Nigerian cooking lady, plus chicken

Off-the-grid thinking to end Nigeria’s blackouts

Image credit: Getty Images

Nigeria is one of Africa’s most developed, resource-rich countries and yet it has notably failed to provide its people with a reliable electricity supply. That is at last beginning to change.

Five years after the privatisation of Nigeria’s power sector, even the most luxurious Lagos hotels still suffer daily blackouts. The size of the gap between the country’s energy needs and its current provision is daunting.

Although rich in oil and gas as well as hydro and solar resources, Nigeria’s power companies generate only about 4,000MW on a typical day, according to the US Agency for International Development. That is less than one-third of what is required to supply its more than 190 million citizens.

Debate over the gap has now shifted towards off-grid, distributed solutions, where smaller units can generate and distribute power locally rather than through centralised grids.

Out of 137 countries in the Spectator’s index of worst-performing countries in 2017, Nigeria has the second-worst supply of electricity after Yemen. This is shocking, given that Nigeria’s first power station opened as long ago as 1968.

The country became a major oil producer in 1956, has huge gas reserves, and gained independence in 1960. Now Africa’s most populous country, Nigeria has only 12,667MW of installed on-grid electricity capacity, of which as much as half is not operational at any one time.

Despite nearly $20bn having been spent over two decades on increasing electricity capacity, less than half of Nigeria’s population has access to electricity. Electricity is both expensive and unreliable, and many households depend on liquified petroleum gas or wood for cooking, something which is very often done by candlelight. Furthermore, businesses spend almost $14bn a year on imported, expensive and dirty diesel for their onsite generators, creating smog in major cities like Lagos, Abuja and Port Harcourt.

The parlous condition of Nigeria’s power sector is down to a mix of factors, of which perhaps the most important is that, until very recently, it was wholly state-owned and operated with too little spent on maintenance and investment in new power plants, or in transmission and distribution infrastructure. Indeed, no new electric power infrastructure was built between 1980 and 1990.

These factors have combined with startling levels of mismanagement, theft, corruption, and the basic failure to actually collect payments for electricity used, to make Nigeria’s power sector an extremely flawed operation.

To address the problem, Nigeria’s government took some serious steps to combat the country’s problems, including partial liberalisation of the power sector. It established a new national regulatory body, the Nigerian Electricity Regulatory Commission (NERC), and unbundled or broke up the power sector into separate components, namely state-owned grid operators but with contracted-out management. It also partially privatised the distribution network into regional distribution companies (‘discos’) and created six fully privatised independent generating companies (‘gencos’).

In addition to the partial liberalisation of the market structure, the government undertook to substantially increase the country’s on-grid power capacity from a negligible 12,667MW in 2018 to 22,958MW by 2023.

Nigeria has abundant gas reserves of 192 trillion cubic feet (5.4 trillion cubic metres), and gas provides nearly 80 per cent of power generation. Despite this, power stations have found themselves short of gas due to insufficient pipeline capacity, a lack of pipeline connections and sabotage of pipes.

All this is likely to change. The Nigerian Gas Processing and Transportation Company (NGPTC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), plans to build the 1,300km-long Trans-Nigeria gas pipeline, according to a report in Oil Review Africa.

The first section comprises the $2.8bn 614km AKK pipeline connecting Ajaokuta with Kano. Its second section will link the Qua Iboe terminal with Cawthorne Channel/Alakiri plus a metering station to be located at Obiafu/Obrikom.

The third and final section will be laid between the Obigo gas compressor station and the Ajaokuta node. This pipeline is designed to carry between 11 and 24 million cubic metres per day of natural gas and link gas fields in south-eastern Nigeria with proposed new gas power plants throughout the country. The pipeline will also form part of the Trans Sahara Gas Pipeline.

According to the Oil Review Africa in October 2018, the planned creation of a virtual gas pipeline network to carry gas from Nigeria’s vast gas fields to existing gas power plants has been developed sooner than expected. This project by the NNPC and a private firm, aims to transport about 84 million standard cubic feet of gas a day, in customised cryogenic tankers, from gas production fields to areas not easily accessible by pipeline.

To inject finance into the whole power generation sector, the Central Bank of Nigeria has agreed to guarantee payments to be made by the Nigerian Bulk Electricity Trading Plc to gas suppliers. Also, there are to be major upgrades to the national transmission network, to be partially financed by a now-approved $486m credit facility from the World Bank. These are planned to increase installed on-grid capacity to 21,854MW by 2022. However, in reality, this would provide just 0.1kW per head for the greatly increased population of 216 million by that time.

