Nigeria is a fascinating country comprising “a federation of 36 autonomous states, a multi-ethnic and culturally diverse society, with an abundance of resources, Africa’s largest oil exporter, and also holding the largest natural gas reserves on the continent” (World Bank, 2017). Nigeria is the largest economy in Africa, the 11th largest oil producer in the world (The Telegraph, 2014 and International Energy Statistics, 2016) and has the ninth-largest gas reserves (GECF, 2016).
Despite these rich resources and a slow recovery from recession, very little revenue from the sale oil and gas filters down to the rural community, and the population of 180 million people (increasing rapidly towards 200 million – New Telegraph, 2018) is getting poorer and the IMF is now calling for urgent economic reforms (IMF, 2018). The current government continues to champion “the idea that for Africa’s largest economy to have any hope of making meaningful progress it needs to diversify away from its reliance on oil” (Quartz Africa, 2017) but there is little evidence that this is happening. Indeed, others claim that much of the recovery “comes from a return to oil dependence after a rise in global oil prices and a rebound in crude production” (Reuters, 2018), so potentially fragile.
The population and the economy of the resource rich country have not benefitted as much as they should from the rich reserves. The country continues to suffer from insufficient power generation to meet demand as well as regular power outages (Adeyemo, 2017). Installed capacity is a fraction of other developing countries such as Brazil, China and India (Soleye, 2017). In fact, more than half of Nigerians are said to live without access to electricity entirely (just 10% of the rural population and half of those in urban areas), and a regular supply is restricted to about 25%, affecting home life as well as being hugely disruptive to economic activity.
In order to move forwards, Nigeria has to take action to develop the economy and one key aspect is in power supply. A buoyant Nigerian economy, which could be attainable with a number of significant changes including a reliable and sustainable energy supply, could lift the country dramatically, and even drive the African continent forwards. It could become a key power on the global stage with the associated benefits for its population.
1.2 Industry background
The Nigerian power supply chain is complicated, incorporating many organisations and companies, and is important to understand to fully understand the current position, the opportunities and the way forward.
Private companies have operated in electricity generation, transmission and distribution sectors since 2005.
Twenty-three generating plants, operated by six private companies, 40 independent power producers and 10 national integrated natural gas power projects, with a total installed capacity of 12.522 GW, although operational capacity reduces this to 7.5 GW and actual generation of just 3.879 GW.
Power supply in Nigeria is dominated by thermal plants (oil and gas), which comprised 77% of total energy generated in the final quarter of 2017, followed by hydroelectric (23%). Currently, however, there is no solar or wind power plant connected to the grid. Although hydroelectric power generation continues to expand with output expected to double by 2024 following recent Chinese investment (Monks, 2017), there are still barriers to sustainable energy development (Edomah, 2016, Nigeria Electricity Hub, 2017 and Oyedepo, 2012). And there is little focus on solar power, which is said to have the potential to supply all of the energy demand, and therefore could revolutionise life and the economy in Nigeria (Akinosun, 2017).
Transmission is controlled by the government-owned Transmission Company of Nigeria. It is responsible for moving electric power generated by the electricity generating companies to the distribution companies. Transmission capacity amounts to 5.3 GDW with losses of 8.34% (2016) and 9.47% (2017).
Finally, eleven private electricity distribution companies provide net power of approximately 3.1 GW after additional losses amounting to around 12% of the total generated.
Less than half of the population has access to electricity, and it is estimated that current supply represents between 20% and 25% of Nigeria’s minimum demand of 12-15 GW.
1.3 Research aims, objectives and questions
This research focuses on exploring and explaining whether Nigeria could generate power exclusively from renewable energy to supply all of its demand within a specific timeframe.
The aim of the research is to evaluate how and when Nigeria can meet all of the demand for electricity from fully sustainable energy generation.
The specific objectives are to:
• evaluate the current issues of power generation in the country
• assess the political will (for and against fossil fuel as well as renewable energy production)
• analyse the advantages and disadvantages of generating all energy from renewable sources in Nigeria
• devise an action plan and timescale for possible implementation.
These objectives translate into specific research questions:
• What is the historical and current energy supply and demand position in Nigeria?
• What are the reasons for the imbalance in supply and demand?
