Going solar to escape diesel and the grid: the contract terms that decide whether it pays

The push is easy to understand. After the government removed subsidies for Band A customers in 2024, in exchange for a promise of at least 20 hours of supply a day, many large users saw their bills jump. One university reported its monthly bill rising from ₦80 million to ₦250 million. Diesel is no cheaper. Solar looks like the obvious answer, and often it is.

Three ways to buy solar

Structure	What you pay for	Who owns the system	Who carries most of the risk
Outright purchase	The equipment, upfront	You	You
Lease or lease-to-own	Monthly rent for the equipment	The installer, until any transfer	Shared, depending on the contract
Power purchase agreement (PPA)	The electricity produced, per unit	The installer	Mostly the installer, if the contract is well written

The eight terms that matter

1. A guarantee on output, not just equipment. Panel and inverter warranties protect the hardware. You need a guarantee on the energy delivered each month or year, with a real remedy when it falls short.

2. Price and escalation. Is the price in naira or dollars? How often can it rise, and by how much? A dollar-linked price moves currency risk onto you.

3. Maintenance and response times. Who cleans, repairs and replaces batteries, and how quickly?

4. Ownership and exit. What happens if you move premises, sell the business or want out early? Is there a clear buy-out formula?

5. Installer failure. If the installer goes under, who maintains the system, and can its lenders take equipment off your roof? Ask for the right to step in or take over.

6. Your landlord. If you rent, get written consent before installation and agree who owns the system when the lease ends.

7. Insurance. Who insures the equipment against theft, fire and damage?

8. Regulatory status. A business generating more than 1MW for its own use needs a captive generation permit from the regulator. If the installer sells you electricity by the unit rather than leasing you equipment, ask whether its arrangement needs a licence or permit, and who carries the risk if it does.

Our view

Too many businesses sign the installer’s standard contract because the savings look obvious. But the savings depend on three things the standard contract rarely protects: steady output, a stable price and an installer still in business ten years from now.

A one-page performance schedule with a real remedy is worth more than a long equipment warranty. Where possible, price in naira, or cap how far a dollar-linked price can move in a year. And never let installation start before the landlord, insurance and exit terms are agreed.

What to do now

• Write down your current energy costs: grid bills, diesel, generator maintenance. That is the baseline any proposal must beat.

• Ask for proposals under at least two structures, and compare the total cost over ten years, not the monthly figure.

• Have the contract reviewed before you sign, with the eight terms above as the checklist.

• Confirm landlord consent and insurance before anyone climbs onto the roof.