Economic Evaluation of Hybrid Renewable Energy Systems for Electricity Generation in Nigeria: A Discounted Cash Flow Analysis

Abstract

Nigeria has great renewable energy resource potential comprising solar, wind, biomass and hydro and much work has been done on estimation of this potential. Variability of a single resource type, high cost of energy from renewable sources and impracticability of grid extension to distant rural areas from the national grid has led to the development of hybrid renewable energy systems (HRES). Although Nigeria is rich in these renewable resources, a hybrid application approach seems more feasible to ensure a reliable and cost-effective power supply from these sources. This study was conducted to assess Nigeria’s technological readiness for adopting HRES, its environmental impact and its viability over a 20-year period. A review of past literature was carried out to ascertain the country’s readiness for HRES and its environmental impact, while the discounted cash flow (DCF) analysis, along with other economic indicators of net present value (NPV), internal rate of return (IRR) and payout period (PO) were adopted to estimate the economic viability of the system. The outcome of this paper shows that HRES for power generation in Nigeria is economically viable.