• What is restricting the development of the power supply industry?
• What are the reasons for the regular power outages and their implications?
• What can Nigeria learn from the experience of other countries – those with a similar fossil fuel to renewable energy generation profile, those using wholly renewable energy and those which have or had similar under supply positions?
• Is Nigeria capable of replacing fossil fuels with fully sustainable energy generation? (solar energy in particular) If so, when and how?
• What are the limitations and restrictions – technical, financial or other – on the transformation? And how can they be overcome?
1.4 Rationale for the study
The study seeks to find a solution to the conflicting issues that affect the Nigerian economy – the potential of the economy and the enterprise and enthusiasm of the population restricted by insufficient and unreliable power supply.
Much has been written about the oil and gas industry and the anomalies within the electricity supply sector in general, but very little on how the transition to a reliable, secure and sustainable supply can be achieved within a suitable timescale.
This research aims to fill the gap with an initial proposal to do just that.
1.5 Research approach
The research is strongly data driven with a focus on quantities and numbers, and has included secondary data collection covering government, legislative and industry organisations, news and technical journals, websites and industry reports.
The initial secondary research defined the research questions and the specific topics for further investigation, as well as identifying individuals and organisations to approach for primary research.
Primary data and information collection has involved research among political leaders, experts in the fossil fuel and renewable energy sectors, national and international companies in the industry, energy producers and consumers, as well as two research visits to Nigeria.
2 Literature review
2.1 Introduction
The literature review has honed the research questions and specific topics for further investigation, as well as identifying individuals and organisations to approach.
The literature review has enabled a breakdown of the subject into the main concepts and key words; limited the scope of information by adding more key words and taking into account its age, language, geography and quality; and assed the value of information sources such as databases, websites and library catalogues.
Initial sources of information have included:
• Interactive community library
• Internet search, including: government websites, legislative websites, industry and corporate websites, conferences, newspapers, official statistics, books, journal articles, libraries and professional bodies.
2.2 Power supply and demand
Power supply and demand in Nigeria is well documented in the literature, both by internal national state bodies and by external organisations for political and economic clarity. The Nigerian Electricity Regulatory Commission (2018) for example, with its goals of uninterrupted electricity, private sector participation, consumer protection and fair regulation, clearly sets out capacity, generation, transmission and distribution data and monitors the performance of the supply industry. And the National Bureau of Statistics (2018) provides power sector reports of energy generated, sent out and consumed. The World Bank (2018), partly funding electricity transmission projects, and PwC (2016) providing advice to investors, are two examples of external organisations providing clear evidence of the energy supply position in Nigeria.
These organisations show that more than half of the population (approximately 55% or 95 million people) is without electricity altogether, a regular supply is restricted to about 25% and there is insufficient energy generated to cater for current demand. Unreliable supply forces households and industry to generate their own power. The World Bank estimates that 41% of Nigerian businesses generate their own power supply to supplement the national supply, at a cost approximately 2.4 times higher. The sector is affected by structural problems in generation, supply, transmission and distribution. Operational capacity of power plants is less than one third of their installed capacity. Oil and gas pipelines are damaged, lack of maintenance affects transmission and high distribution losses have led to unviable operations.
The Nigerian government has attempted to improve the power sector since 2005 with structural reforms including privatisation of generating capacity, transmission and distribution and new regulations, but all with little affect. It continues to focus development effort on hydro, coal and natural gas, rather than on power generation through solar, wind and other renewable resources.
Twenty-five generating plants, operated by six private companies, 40 independent power producers and 10 national integrated natural gas power projects, with a total installed capacity of 12.522 GW, although operational capacity reduces this to 7.5 GW from 21 plants and actual generation of just 3.879 GW due to obsolete equipment and poor maintenance.
Power supply in Nigeria is dominated by 22 thermal gas plants, which comprised 77% of total energy generated in the final quarter of 2017, followed by three hydroelectric plants (23%) and small (negligible) amounts from solar and wind. Hydroelectric power generation continues to expand with output expected to double by 2024 following recent Chinese investment (Monks, 2017).
