Why captive and embedded power are growing in Nigeria's supply gap

Nigeria has about 13,000 MW of installed generation capacity. At peak, what reaches customers is 3,500 to 5,000 MW, for a population of more than 200 million. In a GEPA leadership workshop, Christian Oribhabor, power business development manager at Shell Energy Nigeria, set out the two models growing inside that gap: captive power and embedded power.

Why the grid falls short

Ageing plant, poor maintenance and gas supply constraints keep much of the installed capacity unavailable. A large share of what is generated is then lost along the chain. Aggregate technical, commercial and collection losses, known as ATC&C, run at 46 per cent in Nigeria against a global standard of 8 to 10 per cent.

The system is also central. Gencos sell bulk power to NBET, and the national control centre at Osogbo rations it across the states. Oribhabor's illustration is Lagos: the state could use close to 2,000 MW on its own, but might be sent something like 300 MW. Because the whole country hangs on one grid, a single collapse affects everyone.

Two ways to generate around the gap

Captive power is generated on site for your own use. At industrial scale it runs on gas, diesel or solar with no dependence on a disco. Flour Mills of Nigeria at Apapa runs a 33 MW captive plant built from eleven 3 MW gas generators. Studies he referred to put the market's growth at 800 million to 1 billion dollars a year, averaging 8 to 12 per cent.

Embedded power has wider scope. A producer generates directly into a distribution company's network, in partnership with that disco, to serve a defined load centre: the end users in one segment of its network. The plant has no relationship with the national grid. It supplements the disco's allocation and avoids the losses of long-distance transmission, under guidelines set by NERC.

VI Power, a joint venture between Eko Disco and a private investor, is building a 30 MW plant in Victoria Island on this model. Lagos State has issued requests for proposals for its own embedded power programme.

What is driving demand

Oribhabor sees several forces at work:

• Grid unreliability. Where the grid keeps collapsing, businesses secure their own supply.
• Decentralisation. The state electricity market, born of the Electricity Act 2023, is meant to let states generate power for themselves, and Lagos, Oyo and Ekiti are beginning to adopt it.
• Industrial cost pressure. In industry generally, power is 30 to 40 per cent of operating cost.
• Power as a service. Independent power producers build the plant and sell power per kilowatt hour, to industry and now to some discos.

He names industrial clusters, data centres, hospitals and off-grid communities as the segments to target. Data centres need close to 100 per cent availability because mobile and internet connectivity depend on them. He tentatively expects the power industry to grow by 10 to 15 per cent over the next five years, possibly more, helped by states adopting the state electricity market and a higher gas flaring penalty that pushes producers to route gas to power plants. He also hopes cost-reflective tariffs will extend beyond band A so investors can recoup their investment.

Where one person fits

Asked what an ordinary individual can do, Oribhabor is realistic. Nobody plays across the whole value chain alone; it takes a company or a consortium. The smallest genuine entry point in generation is solar, where providers install the system and charge per kilowatt hour instead of up front.

The session's host offered routes that need no capital. One is to act as an introducer: find a nearby company spending heavily on fuel, identify providers of captive generation, connect the two, and agree your commission before the introduction. Another is to solve a disco problem: one founder she knows built a business around tariff collection, which NERC has recently moved to regulate. A third is to choose a function in the sector, acquire the skill it needs, and set a date to apply.

The full course, taught from the workshop recording, also covers the coming supply licence regime, which would separate distribution from retail.