Despite significant financial and policy initiatives over the past 20 years, the quality of the Nigerian Electricity Supply Industry’s (NESI) power supply and service has remained essentially unchanged, which is a serious problem.
Nigeria, a country with an estimated electricity demand of 98,000MW, supplies its over 200 million growing population less than 10,000MW. The country has only managed to achieve a total installed generating capacity of about 16,384MW, with an available 6,000MW currently serving the country.
Self-generation in Nigeria is extremely prevalent; nearly 14GW capacity exists in small-scale diesel and petrol generators, and nearly half of all electricity consumed is self-generated.
The impact of continuous grid-electricity supply outages on family and commercial customers’ quality of life and operating expenses makes it difficult to overlook the daily repercussions of these failures.
People and companies with the resources have turned to self-help by investing in alternative energy sources, such as hybrid power and off-grid systems since policy changes and power sector operators have failed to deliver on the promise of a change in the country’s power supply situation.
Findings from different data sources, particularly from the Nigerian Electricity Regulatory Commission (NERC), showed that Nigeria’s privately generated electricity capacity, also known as “captive power generation” has surpassed the national grid capacity, with companies and institutions producing over 6,500MW of electricity, exceeding the grid’s 4,500MW capacity. This signifies a significant portion of Nigeria’s total power generation coming from private sources.
According to data sourced from the NERC, 249 firms and institutions were granted permits to generate captive power.
Some permits were issued as far back as 2010, 2016, 2020 and 2022. It was learned that the request for captive power generation increased in 2023.
Dangote Industries Limited, for instance, generated about 1,500MW of electricity. The Dangote refinery alone has a 435MW power plant that can meet the total power requirement of the Ibadan Electricity Distribution Company.
“We don’t put pressure on the grid. We produce about 1,500 megawatts of power for self-consumption,” Aliko Dangote said last year at the Afreximbank Annual Meetings and AfriCaribbean Trade and Investment Forum in Nassau, The Bahamas.
Also notable amongst these licences are Pure Flour Mills Limited in Rivers State permitted to generate 546MW, Nigeria LNG generates 360MW.
The United Cement Company of Nigeria Limited (Lafarge Africa Limited) generates 105MW; Total E & P Nigeria Limited, 174MW; Esso Exploration & Production Nigeria Limited, 76MW; First Global Commerce Solutions Limited, 77MW; Flour Mills of Nigeria Plc, 70MW; and Lafarge Cement Wapco Nigeria Plc, 90MW.
While we commend President Bola Tinubu’s bold move on June 9, 2023 in signing the new Electricity Act, which was passed by the Nigerian Senate in July 2022, replacing the 2005 Electricity and Power Sector Reform Act, which now allows states and individuals to generate and distribute electricity in areas covered by the national grid, more needs to be done in the short to medium term to improve electricity supply by drawing on the captive (excess) power from large producers to support distribution in their immediate community.
We must aim to attain the threshold of a new era in power delivery. And we believe that this opportunity can ride on the existing system if right policies and timely technical interventions are incorporated in the mix, specifically, net metering, among others.
Net metering will allow electricity consumers to receive (or purchase) energy from the grid when they need it and supply (sell) back to the grid when they have surplus self-generated energy.
The government must have policies and framework that will enable captive power generators to sell to their immediate community as this will further enhance economic activities and drive economies of scale, address the problem of grid failure and vandalism, as well as enable companies to fulfill their social responsibility to their host communities.
The Nigerian electricity market no doubt has a complex regulatory environment. Captive power generation is subject to various laws and regulations, which can be ambiguous and inconsistent. This can create difficulties for private power producers trying to comply with legal requirements while navigating bureaucratic hurdles.
Similarly, the overall infrastructure for electricity distribution in Nigeria is underdeveloped. Many areas lack reliable grid access, making it difficult for captive power producers to deliver their electricity to potential consumers efficiently and economically. Therefore, transmission losses can be significant.
The NERC must streamline and clarify regulations governing captive power generation to facilitate easier market entry and compliance for businesses.
The government should establish a concise legal framework that defines the roles and responsibilities of captive power producers.
Ultimately, the government must invest in the expansion and modernisation of the electricity grid to help accommodate excess capacity from captive power plants and improve overall reliability.
We believe that encouraging partnership between government entities and private sector players can facilitate infrastructure development and share risks associated with captive power generation projects.
These will further reduce complication in the landscape for selling and operating these power systems and stimulate growth in this sector