Transmission is controlled by the government-owned Transmission Company of Nigeria. It is responsible for moving electric power generated by the electricity generating companies to the distribution companies. Theoretical transformational capacity amounts to 19 GW with 159 substations, transmission lines of 15 GW and transmission capacity of 5.3 GW which is well above the 3.879 GW operation generation. Transmission losses amount to 8.34% (2016) and 9.47% (2017), despite an operation aim of reducing losses to 5%. If operational generation increases it will be limited by transmission capacity without investment in infrastructure here too.
Finally, eleven private electricity distribution companies provide net power of approximately 3.1 GW after additional losses amounting to around 12% of the total generated. Overall, less than 25% of total installed capacity is actually distributed as power to consumers, and it is estimated that current supply represents between 20% and 25% of Nigeria’s minimum demand of 12-15 GW.
The constraints, therefore, on power supply are:
• lack of investment in installed capacity to reach minimum national demand
• the gap between installed and operational capacity due to insufficient gas production, poor infrastructure and lack of maintenance
• poor transmission infrastructure
• losses from distribution to consumer
In order for supply to meet demand and to at least reduce the power shortages, these problems throughout the supply chain must be resolved, in particular improving power generation. Despite intervention by the government, the position has not improved.
Power consumption per capita (129 KWh in 2017) has really not increased in almost two decades and is far below other countries (178th of 217). Nigeria should see a 4 to 5 times increase in consumption to put it on a par with similar GDP per capita nations. Similarly, the proportion of the population supplied by electricity is low compared to other countries in Africa.
The reasons are for the regular power outages are the lack of generated electricity, insufficient to cater for demand, and the partial or total system collapses in transmission.
The implications of the lower power supply and regular power outages is that it restricts economic growth and social prosperity.
The factors restricting the development of the power supply industry include insufficient gas production and supply to the domestic market (of which only 9% goes to power generation), despite huge reserves. The volume supplied is insufficient to run the existing thermal power plants – it would require approximately double the volume to operate all current capacity. This is because there has not been enough investment due to low gas prices and small returns and now there is not enough gas processing and pipeline infrastructure, limited funding and discussions on regulating the industry have caused uncertainty.
In addition, poor maintenance of, lack of infrastructure investment and capacity limitations in the transmission system have and will continue to restrict the development of the power supply industry.
In terms of distribution, the biggest challenge is the level of distribution losses. Recent data suggests that approximately 46% of energy is lost through technical (12%), commercial (6%), where energy is not billed, and collection losses (28%), where energy is billed but not paid for.
In addition, transmission to rural communities is restricted by the cost of installing a grid which depends on the system used, the length of connection required, topography, usage pattern and the load factor of the supply point. Consequently, grid connection has become less popular and less economically viable for electricity generation in rural areas.
There are enormous challenges in all sectors of the power industry if electricity supply is ever to meet demand. The long-term viability of the sector is tied to the health and sustainability of all stages of the value chain from generation to payment by end users.
2.3 Solutions
Refurbishing and restoring existing generating capacity as well as construction of new power stations will go some way to meet the demand. In addition, increased gas production and improved gas delivery is required as well as repair, maintenance and expansion of transmission capacity.
The transmission company has approved many projects to strengthen the network, but past experience suggests that work will be slow and completion will take time due to lack of finance. Indeed, the cost of installing a grid system to some communities is the major barrier for access to the national supply network.
The problems throughout the supply chain must be resolved to reduce the power shortages at least, and in particular improve power generation. Despite intervention by the government, the position has not improved.
The government has stated the need to invest US$1 billion per year for ten years to upgrade and expand the electricity transmission infrastructure. So the recent announcement (February 2018), that the World Bank had approved credit of US$486 million for a four year programme of rehabilitation and upgrading of electricity transmission substations is a good start. They state that “The investments under the Nigeria Electricity Transmission Project will increase the power transfer capacity of the transmission network and enable distribution companies supply consumers with additional power. Together with other investments and policy measures, the project will contribute to ensuring adequate and reliable electricity supply that is necessary for Nigeria’s continued economic development. It will also support private sector participation, capacity development and better governance in Transmission Company of Nigeria and sector institutions.”
The challenge of financing the remaining additional investment required raises questions as to the likelihood or viability of achieving this option. Consequently it is important to explore alternatives.
