Wind farms
Wind farms
Business Model Description
Install and operate windmills for electricity generation with energy sold to a local utility company.
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: North West
- Nigeria: South East
- Nigeria: North Central (Middle Belt)
- Nigeria: South South (Niger Delta)
Sector Classification
Renewable Resources and Alternative Energy
Development need
Sustainable Development Report shows 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 and 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 continuously 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.(16)
Nigeria's renewable energy sector, still in an early stage of development, faces challenges such as
high initial capital investment; inadequate human capacity in renewable energy; absence of local manufacturing capacity for renewable energy components and systems; insufficient public awareness and participation.
Wind Technology and Project Developers
Pipeline Opportunity
Wind farms
Install and operate windmills for electricity generation with energy sold to a local utility company.
Business Case
Market Size and Environment
> USD 1 billion
Developing off-grid alternatives to complement the grid creates a USD 9.2 billion/year (NGN 3.2 trillion/year) market opportunity for minigrids and solar home systems, which will save USD 4.4 billion/year (NGN 1.5 trillion/year) for Nigerian homes and businesses.(3)
There is also an advantage of high density population for power use, with high demand and willingness to pay for the switch to renewable power.
Indicative Return
15% - 20%
Investment in renewable energy has the potential to generate a 15% - 35% return on investment depending on economic clusters and markets.(3)
A regional benchmark, the Potou Wind Power Plant (25 MW) in Senegal, has a Project internal rate of return (IRR) of 17% and Equity IRR of 15%.(17)
Investment Timeframe
Long Term (10+ years)
Investments in wind energy typically break even after 10-20 years (4).
A regional benchmark, the Potou Wind Power Plant (25 MW) in Senegal, has a payback period of 5 years.(17)
Ticket Size
> 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 continually rising along with increasing population growth and economic development. Total energy demand is estimated to be increasing at an average rate of 8.3% since 2005.(2)
A significant number of Nigerians receive power from small-scale generators (10-15GW) and almost 50% of the population has limited access to the national power grid.(3)
Nigeria's nascent renewable energy sector faces challenges such as: high initial capital investment; inadequate human capacity in renewable energy; absence of local manufacturing capacity for renewable energy components and systems; insufficient public awareness and participation.
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 this IOA can improve access to electricity for households and industries.
Investments can also improve productivity (e.g. agricultural productivity) and reduce cost of production for industries.
Gender & Marginalisation
Promoting renewable and clean energy sources can help reduce air pollution, particularly in rural areas where fossil fuels are used for energy and heating. This change will particularly benefit 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 liquified 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 providing 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
Public sector
Outcome Risks
Wind turbines can be a threat to wildlife.
Wind turbines create noise pollution.
Impact Risks
Evidence risk given there is very limited data about investment intelligence for this IOA.
Efficiency risk given public engagement in renewable energy projects is very high.
Unexpected impact risk given wind power plans may disrupt important habitat.
Impact Classification
What
Investments in renewable energy will create positive outcomes by increasing access to clean and affordable energy for all
Who
Energy consumers (households, business owners, governments, financial institutions, etc.)
Risk
Unpredictable wind implies wind energy may not be sufficient to meet energy demand without some form of energy storage
Impact Thesis
Help transition into a cleaner energy source for electricity, reduce power disruptions and ensure equal access to electricity.
Enabling Environment
Policy Environment
The National Energy Policy: This policy establishes guidelines for protecting the environment while exploiting Nigeria's fossil fuels. It also emphasizes the exploration of renewable and alternative energy sources, primarily solar, wind, and biomass.(5)
The National Energy Policy: The policy also emphasizes that the country will take necessary measures to ensure wind energy is harnessed at sustainable costs to both suppliers and consumers in rural areas.(5)
Financial Environment
Financial incentives: Rural electrification funds are available for investments in Renewable Energy. Financing is available from domestic financial institutions for bankable renewable energy projects. Bank of Industry provides financing for renewable projects.
Fiscal incentives: Tax incentives (tariff flexibility) are also available for investments in renewable energy.(8)
Other incentives: Nigeria has a favorable environment for issuing green bonds targeted at climate change adaptability/mitigation projects. (It issued the first sovereign green bond in 2017.)
Regulatory Environment
The Electric Power Sector Reform Act: This Act licenses private sector actors providing renewable energy, specifically for any electricity generation of 1 MW and above.(6)
The 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 a significant effect on the environment, including renewable energy projects.(7)
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).
Marketplace Participants
Private Sector
Standard Chartered, Cross Boundary Energy, Day Star, Topec, Cambridge Energy Partners, Green Village Electricity, Nayo Tropical Technology, Blue Camel, Asteven, Solonic, Haven Hill, Green Light Planet, Solar Sisters
Government
Bank of Nigeria, Bank of Industry, Development Bank of Nigeria
Multilaterals
World Bank, AfDB (African Development Bank), EU (European Union), German government, EIB (European Investment Bank), UNIDO (United Nations Industrial Development Organization)
Public-Private Partnership
Nigeria Electrification Project
Target Locations
Nigeria: North West
Nigeria: South East
Nigeria: North Central (Middle Belt)
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 and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
- (3) The Rural Electrification Agency. Opportunities for Investment in Nigeria's Power Sector for Minigrids/Renewable Energy.
- (4) SolarReviews (2020). Wind energy pros and cons. https://www.solarreviews.com/blog/wind-energy-pros-and-cons
- (5) National Energy Policy.
- (6) Electric Power Sector Reform Act (2005).
- (7) Environmental Impact Assessment Act (1992).
- (8) National Renewable Energy and Energy Efficiency Policy (NREEEP) (2015).
- (9) Nairametrics (2020). Wind energy: a choice for energy generation in Nigeria. https://nairametrics.com/2017/11/13/wind-energy-choice-energy-generation-nigeria/
- (10) Vergnet (2017). The Power committee of the Nigerian national assembly visited the VERGNET wind power plant of Katsina. http://www.vergnet.com/news/power-committee-nigerian-national-assembly-visited-vergnet-wind-power-plant-katsina/#:~:text=VERGNET%20is%20responsible%20for%20the,MINISTRY%20OF%20POWER%20(FMP).
- (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) African Development Bank (2019). West Africa Forum for Climate and Clean Energy Financing Project Snapshots. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/WAFCCEF-3_Project_Snapshots.pdf
- (18) Kukayi, D., Oigiagbe, U., Cookey, M., Amodu, A., Sulaimon, O. (2020). 'The Renewable Energy Law Review: Nigeria'. The Law Reviews. https://thelawreviews.co.uk/title/the-renewable-energy-law-review/nigeria#:~:text=The%20NERC%20REFIT%20Regulations%20aim,companies%20(Discos)%20and%20NBET