Biomass energy
Biomass energy
Business Model Description
Build and operate biomass plants to generate energy for sale to local utility companies or directly to end users.
Expected Impact
Help transition into a cleaner energy source for electricity, reduce power disruptions and ensure equal access to electricity.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Nigeria: South East
- Nigeria: South South (Niger Delta)
Sector Classification
Renewable Resources and Alternative Energy
Development need
Sustainable Development Report shows that progress towards SDG 7 (Affordable and Clean Energy) appears to have stagnated (with an overall index score of 37.1), particularly for indicators measuring Access to Electricity (59.3%) and Access to Clean Fuels (4.9%).(1)
Policy priority
Nigeria's Economic Recovery & Growth Plan highlights the government’s interest in improving energy efficiency and diversifying energy mix through greater use of renewable energy. The government has also prioritized rural electrification using off-grid renewable solutions to address the energy gap currently ravaging the country.(2)
Gender inequalities and marginalization issues
Women are the ones most likely to walk long distances to collect fuel wood, and ingest harmful air pollution from kerosene and wood fires as they cook, care and provide for their families.(15)
Investment opportunities introduction
High political momentum creates an opportunity for new and enhanced investment in renewable and alternative energy in off-grid and on-grid solutions.
Key bottlenecks introduction
Significant challenges in the energy sector are continually crippling industry, the agricultural sector, the mining sector, etc., further impeding economic development.
Alternative Energy
Development need
A significant number of Nigerians receive power from small-scale generators (10-15 GW) and almost 50% of the population has limited access to the national power grid.(3)
Gender inequalities and marginalization issues
Electricity for lighting and cleaner cooking technologies are still a luxury for many rural women and men, and modern energy services are far from being accessible. While this is true for both the formal and informal sectors, this problem is more pronounced in the informal sector, where solid fuels and traditional biomass are the main source of fuel and poor women tend to be more involved in this sector.(16)
Biofuels
Pipeline Opportunity
Biomass energy
Build and operate biomass plants to generate energy for sale to local utility companies or directly to end users.
Business Case
Market Size and Environment
Nigeria was projected to have a total energy potential of biomass of about 5.5EJ in 2020
Total energy potential of biomass is forecasted to increase to about 29.8EJ by 2050.(17)
Indicative Return
5% - 10%
15% - 20%
Investment in renewable energy has the potential to generate 15% to 35% return on investment depending on economic clusters and markets.(3)
Hydrothermal processing involves heating aqueous slurries of biomass or organic wastes at elevated pressures to produce an energy carrier with increased energy density. The internal rate of return (IRR) is between 5% and 15%.(18)
Investment Timeframe
Medium Term (5–10 years)
Consulted investors suggest investments in biomass plants have a stable and predictable long term cash flow, with low volatility of returns.(19)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Market - Highly Regulated
Impact Case
Sustainable Development Need
Nigeria's energy demand is continuously rising along with increasing population growth and economic development. Total energy demand is estimated to be increasing at an average of 8.3% since 2005.(2)
This increase has, however, been accompanied by persistent failure of continuous power production, transmission inefficiencies and low performance of the Nigerian electricity generation sector.
Currently, fossil fuels make up 70% of electricity generation, estimates show the country's ample crude oil reserves could run out in the next 50 years.(2) Given this dependency of fossil fuels, the need to explore renewable energy solutions is high.
Gender & Marginalisation
Women are the ones most likely to walk long distances to collect fuel wood, and ingest harmful air pollution from kerosene and wood fires as they cook, care and provide for their families.(15)
Expected Development Outcome
Investments in biomass can improve access to electricity for household and industries, improve waste management and improve power supply reliability.
Investments could also reduce consumption of fossil fuels, as well as pollution levels and greenhouse gas emissions while creating employment opportunities for unemployed/underemployed youth and increasing household incomes.
Investments are also expected to contribute to productivity.
Gender & Marginalisation
Promoting renewable and clean sources of energy can help reduce air pollution, particularly in rural areas where fossil fuels are used for energy and heating. This change will particularly help women, who largely perform unpaid domestic work.
Primary SDGs addressed
7.1.1 Proportion of population with access to electricity
7.1.2 Proportion of population with primary reliance on clean fuels and technology
7.2.1 Renewable energy share in the total final energy consumption
59.3%. (11)
28.2% in 2015. (11)
N/A
100% (12)
Nigeria is committed to implementing its Natural Gas Expansion Programme within 12 months through its Inter-Ministerial Committee on liquid petroleum gas (LPG). This programme will support the creation of 1 million jobs by converting 30 million homes from dirty fuels (kerosene, charcoal and diesel) to LPG.(13)
The Federal Ministry of Power, together with Rural Electrification Agency and Niger Delta Power Holding Company, is committed to provide solar power to 5 million households by 2023 while creating 250,000 jobs in the energy sector.(14)
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Indirectly impacted stakeholders
Public sector
Outcome Risks
Production of energy crops could have a detrimental effect on food security.
Investments could pose risk of monoculture due to bioenergy crops, as well as the impact of biomass on water and soil.
Impact Risks
Evidence risk given the very limited data about investment intelligence for this IOA.
Unexpected impact risk given biomass investments may significantly distort food prices.
Impact Classification
What
Investments in renewable energy will create positive outcomes by increasing access to clean and affordable energy for all.
