Degree of reliance on imported energy:
Nigeria consumed 270,000 bbl/d of petroleum in 2012. The country has four refineries (Port Harcourt I and II, Warri, and Kaduna) with a combined crude oil distillation capacity of 445,000bbl/d, according to OGJ. The refineries chronically operate below full capacity because of operational failures, fires, and sabotage mainly on crude pipelines feeding refineries. Refinery utilization rates have fallen from 65% to 18% in recent years, according to IHS CERA. As a result, the country must import petroleum although its refinery nameplate capacity exceeds domestic demand. According to the OPEC 2013 Statistical Bulletin, Nigeria imported slightly more than 84,000 bbl/d of petroleum products in 2012.
Main sources of Energy:
There are currently 23 grid-connected generating plants in operation in the Nigerian Electricity Supply Industry (NESI), with a total installed capacity of 10,396.0 MW and available capacity of 6,056 MW. Most generation is thermal based, with an installed capacity of 8,457.6 MW (81% of the total) and an available capacity of 4,996 MW (83% of the total). Hydropower from three major plants accounts for 1,938.4 MW of total installed capacity (and an available capacity of 1,060 MW).
Demand for electricity in Nigeria exceeds supply. A study by a major European engineering firm has estimated that demand will rise from around 33 terawatt hours in 2011 to between 56 and 95 terawatt hours by 2020. This will result in an increase in peak load demand from around 5,000 MW in 2011 to between 9,000 MW and 16,000 MW by 2020.
According to Nigeria's August 2013 Roadmap for Power Sector Reform, Nigeria's generation capacity was around 6,000 MW in 2012, of which 4,730 MW (79%) was from fossil fuel sources and 1,270 MW (21%) was from hydro sources. Generation capacity is projected to have increased to 6,579 MW by the end of 2013, according to the August 2013 Roadmap. Net electricity generation was almost 26 billion kWh in 2011, according to EIA's latest estimates. Nigeria has one of the lowest net electricity generation per capita rates in the world.
EIA estimates that in 2011 total primary energy consumption was about 4.3 quadrillion British thermal unit (Btu). Of this, traditional biomass and waste (typically consisting of wood, charcoal, manure, and crop residues) accounted for 83%. This high share represents the use of biomass to meet off-grid heating and cooking needs, mainly in rural areas.
Extent of the network:
Only about 40% of the households in Nigeria have access to the public utility supply and only 46% have access to electricity. Only 2% of the rural households in Nigeria have access to electricity either by rural electrification actions initiated by the government or self-generation by private individuals (Y.S. Mohammed et al, 2013)
The nation is deep-rooted in a serious energy crisis. The energy delivery infrastructure is absolutely inadequate to handle the energy demand of the country. Moreover, efforts towards considerable expansion in the quantity of electric power generated are not simultaneously accompanied by tactical expansion of the transmission and distribution systems. This is mainly prevalent in rural areas where the government focuses on traditional grid extension for electricity provisioning without any corresponding expansion of the generation system. There has been a consistent drop in power production from the nation’s power sector due to inadequate funding, persistent economic regression, poor system maintenance strategies and constraints of technical reliability (Y.S. Mohammed et al, 2013).
Potential for Renewable Energy:
Nigeria lies within a high sunshine belt and thus has enormous solar energy potentials. Solar radiation is fairly well distributed with average solar radiation of about 19.8 MJm –2 day-1 and average sunshine hours of 6hrs per day. If solar collectors or modules were used to cover 1% of Nigeria’s land area, it is possible to generate 1850 x103 GWh of solar electricity per year; this is over one hundred times the current grid electricity consumption level in the country.
Wind energy is available at annual average speeds of about 2.0 m/s at the coastal region and 4.0 m/s at the far northern region of the country. With an air density of 1.1 kg/m3, the wind energy intensity perpendicular to the wind direction ranges between 4.4 W/ m2 at the coastal areas and 35.2 W/ m2 at the far northern region.
Biomass & Biogas
The biomass resources of Nigeria can be identified as crops, forage grasses and shrubs, animal wastes and waste arising from forestry, agriculture, municipal and industrial activities, as well as, aquatic biomass. Crops such Sweet sorghum, maize, Sugarcane were the most promising feedstock for biofuel production. It has been estimated that Nigeria produces about 227,500 tons of fresh animal waste daily. Since 1 kg of fresh animal waste produces about 0.03 m3 biogas, then Nigeria can potentially produce about 6.8 million m3 of biogas every day from animal waste only. Although biogas technology is not common in Nigeria, various research works on the technology and policy aspects of biogas production has been carried by various scientists in the country.
