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(Bloomberg) — Generators are everywhere in Lagos, used by almost everyone in the Nigerian megacity to counteract crippling power outages.

Those living in upscale gated communities or working at big companies turn to massive, soundproof diesel generators when the electricity grid inevitably fails. There are the smaller, noisier petrol versions for those who can’t afford to maintain a diesel rig. And at the bottom of the generator hierarchy, found in countless shops and homes, are legions of less capable machines known in Nigerian Pidgin as “I-pass-my-neighbor generators.” The derisive name mocks those who can’t afford even a generator that puts out just enough juice to run fans, turn on lights and charge phones.

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The lowest-end generators make up for their deafening roar and abundant fumes with the distinct advantage of portability, allowing users to plug in at home and work. These are the machines Femi Adeyemo has spent years trying to displace with equally flexible and affordable solar technology.

On a summer day when a package arrived from China, the staff at Adeyemo’s decade-old company, Arnergy, huddled around his desk to examine the latest prototypes. The portable power station resembles an old-school boombox and can be plugged into solar panels. A screen shows how much power it has left, and outlets connect electronics.

Arnergy has already had success offering solar technology to high-income earners, and this is meant to be its first mass-market product. The company raced to get the prototype ready as quickly as possible after Nigeria’s approach to energy suddenly changed. Bola Tinubu, the country’s new president, stood at a podium in May, dressed in his white agbada robe and a cap embroidered in green-and-white national colors, and veered far off script. “The fuel subsidy is gone,” Tinubu declared in the middle of his 30-minute inauguration speech.

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With that five-word decree, the economics of Nigeria’s nascent solar industry changed at once. “The subsidy removal has thrown that market wide open,” Adeyemo says. Fuel prices spiked 175% overnight, disrupting the economics of a generator-dependent nation. Prices have risen even further since then.

A lack of refining capacity means Nigeria imports virtually all its gasoline even though it’s Africa’s biggest crude exporter. The fuel subsidies, in place for more than three decades to keep pump prices low, recently cost the treasury as much as 400 billion naira ($522 million) per month. In all, the country spent $9.7 billion last year on imported gasoline.

But that enormous expense has been considered one of the few widespread benefits of the country’s oil wealth—and it’s been politically untouchable. When a previous government tried scrapping the subsidy in 2012, tens of thousands of Nigerians took to the streets and forced a partial reversal.

In Lagos, a city known for grinding traffic, the sudden end of the subsidy has cut the number of vehicles plying the roads. In Abule Egba, a northern neighborhood, you can watch a minibus driver turn off his engine to save fuel and hop out to push the eight-seater forward through gridlock. People across the city are adjusting to buying petrol for more than triple the price of what it was only four months earlier. Morning news shows discuss workers being forced to sleep in their offices because they can’t afford the commute home.

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Yet pushback on the policy has so far been muted, suggesting higher pump prices might be here to stay this time. The new reality has prompted dramatic changes in Nigeria’s solar outlook by putting the cost of electricity from sunlight on par with unsubsidized gasoline. Within days, energy researchers at BloombergNEF completely revamped their projections and put the country on a path to reach 1.6 gigawatts of solar capacity within a year—about triple the previous forecast. “This could be one of the first markets where off-grid solar begins to really build grid-scale volumes,” says Jenny Chase, a solar analyst at BNEF.

Near the city’s eastern border, Patience Johnson’s fridge hasn’t come on since the subsidy ended. The 45-year-old single mom used to pay 3,500 naira each week for 20 liters (5.3 gallons) of petrol to run her small generator from 9 p.m. to midnight. That allowed her to charge phones, light up her two-bedroom home and run a fan to help her 16-year-old daughter, Favour, study on humid nights. Now reading happens by candlelight, and Johnson charges her phone at work. She buys only enough food to eat within the day. “We haven’t even smelled light in my neighborhood since the end of the subsidy,” she says.

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Her neighborhood is in Ibeju-Lekki, a stretch of land sometimes called the New Lagos because it was mostly swamp 20 years ago. Now there’s an expressway flanked by uninterrupted buildings. This accelerating urbanization, found across Africa, is colliding with governments’ failure to provide basic services. More than half of Africa’s urban population lives in slums or informal settlements, often with inadequate access to water, sanitation and power.

In Lagos, about 70% of households aren’t connected to the grid. The lucky few with connections contend with blackouts lasting more than 12 hours a day. The national grid delivers only 1,000 megawatts to a city of 25 million people. By contrast, Shanghai, with roughly the same population, supplies more than 30,000MW at peak demand. Ghana’s capital, Accra, another West African city of about 5 million people, uses about 800MW from its grid.

That’s where all the generators come in. Researchers at Dalberg Global Development Advisors, a consultant in New York, estimated as recently as 2019 that Nigeria had a fleet of 22 million petrol generators with a capacity below 4 kilovolt-amperes, including I-pass-my-neighbor generators. Collectively these low-power generators emit 51 million tons of carbon dioxide equivalent annually, roughly equal to all the emissions produced by New York City.

