Captive Power in Nigeria a Comprehensive Guide to Project Development
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Captive Power in Nigeria A Comprehensive Guide to Project Development Captive Power in Nigeria A Comprehensive Guide to Project Development Market Study and Project Scouting Nigeria 2 Imprint Published by: Design & Layout: European Union Energy Initiative Schumacher. Design und digitale Medien Partnership Dialogue Facility (EUEI PDF) www.schumacher-visuell.de Photos: © EUEI PDF / Partners for Innovation Production: c/o Deutsche Gesellschaft für Printed on 100% recycled paper Internationale Zusammenarbeit (GIZ) GmbH Dag-Hammarskjöld-Weg 1–5 65760 Eschborn, Germany The Partnership Dialogue Facility (EUEI PDF) is an instrument of the EU Energy Initiative (EUEI). It currently receives contributions [email protected] from the European Commission, Austria, Finland, Germany, Italy, www.euei-pdf.org the Netherlands and Sweden. EUEI PDF is responsible for the www.africa-eu-renewables.org implementation of the Africa-EU Renewable Energy Cooperation Programme (RECP). The RECP is a programme of the Africa-EU Energy Partnership (AEEP) Place and date of publication: Eschborn, November 2016 Editor: Ina de Visser Authors: Partners for Innovation B.V.: Thessa Bagu, Thomas Dietz, Emiel Hanekamp, Aniche Phil-Ebosie and Bolade A. Soremekun Market Study and Project Scouting Nigeria 3 ACKNOWLEDGEMENT As part of this study, the researchers have conducted interviews and communicated with over 70 persons from different government agencies, non-governmental organisations and the private sector (GenCos, DisCos, financiers, relevant experts, power project developers and agri-food sector companies). More than 40 companies active in the agri-food sector have been visited, often multiple times. We would like to express our gratitude to all those that have cooperated in this study as their input has been very important to the outcome of this report. Special thanks goes to Godwin Eni Aigbokhan, Renewable Energy Market Adviser of the National Competitiveness Council of Nigeria and focal point for the RECP. Godwin was involved in many interviews and field visits. The researchers also would like to thank the RECP team for their flexibility and providing their suggestions on how to improve the outcome of this study. NOTES FROM THE AUTHORS The information in this report is based on interviews, site visits and desk- and literature research. Finding recent and reliable data in Nigeria is challenging. The researchers therefore had to use many different data sources with often different time frames and units. Combining these sources provided new insights but also raised new questions, especially in relation to reliability of the gathered data. Some data was not available, e.g. energy demand for the different manufacturing sectors (especially the agri-food sector) or the amount of self-generated captive power in Nigeria. The researchers had to use combinations of old and recent, direct and indirect data and extrapolations to be able to provide an estimate for these figures. The information in chapter six of this report is based on quality sources and is accurate at the time of writing (2016). However, the Nigerian energy sector is still in development and processes, procedures, timelines, fees and the likes are subject to change. Moreover, more than one respondent indicated that there are hidden obstacles and processes. Therefore, for any entity intending to set up a power project in Nigeria it would be wise to liaise with relevant experts who can use their insider knowledge and relationships to ensure all necessary steps at that point of time are indeed taken. Market Study and Project Scouting Nigeria 4 ABBREVIATIONS AND DEFINITIONS AFD Agence Française de Développement GTA Gas Transportation Agreement AfDB African Development Bank HYPPADEC Hydro Electric Power Producing Areas APC All Progressive Congress Development Commission BMZ German Federal Ministry for Economic IEDN Independent Electricity Distribution Cooperation and Development Networks BOOT Build-Own-Operate-Transfer IFC International Finance Corporation CAC Corporate Affairs Commission IPP Independent Power Producer CBN Central Bank of Nigeria JICA Japan International Cooperation CCI Certificate of Capital Importation Agency CNG Compressed Natural Gas LTSA Long term Service Agreement CP Condition Precedent MAN Manufacturers Association of Nigeria CPS Country Partnership Strategy MEND Movement for the Emancipation of the CREN Council for Renewable Energy Niger-Delta DBOM Design-Build-Operate-Maintain MFB Micro Finance Bank DCS Detail Commercial Solicitors MFI Microfinance Institutions DFID Department for International MIGA Multilateral Investment Guarantee Development Agency DisCo Distribution Company MoF Ministry of Finance DMB