The country is reasonably endowed with large rivers and some few natural falls. Small rivers and streams also exist within the present split of the country into eleven River Basin Authorities, some of which maintain minimum discharges all the year round. In a study carried out in twelve states and four river basins, over 278 unexploited small hydropower (SHP) sites with total potentials of 734.3 MW were identified. However, SHP potential sites exist in virtually all parts of Nigeria with an estimated total capacity of 3,500 MW. They indicate that Nigeria possesses potential renewable source of energy along her numerous river systems, a total of 70 micro dams, 126 mini dam and 86 small sites have been identified.
The total technically exploitable hydropower potential based on the country’s river system is conservatively estimated to be about 11,000 MW of which only 19% is currently being tapped or developed. These rivers, waterfalls and streams with high potentials for hydropower, if properly harnessed will lead to decentralized use and provide the most affordable and accessible option to off-grid electricity services especially to the rural communities.
Potential for Energy Efficiency:
Households consume 95% of the country's fuel-wood supply. Primary energy consumption per capita is 0.72 toe (2007), with the residential sector contributing most to final energy demand. This is primarily due to the use of fuel-wood for heating, light and cooking in many areas of the country. Extension of grid electricity, or the installation of renewable distributed generation systems, would assuage this. Issues identified within Nigeria include the dominant use of incandescent light bulbs and inefficient, often second-hand heating and cooling equipment; a lack of efficient practices in appliance usage (for example, leaving appliances on, on standby, or using multiple appliances simultaneously in a building); the widespread use of inefficient, private water boreholes, and the overlapping of industrial sites with residential areas, causing problems in the efficiency of high-volume electricity supply.
The government is in charge of the electricity distribution and generation in the nation under the umbrella of Power Holding Company of Nigeria PHCN, which was formerly called National Electric Power Authority for the past 30 years and the energy sector has suffered low investment.
Structure / extent of competition:
Nigeria is privatizing the state-owned Power Holding Company of Nigeria (PHCN) in hopes that it will lead to greater investment and increased power generation. PHCN was initially established following the Electric Power Sector Reform Act of 2005 and replaced the National Electric Power Authority (NEPA). The PHCN was made of 6 generation and 11 distribution companies. In late 2012, companies run by PHCN were put on sale for a total of $2.5 billion.
On September 30, 2013, the Nigerian government relinquished ownership of 15 electricity companies under PHCN (5 generation and 10 distribution). The purchasing companies, which are a mix of local and international, are expected to take physical ownership of the infrastructure. Nigeria's two remaining state-owned electricity companies under PHCN are expected to be sold within the following six months, according to an article by Reuters. NIPP power plants are also expected to be sold to private investors in 2014.
The unbundling of the National Electric Power Authority (NEPA) into a number of successor companies, comprising Power Holding Company of Nigeria (PHCN) Power Holding Company of Nigeria, occurred (i.e. that is, before complete commercialization), with full licenses in effect from January 2010, upon payment of license fee. Thus the previously vertically integrated state-owned utility was reconfigured as separate generation companies, a transmission company and 11 distinct distribution companies.
As of 2012, three large-scale IPPs produce approximately 25% of Nigeria’s electric power, with the balance provided by the Power Holding Company of Nigeria (PHCN) and State governments, viz. about 1,000 MW (IPPs) and 3,000 MW (non-IPP), respectively.
The introduction of IPPs has been gradual (dating to 1999), but according to the ‘Road Map’, the private power component will more than double in less than five years, including via the country’s sale of its generating assets. The incorporation of the Bulk Electricity Trader (BET) in July 2011 was among the next series of key reforms to be enacted, as described below. With ongoing reforms, championed by the Jonathan administration, and largely overseen by the Bureau of Public Enterprises, together with the Presidential Task Force on Power and the Presidential Action Committee on Power, PHCN has largely become defunct, as assets are prepared for privatization and a phased introduction of competition, as described below. As the Presidential Task Force on Power writes, “currently 70 percent of power supply in Nigeria comes from state-owned power plants,”. However, to meet stated goals of delivery and expansion, including an identified target of 40,000 MW by 2020, “in the next three to four years, 70 percent of our power will be generated by private companies."