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A third of these generators are in Lagos, where people can muster 15,000MW of energy by some estimates, 15 times more than what the grid supplies. “There’s a failed social contract that’s very apparent,” says Taibat Lawanson, professor of urban management and governance at the University of Lagos. “Everyone in Lagos is fending for themselves.”

Johnson isn’t sold on solar because most products on the market offer too much or too little. The higher-end solar home systems with panels, batteries and inverters can power a fridge, computer, television, water pump and multiple fans. Those carry an upfront cost of as much as $2,000, a year of Johnson’s pay.

At the lower end, d.light (founded by two Stanford University MBA graduates), Sun King (a Kenya-based off-grid solar provider with operations in a dozen countries) and others have taken part of the market by selling solar products that produce just enough energy to charge phones and power a few lights. Their scaled-up products, which can run fridges or barber’s clippers, have been much less popular.

Johnson decided to retrofit her petrol generator to run on cheaper cooking gas. That temporarily allowed her household to use as much electricity as before. “But now even cooking gas is expensive,” she says. Eventually she had to idle the generator.

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Lagos has a plan to provide all of its residents with reliable electricity by the end of 2036. Its strategy is anchored on the creation of a market that will serve only the city rather than relying on the national grid. A federal law passed in June paves the way for the work to start. The city aims to draw private investment to build its own grid.

“It’s a market that’s going to be transparent, and it’s a system that’s going to be expandable,” says Olalere Odusote, the most recent Lagos state commissioner for energy and mineral resources.

Nigeria has an installed capacity of 14,300MW of power, but the grid can carry only about half of that. Then only half of that residual amount gets to customers because of a litany of issues including aged infrastructure and vandalism.

“The big market isn’t working here, so the plan is to start small and then expand,” Odusote says.

Even with its own electricity market, Lagos aims to maintain an off-grid component as part of the mix, according to the city’s energy strategy. If all proceeds according to plan, fossil fuel generators will go from the city’s main source of power today to total elimination. Planners say this shift could make Lagos a more livable city.

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There’s also a national incentive. The power sector is the biggest emitter in Nigeria, and the country has pledged to become carbon neutral by 2060. Shifting away from diesel and petrol generators is the top priority in the decarbonization strategy.

But the average Nigerian isn’t thinking about their carbon footprint, and energy savings may end up being the strongest argument to change behavior. “Removing subsidies will focus greater attention on efficient sources of energy because people now have to pay for it themselves,” says Eluma Obibuaku, a senior vice president and head of power at the Africa Finance Corp. in Lagos. “Anything that’s more efficient will win.”

The country’s nascent solar industry wants to supply that efficient energy. “The economics now make sense for microenterprises, big and small families,” says Rotimi Thomas, chief executive officer of SunFi, a marketplace for solar providers and customers that provides financing.

A month after the subsidy removal, SunFi hosted solar vendors in its offices on a quiet street in Ikoyi, an affluent neighborhood whose towering trees have been felled to build luxury high-rises, broaden roads and create drainage as Lagos grows. There was palpable excitement about the possibilities of reaching a wider market following the subsidy removal.

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“The landscape has permanently changed in Nigeria for solar systems,” Thomas said to an audience of about 50 solar providers. “Almost every customer that’s using a petrol generator is fertile ground for solar now.”

Adeyemo attended as a star speaker, having recently hosted Lagos events with Bill Gates (who’s invested in Arnergy through his Breakthrough Energy Ventures). His startup isn’t the only company accelerating its growth plans. Lagos-based solar manufacturer Auxano Solar is expanding its plant’s capacity. Engie Energy Access, a unit of France’s Engie SA, has also raised its growth targets.

But there’s some skepticism, too. Financing remains a barrier to solar adoption in Nigeria. The industry also faces broken trust in the technology after an influx of substandard solar lanterns and panels made consumers wary. Above all, people value the familiar.

Breaking the generator habit isn’t easy, warns Uvie Ugono, founder and CEO of Solynta Energy in Lagos. One feature of generators that consumers value is the ability to turn them off and on as a way to manage costs, so his team built tech allowing people to set the amount they’re willing to spend on solar energy.

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“It works like a smartphone,” Ugono says. Instead of data bundles, “they buy power bundles.” This sets his offering apart from popular sales models that rely on monthly subscriptions or fixed lease-to-own payments.

It’s ironic that selling solar is complex in a sun-drenched city facing an unreliable power supply. But the sector’s pioneers understand that success will require custom-made solutions that resonate with their audience. What will it take for more Lagosians to go green?

Adeyemo says years of trying to sell solar have taught him it’s about building affordable products that suit the customer’s lifestyle rather than trying to change that lifestyle. An earlier version that failed to catch on “was ahead of its time,” he says in an admission that the transition hasn’t been easy.

As he made his way to work, crossing one of Lagos’ looping bridges, he noticed an expanse of panel-less rooftops. If Africa’s most populous city is on the verge of a solar boom, Adeyemo would be able to track it along his commute and in his business. 

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