranges from 10-30% over the system lifetime. That significantly beats investing in stocks, bonds, or rental properties. Going solar provides decades of free electricity and financial savings.
Future Outlook
The cost of solar power in Nigeria is projected to continue declining in the coming years due to a few key factors. First, solar panel prices are dropping globally as manufacturing scales up and technology improves. According to Bloomberg, panel prices have fallen 90% in the last decade and are forecast to fall another 40% by 2030. As Nigeria imports most of its solar equipment currently, these global price declines will directly reduce costs.
Secondly, increased localization of solar production within Nigeria could further reduce costs by avoiding import duties and transportation expenses. The Nigerian government has set targets to produce 1 gigawatt of solar panels domestically by 2025. Local manufacturing and assembly of balance of system components like inverters and racking is also expected to grow.
Finally, as solar power reaches cost parity with fossil fuel generators and grid electricity, adoption rates are projected to rise significantly. Nigeria aims to generate 30% of its electricity from solar by 2030, up from less than 1% today. Increased scale will drive down soft costs like customer acquisition, permitting, and financing. It also allows developers to access cheaper capital and benefit from economies of scale in project development.
In summary, the outlook for solar power costs in Nigeria is very positive due to improving global economics, localization potential, and rising domestic demand. Prices are expected to become increasingly competitive with conventional power sources in the years ahead.
Recommendations
There are a few ways Nigerians can reduce the costs of going solar:
Shopping around for the best deals on equipment can help find affordable solar panels, inverters, and batteries (https://guardian.ng/news/households-consider-solar-alternatives-amid-high-onboarding-cost/). Buying panels and equipment in bulk or as a community can also lower costs through volume discounts.
Using local manufacturers and installers is another way to potentially find more affordable pricing compared to importing everything (https://www.linkedin.com/pulse/solar-panels-price-nigeria-comprehensive-breakdown-oluwaseun-adeleke). Supporting local solar companies helps improve the long-term solar infrastructure and expertise in the country.
Financing options like solar leasing, loans, or pay-as-you-go models can spread out the upfront investment over time. Some banks and solar companies now offer specific solar financing products with favorable terms for Nigerian homeowners and businesses (https://apnews.com/article/nigeria-fuel-subsidy-solar-climate-9b3f32283b0f2fab9f6096761ef815e7).
Government incentives like import tax waivers, rebates, and feed-in tariffs can directly reduce solar costs. Advocating for more supportive solar policies is key for driving wider adoption.
Overall, utilizing these strategies can help make solar power more affordable and accessible for Nigerian households and businesses looking to tap into this abundant renewable resource.
Conclusion
In summary, the costs of solar power in Nigeria can vary greatly based on system size, components, and installation, but panel prices have dropped significantly in recent years. With government incentives and a comparison to rising grid electricity costs, solar can have a return on investment in just a few years. Widespread solar adoption could provide Nigeria with more sustainable, reliable electricity and energy independence. But policy improvements and financing options may be needed to make solar affordable and accessible for more Nigerians. With prudent planning and strategic solar investments, individuals, businesses, and the nation as a whole can benefit from this abundant renewable resource.
