Nigeria mainly uses fossil fuels and hydro in its 4 GW power generation fleet. It has been estimated around 30 GW of capacity would be needed to fully cover its population of 200 million people.

The International Renewable Energy Agency (IRENA) estimated Nigeria had 33 MW of grid-connected solar at the end of 2021. With solar irradiance ranging from 1.5 MWh/m² to 2.2 MWh/m², why does the country remain shackled by energy poverty? IRENA has estimated renewables could meet 60% of Nigeria’s energy demand by 2050.

Thermal power stations generate around 70% of Nigeria’s electricity today, with hydro providing most of the remainder. Five main generation companies (GenCos) dominate and the Transmission Company of Nigeria is the sole transmission entity, responsible for the development, maintenance, and expansion of the transmission network.

The distribution sector has been completely privatized. Power produced by the GenCos is sold to Nigerian Bulk Electricity Trading Company (NBET) which is the only bulk trader of electricity. It buys electricity from the GenCos through power purchase agreements (PPAs) and sells to private distributors through vesting contracts. This structure ensures that the generating companies get a guaranteed price irrespective of what happens on the distribution side. There are fundamental problems with the system which also affect the adoption of solar technology as a part of Nigeria’s energy mix.

due to policy uncertainty and lack of grid infrastructure,the lack of lender trust in the Nigerian power market also stems from fundamental issues with the electricity grid, especially with regards to its reliability and flexibility. That is why most lenders and developers require guarantees to safeguard their investments. Much of Nigeria’s grid infrastructure is unreliable.

Nigeria is a potentially big market for solar mini-grids as there are towns and communities without any connection to the grid.

Mini grids are also an opportunity for developers and financiers to serve those without access to electricity, and for the development of captive solar power facilities for heavy energy consumers, such as mines, to ensure their own reliable and affordable power capacity. There is also opportunity for development of energy storage solutions to stabilize local grids.

Tapping Nigeria’s PV potential will require a synchronous effort between the government, developers, lenders, and consumers. And time is of the essence now that many countries are in the race to net zero. Decarbonizing power infrastructure is key.

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