At year-end 2014, Nigeria had an installed electricity capacity of 10.7GW, of which 11.9% was large hydro, 0.6% small hydro and 87.5% fossil fuels. Having gone through major power sector reform, and elections in 2015, it has yet to deploy grid-scale renewable energy projects despite having a feed-in tariff (FiT) in place.
With a population of 177m and a GDP of $569bn, Nigeria is the continent’s most populous country, and its GDP growth is 6.3% per year. It is an OPEC member endowed with abundant oil and gas resources, and exports 2m barrels of oil per day. Nigeria’s economy is highly fossil-fuel dependent.
The country’s annual power capacity utilization is 37% and its peak demand is 12.5GW. Power cuts are a common occurrence, so owning a gasoline/diesel generator is common for most households and businesses that can afford one. Overall, around 58% of the Nigerian population has access to grid electricity – but among the rural population this drops to less than 20%. The electrification target is 75% by 2020 and 100% by 2030. The Nigerian grid also suffers from a lack of maintenance. In its current state, the grid would struggle to handle much more than it now delivers.
In March 2015, Nigeria elected a new president, General Muhammadu Buhari of the opposing APC party to succeed the PDP’s Goodluck Ebele Jonathan. Indications are that the new government will maintain the momentum on renewables and energy-efficiency policy development.
In May 2015, the Nigerian Federal Executive Council approved the National Renewable Energy and Energy Efficiency Policy (NREEEP). The NREEEP does not contain hard numbers. Rather, it mandates which instruments (FiTs, energy targets, etc.) will be applied.
Following the enactment of the NREEEP, the relevant energy ministries have started the work required to produce a quantitative document of targets and tariff rates called the National Renewable Energy Action Plan (NREAP). Local players and ministers expect the NREAP to be made available to power producers in 2016 as Nigeria’s first ever renewable energy-specific policy.
Nigeria currently has a target for 40GW of installed power capacity by 2020, of which 10% must come from renewable energy. Under the Multi-Year Tariff Order 2 (MYTO2), it also has a FiT set by the Nigerian Electricity Regulatory Commission (NERC) and underwritten by the government-backed electricity trader the Nigerian Bulk Electricity Trading Company (NBET).
New draft regulations for the country’s feed-in tariff were published in July 2015. They introduce another renewable energy target: for some 1GW of grid renewable power by end-2018, reaching 2GW two years later. That also acts as a cap on the available capacity under the FiT, while individual projects are limited to 30MW, with technology-specific caps for overall PV, wind, hydro and biomass capacity. Other crucial differences that make the FiT more attractive: it will be denominated in US dollars rather than Nigerian naira, and FiT rates will be fixed for the duration of the power purchase agreement (i.e. 20 years) rather than reviewed every five years.
The country has no operating grid-connected renewable energy projects except for hydro. However, there are many small scale (<50kW) solar PV mini-grid and rooftop PV projects distributed across the country built with small loans issued by the Bank of Industry and other lenders.
Aside from the NREEEP policy and FiT proposal, the most significant recent development was the unbundling and privatisation of generation and distribution companies in the Nigerian power sector. That process began in earnest in 2003 with the National Electric Power Policy, which resulted in unbundling in 2005. Privatisation began in 2010 and was completed in late 2013. The so-called transitional electricity market began in February 2015, after multiple delays, with NBET acting as a clearing house and guarantor for power purchases.
Score Summary
Nigeria scored 1.58 in Climatescope 2015, placing it 12th on the list of countries overall. This was an increase from 2014 and was largely due to a higher score on Clean Energy Investment and Climate Financing Parameter II in general, and the growth rate of clean energy investment in particular.
On Enabling Framework Parameter I, the country’s score increased thanks largely to a rise on its small base of clean energy generating capacity.
On Parameter II, Nigeria ranked 7th overall and highest among the African nations. This reflected an increase of 158% in the volume of asset finance to $359m in 2015.
Nigeria’s high score on Low-Carbon Business & Clean Energy Value Chains Parameter III was supported by a high number of value chains and service providers.
On Greenhouse Gas Management Activities Parameter IV, the country was ranked 30th and showed some strength in the carbon offsets category.