Power outages shape Africa’s oil giants
Poor electricity supply in Nigeria has greatly hampered economic growth. The efforts of governments to reform the ailing electricity sector through privatizations and restructuring are just as long so far with moderate success. Power outages are still the order of the day, on average four to five hours of electricity are available per day so that companies fall back on expensive self-supply of power using diesel generators, which brings about a competitive disadvantage as a result.
Nigeria’s electricity sector is therefore overripe for major investments. The figures show how extensive the pent-up demand is: In mid-2020, the largest economy in Africa is believed to have an installed capacity of around 13,300 megawatts. Of these, only around 5,000 megawatts are operational due to transmission losses. Because no electricity comes from the grid, hundreds of thousands of private diesel generators produce between 8,000 and 14,000 megawatts – the most expensive electricity of all the alternatives available.
One can only speculate about the actual energy demand in the 200 million-inhabitant country. The numbers range from a very conservative estimate of 12,800 megawatts (by the government) to 100,000 megawatts. With the Nigerian Electrification Roadmap 2020-2025, the Buhari-led administration’s plans to modernize the power grid and expand capacities.
For the implementation of the project, which is divided into three phases, Nigeria has signed a six-year contract with Siemens of an unknown amount. The goal is to achieve a reliable output of 7,000 megawatts by 2021 and 11,000 megawatts by 2023. The long-term goal is a production and network capacity of 25 megawatts.
Efforts Towards Getting Constant Power Supply in Nigeria
Privatization: hope for investment
While electricity shortages are not a new problem, there has been a lack of investment in the electricity sector for years. In 2013 the electricity sector was reformed and unbundled. The formerly state-owned electricity supplier Power Holding Company of Nigeria (PHCN) was split into eleven distribution companies (DisCos), six electricity generation companies (Generation Companies of Nigeria – GENCOs), and one electricity transmission company.
The power transmission company TCN (Transmission Company of Nigeria) is still fully state-owned. The state-owned Nigerian Bulk Electricity Trading (“Bulk Trader”) obtains the electricity from the generating companies including grid-connected solar power producers (Independent Power Producers – IPP) via power purchase agreements (PPAs).
The tariffs are regulated and subsidized by the competent authority NERC (Nigerian Nigerian Electricity Regulatory Commission). The electricity price is made up of a basic fee and the respective consumption. Since the DisCos have failed to invest in the infrastructure for years, over 60 percent of consumers are billed based on estimates, as there are no electricity meters.
Since the liberalization of the electricity sector, which began in 2012, private investors are also to be attracted to the construction and operation of power plants. Almost 80 percent of Nigeria’s grid electricity now comes from gas-fired power plants, the rest is largely generated in hydropower plants. However, the larger gas-fired power plants, in particular, operate with reduced capacity due to gas supply bottlenecks, a problem that has existed for years. The need for additional power plants remains high. In the south of the country in particular, where the transmission network is comparatively well developed, further power plant projects are likely to emerge in the next few years.
Rural electrification is being promoted
Currently, only about 50 to 60 percent of Nigerians are supplied with electricity. In 2018, over 80 percent of the urban population had access to electricity, while the electrification rate of the rural population was just 31 percent. By 2025, 75 percent of the population should have access to electricity.
With the Off-Grid Electrification Strategy, the government is promoting the use of decentralized energy solutions to power households, communities, and companies. The plans are ambitious: By 2023, 10,000 mini-grids are to be developed to supply around 14 percent of the population with electricity. The provision of around 5 million stand-alone solar systems for households and small and medium-sized companies is a further goal of the strategy.
There are hundreds of thousands of diesel generators in Nigeria, producing the most expensive electricity of any available alternative. Every business, every wealthy household, and every government building is hooked up to generators. Unlike neighbouring Ghana, for example, these are not an emergency backup, but the basic supplier of electricity. Now and then the cheaper electricity flows from the grid and you can switch off the generator. Nigeria is the world’s largest market for diesel generators. Companies like the American Caterpillar and the Italian Mikano divide the market among themselves and earn a golden nose from it.
