The Nigerian Energy Support Programme (NESP) The Nigerian Energy Support Programme (NESP) The Nigerian Energy Sector - an Overview with a Special Emphasis on Renewable Energy, Energy The NigerianEfficiency Energy and Rural Sector Electrification - an Overview withNovember, a Special 2014 Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification The Nigerian Energy Sector - an Overview with a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification November, 2014 Implemented by Implemented by 20141121_Energy Sector Study_NESP Publication draft_v2.docx The Nigerian Energy Sector - an Overview with a Special Emphasis on Renewable Energy, The Nigerian Energy Sector - an Overview with Energy Efficiency and Rural Electrification a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification 20141121_Energy Sector Study_NESP Publication draft_v2.docx 20141121_Energy Sector Study_NESP Publication draft_v2.docx 2 Acknowledgements This report on the Nigerian Energy Sector was financed by the German Federal Ministry for Economic Cooper- ation and Development (BMZ) and implemented by the Deutsche Gesellschaft für Internationale Zusammenar- beit (GIZ) GmbH under the Nigerian Energy Support Programme (NESP). The authors would like to thank the GIZ Nigeria team for having entrusted this highly relevant subject to GOPAInternational Energy Consultants GmbH, and for their extensive and dedicated inputs and guidance pro- vided during implementation. The authors express their gratitude to all project partners who provided particu- larly valuable and interesting insights into ongoing activi- ties during the course of the project. It was a real pleasure and a great help to exchange ideas and learn from highly experienced management and staff and committed repre- sentatives of this programme. 3 Imprint Published by: Maps Deutsche Gesellschaft für The geographical maps are for informational purposes Internationale Zusammenarbeit (GIZ) GmbH only and do not constitute recognition of international Imprint boundaries or regions; GIZ makes no claims concerning The Nigerian Energy Support Programme (NESP) the validity, accuracy or completeness of the maps nor No.Published 2, Dr. by:Clement Isong Street does it assume any liability resulting from the use of the Deutsche Gesellschaft für Abuja/Nigeria information therein. Internationale Zusammenarbeit (GIZ) GmbH Contact: Daniel Werner ([email protected])The Nigerian Energy Support Programme (NESP) Layout: T:No. +234 2, Dr. (0)8057601986 Clement Isong Street FINE GERMAN DESIGN Abuja/Nigeria Frankfurt / Main Contact: Daniel Werner ([email protected]) Federal Ministry of Power T: +234 (0)8057601986 Federal Secretariat Complex ShehuFederal Shagari Ministry Way, of Power Maitama AbujaFederal / NigeriaSecretariat Complex Contact:Shehu Shagari Engr. Way, Faruk Maitama Yusuf Yabo Abuja / Nigeria ([email protected]) Contact: Engr. Faruk Yusuf Yabo ([email protected]) BMZBMZ Berlin StresemannstraßeStresemannstraße 94 94 1096310963 BerlinBerlin / Germany T: +49 (0)30 185350 T: +49 (0)30 185350 Authors / Editors etc. GOPA International Energy Consultants GmbH, Consultant Justus-von-Liebig-Str. 1, 61352 Bad Homburg v.d.H. Germany www.gopa-intec.de AuthorsKarsten Ley / Editors etc. Dr. Jeremy Gaines GOPAAnil Ghatikar International Energy Consultants GmbH, Consultant Justus-von-Liebig-Str.Photo Credits 1, 61352 Bad Homburg v.d.H. Germany www.gopa-intec.de Maps The geographical maps are for informational purposes only and do not constitute recognition of international Karstenboundaries Ley or regions; GIZ makes no claims concerning the validity, accuracy or completeness of the maps nor does Dr.it assume Jeremy any Gaines liability resulting from the use of the information therein. Anil Ghatikar Printed and Distributed by: Photo Credits 20141121_Energy Sector Study_NESP Publication draft_v2.docx 4 Table of Contents 1. Executive Summary 14 2. Introduction to Nigeria 17 2.1 Geography, Climate and Political Situation 17 2.1.1 Geography 17 2.1.2 Climate 18 2.1.3 Political Situation 23 2.2 Fast Population Growth 24 2.3 The Nigerian Economy 25 2.4 The Energy Sector - A Key Macroeconomic Factor 27 2.5 Regional Context 29 3. The Nigerian Energy Sector 30 3.1 Energy Resources 31 3.2 Primary Energy Supply 31 3.3 Energy Consumption 33 3.4 Electricity Generation 35 3.4.1 Prospective Generating Companies 37 3.4.2 Decentralised Diesel Generator Capacity 38 3.5 Electricity Consumption 38 3.6 Energy Prices 42 3.6.1 Fuel Prices 42 3.6.2 On-Grid Electricity Prices 43 3.6.3 Off-Grid Electricity Prices 44 3.7 Electrification 45 3.7.1 National and State Electrification Rates 45 3.7.2 Off-grid/Captive Generation Technologies 46 3.8 Transmission and Distribution Sector 48 4. Energy Market - Stakeholders and Roles 53 4.1 National Public Institutions 