Recognising the challenges, the Nigerian government has produced a Power Sector Recovery Programme. The role of renewable energy is targeted to increase from 13 per cent of total electricity generation in 2015 to 23 per cent in 2025 and provide 10 per cent of energy consumption. Another target has been to increase electrification rates from 42 per cent in 2005 to 60 per cent in 2015 and 75 per cent by 2025.

The plan includes increasing small hydro from 600MW in 2015 to 2,000MW by 2025. There is also a proposition to build 500MW of solar PV and 40MW of wind power and expand generating capacity of biomass-based power plants from 50MW in 2015 to 400MW by 2025.

Fiscal and market incentives are being introduced to support growth in renewable energy, including a moratorium on import duties on renewable energy technologies and development of further tax credits, capital incentives and preferential loan opportunities for renewable energy projects.

By 2020, Nigeria plans to have laid enough solar mini-grids to supply power to more than 100,000 homes. Solar mini-grids are not a new concept and are a popular way to provide low-cost reliable electricity to rural areas around the world. In Nigeria, they have the potential to give 26 million residents access to electricity, according to GIZ, the German aid agency that supports this initiative.

Infrastructure

Power generation, transmission & distribution

The Nigeria Electricity Supply Industry (NESI) has the following industry participants:

Federal Ministry of Power.

Nigerian Electricity Regulatory Commission.

Electricity Generation Companies (GenCos).

Transmission Company of Nigeria (TCN).

11 Electricity Distribution Companies (DisCos).

Nigerian Bulk Electricity Trading Plc.

Gas Aggregator Company of Nigeria.

Nigerian Electricity Management Service Agency (NEMSA).

There are currently 23 active grid-connected generating plants.

 

There are plans to nearly double the country’s power generation capacity from just 12,667MW in February 2018 to 22,958MW by 2023, according to African Live Data 2018.

In February 2018, Nigeria’s generation capacity consisted of 10,729MW of gas power and 2,358MW of hydropower. There are plans that by 2023, gas power will provide 18,095MW, hydropower 3,809MW, solar 779MW, wind 60MW and diesel 215MW. This means that by 2023, gas power generation will remain the dominant source of power, despite investment in expansion of renewables.

In terms of specific projects, there are a number at various stages of development. For instance, already completed in May 2018 is the $900m 461MW Edo-Azura Open Cycle Gas Turbine power station near Benin City in Edo State.

In addition, construction has started on what will be Nigeria’s largest dam project, the 3,000MW Mambilla hydro plant in Taraba State, which is scheduled for completion in 2024.

This is not to neglect improvements in the grid. The recently formed grid operator, Transmission Company of Nigeria (TCN), installed and energised 29 high-voltage transformers and substations across the country between February 2017 and August 2018. In addition, to improve the quality of work completed, TCN implemented various anti-corruption and bribery due-diligence measures in the procurement of contractors, equipment and services and by deploying its own in-house engineers.

While Nigeria has an installed capacity of some 12,000MW, the minister of power Raji Fashola observes that at its peak the country is still limited to just 6,000MW of electricity, largely because of criminal or terrorist sabotage to gas pipelines supplying power stations, and poor management of gas transmission.

Disruption to gas supplies for power stations continues unabated. One notable example was the January 2018 bush fire that knocked out the Escravos-Lagos pipelines, which supply five power stations in the south-west.

Moreover, the use rate – that is, the gap between installed capacity and operating capacity – continues to be poor. For example, on 12 June 2018, unused generation capacity of 2,195MW was recorded due to gas supply constraints.

It does not help that the transmission network of 20,000km is not up to the job. It has a theoretical transmission capacity of 7,500MW but operational capacity of only 3,900MW, which is far below the total installed generation capacity of over 12,500MW.

Transmission losses are high, averaging 7.4 per cent, and the radial infrastructure lacks redundancy, which contributes to unreliability of electricity supply. However, the number of system collapses has fallen from a peak of 42 in 2010 to just a few.

Cashflow problems are endemic throughout the system, partly because of customer failure to pay their power bills to regional distribution companies. These companies cannot, in turn, pay their suppliers, which then leaves generating firms out of pocket and unable to fund improvements. When prepaid metering becomes installed throughout the country these problems should ease.

The reforms of 2015 did little to attract private investment. The absence of government-guaranteed payments and cost-reflective tariffs in Power Purchase Agreements have stalled projects such as the $1.1bn Qua Iboe Power Plant, reported Reuters in December 2018.