Existence of an energy framework and programmes to promote sustainable energy:
The development of RE technologies in Nigeria has been slow. New measures are aimed to boost growth in the RE sector (legislative framework, licensing arrangements for private-sector operators, Feed-in Tariffs and clarifying market rules for RE services and products). Rural electrification programs are to take RE sources into full account. Liberalization has led to private sector participation in the generation sector, and a number of operational IPPs in the country today. Establishment of off-grid generation/distribution plants is encouraged. Means include:
- moratorium on import duties for renewable energy technologies
- design of further tax credits, capital incentives and preferential loan opportunities for renewable energy projects
- Feed-in Tariffs for solar energy, wind power and small-hydro (under development)
Renewable Energy Master Plan (REMP)
The country’s Renewable Energy Master Plan was launched in 2006 and identifies considerable potential for generating solar, small and large hydro, biomass, biogas and wind energy across the country.
Gradual movement from a fossil economy to one driven by an increasing share of renewable energy. Targets for renewable energy technologies by 2025
- Small-hydro: (600 MW in 2015) 2,000 MW
- Solar PV: 500 MW
- Biomass-based power plants: (50 MW in 2015) 400 MW
- Wind: 40 MW
- Electrification: (2005 level 42%, 60% in2015) 75%
National Integrated Power Project (NIPP)
Nigeria plans to increase generation from fossil fuel sources to more than 20,000 MW by 2020. The Nigerian government has set several targets to increase power generation over the past decade, but none of these targets have been met. The NIPP was initially established in 2004 by the Nigerian government as a plan to construct multiple natural gas-fired power plants using natural gas that was flared. Although progress has been slower than initially expected, some of the power plants are expected to come online in the short term. According to the August 2013 Roadmap, NIPP projects currently contribute more than 1,000 MW to the national grid capacity, and it is expected to reach 4,771 MW in 2015 when all planned units are expected to be completed and commissioned. A major source of capacity expansions is expected to come from Independent Power Projects (IPPs). IPPs currently contribute around 1,674 MW to the national grid capacity, and capacity from IPPs is expected to grow to about 14,000 MW by 2020, according to the August 2013 Roadmap. IPPs include power plants operated by IOCs.
Nigeria plans to increase hydroelectricity generation capacity to 5,690 MW by 2020, quadrupling the capacity from the 2012 level. The country plans to increase hydroelectricity generation by upgrading current hydroelectricity plants and constructing new plants: Gurara II (360 MW), Zungeru (700 MW) and Mambilla (3,050 MW). In late 2013, the Nigerian government announced a $1.3 billion deal with China to build the 700-MW Zungeru hydropower project. The Export-Import Bank of China will cover 75% of the cost, while the Nigerian government will finance the remaining cost.
Energising Access to Sustainable Energy (EASE)
The programme aims to improve the enabling framework conditions for renewable energy and energy efficiency in Nigeria and, in particular, with a focus on the use of renewable energies by Small and medium enterprises (SMEs) and households.
The EASE programme will also address the massive deforestation and cutting of trees for fuel wood, which is the main energy source for the majority of the population, by planting more trees. Furthermore, Nigeria is the second largest gas flaring country, emitting some 40 million tons of CO2 each day. Through the promotion of reduced gas flaring, the EASE programme will contribute to resource conservation and help fight climate change by reducing greenhouse gas emissions.
Some other activities to be carried out through the programme will include: design of energy assessment and strategies to increase access to energy, providing essential training on aspects such as norms, standards, and tariffs, or the development of business plans to demonstrate commercial viability of small-scale gas resources.
The new programme will be run in partnership with the World Bank (which will contribute with over €4.6 million) and the GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit) (with a contribution of €9 million).
Current energy debates or legislation:
In 2005, reform efforts accelerated via the Electric Power Sector Reform Act (EPSRA), which indicated how the National Electric Power Authority (NEPA) would be divided into a number of successor companies, an independent regulator would be established, and service would be extended and improved. At the time, it was among the most ambitious power sector reform programs on the African continent. By 2010, however, five years into the latest reform, very little restructuring had been undertaken, and available generation capacity was less than 4,000 MW (a figure largely unchanged since the 2005 reforms), for a population of over 150 million, the largest on the African continent. According to the Presidential taskforce, Nigeria’s gap between demand and supply represents the greatest such gap in the world (2011). In a recent survey, 83% of firms indicated that electricity was a hindrance to doing business in Nigeria.
