Updated legislation in Nigeria leads to pipeline of renewable projects

Renewable energy has long been a core part of the electricity mix in Nigeria, with its three hydroelectric dams contributing around 20% of power supply. However, with the passing of a new national renewable energy policy, including targets and feed-in tariffs for various forms of renewables, the country hopes to take an even bigger step. The goal is to source 10% of renewable energy from sources other than large-scale hydro by 2020, an objective outlined in the National Energy Masterplan. That implies a total of 2000 MW of new, renewables-based generation.

The Law 

The National Renewable Energy and Energy Efficiency Policy became law in 2015 and provides a legislative framework for renewables deployment. Distribution companies will be required to buy half of the output produced, and Nigerian Bulk Electricity Trading, the state’s buyer and redistributor of power, will take the other half. The programme’s design hopes to attract smaller facilities with capacity of 1-30 MW, while those with a greater capacity will have to meet additional requirements. The feed-in tariffs are to be set with 2016 as a base year, with incremental increases to follow after. The tariffs are to be denominated in dollars, and producers are expected to sign 20-year power purchase agreements in order to access the programme. The Nigerian Electricity Regulatory Commission will be responsible for maintaining the tariff regime. In 2016 the rates are $177 per MWh for solar power, $125.47 for wind, $154.72 for small hydro and $154.71 for biomass.

Larger Role 

Nigeria has long seen smaller facilities as being more suitable for off-the-grid production for specific cities or areas, such as solar power for remote settlements. However, the pipeline of large-scale projects is growing to include hydro and solar as well. In February 2016 Babatunde Raji Fashola, the minister of power, works and housing, announced that construction had resumed at Zunguru Hydro Power Dam after a legal delay of about two years. The $1.3bn government project in Niger State will add 700 MW of capacity, with concessional financing from the Export-Import Bank of China and construction led by Sinohydro.

A bigger dam project at Mambilla is still in the earlier stages and has faced a longer delay. A site was first chosen in 1982 and the government had been in talks with Sinohydro for the construction contract for the dam in 2012. However, the contract with the Chinese firm was cancelled in 2013 and no final details on the project, which reportedly will have a capacity of up to 3050 MW, have emerged since.

Outside of hydro, a number of projects have been proposed. Nigerian Solar Capital Partners, a joint venture between Gigawatt Global, a Dutch renewables developer, and Industry Capital Advisors, a US-based private equity firm, has proposed a 135-MW solar photovoltaic installation in Bauchi State. Nigerian-based JBS Wind Power has put forward a plan for a 100-MW wind farm in Plateau State. Another potential investor in Nigerian renewables is Black Rhino Group, a new vehicle capitalised by US energy investment firm Blackstone Group. In March 2016 Muhammadu Sanusi II, chairman of the board at Black Rhino, told local energy sector review Sweet Crude Reports that among the $10bn worth of projects under consideration was a solar-power facility in Kano State.

Funding 

Renewables projects could also be in line for risk-mitigation instruments such as the locally developed put-and-call option agreement or the World Bank’s partial risk guarantees, similar to those that helped the Azura-Edo Independent Power Project. Guarantees for these programmes are contingent liabilities on the government’s balance sheet, so discretion lies with the federal government to choose which projects it wishes to back. While as of mid-2016 the government had not yet released an updated list of which projects fit the criteria, a 2014 list submitted to the World Bank contains two renewables projects.

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The Report: Nigeria 2016

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