Nigeria’s power sector: The way forward (Part 2)

This is the second part of my concluding articles and the 23rd in my series of articles on the power sector. The first, published last week, was titled “Nigeria’s power sector: the way forward (part one).” It focused on medium- to long-term strategic and structural considerations, which are preconditions for turning around the Nigerian power sector. I have amended the phrasing of the titles of the present and subsequent articles to reflect the core proposition of each article as a way forward for the Nigerian power sector.

One of the structural challenges of the Nigerian power sector is the limited sources of power supply, primarily—until recently—thermal (gas-fired) plants and hydro. Solar energy joined our energy mix only a few years ago. We for decades ignored coal, despite our huge deposits of the ‘dark diamond’ estimated at 2.8 billion metric tonnes, with about 639 million tonnes of proven reserves. Until recently coal was China’s primary source of power generation, representing over 60 percent of total power generation. (It still is). Likewise, in South Africa, coal accounted for 84 percent of total electric power generation in 2022. This is not an advocacy for coal-fired power plants in Nigeria in an era of power supply decarbonisation. It is instructive, however, for us to reflect on the decades-long missed opportunities in not exploiting our huge coal deposits for power generation as a result of a lack of power generation diversification strategy. This sharply contrasts with the situation in industrialised and newly industrialising countries, where there is a reasonable diversification of the energy mix, and is a result of the long-term public sector dominance of the power sector in Nigeria.

Read also: Nigerias power sector the way forward part one

In China in 2022, of the total power generation of 2,564 gigawatts (GW)—2,564,000 megawatts (MW)—62 percent was coal, 15 percent was hydropower, 8 percent was wind, 5 percent was nuclear, 4 percent was solar, 3 percent was natural gas, and 2 percent was biofuel. Renewable energy (hydro, wind, nuclear, and solar) constituted 32 percent, but by 2024, just two years later, renewable energy (solar, wind, and hydro), primarily solar, jumped to 56.4 percent of China’s energy mix. Though coal’s contribution has decreased, it still remains dominant at 58 percent. However, solar and wind are fast gaining ascendancy. Even with nuclear energy representing 4 percent of China’s energy mix in 2022, it came a close second to the United States, which was the largest nuclear power-generating country globally in that year.

The implication for Nigeria’s power sector is an ambitious power supply diversification plan. Even with the solar energy surge in China, they are still investing in new coal-fired plants, even though at a decreasing rate, and the contribution of coal to China’s energy mix has begun an irreversible descent. Nigeria does not have the option of investing in coal, as it is not our energy transition vehicle. Natural gas is. The options that are within our reach are hydro, solar, wind, nuclear, geothermal, and biomass.

“Development finance institutions like the Bank of Industry and the Development Bank of Nigeria should develop financing programmes for renewable energy, including wind farms.”

Hydropower contributes between 20 and 28 percent of Nigeria’s total power supply. In 2024 the newly inaugurated Zungeru hydropower dam contributed 700 MW to Nigeria’s power supply as part of the 30 percent increase in power supply in 2024, bringing the total to 5,528 MW. The total installed capacity of hydropower in Nigeria is 2062 MW, while the estimated potential is 14,200 MW. The government should create the enabling environment for public-private partnership vehicles for accelerated investments in the hydropower sector. The Mambilla Plateau hydropower contract award conundrum should be resolved as quickly as possible.

Solar energy adoption is already catching on like a wildfire in Nigeria. All the government needs to do is create an enabling environment for a wide range of players, including manufacturers of solar panels and lithium-ore storage batteries, and provide technical training for downstream solar energy entrepreneurs and investors, among others. The recent investment by Tranos, a Nigerian engineering/manufacturing firm, in a solar panel plant in Ogun State with an annual capacity of 800 MW is a welcome development. However, the plan by Egypt to build the largest solar energy plant in Africa should be a challenge to Nigeria. There is also a need to expand the scope of the Rural Electrification Agency and rename it the Renewable Energy Agency of Nigeria. Nigeria should learn from China and adopt an ambitious solar energy plan, driven by the private sector, with input from various local and foreign investors, financiers, and other stakeholders.

Nigeria has a moderate wind power potential largely in the Northern states and in the coastal areas. The investments in the 10 MW Katsina wind farm and the 50 MW Gurara II wind farm are welcome developments. More ambitious wind development plans should be embarked upon with stakeholders in the Nigerian engineering and financing landscape. Development finance institutions like the Bank of Industry and the Development Bank of Nigeria should develop financing programmes for renewable energy, including wind farms.

Nigeria’s nuclear energy plan has been on the drawing board for decades without any hope of a takeoff in the nearest future, mainly because of the tremendous knowledge and technical skill transfer required, the probable risk of nuclear accident, and the enormous financial investment outlay, which will be borne entirely by the Federal Government of Nigeria. The way forward is the adoption of the Small Modular Nuclear Reactor (SMR) model. China is a leader in SMR technology and technology transfer. Nigeria should emulate Thailand, which has recently signed a Memorandum of Understanding (MoU) with China National Nuclear Corporation Overseas Ltd. for knowledge and technology exchange leading to the construction of 125 MW to 600 MW SMR plants in Thailand as part of its decarbonisation and energy transition plan. Nigeria can develop a minimum of ten SMR plants within a 10-year period with private sector participation. “SMRs have simpler designs, use passive cooling systems, and require lower power and operating pressure, making them inherently safer to operate than traditional reactors.” That also means that they are cheaper and quicker to build and commission.

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Another renewable energy source where Nigeria has significant potential is geothermal energy, particularly in the Northern regions, with an estimated 10,000 MW. Hot springs like Ikogosi in Ondo State and Lamurde in Adamawa State are potential sources of geothermal energy. Nigeria simply has to connect the dots of our technical and engineering institutions and manpower with economic and financial expertise with an enabling environment and support from the government to develop a robust geothermal energy programme. Nigeria can learn from the great milestones achieved by Kenya, where geothermal energy produces 1,800 MW, which is 40 percent of the country’s energy mix.

Finally, Nigeria has tremendous biomass potential from agricultural and urban waste, which we are not utilising. The technology is within reach. All that is needed is government policy direction and a strategic investment plan involving all relevant stakeholders.

In conclusion, Nigeria should develop a robust electric power diversification plan encompassing all types of thermal and renewable energy sources, which we have in abundance in Nigeria. Because of our geographical location, we are blessed with an abundance of solar, hydro, wind, and thermal energy and other renewable energy resources, which we are yet to explore and exploit to the benefit of the Nigerian people and economy. The government needs to broaden its policy horizon and options and adopt a more inclusive strategy that brings all energy sector stakeholders in traditional and renewable energy together to fashion out a winning energy diversification strategy for Nigeria.

Mr. Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.