Meanwhile, private, self-generation is ubiquitous; it is estimated that self-generation exceeds grid generation, and may be anywhere from 4,000-8,000 MW, representing a huge economic and environmental cost to society. Seen in this light, the hope and potential for change, which characterize the sector as of 2012, referenced at the outset, is significant, but it is not altogether new.
Major energy studies:
As a member state of the Economic Community of West African States (ECOWAS), Nigeria is part of the ECOWAS Centre for Renewable Energy and Energy Efficiency.
Role of government:
Federal Ministry of Power
The Federal Ministry of Power has the overall responsibility of formulating electric power policy. The Ministry’s powers are guided by the National Electric Power Policy ‘NEPP’ 2001, the Electric Power Sector Reform Act 2005 and the Roadmap for Power Sector Reform of August 2010. The NEPP is the national policy document for the power sector, the EPSR provides the legal framework, and the Roadmap is more an implementation document for reforms in Nigeria's power sector. The Minister of Power as part of its powers may issue general policy directions to NER on the power sector which NERC has an obligation to comply with except where such policy directions conflict with the EPSR Act and the constitution.
Rural Electrification Agency
The Rural Electrification Agency (REA) is a Federal Government Parastatal under the Federal Ministry of Power. It was established by the EPSR Act with the statutory functions of promoting, supporting and providing electricity access to rural and semi-urban areas of the country.
The Agency also administers the Rural Electrification Fund (REF). The purpose of the REF is to promote, support and provide rural electrification programmes through public and private sector participation in order to achieve more equitable regional access to electricity, and promote expansion of the grid and development of off-grid electrification. Eligible customers and licensees are required to contribute to the Fund at rates to be determined by the NERC.
Presidential Task Force on Power
The Presidential Task Force on Power (PTFP) was established in 2010 to drive the implementation of the reform of Nigeria's power sector.The role of the PTFP is to co-ordinate the activities of the various agencies charged with ensuring the removal of legal and regulatory obstacles to private sector investment in the power industry. It also has the mandate to monitor the planning and execution of various short-term projects in generation, transmission, distribution and fuel-to-power that are critical to meeting the stated service delivery targets of the power sector roadmap. The PTFP is administered by a Board of Directors headed by a Chairman.
Government agencies in sustainable energy:
National Climate Change Commission
On July 22, 2009, the Nigerian Senate passed a bill to establish the National Climate Change Commission as a statutory body and to vest it with the responsibility to regulate and coordinate policies and actions on climate change. The Commission is also to set up a National Carbon Market Scheme and tackle the effect of global warming and its impact on Nigeria. The Commission would be tasked with coordinating resources, policies and actions in the field of climate change, providing advice to the Federal Government and developing a national strategy for the reduction of greenhouse gas emissions and a low carbon economy.
Energy planning procedures:
The players in the Nigerian electricity market are often referred to as market participants. In order to carry on business as a market participant, it is imperative that such entity(ies) obtain the appropriate licence from the Nigerian Electricity Regulatory Commission (NERC). A generation licence authorises the licensee to construct, own, operate and maintain a generation station for purposes of generation and supply of electricity in accordance with the Electric Power Sector Reform Act, 2005. Subject to this Act, the holder of a generation licence may sell power or ancillary services to any of the classes of persons specified in the licence. An electricity generation licence is needed for any power generation activity beyond 1 MW. A distribution licence authorises the licensee to construct, operate and maintain distribution systems and facilities. A distribution licensee may also have the obligation to provide electricity to its distribution customers, pursuant to the terms of a trading licence issued by the Commission to the distribution licensee. A transmission licence authorises the licensee to carry on grid construction, operation, and maintenance of transmission system within Nigeria, or that connect Nigeria with a neighbouring jurisdiction limited to, the following activities as may be specified in the licence.
A system operation licence authorises the licensee to carry on system operation. A trading license authorizes the licensee to engage in the purchasing, selling, and trading of electricity. The Commission (NERC) determines the terms and conditions of trading licences as may be appropriate in the circumstances.
Energy regulator Date of creation:
The Nigerian Electricity Regulatory Commission (NERC) is an independent regulatory agency which was inaugurated on 31st October 2005 as provided in the Electric Power Sector Reform Act 2005.
The oil industry is regulated by the Department of Petroleum Resources (DPR, www.dprnigeria.com), a department within the Ministry of Petroleum Resources.