Risk
Processing and burning woodchips and pellets for energy are associated with a high risk of fires and explosions. Fuel supply risk in the long run.
Impact Thesis
Help transition into a cleaner energy source for electricity, reduce power disruptions and ensure equal access to electricity.
Enabling Environment
Policy Environment
Nigerian Biofuel Policy and Incentives: Th objective of this framework is to gradually reduce the nation’s dependence on imported gasoline, reduce environmental pollution and create a commercially viable industry.(4)
Nigerian Biofuel Policy and Incentives: The framework aims to create an enabling environment that is expected to incentivizes and catalyzes the development of the country‘s bio-fuels industry.(4)
Financial Environment
Financial incentives: The biofuel policy applies for a waiver, granting Pioneer Status to investors for an initial 10-year period with the possibility of a 5-year extension. This Pioneer Status offers companies income tax relief.(4)
Biofuel companies are exempt from taxation, withholding tax and capital gains tax imposed under sections 78,79,80 and 81 of the Companies Income Tax Act in respect of interest on foreign loans, dividends, services rendered from outside Nigeria to biofuel companies by foreigners.(4)
Other incentives: An import duty waiver is also granted for biofuels.
Regulatory Environment
Electric Power Sector Reform Act (2005): This Act licenses private sector actors providing renewable energy, specifically for any electricity generation of 1 MW and above.(5)
Environmental Impact Assessment (EIA) Act: This Act makes it mandatory for an environmental impact assessment to be conducted on projects that are likely to have significant effect on the environment, including renewable energy projects.(6)
The Regulations on Feed-In Tariff for Renewable Energy Sourced Electricity in Nigeria (REFIT) provides the tariff framework for renewables (specifically, wind, hydro, biomass and solar photovoltaic (PV) with a capacity of between 1 MW and 30 MW).(7)
Marketplace Participants
Private Sector
Standard Chartered, Cross Boundary Energy, Day Star, Topec, Cambridge Energy Partners
Government
Bank of Nigeria, Bank of Industry, and Development Bank of Nigeria
Multilaterals
World Bank, AfDB (African Development Bank), EU (European Union), German government, EIB (European Development Bank), UNIDO (United Nations Industrial Development Organization)
Public-Private Partnership
Nigeria Electrification Project
Target Locations
Nigeria: South East
Nigeria: South South (Niger Delta)
References
- (1) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G. (2019). Sustainable Development Report 2019. New York: Bertelsmann Stiftung and Sustainable Development Solutions Network (SDSN).
- (2) Federal Republic of Nigeria (2017). Economic Recovery & Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning. https://nigeriaembassygermany.org/mosaic/_M_userfiles/Economic-Recovery-Growth-Plan-2017-2020.pdf
- (3) The Rural Electrification Agency . Opportunities for Investment in Nigeria's Power Sector for Minigrids/Renewable Energy
- (4) Nigerian Biofuel Policy and Incentives (2007).
- (5) Electric Power Sector Reform Act (2005).
- (6) Environmental Impact Assessment Act (1992).
- (7) Nigerian Electricity Regulatory Commission(2020). NERC's Regulation Envisages 2,000MW of Renewable Sourced Electricity by 2020. https://nerc.gov.ng/index.php/media-library/press-releases/315-nerc-s-regulation-envisages-2-000mw-of-renewable-sourced-electricity-by-2020
- (8) Nigeria Electricity Hub (2020). UNIDO Hands Over Biomass Power Plant to Ebonyi. https://www.nigeriaelectricityhub.com/2016/11/27/unido-hands-over-biomass-power-plant-to-ebonyi/
- (9) Petroleum Africa (2020). Power Plant for Delta State. https://www.petroleumafrica.com/power-plant-for-delta-state/
- (10) Privida Energy (2020). Privida Energy. https://www.prividaenergy.com/
- (11) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf
- (12) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press.Sustainable Development Report, 2020. https://dashboards.sdgindex.org/profiles/NGA
- (13) Federal Republic of Nigeria (2020). Nigeria Economic Sustainability Plan. https://media.premiumtimesng.com/wp-content/files/2020/06/ESC-Plan-compressed-1.pdf
- (14) Federal Republic of Nigeria (2020). Integration of the SDGs into National Development Planning: A Second Voluntary National Review (2020). https://sustainabledevelopment.un.org/content/documents/26309VNR_2020_Nigeria_Report.pdf
- (15) IRENA (2018). Empowering Women in Nigeria with Solar Energy. https://www.irena.org/newsroom/articles/2018/Feb/Empowering-Women-in-Nigeria-with-Solar-Energy
- (16) UNDP (2012). Gender and Energy. https://www.undp.org/content/dam/undp/library/gender/Gender%20and%20Environment/TM3-Africa_Gender-and-Energy.pdf
- (17) Sobamowo, G.M. (2018). 'Tech-economic analysis of biomass energy utilization through gasification technology for sustainable energy production and economic development in Nigeria'. Journal of Energy. https://www.hindawi.com/journals/jen/2018/4860252/
- (18) Pacific Northwest Laboratory (2017). Hydrothermal processing of biomass. https://www.energy.gov/sites/default/files/2017/05/f34/waste_to_energy_billing_222301.pdf
- (19) PwC / UNDP Consultations 2020.