Business case for how a diesel-battery hybrid system can reduce electricity cost in Nigeria


Due to the grossly limited on-grid generation, most Commercial and Industrial (C&I) businesses in Nigeria augment their electrical energy needs with an on-sight off-grid diesel generator. This drives the average weighted unitized cost of electricity for the C&I space much higher than most other developed or developing countries. The ripple effect is higher operational costs which translates to higher costs of goods sold in the country.

In this article, we will evaluate the use case of augmenting a site or building with a Lithium Ion based Battery Energy Storage System (BESS) to reduce electricity cost in Nigeria.


True Cost of Electricity ($/kWh)

We will be using US Dollars as the base currency and a NGN315/$1 exchange rate.

For a large scale commercial customers, an average load of 900 kW per hour can be assumed. The average monthly energy used will be ~648,000 kWh.

Using data from customers, on average 25% of this energy need is met by the grid and the remaining 75% is met by Diesel Generators.

On-Grid Electricity Cost:

Each Distribution company in Nigeria has slightly different price for electricity, we shall use the Eko Distribution Company for this analysis.

The fixed monthly charge for a large commercial customer is ~$475. And the variable energy price is ~$0.07/kWh (7 cents).

With 25% of the monthly energy being met by the grid, the bill will be $11,815/month. Hence a unitized cost of electricity of $0.073/kWh from the grid.


Diesel Electricity Cost:

This shall be approached a little different, as the customer must own the generation asset. A 2,000 kVA rated generator is customary due to the long run hours. In addition, where the site load is critical, 3 onsite generators are installed for a n+2 redundancy.

The useful life of a Diesel Generator is 12,000 run hours, with an initial turnkey cost of ~$1M. A Diesel Generator run at 50% load will consume about 273 Liters/hour, with a diesel cost of $0.84/Liter.

Taking the capital cost, lifetime, average hours run per day, diesel cost and preventative maintenance costs. Hence a unitized cost of electricity of $0.403/kWh from the generator.

Average weighted unitized cost of electricity (Grid & Diesel): $0.321/kWh



How a Hybrid System Works

Lithium Ion batteries can be cycled continuously for a long period of time with little effect to the capacity (compared to Lead Acid Batteries). With 2 full 100% charge/discharge cycles a day, the lifetime of the BESS can be up to 14 years.


Lithium-Ion Battery Cycle


With that in mind, the goal of the BESS in a hybrid system is to

  1. Charge from the grid when it is available as grid power is the cheapest. And discharge to the loads when the grid is not available, this has an added effect of reducing the average run time of the generator from 75% in a day to ~50% a day.
  2. Charge from the generator when the BESS is out of charge and there is no grid available. This forces the generator to run at a more efficient state.

Energy Efficiency Curve

Once the BESS is fully charge, it then turns the generator off and discharges its energy into the load. This reduces the run time of the generator even more from ~50% to ~25%.




Taking the turnkey cost of the BESS, extended lifetime of the generator, reduced generator run per day, diesel and preventative maintenance costs. The weighted average unitized cost of electricity is now $0.244/kWh. A 24% reduction!

New average weighted unitized cost of electricity: $0.244/kWh

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About The Author

Chinedu Igbokwe

Renewable energy expert. Passionate about power and infrastructure developments in the African Continent.

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