Biomass energy

Biomass energy
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Biomass energy
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Renewable Resources and Alternative Energy
Alternative 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.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
5% - 10% (in IRR)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
Nigeria was projected to have a total energy potential of biomass of about 5.5EJ in 2020
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
Affordable and Clean Energy (SDG 7) Climate Action (SDG 13)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
No Poverty (SDG 1) Zero Hunger (SDG 2) Clean water and sanitation (SDG 6)
Country
Regions
  • Nigeria: South East
  • Nigeria: South South (Niger Delta)
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Renewable Resources and Alternative Energy
RR

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.

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Alternative Energy
RR.1

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)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Biofuels
RR-BI
Investment Opportunity Area

Biomass energy

Business Model

Build and operate biomass plants to generate energy for sale to local utility companies or directly to end users.

Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
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)

IRRDescribes an expected annual rate of growth of the IOA investment.
5% - 10%
ROIDescribes an expected return from the IOA investment over its lifetime.
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)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
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)

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Capital - Limited Investor Interest
Insufficient funding, a lack of accurate data and a master plan, limited access to large scale financing
Business - Supply Chain Constraints
Insufficient transmission infrastructure
Market - Highly Regulated
Regulatory constraints
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 - Affordable and Clean Energy
Affordable and Clean Energy (SDG 7)

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

Current Level

59.3%. (11)

28.2% in 2015. (11)

N/A

Target Level

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)

13 - Climate Action
Climate Action (SDG 13)
Secondary SDGs addressed
1 - No Poverty
No Poverty (SDG 1)
2 - Zero Hunger
Zero Hunger (SDG 2)
6 - Clean water and sanitation
Clean water and sanitation (SDG 6)
Directly impacted stakeholders
People
Households and energy consumers
Planet
Environment benefitting from more sustainable energy generation practices
Corporates
Small and medium enterprises, industries
Indirectly impacted stakeholders
Public sector
Government institutions
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.

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

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.

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)

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

country static map
semi-urban
Nigeria: South East
The Ebonyi State Government is working closely with UNIDO to develop a biomass gasification plant at the UNIDO Mini-industrial cluster in Ekwashi Ngbo (Ohaukwu Local Government Area), to generate about 5.5 MW of energy, using risk husks and other waste materials.(8)
semi-urban
Nigeria: South South (Niger Delta)
Similar plants are being prioritized in the state as well as neighboring states such as Delta State. A locally owned power company, Onose Tbea Energy, plans to build a 400 MW gas-fired power plant at Ekrokpe in Delta State. The government is encouraging private investments in this subsector.(9)
Sector Sources
  • 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
IOA Sources
  • 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.