When you think of Nigeria’s megapolis Lagos, you first think of traffic chaos and smog. But also of the thundering noise of diesel generators that have been the city’s soundtrack for years. But in the last few weeks, these have become more and more silent: “We now have more electricity than ever before,” report residents of the nine million metropolia.
Some districts in Lagos have electricity 24 hours a day – without any failures, reports Zakari Yao, who runs a small shop in Lagos. “I used to have to switch off the refrigerator again and again to reduce the cost of the generator.” But now electricity is flowing regularly from the socket and he can finally offer chilled water and frozen food again.
Mechanics and welders also breathe a sigh of relief: they need a lot of electricity for this work – and it quickly becomes expensive for those who depend on the generator: “Sometimes I spent up to five thousand naira (N5,000) a month,” says the owner of a car repair shop. The equivalent of 27 US Dollars just to feed the generator – that’s a lot of money when you consider that an average monthly income in Nigeria is around 109 US Dollars.
Hybrid solutions, in which you can switch back and forth between solar and diesel power, can save costs at high diesel prices. So far, however, they have hardly been used. The same applies to possible cost savings through energy efficiency. So far, neither households nor industries are open to such measures. However, given the problems with the power supply, this is slowly changing.
Transformation of cassava into electricity
A collaboration between several companies and organizations will make it possible to valorize the treatment of waste in the rural areas in Nigeria, and in particular the cassava peels, which will be transformed into electricity.
Nigeria is considered to be the largest producer of cassava in Africa, with an estimated annual production of nearly 40 million tonnes. Cassava is an edible plant native to the Amazon basin, widely consumed and considered one of the staple foods of Nigerians, used in particular in the preparation of fufu or flour. Given the popularity of this tuber, cassava peels, if properly used to generate electricity, can represent a real resource for the country.
At the head of the collaboration is PyroGenesys, a company based in Birmingham, England, specializing in the production of electricity from waste. The consortium also works in partnership with the African Agricultural Technology Foundation (AATF), Koolmill Systems, Mobinet, Babban Gona Farmer Services, and finally researchers from the University of Leicester in England.
The technology used for this electrical transformation is called PyroPower. Thanks to this innovative process, cassava waste is transformed into briquettes, the combustion of which is a source of heat, a source of energy then captured to produce electricity. According to the president of the AATF, this process is already in place in various states of the country, such as the states of Osun, Oyo, Ogun, or Edo.
The initial objective of this project is to install 100 commercial systems composed of the PyroPower process, to produce clean and inexpensive electricity.
This initiative is in line with sustainable development objectives number 7: Clean energy at an affordable cost and 12: responsible consumption and production.
Solar power is on the rise
The Buhari-led administration had also launched Vision 30:30:30 which is expected to generate 30 gigawatts of 30 percent renewable energy by 2030.
With its Vision 30:30:30 (National Renewable Energy Action Plan – NREAP), the government is focusing on renewable energies. By 2030, the plan envisages the implementation of 30 gigawatts of installed capacity with a share of at least 30 percent renewable energies 2030. The target for the installed capacity for solar power is 2,000 megawatts by 2020 and 5,000 megawatts by 2030. Various incentives such as tax breaks or the duty-free introduction of certain goods have been created to achieve this goal. The currently installed off-grid output of photovoltaic systems is around 20 megawatts and thus remains well below the target for 2020. At the current rate of expansion, Nigeria will not even come close to reaching its target for 2030.
Nevertheless, business opportunities arise in various segments in the solar energy sector. There are opportunities in the on-grid area where interested companies can take part in corresponding tenders and auctions. However, there is more potential in the off-grid market, which the Rural Electrification Agency of Nigeria (REA) estimates at several billion US dollars per year. The implementation of the Meter Asset Provider Regulation from 2018, which liberalizes metering services in Nigeria and aims to abolish billing based on estimated electricity consumption, is also of interest to metering service providers. The first licenses were issued in 2018 with a term of between 2 and 3 years. The potential of the market is estimated at around 1.8 million US Dollars.