Degree of independence:
The Electric Power Sector Reform Act 2005 provides for the tenured appointment of seven Commissioners for the NERC, with one of them designated as Chairman/Chief Executive Officer, and another as Vice Chairman. The Commissioners are nominated by the President and confirmed by the Senate. Funding for the commission comes from operational revenues, for example from the granting of licenses, and such monies as allocated by the government for the Commission's operation, or provided upon request of the Commission.
The Director-General of the Energy Commission of Nigeria is the Secretary to the Commission. The Commission has the power to regulate its own proceedings.
Regulatory framework for sustainable energy:
The regulation of the sector and monitoring of the sector-based laws of energy, are governed by the Energy Commission of Nigeria Act, Cap 109 LFN 1990, which granted these prerogatives to the Energy Commission.
The Commission is mandated to carry out:
- The monitoring and regulation of the electricity industry
- Issuance of licences to market participants, and
- Ensure compliance with market rules and operating guidelines.
Role of government department in energy regulation:
The Rural Electrification Agency of Nigeria was first inaugurated in March 2006 to rapidly expand rural and peri-urban access to electricity in the country in a cost-effective manner, employing both grid and off-grid options. It emphasizes the application of subsidies, primarily on access expansion rather than consumption, since the intention is to encourage greater participation of the private sector providers.
As on date, the country is still in need of a market-oriented policy that will increase RE investors’ participation in constructive development of the available resources. Effective policy making is an incitement that can strengthen the prospect for investment and development of RE technology. Feed-in tariffs, investment tax credits and renewable portfolios are some policy issues that could be useful to enhance better share of RE in the nation’s power generation mix. The suggested issues are regulatory strategies to lower the costs of RE while increasing the adoption of RE sources. With the fact that soaring upfront investment expenses of RE development is sometimes responsible for their being ignored by potential investors, well-structured policies can be employed to resolve issues regarding subsidies and tax waivers (Y.S. Mohammed et al, 2013).
www.nortonrosefulbright.com (2012): Scaling-up Renewable Energy in Africa: Nigeria. Available at http://www.nortonrosefulbright.com/knowledge/publications/59010/scaling-up-renewable-energy-in-africa-nigeria Accessed 18th February 2014
Vincent-Akpu, Ijeoma (2012): Renewable Energy Potential in Nigeria. Available at http://www.iaia.org/conferences/iaia12/uploadpapers/Final%20papers%20review%20process/Vincent-Akpu,%20Ijeoma.%20%20Renewable%20energy%20potentials%20in%20Nigeria.pdf?AspxAutoDetectCookieSupport=1 Accessed 18th February 2014
Europe.eu (2013): New EU support for renewable energy policy in Nigeria. Available at http://europa.eu/rapid/press-release_IP-13-649_en.htm Accessed 18th February 2014
Y.S. Mohammed et al: Renewable energy resources for distributed power generation in Nigeria: A review of the potential. Renewable and Sustainable Energy Reviews 22 (2013) 257–268. Available at www.elsevier.com/locate/rser Accessed 18th February 2014
ICA (2012): Light inside: the experience of independent power projects in Nigeria Available at http://www.gsb.uct.ac.za/files/Lightinsidev2.pdf Accessed 24th February 2014.
Premium Time (2013): Nigeria’s power generation declines to 10-month low, says presidential task force. Available at http://www.premiumtimesng.com/news/147010-nigerias-power-generation-declines-10-month-low-says-presidential-task-force.html Accessed 24th February 2014.
NIPP Transactions website: Nigerian Electricity Market Available at http://www.nipptransactions.com/background/electricity-market/ Accessed 17th February 2014.
NERC website: Available at http://www.nercng.org/index.php/about-us Accessed 17th February 2014.
FUAS (2013): NIGERIA & RENEWABLE ENERGY Country at-a-glance http://www.laurea.fi/en/connect/results/Documents/Nigeria%20Fact%20Sheet.pdf Accessed 14th February 2014.
EIA (2013): Nigeria Available at http://www.eia.gov/countries/cab.cfm?fips=ni Accessed 15th February 2014
KPMG (2013): Nigerian Power Sector Guide Available at http://www.kpmg.com/Africa/en/IssuesAndInsights/Articles-Publications/Documents/Guide%20to%20the%20Nigerian%20Power%20Sector.pdf. Accessed 15th February 2014.
Detail Commercial Solicitors (2012): Nigeria Power Guide Available at http://clients.squareeye.net/uploads/ipfa/NigeriaPowerGuide2012EDITION.pdf Accessed 28th February 2014