Oil-rich Nigeria Moves to Boost Renewables to 30 Percent by 2030

From Norway to the United Arab Emirates and Saudi Arabia, big oil producers are becoming big backers of renewable-energy. Now, Nigeria has signed two agreements with solar developers to guarantee the payment risks for 50-megawatt and 70-megawatt solar farms.

The oil and gas sector makes up 35 percent of Nigeria’s GDP and 90 percent of its exports. But unlike the population of the other oil producers, Nigeria’s 192 million people remain energy-poor. Nearly half the country lacks access to electricity (in comparison, Saudia Arabia and the UAE have 100 percent electrification rates). Nigeria’s total installed capacity is about 13-gigawatts, but less than one-third of that is actually functional. To accelerate Nigeria’s pace of development, one study estimates that 60-gigawatts of renewable capacity is needed.

Nigeria’s so-called “put-call option agreements” are designed to spur solar development in the sun-rich country by placing payment risk for new power agreements onto Nigeria’s Ministry of Finance. Such guarantees are considered the key to unlocking solar projects worldwide. Now that costs have fallen dramatically, investors are worried that counterparties, such as utilities, won’t pay.

The World Bank and others are experimenting with risk-reduction mechanisms that can make solar projects institutional grade (see, “Clean Energy Revolution Trumps Climate Skepticism at Global Climate Talks”).

Late last year, Michael Eckhart, Citigroup’s global head of environmental finance and sustainability, told ImpactAlpha such guarantees “would unlock the global market instantly. Even Citi could loan.”

This post originally appeared in ImpactAlpha’s daily newsletter. Get The Brief.

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