A study for increased revenue generation for distribution companies in Nigeria through the application of renewable energy. Case study: Kaduna Electricity Distribution Company (KAEDCO)

Overviewing the overall electricity industry in Nigeria, it’s clear that there exists a huge gap in the entire value chain. Full invoices are not being paid or collected by any of the three arms (generation, transmission, and distribution) of the power sector. There are blames and counter blames between all three arms. The distribution (dis-com) being the sole cash entry point into the entire value chain is under tremendous pressure to develop strategic ways to increase the revenue flow to distribution companies. The monthly repayment deficit to generation companies and the transmission company of Nigeria by each dis-com is in excess of NGN2billion (US$4.1million, equivalent) since their inception [1]. The use of renewable and sustainable energy to achieve financial stability and growth in the sector has great potential. It is explored in this study using Kaduna Electricity Distribution Company (KAEDCO) as a case study. The R2 Residential customers under the company (R2, consume between 10 kWh and 40 kWh per day) account for 90% of the total customer population. Customers under this tariff class consume 65% of the electricity supplied to KAEDCO but only pay 17% of their total bill amount. Further analysis shows that 70% of the customers are farmers. Considering this category of customers account for the majority of KAEDCO’s customer base, yet pay the least in terms of weighted percentage, the study focused on farmers under the R2 tariff class.

The study employed a multidisciplinary mixed methods approach comprising of a fieldwork in Nigeria where qualitative data was collected via stakeholder interview and quantitative data collected via the use of a questionnaire. This was used to develop a socioeconomic analysis.

Findings from the fieldwork showed only 10 (6.9%) respondents paid above 50% of their bills. All these 10 respondents were commercial farmers and had savings of $300 and above monthly. On the contrary, 92 (63.8%) respondents who reported a monthly savings of $50 and below all paid between 11% - 30% of their bills. All the 92 respondents reported to spending all their income on home necessities every month and were left with no savings. As such, low payment of bills was attributed to customers not having enough money (savings) at the end of electricity billing circle, and poor service delivery which caused consumer apathy towards paying bills.

After completing the field investigation, the use of renewable energy to increase revenue was evaluated for feasibility. and it was established that the project was feasible. An economic analysis was carried out using the net present value method to calculate the levelized cost of water (LCW) for a 10m³ per day system comparing a solar PV system to a petrol generator over a 20-year period. The LCW for the solar PV system and petrol genset were calculated to be US$0.35/m³ and US$1.74/m³ respectively. It was concluded that over 20-year, KAEDCO customers could be saving US$1.39/m³ on the LCW for a 10m³ per day system if they embrace a SWPS compared to using petrol gensets. This could then be channeled into paying more on their electricity bills.