Though the focus for power in Nigeria is on leveraging the country’s considerable gas reserves, there is also a master plan and contribution targets for renewable sources. The plan aims to attract investment in a range of related activities beyond building and running power plants, including equipment manufacturing, feasibility studies and capacity building. For now, Nigeria remains more prospective than productive in renewables, with only hydroelectric energy making a major contribution, at about 20% of installed capacity.
Running on Renewables
Nigeria has set a target that 18% of total capacity should come from renewables by 2020, according to a state presentation. It is an ambitious goal, given the work it will entail and the supply increases forecast in the interim – equivalent to about a tenfold jump. The authorities want a 20% contribution from renewables by 2030, chiefly from hydro and solar sources. The expectations for 2025 are 760 MW from hydro and 4000 MW from solar.
Targets have also been set for wind power (40 MW) and biomass (400 MW). The renewables plan sets clear conditions for feed-in tariffs it believes will make such projects profitable. They will be based on investment, operational and maintenance costs for individual plants as well as financing costs. In each case, a plant is assumed to have a life span of 25 years.
The government also expects that investors that produce for the national grid will see a credible and reliable buyer of power in Nigerian Bulk Electricity Trading (NBET), a state agency created as the buyer of energy from generation companies and seller to distributors. The agency was established to add a measure of reliability in the market by making it easier for large-scale power producers to get partial risk guarantees from the World Bank (see analysis). As the market matures and firms at various points in the value chain become more comfortable in long-term contracts, it is likely to be unwound to a more free-market model.
There is one major new hydro facility in the works now, at Zungeru in Niger State. A 700-MW dam expected to cost N162.9bn ($993m) is being built by Sinohydro and China National Electric Equipment. The project is expected to be complete in five years, with 75% of the cost being paid via a 20-year loan at 2.5% interest from the Export-Import Bank of China. As of mid-2014 progress toward completion was unclear for a larger project at Mambilla in the northern Taraba State. The government aims for a 3050-MW plant powered by three separate dams, a plan extant since 1982, but has yet to find a contractor to build it and in December 2013 the Federal Ministry of Power said that reports of China’s Sinohydro signing a $3.2bn contract to build the facility were false. For future participants on a smaller scale, the government has a list of 10 hydro projects for which it wants investors. The projects are for plants up to 10 MW in capacity, totalling 83.25 MW, and are together estimated to cost $207m.
Northern states have high potential for solar projects. These areas are far from natural gas reserves, and although a gas pipeline to the north has been proposed, there were no plans to build one as of early 2015. For rural communities, small solar plants are a viable solution and may be initiated by their distribution firms. Other support in the last two years has come from the US Power Africa initiative. In a partnership with General Electric, the US African Development Foundation is promoting solutions to rural problems by awarding grants of up to $100,000 to local companies, entrepreneurs or research centres looking to study or build renewables. Past winners of the Off-Grid Energy Challenge grants are TransAfrica Gas and Electric, which will use solar energy to power cold-storage units for crops in Jos; GVG Projects, which aims to extend solar power to some 24 off-grid communities; and Afe Babalola University in Ekiti State, which hopes to power its campus and environs with a mix of hydro and solar. Under another initiative called Operation Light Up Rural Nigeria, three rural communities have been powered by solar energy for over a year, as a pilot project the Ministry of Power hopes to replicate across the country.