The Energy sector is one of the most exciting due to the room it leaves for a variety of possible innovations and creativity in the entire energy value chain ranging from power generation to converstion to storage to distribution to meter reading to billing etc. Currently, Nigeria's largest power source is the post-colonial Kainji hydroelectric power dam with a compromised capacity of 740MW out of Nigeria's total supply of almost 5,000MW attained as of 2016.
With a fast growing population and rapid industralisation of the country, the current power capacity is said to be only 12% of what the country needs. In order to bridge the huge gap between demand and supply of energy in the country, the Federal Government had enacted the Electric Power Sector Reform Act (EPSRA) 2005 which liberalised, diversified and commercialized the energy sector. As a result, there has been an increased private sector involvement and a healthy diversity of solutions including renewable energy resources including hydro-electricity, solar, wind and biomass energy. However, the biggest challenge for investors has been to keep tariffs as low as the Nigerian consumers are already used to. The Federal Government has already put in place tax holidays, investment incentives and other protections for foreign direct investors in this sector.
Clean and renewable energy is highly encouraged by the Government as it will reduce the country’s dependence on fossil fuels and provide an economically stable source of energy to the power generation mix. The major challenge with the energy sector is keeping the tariffs low within the spply chain to ultimately achieve an affordable price to the end-consumer. Although the Government enforced the embedded generation to enables energy producers supply power to distribution companies on mutually agreed terms of tariff, investors are advised to critically examine the cost dynamics peculiar to this sector and apply longterm ROI for success.