Deposit Money Bank MoP Ministry of Power, Works and Housing ECN Energy Commission of Nigeria MoPR Ministry of Petroleum Resources ECOWAS Economic Community of West MSMEs Micro, Small and Medium sized African States Enterprises EFB Empty Fruit Bunch MYTO Multi-Year Tariff Order EIA Environmental Impact Assessment NAE Nigeria Alternative Energy EOI Expression of Interest NAPTIN National Power Training Institute of EPC Engineering, Procurement & Nigeria Construction NASENI National Agency for Science and EPSRA Electric Power Sector Reform Act Engineering Infrastructure EPZ Export Processing Zones NBET Nigerian Bulk Electricity Trading Plc FCO Foreign and Commonwealth Office NBS Nigeria Bureau of Statistics FCT Federal Capital Territory NCAPMA National Cassava Processors and FDI Foreign Direct Investment Marketers Association FEC Federal Executive Council NCERD National Centre for Energy Research FFB Fresh Fruit Bunch and Development FGN Federal Government of Nigeria NCHRD National Centre for Hydropower FME Federal Ministry of Environment Research and Development FMP Federal Ministry of Power NCP National Council on Privatisation FTZ Free Trade Zone NDPHC Niger Delta Power Holding Company GACN Gas Aggregation Company Nigeria NEEDS National Economic Empowerment and Limited Development Strategy GDP Gross Domestic Product NEITI Nigeria Extractive Industries GenCo Generation Company Transparency Initiative GIZ Deutsche Gesellschaft für Internationale NEMSA Nigerian Electricity Management Zusammenarbeit (GIZ) GmbH Services Authority GNI Gross National Income NEMSF Nigeria Electricity Market Stabilization GSA Gas Supply Agreement Facility NEP National Energy Policy Abbreviations and definitions 5 NEPA National Electric Power Authority TCN Transmission Company of Nigeria NEPP National Electric Power Policy TEM Transitional Electricity Market NERC National Electricity Regulatory TPA Transmission Project Agreement Commission TPO Technical Palm Oil NESI Nigerian Electricity Supply Industry TUOS Transmission Use of System Agreement NESP Nigerian Energy Support Programme UNDP United Nations Development NGC Nigerian Gas Company Programme NGN Nigerian Naira UNIDO United Nations Industrial Development NIAF Nigerian Infrastructure Advisory Facility Organisation NIFOR Nigerian Institute for Palm Oil Research USAID United States Agency for International NIPC Nigerian Investment Promotion Development Commission NIPP National Integrated Power Projects NNPC Nigerian National Petroleum Corporation Important definitions NOTAP National Office for Technology Agri-food The agri-food sector includes those Acquisition & Promotion sector enterprises engaged in agriculture NPC National Population Commission (and life stock) and the processing NPDC Nigerian Petroleum Development of food and drink. Company Grid- Power plant where the electricity NREEEP National Renewable Energy and Energy connected generated is evacuated on the Efficiency Policy power national (TCN) grid O&M Operation & Maintenance Embedded Electricity directly connected to and ONEM Operator of the Nigerian Electricity power evacuated through a distribution Market system which is connected to a OPC Odua People’s Congress transmission network operated by a PAPs Project Affected Persons System Operations Licensee PCOA Put Call Option Agreement Captive The generation of off-grid electricity PDP People's Democratic Party power that is entirely consumed by the PHCN Power Holding Company of Nigeria generator itself and has an installed PKO Palm Kernel Oil capacity exceeding 1 MW (no upper PPAs Power Project Agreements limit) PV Photovoltaic Off-grid Small scale (0–1 MW) electricity REA Rural Electrification Agency power generation to a single or limited REAP Renewable Electricity Action number of customers, including the Programme use of mini-grids RECP Renewable Energy Cooperation Programme REMP Renewable Energy Master Plan This report uses the European notation of numbers. REPG Renewable Electricity Policy Guidelines RFP Request for Proposal Exchange rates used of 2nd of May 2016: ROW Right of Way € 1 = 228 Naira and $ 1 = € 0,851 SCPZs Staple-Crop Processing Zones SERC Sokoto Energy Research Centre SHP Small Hydro Power SHS Solar Home Systems 1) The Naira is highly volatile with inflation rates in 2016 above SPO Special Palm Oil 11%, therefore, prices converted from Naira to Euro in this report may not be accurate at the time of reading. Market Study and Project Scouting Nigeria 6 EXECUTIVE SUMMARY The energy situation in Nigeria is critical and a key I. Grid-connected: a power plant where the elec- constraint for economic development. About 55% tricity generated is evacuated on the national grid. of the population has no access to electricity and out of the total energy consumption, traditional II. Embedded: electricity that is directly connected