Without bankable Power Purchase Agreements, other projects are vulnerable too. Eyo Ekpo, a former commissioner with the Nigerian Electricity Regulatory Commission also points to current regulations, which discourage new entrants from building large power plants. According to a report by Lagos-based Financial Derivatives Ltd, power generation in 2018 reached a daily average of 3,798MW, but actual daily demand is estimated at 98,000MW.

A number of power project initiatives are currently being undertaken by individual states, cities, local businesses and non-government agencies. Some of these are outlined below.

1. Lagos LNG gas-to-power project

To overcome the inadequacy of electricity supply, caused by frequent sabotage to piped gas and inadequate power generation, the state of Lagos has taken matters into its own hands. According to Reuters, the state government is currently in discussions with Bermuda-based Golar LNG to develop a $3bn 3,000MW gas-to-power plant based on a floating storage regasification unit with capacity to regasify up to 750 million standard cubic feet of imported gas a day and provide reliable power for 18 million inhabitants.

2. Katsina state solar PV plant

Helsinki-based manufacturer Wärtsilä and London-based Pan Africa Solar have signed a contract to build a 75MW PV power plant, enough to supply one million homes in northern Nigeria near Kano, under the government’s 2016 planned 1.2GW of solar provision awards.

The solar array will be built on 120ha of land and located 3.66km from the nearest substation in Kankia. The off-taker of the electricity will be the National Bulk Electricity Trader under a Power Purchase Agreement with a fixed tariff and a 20-year term.  

3. Katsina state wind project

A 10MW-capacity wind farm supplying the grid in the state of Katsina was completed in 2018 with funding provided by the Japanese International Cooperation Agency and developed by French company Vergnet. This is the first wind-based energy development in the country and the largest in West Africa. Consisting of 37 275kW wind turbines, the farm has a peak capacity of 10MW.

To provide power for rural inhabitants in particular, the government has launched a $35m Nigeria Electrification Project backed by the World Bank to establish 12,000 mini-grids. The mini-grid sector in Nigeria is defined as small, privately owned and operated systems with generation of up to 10MW capacity and a network that distributes power to several customers.

According to Greentechnica in March 2017, over 10,000 Nigerian homes already obtain their power from solar microgrids, using technology supplied by Community Energy Social Enterprises Ltd, a Nigerian company, and Renewvia Energy Corporation, a US firm.

The home solar market is still in its infancy with only around 170,000 homes equipped with solar panels provided on a pay-as-you-go system. According to Nigeria’s Rural Electrification Agency, off-grid solutions could find a $9.2bn-a-year market opportunity because mini-grids and solar home systems could save Nigerians as much as $4.4bn a year.

There is potential to install 10,000 mini-grids of 100kW each by 2023 and still leave 70 per cent of market demand unsatisfied. A medium-scale 200kW system can make a return and cover its capital cost in just three years.

The market demand exists since many rural households already spend more than $6 a month on kerosene or battery-powered torches, making a compelling case for solar home systems.

A novel project funded by Nigeria’s federal government is under way to allow four universities to disconnect from the main electricity grid and get their power from 9.3MW of solar and 5,760 battery cells supplied by Metka Power West Africa, according to PV magazine in April 2018.

David Umezurike, CEO of renewable energy services supplier Solar Force, told the Oxford Business Group in September 2018: “Mini-grid regulation, eligible customer regulation and rural grid regulations have emerged in the past few years that substantially increase opportunities for alternative off-grid energy solutions. Last year witnessed real uptake, and the sector has attracted both local and international companies.”

In the near future, it is likely that Nigeria will offer big opportunities to major companies like Tesla and Panasonic to be able to offer combined home solar and energy storage batteries to power both homes and electric cars – one thing Nigeria is not short of is sunshine.

There is currently no closure in sight for the power gap, but it can be – and indeed is being – reduced by a combination of new technologies, upgrades and new investment, as well as an increasing role for private sector finance and entrepreneurship.

Projects

Increases in capacity

Installed on-grid capacity: 12,667.4MW, of which 10,729MW (85 per cent) is gas-fired and 1,938.4MW is hydroelectric power (HEP).

Under construction: 6,516MW of on-grid capacity including 2,471MW of gas-fired, 3,820MW of HEP, 10MW of wind and 215MW of diesel.

Source: African Energy Live Data

nigeria energy mix

Image credit: African Energy Live Data

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