The recent hike in the price of diesel has become a burden to many businesses. According to October 2022 data from the National Bureau of Statistics (NBS), Nigerians paid an average of N801.09 per litre for diesel.
This amount signifies a 215.30% increase from N254.07 per litre in October 2021. Meanwhile, the price per litre stood at N789.90 in September 2022.
The hike in diesel prices has created the opportunity for Nigeria’s renewable energy players to meet demands in the commercial and industrial (C&I) sectors. Rensource Energy Limited is one such player.
In this interview with Nairametrics, the Chief Executive Officer of Rensource Energy Limited, Prince Ojeabulu, tells us more about this.
Enjoy the conversation.
NAIRAMETRICS: How many companies have Rensource helped with commercial and industrial solar installations?
Prince Ojeabulu: There are several of them. We like to see ourselves as Nigerian because we are operating in Nigeria. But we do have some operational projects outside the shores of Nigeria.
Our customers span different sectors in Nigeria. We are focused more on education, healthcare, and agro-processing. The idea behind our focus is the ripple effect these sectors have on the Nigerian economy, which is our mainstay.
One of our solar installations can be found at Abuja-based Premium Poultry Farm which is the largest egg producer in West Africa. Rensource installed a 700 kilowatts KW solar system at Premium Poultry Farm. We have also installed a 120-kW solar system for Valentine Chicken in Kwara state, which produces frozen chicken.
We have agreed, in principle, to install 1.2 megawatts (MW) of solar by 2023. One of our clients, a Kaduna-based steel manufacturing company has installed 300 KW of solar.
Rensource has a 40 KW offshore installation at Rubis Energie, a downstream fuel distribution company in Nairobi, Kenya, the company has the largest market share of fuel distribution in the country.
We have several other regular and prospective clients in Nigeria’s northern region, as well as in the country’s southeast and southwest regions.
Some of our other installations are in construction, for example, we have a 5 MW project in construction for Baze University in Abuja, and a couple of others. On average we currently have C&I projects both in construction and completed for 11 companies/businesses in Nigeria.
NAIRAMETRICS: Who are your partners for C&I installations in Nigeria?
Prince Ojeabulu: The partners can be grouped in two ways; the techno-commercial and the financing partners. By virtue of the nature of the C&I business model, there is a huge financing implication. So, in terms of financing partnerships, Rensource is backed by some of the biggest infrastructure financiers.
For instance, we are working very closely with one of the largest utility companies in the world – Energias de Portugal (EDP). We also work with infrastructure financiers like Amaya Capital Partners, the first investors in the Azura Independent Power Plant (IPP) in Edo state.
We have other backers accessing funds, mostly in Europe and the United States.
On the techno-commercial side, we work with engineering, procurement, and construction (EPC) and operations and maintenance (O&M) partners. We look to Huawei for equipment supply and technical support. We also partner with tier-1 panel manufacturers like JA Solar and JinkoSolar.
Rensource has the capability for construction. However, we are building partnerships with players like Jubaili Bros and other versatile local players. We have been partnering closely with GreenElec mostly on the commercial side. Overall, Rensource works with world-class and standard firms, both on the technical and commercial ends.
NAIRAMETRICS: What does Rensource hope to achieve by doing business in Nigeria?
Prince Ojeabulu: Rensource was founded in 2016 as a solar company. We have delivered services in residential solar and we have done the same with solar home systems, as well as mini-grids.
Now, we are carrying out services in the commercial and industrial (C&I) sectors. The reason is we think there is a significant share of energy deficits that can be addressed in that market compared to the other markets. For instance, when you compare the 700-kW commercial installation I mentioned earlier with the 10-kW energy requirement for a residential home. It is the equivalent of closing the energy gaps in approximately 70 homes.
There is a bigger portion of Nigeria’s energy deficit that is addressed by C&I. In terms of impact on the economy, businesses and industries need a greater share of energy to move markets/businesses forward which creates jobs and contributes to financial flows. Without concerns about power cuts, clean energy-reliant businesses can focus on important aspects of their ventures. By providing off-grid power solutions to businesses, we are also addressing climate change issues, by cutting diesel-related carbon emissions.
NAIRAMETRICS: What is your company’s economic outlook for the end of 2022 and Q1/2023?
Prince Ojeabulu: So far, Rensource has done tremendous revenue figures over the years. In 2022, we have seen 30% to 40% growth quarter-on-quarter. What we have seen by the singular act of the increase in diesel costs, has naturalized the demand for the kind of service we render. We have experienced skyrocketing demand from small business enterprises and large corporate organizations, who are actively looking at the implication of running diesel-dependent ventures, as opposed to clean energy efficient ventures. As a result, our pipeline of projects grew by 150% in 2022.
The inflection point has been around the cost of generating diesel-powered electricity which has almost tripled and the continuous purchases of diesel generator sets for businesses have resulted in the degradation of Nigeria’s environment. In 2023, we believe the demand for our services will increase and our 70 MW project pipeline in Nigeria will expand even further. We project that our project pipeline will grow to 300 MW in the next three years. If C&I-focused off-grid solar businesses keep up with growth, we will be able to phase out fossil fuel from Nigeria’s business and industrial hub.
A 2019 Bloomberg study pegs Nigeria’s C&I market at 1,500 MW. I will multiply that figure by 2 to reflect the current rise of new businesses in the country. With our solutions, we know there will be stronger growth by 2023.
Although the country is in the election season and foreign exchange rates are rising, these could spell some uncertainty in the markets. However, businesses will continue to run, and they will seek ways to replace their current energy generation with more sustainable options, and that’s where Rensource comes in.
NAIRAMETRICS: Please share details of Rensource’s impact on clean energy technology adoption in open-air markets in Nigeria.
Prince Ojeabulu: Rensource was not always a C&I company. Before the COVID-19 pandemic, we saw great opportunity in smaller-scale solar solutions, particularly for merchants in Nigeria’s markets.
Rensource’s previous business model made a significant impact by taking businesses off of diesel. While we still think all businesses should look to solar as a reliable and affordable option for power, we have pivoted to C&I developments for 3 key reasons:
- Transitioning larger energy consumers to solar has a significant positive climate impact
- There is still a fundamental challenge of grid reliability which presents a massive opportunity to provide energy solutions to large businesses.
- The business model for C&I is less risky than others since there is guaranteed offtake.
NAIRAMETRICS: How does Rensource tackle affordability issues in a country with rising inflation rates?
Prince Ojeabulu: It is no secret that businesses have been significantly affected by high fuel prices, especially diesel. We think businesses should not be on diesel in the first place because of its polluting nature and its vulnerability to price increases.
To address this, Rensource’s model is to design, install, and manage a solar solution for a business that gives them predictable rates for the power the installation produces. This prevents worrying about external shocks to fuel prices, like the War in Ukraine and inflation, for example. This certainty allows businesses to manage their expenses, plan for expansion, and, more importantly, hire more Nigerians.