Generating power privately is said to be 50 times more than the cost of operating on the power supply from the national grid, so Nigerian companies often choose to relocate outside the country, to places like Ghana. The resident population, however, has had no choice but to install generators as a private source of power supply. In fact Nigeria is the leading importer of generators in Africa (United Nations, 2016), with a value of approximately US$30 billion annually, to power factories, offices and homes.
Generators do help with supply but they can emit toxic gases and carcinogenic substances and led to over 14,000 deaths in one year (2014).
A renewable source of energy is a key alternative and a solution to many of these problems. Solar power in particular, with a focus on off-grid power generation.
2.4 Solar power
The National Agency for Science and Engineering Infrastructure (NASENI) has advised the Federal Government that solar energy is the most suitable means of providing electricity to rural communities that are far away from the reach of the country’s power grid, in total affecting over half of the Nigerian population.
The cost of installing a grid system to supply rural populations is unviable economically due to the length of connection required, topography and usage patterns. As Nigeria receives 5.5kWh per square metre per day of solar energy and an average of six to nine hours sunshine per day, solar energy has the potential to tackle this challenge.
The growth of solar power generation worldwide is set to boom (Landbery and Eckhouse) due to the declining price. It is now cheaper than coal and within a decade is forecast to be the lowest cost product, falling below wind and natural gas power.
The latest Bloomberg New Energy Finance study (Bloomberg, 2018) of comparative costs worldwide shows an 18% improvement in the competitiveness of onshore wind and solar in the last year, but innovations such as roof tile solar panels are also driving the sector. Since 1977, prices have fallen from about US$77 per watt to current levels of about $0.30 per watt and are expected to decline by 50% approximately every 10 years.
Historical cost of solar PV models (US$ per watt)
Bloomberg New Energy Finance
This continued drop in the cost of solar PV modules has made solar energy significantly more competitive with other sources of energy, especially true for utility-scale solar plants. The cost of electricity for solar power plants entering service in 2022, is expected to be US$85 per MWh compared to an average cost of electricity of US$102 per MWh for all power plants. Solar power is projected to become cheaper than coal in 2024 and wind in 2029
Greenpeace (2018) argues that solar could meet the world’s energy demands many times over. Bloomberg New Energy Finance projects that solar will account for 29 percent of the world’s electric capacity in 2040, up from 4 percent in 2015.
This research focuses on exploring and explaining whether Nigeria could generate power exclusively from renewable energy to supply all of its demand within a specific timeframe.
The aim of the research is to evaluate how and when Nigeria can meet all of the demand for electricity from fully sustainable energy generation.
The specific objectives are to:
• evaluate the current issues of power generation in the country
• assess the political will (for and against fossil fuel as well as renewable energy production)
• analyse the advantages and disadvantages of generating all energy from renewable sources in Nigeria
• devise an action plan and timescale for possible implementation.
These objectives translate into specific research questions to be addressed in the research:
• What is the historical and current energy supply and demand position in Nigeria?
• What are the reasons for the imbalance in supply and demand?
• What is restricting the development of the power supply industry?
• What are the reasons for the regular power outages and their implications?
• What can Nigeria learn from the experience of other countries – those with a similar fossil fuel to renewable energy generation profile, those using wholly renewable energy and those which have or had similar under supply positions?
• Is Nigeria capable of replacing fossil fuels with fully sustainable energy generation? (solar energy in particular) If so, when and how?
• What are the limitations and restrictions – technical, financial or other – on the transformation? And how can they be overcome?
The research has been strongly data driven with a focus on quantities and numbers. It has included secondary data collection covering government, legislative and industry organisations, news and technical journals, websites and industry reports.
The initial secondary research has honed the research questions and the specific topics for investigation, as well as identifying individuals and organisations to approach for primary research.
Primary data collection has involved research interviews among political leaders, experts in the fossil fuel and renewable energy sectors, national and international companies in the industry, energy producers and consumers.
In addition, two research visits to Nigeria have been undertaken in November 2017 and May 2018. Specifically to three areas (Foreign & Commonwealth Office, 2018):
• the oil producing Delta state and its commercial capital city Warri, one of the major hubs of petroleum activities and businesses in southern Nigeria
• Lagos state and city, probably the most economically important state of the country
• Osun state in south-western Nigeria, the capital Oshogbo and several surrounding towns and villages.