53 4.1.1 Energy Commission of Nigeria (ECN) 53 4.1.2 Federal Ministry of Environment (FMENV) 54 4.1.3 Federal Ministry of Lands Housing and Urban Development (FMLHUD) 55 4.1.4 Federal Ministry of Power (FMP) 55 4.1.5 Federal Ministry of Water Resources (FMWR) 55 4.1.6 National Power Training Institute of Nigeria (NAPTIN) 56 4.1.7 Nigerian Bulk Electricity Trading Plc (NBET) 56 4.1.8 Nigerian Electricity Regulatory Commission (NERC) 57 4.1.9 Nigerian National Petroleum Corporation (NNPC) 58 5 4.1.10 Presidential Task Force on Power 58 4.1.11 Rural Electrification Agency of Nigeria (REA) 58 4.1.12 Standards Organisation of Nigeria (SON) 59 4.2 Role and Functions of States and Local Governments 60 4.3 Market Players in Generation, Transmission and Distribution 60 4.4 Other Relevant Stakeholders 65 5. Energy Policy 66 5.1 Fuel Market Policy and Strategy 66 5.2 Electricity Market Policy and Strategy 67 5.2.1 Introduction 67 5.2.2 Major Programmes and Initiatives, Policy Mix 68 5.3 Climate Change Policy and Strategy 69 5.4 Milestones in National Energy Policy and Laws 71 5.4.1 National Electric Power Policy (NEPP), 2001 71 5.4.2 National Energy Policy (NEP), 2003 71 5.4.3 National Economic Empowerment and Development Strategy (NEEDS), 2004 72 5.4.4 National Power Sector Reform Act (EPSRA), 2005 72 5.4.5 Renewable Electricity Policy Guidelines (REPG), 2006 73 5.4.6 Renewable Electricity Action Programme (REAP), 2006 74 5.4.7 National Biofuel Policy and Incentives (2007) 75 5.4.8 Roadmap for Power Sector Reform, 2010 and 2013 (Update) 76 5.4.9 Relevant Sections of Vision 20:2020, 2010 77 5.4.10 Renewable Energy Master Plan, 2005 and 2012 (Update) 79 5.4.11 National Renewable Energy and Energy Efficiency Policy (NREEEP), 2014 80 5.4.12 Multi-Year Tariff Order (MYTO) 81 5.4.13 Draft Rural Electrification Strategy and Implementation Plan (RESIP), 2014 81 5.5 Key Electricity Market Regulations 82 5.5.1 Regulations on the Procurement of Generation Capacities, 2014 82 5.5.2 Embedded Generation Regulations, 2012 82 5.5.3 Regulations for Independent Electricity Distribution Networks (IEDN) 83 5.5.4 Transmission, Distribution and Metering Codes 83 5.5.4.1 Grid Code 83 5.5.4.2 Distribution Code 84 5.5.4.3 Metering Code 85 6. On-grid Renewable Energy 86 6.1 A Market in its Infancy 86 6.1.1 The Potentials 86 6.1.2 Existing and Planned Renewable Energy Projects - Current Progress 93 6.2 Renewable Energy Stakeholders 95 6 6.2.1 Public Authorities 95 6.2.2 Key Players in Nigeria’s Emerging RE Market 96 6.3 Renewable Energy Regulations and Policies 101 6.4 Renewable Energy Support Mechanisms, existing and planned 104 6.5 From Project to Realisation: Renewable IPPs - The Process 106 6.5.1 NERC - Generation Licence 106 6.5.2 NBET - Power Purchase Agreement 107 6.5.3 Embedded Generation 108 6.5.4 Challenges 109 6.6 Conclusions: Strong Potential for Renewable Energy 109 7. Energy Efficiency 111 7.1 Energy Efficiency Market 111 7.1.1 Existing Energy Efficiency Projects 112 7.1.2 Planned Efficient Energy Projects 112 7.2 Energy Efficiency: Power Generation 114 7.2.1 Efficiency of On-Grid Generation, Transmission and Distribution 114 7.2.2 Genset-based Generation 114 7.3 Energy Efficiency: Consumption 115 7.4 Energy Efficiency Stakeholders 120 7.4.1 Public Authorities 120 7.4.2 Key Players in Energy Efficiency 121 7.4.3 International Organisations 122 7.5 Energy Efficiency Policy and Strategy targets 122 7.5.1 National Renewable Energy and Energy Efficiency Policy 122 7.5.2 Draft National Energy Efficiency Policy for Nigeria 123 7.5.3 Standards and Labelling 124 7.6 Energy Efficiency Support Mechanisms 125 7.6.1 Price Incentives 125 7.6.2 Tax Relief 125 7.6.3 Financing Mechanisms/Opportunities 126 7.7 Conclusions 126 8. Rural Electrification, Including Off-Grid Renewable Energy 128 8.1 Rural Electrification Market 128 8.1.1 Renewable Energy and Rural Electrification Potentials 130 8.1.2 Existing Rural Electrification Projects 131 8.1.3 Planned Rural Electrification Projects 133 8.2 Rural Electrification Stakeholders 134 8.2.1 Public Authorities and their Roles 134 8.2.2 Rural Electrification Market Players 135 7 8.3 Rural Electrification Policy and Strategy 136 8.3.1 Draft Rural Electrification Strategy and Implementation Plan (RESIP) 136 8.3.2 Tariffs 137 8.3.3 Further Policy Documents 137 8.4 Rural Electrification Support Mechanisms 138 8.4.1 Price Incentives - the Rural Electrification Fund 138 8.4.2 Other Support Programmes 140 8.4.2.1 Solar Sisters 140 8.4.2.2 The International Centre for Energy, Environment and Development (ICEED) 140 8.4.2.3 The Rural Energy Access Project (REAP) 140 8.4.2.4 Operation Light-Up Rural Nigeria 140 8.5 Conclusions 141 9. Recommendation 142 9.1 On-Grid Renewable Energy 142 9.2 Energy Efficiency 145 9.3 Rural Electrification 146 10.