PROJECTS

Competitive Tender Regime for Renewable Energy Generation in Nigeria

The problem

Nigeria lacks electricity generation capacity and so suffers from constant power cuts and low levels of electrification. Developing local renewable energy resources through competitive procurement of privately-financed generation could expand power availability and reduce costs. However, Nigeria had little experience with renewable energy, and no system for competitive procurement of such capacity.

How we helped

Castalia designed a process for the Government to competitively procure utility-scale renewable energy from Independent Power Providers (IPPs). We drafted tender documentation, reviewed the regulatory framework, showed how competitive procurement of renewable generation could work within it, and drafted process documents and guidelines. We assessed the transmission network and system stability to estimate the maximum quantities of variable renewable energy that could be added at various locations without overloading transmission or threating system stability. We also analyzed cashflow through the Nigerian electricity value chain to pinpoint were financial viability and credit-worthiness problems arose.

Impact

Several IPPs were negotiating PPAs with the Nigeria Bulk Energy Trader. The threat of competitive procurement led them to drop the prices by a third, allowing PPAs to be signed at much more reasonable prices.