- President Bola Ahmed Tinubu removed fuel subsidies in May 2023, leading to changes in fuel prices, transportation costs, and a potential increase in electricity tariffs; as a result, the solar market is expected to experience a surge in demand, benefiting companies like Auxano Solar.
- Mr Umezulora emphasized that the removal of fuel subsidies in Nigeria has had a significant impact on the renewable energy sector. Solar energy is expected to be the primary beneficiary of this change, as Nigerian banks now view solar as a financeable asset.
- He projected that the removal of fuel subsidies will attract more financial investments and innovative ideas into the solar industry, further driving its growth and development.
President Bola Ahmed Tinubu made the decision to remove fuel subsidies in May 2023, and since then, significant changes have occurred in fuel prices and transportation costs.
Additionally, there is a possibility of an increase in electricity tariffs due to economic factors.
In a recent interview conducted by Nairametrics, Mr Chuks Umezulora, the co-founder and Chief Operating Officer of Auxano Solar, shed some light on the impact of the fuel subsidy removal on the renewable energy industry.
According to him, the solar market is expected to witness a surge in demand now that the fuel subsidy has been eliminated.
Auxano Solar, a company preparing to establish a second solar component factory in Lagos, stands to benefit greatly from this increased demand.
NAIRAMETRICS: How will the fuel subsidy removal impact Nigeria’s renewable energy industry?
CHUKS UMEZULORA: The removal of fuel subsidies in Nigeria by President Bola Ahmed Tinubu has changed the dynamics of the renewable energy industry because renewables will sell even higher than they were before.
I think solar will be the biggest gainer following the fuel subsidy removal, especially now that Nigerian banks are beginning to see solar as an asset they can finance.
I believe more finance and innovative ideas will come into Nigeria’s solar space. If we were talking about a three-time increase in renewable energy demand before the subsidy removal, we are now looking at between 10 and 15 times increase in demand.
Bear in mind that the alternative Nigerians had which is petrol generators, has suddenly become more expensive, transportation has become more expensive as well.
Also, the change in the foreign exchange regime made the official rate become almost the same as the black market.
Then, the electricity tariffs will eventually increase due to economic forces.
All these mean that power access for the general populace will become more expensive and renewable energy is becoming more price competitive and this will drive an increase in demand.
The biggest hurdle against making the switch to solar has always been the huge upfront cost.
I also expect that in the next 3 to 5 years, there will be more traction in the electric vehicle space in Nigeria, due to the removal of fuel subsidy.
This is because Nigerians who rely on internal combustion engine vehicles are already looking for alternatives that will be less of a hassle than paying over N500 per litre to fuel their cars.
If EVs turn out to be cheaper in the long term, the demand for them will rise and stakeholders will work to meet that demand.
NAIRAMETRICS: What can you tell us about Auxano’s second solar component factory?
CHUKS UMEZULORA: Auxano’s second solar component factory will be located at Ibeju, Lekki axis in Lagos state, after the Dangote Refinery.
Our first solar component factory which is located in Satellite Town, Lagos, has a capacity of 10 megawatts (MW) and was opened in 2016 as an incubation hub.
Meanwhile, this new factory is an automated line and has an annual solar photovoltaic (PV) capacity of 100 MW, the first factory was more like an incubation hub where we tested a few things.
Now we are more confident to produce solar components on a much larger scale.
We manufacture solar modules, solar panels of various sizes, and we have been doing that for a few years.
NAIRAMETRICS: How does Auxano Solar intend to manage its energy requirements at this bigger factory?
CHUKS UMEZULORA: Auxano Solar plans to manage its energy requirements through a combination of different energy sources.
The factory will be reliant on the national grid, we are currently trying to see if we can get the grid connected to the factory location because there is already a transformer to connect power.
We will also rely on a diesel generator, and we are building a 125-kilowatt solar system. In the short term, we will increase the capacity of the solar system at the factory as well.
In the long term, we are also looking at incorporating natural gas into the factory’s energy mix because we know that there is a plan to get natural gas into that axis, so gas generation will eventually be added to the energy mix within two years at the most.
