Nigeria, Africa's largest economy, faces electricity shortage

Recently, the West African country of Nigeria's power grid collapsed, data from the Nigerian system operator portal shows that the grid collapse began at around 7 p.m., and the grid recorded an unprecedented zero megawatt.

This is the third time that the country's power grid has collapsed recently, and the eighth time this year, some areas have only 5-6 hours of stable power supply per day, and high electricity costs and difficult access to fuel have exacerbated the inconvenience of local people's lives.

Nigeria is located in the southeast of West Africa, the population of more than 220 million, accounting for 1/6 of the total population of Africa, is the largest population in Africa, but also the largest oil exporter in Africa.

Not only that, the country is also one of the fastest growing economies in the world, with an average annual growth rate of 6.8% for nearly 10 years, and the country has been at the top of the list since 2018 after overtaking South Africa to become Africa's largest economy.

Coupled with rapid economic growth, the country's power grid is fragile, with frequent power outages.

According to the data, Nigeria has experienced nearly 140 failures in the past 10 years, of which, between 2017 and 2023, the country's power grid collapsed 46 times, and since 2022, the grid has collapsed about 10 times.

It is estimated that Nigeria's total installed power generation is 13.5GW, the peak power demand is 8.25GW, but in recent years the actual power generation is less than 4GW, to fully provide electricity for its 200 million people, the country needs to install about 30GW of power generation facilities.

From a structural point of view, about 70% of Nigeria's existing power generation comes from thermal power, 30% from hydropower, and most of the power generation equipment is old, lack of due maintenance and maintenance, while also facing insufficient natural gas supply, serious problems such as stealing electricity.

Power shortages have forced most government offices, utilities and more than 97 percent of businesses to bring their own generators, and according to a recent report by the International Energy Agency (IEA), Nigerians have to rely on backup generators to meet 40 percent of their electricity needs.

To solve the contradiction between electricity supply and demand has become an urgent task for Nigeria's economic development.

In recent years, Nigeria is accelerating the transformation to renewable energy through a series of policy measures, focusing on photovoltaic + energy storage, hoping to meet the growing power demand and deal with energy security issues, alleviate the residential power crisis, reduce electricity costs, which provides a broad market space for the application of energy storage technology.

At the policy level, the Nigerian government launched the Energy Transition Program in August 2022 and passed a new Electricity Bill in June 2023, which led to decentralization in the power supply sector and opened the window for increased investment by local governments and private enterprises.

According to the government's Energy Transition plan, the installed power capacity will reach 250GW by 2050, of which 90% will be renewable energy.

According to a report by the Nigerian Energy Commission and the International Renewable Energy Agency entitled "Nigeria's Renewable Energy Roadmap", under current and planned policies, Nigeria's utility-scale solar systems could provide 5GW and 25GW respectively by 2030 and 2050.

Nigeria's "Green Vision" is called 30:30:30, which is the deployment of 30GW of electricity by 2030, of which 30% should come from renewable sources.

In terms of incentives, the Nigerian government has introduced the feed-in Tariff subsidy policy (FiT) and the Power Purchase Agreement (PPA), which ensures that PV system suppliers receive stable returns and attract direct investment from foreign investors.

These measures are clearly working.

At the end of 2023, Nigeria reached an agreement with Sun Africa of the United States to jointly invest $2.2 billion in the construction of a huge 961MW photovoltaic + energy storage project. Such a large installed capacity will greatly improve the reliability of the country's electricity supply, creating a more stable energy base for economic growth.

Another incentive is subsidy support for contracting companies. Nigeria has received about 10 loans from the World Bank over the past decade, worth a total of $4.36 billion, to address problems facing the power sector.

The funds are divided into two types of subsidies, one for companies that install off-grid PV systems for homes and businesses, and one for companies that install PV microgrids for homes in rural areas.

In terms of tax policy, the Nigerian government has attracted the private sector to participate in the development of photovoltaic systems through some tax breaks, reducing the import tax on photovoltaic products and other measures. These incentives encourage domestic and foreign investors to invest in large-scale photovoltaic projects by reducing the financial burden of developers and improving investment returns, which has attracted a large amount of investment for local photovoltaic projects.

In addition, Nigeria has been relying on the government's subsidized gasoline to generate electricity, and the subsidy for fossil fuels was canceled in 2023, which makes the kilowatt-hour cost of distributed photovoltaic relatively more attractive, so a large number of micro-grids and small solar independent power generation projects have emerged across the country.

The agency forecasts that with the removal of subsidy policies, it is expected that the country will add 1.6GW of photovoltaic installed capacity in 2024, and Nigeria's photovoltaic installed capacity may reach 21.5GW by 2030.

The increase in photovoltaic projects will also inevitably release more energy storage demand, a large population base and growing energy demand, indicating that Nigeria's energy storage market will have great potential for development.

Some experts believe that although South Africa, with its huge market size and mature infrastructure, is still the number one target market in Africa's energy storage market, but the slowdown in economic growth and market saturation, the pace of growth is gradually slow, the next two years, Nigeria is likely to take over the baton and become a new engine driving the development of energy storage in Africa.

From the actual situation, since the beginning of this year, Nigeria's energy transformation is accelerating.

In June, Nigeria launched a tender for the 24-year Rural Electrification project, which was issued by the Rural Electrification Agency of Nigeria (REA), the executive agency of the Federal Government of Nigeria, which is responsible for the development of electrification projects (NEP) in rural and unserved communities across Nigeria.

The fund is financed in part by allocations from the Nigerian state budget; The other part comes from loans or grants from institutions such as the World Bank and the African Development Bank.

In the past year, the fund has received a total of $1 billion from the World Bank and the African Development Bank.

This tender document includes REA bidding projects for the whole year of 2024, a total of 161 projects.

It is divided into four categories, including category A: power grid expansion, a total of 48 items; Category B projects: micro grid and household system, a total of 4 items; Class C projects: solar street lights, a total of 101; Category D projects: Projects requiring pre-qualification, a total of 8 projects each bidder cannot bid more than 2 projects.

This means that there will be at least 80 winning companies in the end.

In July, the Rural and Electrification Agency of Nigeria (REA) signed a Memorandum of understanding with five private new energy development companies to ensure that the target of building at least 1,300 microgrids in the next few years will be achieved.

The mou covers the delivery of 1.27GW of renewable energy Distributed Access Expansion projects (DARES), including interconnected microgrids, isolated microgrids, commercial and industrial (C&I) solutions, and Productive Use of Energy (PUE) projects.