Market Trends of Nigeria Power Industry
Thermal Power is Expected to Dominate the Market
- Thermal energy is one of the primary electricity generation sources in Nigeria. The country's significant gas potential is expected to aid the growth of thermal energy sources in the medium term.
- Nigeria has significant natural gas reserves, which serve as a primary fuel for thermal power generation. The country's natural gas reserves are among the largest in the world. This abundance of fuel resources makes thermal power generation a reliable and readily available option for meeting the country's growing electricity demand.
- Moreover, Nigeria already has an established infrastructure for thermal power generation, including power plants, pipelines, and gas supply networks. This infrastructure provides a foundation for the continued dominance of thermal power generation. It enables efficient fuel supply, transmission, and distribution, making operating and expanding thermal power plants cost-effective.
- According to the Nigerian Electricity Regulatory Commission, thermal power generation in Nigeria decreased slightly by 2.12% between the third and fourth quarters of 2023, primarily due to gas supply constraints. However, rising energy demands and supportive government steps to secure natural gas from other trade routes are expected to drive power generation via thermal energy sources in the coming years.
- Moreover, utilizing domestic fuel resources, such as natural gas, for thermal power generation enhances Nigeria's energy security. By relying on indigenous fuel sources, the country can reduce its dependence on imported energy and mitigate the risks associated with fluctuating international fuel prices or supply disruptions.
- For instance, in February 2024, Geometri Power Aba Limited constructed a 188 MW natural gas power generation and distribution project in Abia, Nigeria. The project comprises three GE LM6000 gas turbines with a 47 MW individual capacity each. This is expected to meet the growing power demand in the region.
- Due to such factors, the thermal segment is expected to dominate the market during the forecast period.
Understand The Key Trends Shaping This Market
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Increasing Adaption of Renewable Energy to Drive the Market
- Nigeria, one of the most populous African countries, plans to diversify its energy mix by shifting toward renewable energy sources, such as solar and wind energy, to reduce the country's dependence on gas power generation. The country has abundant renewable energy resources, particularly solar, wind, biomass, and small hydropower (SHP).
- Moreover, the widespread adoption of renewable energy sources is expected to expand power generation capacity in Nigeria. By harnessing the country's abundant renewable resources, the power market can increase its overall capacity, addressing the growing electricity demand and enabling access to electricity for more communities. This expansion can be achieved by constructing utility-scale solar and wind farms, small hydropower plants, and biomass energy projects.
- Additionally, renewable energy technologies offer an excellent opportunity for rural electrification in Nigeria. Many remote and off-grid areas currently underserved by the traditional power grid can benefit from decentralized renewable energy solutions. Off-grid solar systems, mini-grids, and other distributed renewable energy technologies can provide reliable and affordable electricity to these communities, improving their standard of living and supporting economic development.
- According to the International Renewable Energy Agency, solar energy installation in the country has been observing steady growth in recent years. In 2023, the installed solar energy capacity in the country was 112 MW, an increase of 9.8% compared to 2022.
- In February 2023, Rensource Energy, one of Nigeria's fastest-growing off-grid renewable energy EPC companies, revealed the signing of several projects in the nation, including 1.4 MW of solar energy. Rensource Energy intends to build on the new projects as soon as possible. The projects will include battery energy storage systems and vary in size from 300 kWp to 700 kWp. This reflects a strong demand for sustainable and affordable electricity in Nigeria.
- Therefore, the adoption of renewable energy is expected to boost the country's power market.