NAIRAMETRICS: Why do you plan to run a solar factory on a diesel generator?
CHUKS UMEZULORA: It may seem strange to some, however, our decision to add a diesel generator to our energy mix at the factory is using the available resource to achieve our goals.
If Auxano Solar were to build a complete solar system that will cater to the full energy demand of the new factory, it will demand an investment of up to N200 million.
The important question here is, can you afford to take out N200 million from the business just to set up solar, or the alternative, start with something small that can power one production line and add other energy sources? Then as you grow, you can begin to expand.
For me, this is a more natural way to go, we are a private business.
This is what makes business sense for us at this time, the best way to run a business is to start with what you have.
NAIRAMETRICS: How will Auxano Solar be sourcing raw materials to produce renewable energy components?
CHUKS UMEZULORA: The bulk of raw materials needed for production at the second Auxano Solar factory will rely on imports from China.
This is because the country offers raw materials at the lowest prices, and they are still the major supplier of raw materials.
I would like to point out that it is still surprising to a lot of people that operators want to import raw materials from China as opposed to resource-rich countries. But that is not how manufacturing works.
The fact that a country has zinc ore does not mean that a zinc factory in that location is plausible.
It is only one aspect of the industry that will take that zinc ore in its natural state and process it in a way that factories can now purchase that processed zinc ore and refine it.
There are basically three stages before any commodity moves from its natural state to a finished state.
So, no one takes the commodity from the natural state to the finished state; it is a totally different sector of the market.
Like oil and gas, the solar industry also has upstream, midstream, and downstream, and everyone plays their own part in making the industry work.
Concentrating on all aspects of the industry is not a very efficient way to do business.
This is a wonderful submission. Solar energy is the best alternative to our current state in the country. I pray God to prosper your visions. Amen
We like importation a lot nigeria cannot build zinc ore refinig factory, alumunion refining factory, iron ore refining factory are all killed to enable white man to produce & sell to us. Nigeria is a large market to sell finished or semi finished products. You even do wonders by assembling semi finished products, we need more people like you. Bravo brother!
Really disappointing that national assets like Ajaokuta Steel Industry are yet to achieve the objectives for which they were setup for over 25 years ago. Nigeria should have been in the forefront on alternative energy by now instead of struggling to catchup
Here is what I believe to be a VERY simple task for this administration in cushioning the effects of the recent fuel subsidy removal in relation to the ever-rising electricity cost, electricity failure and this inevitable hike in solar units & installation; There are 774 LGAs in Nigeria, Kano State has the highest with 44 LGAs and Bayelsa has the least with 8 LGAs and just by going off the 2023 approved budget by each state legislative houses, the lowest approved amount was N113 billion for Ekiti State. Now, the previous administration developed, constructed and operationalized a 10MW solar farm in Kumbutso LGA of Kano state on a 24 hectare of land in 2 YEARS while also dealing with the supply challenges in the after-math of Covid 19. This project cost the Federal government $16m only. In case you are wondering, 10MW can easily power 2000 homes and I am not even gonna go into the jobs this project created in the Kumbusto area or the jobs this type of project usually creates… the point is that a 10MW solar farm that can power 2000 homes in EACH of all 44 LGA (well, now 43) in Kano State will cost only N12b, which is not bad for a state to invest in electricity every 2 years (without Covid restrictions). Therefore, all 774 LGAs can each power at least 2000 homes in no more than 2 years and it will only cost a mere dime in each of the state’s budget allocation.
Each LGA chairman need to be scheduled with the mandate of sourcing and completing their project in no more than 2 years. And also as an added bonus, it could be a good way to fish out the bad apples in government considering the template of 2-YEARS being enough time for completion. Some state could probably power more and the start of this project will curb the solar prices from being charged ridiculously high by independent dealers. Come on, Dear politicians, how many houses can one really own? On a side note, if we keep this project running for another 30 years straight, we will probably achieve our emission goals in well before 2060. Anyway, good luck!