Integrated Resource Planning

Nextier’s Playbook for Building a Better Grid 

An Integrated Resource Plan (IRP) serves as a strategic blueprint for shaping a country’s or region’s energy future. It ensures electricity demands are met efficiently and sustainably over the long term, balancing the needs of today with the opportunities of tomorrow. 

By forecasting demand, optimizing energy efficiency, evaluating cutting-edge technologies, and assessing environmental impacts, an IRP delivers cost-effective resource strategies that align energy supply with demand. More than a plan, it is a critical tool for advancing sustainable development goals and driving resilient energy systems. 

In view of the development of State Electricity Markets (SEMs), the instrumental nature of IRPs to facilitate the growth of these markets cannot be over emphasised. Currently, six states, namely Edo, Ekiti, Enugu, Imo, Kogi, Ondo and Oyo, have received regulatory transfer orders from NERC, empowering them to regulate and foster the growth of their State Electricity Markets (SEM).  

These states, amongst others, will be expected to develop IRPs that will guide the process of power generation, transmission and distribution to meet current and future energy demands of a state’s growing population. 

Nextier Capital Limited, through the USAID-sponsored Power Africa – Nigeria Power Sector Program, has driven the creation of state electricity policies that form the foundation for establishing State Electricity Markets (SEMs). These policies empower states to independently regulate and manage their energy sectors. Building on this progress, Nextier has also developed IRP framework guidelines for Katsina State and spearheaded the creation of the Anambra State IRP. 

Nextier’s IRP planning process is a structured seven-step approach designed to tackle technical, financial, legal, social, and environmental challenges—key components reflected in the IRP framework for Katsina State. 

This framework provides actionable recommendations for addressing these issues, paving the way for effective IRP development. IRPs are crafted to align with federal and state regulatory and policy frameworks, feasibility studies, and detailed planning methodologies, ensuring a tailored approach for each state. By applying these guidelines, states can create customized IRPs that reflect their unique needs and priorities. 

In this article, we’ll unpack these seven steps, detailing the what, how, and why behind the process. 

1. Load forecast 

Developing a load forecast for an Integrated Resource Plan (IRP) is a critical first step, as it predicts future energy demand and peak load requirements, guiding effective electricity system planning. It also informs the evaluation of existing assets to determine if they meet current demand or fall short. The two primary forecasting methods—Statistical and Artificial Intelligence (AI)—can be tailored to a state’s specific approach. 

Key factors in the forecasting process include population size, household numbers, urban-rural distribution, employment rates, lifestyle patterns, climate, industrial activity, and time variables. States may also prioritize unique considerations, such as fuel switching, integrating off-grid systems, or demand-side management strategies. The goal is to create a realistic forecast that balances generation, transmission, and distribution capacities, ensuring resource efficiency, sustainable electricity tariffs, and investor appeal. 

Nextier’s load forecast for Anambra State employed the Statistical Method, using real-time data from distribution and transmission networks. This approach reflected local realities and accounted for population growth, operational costs, and capital investments. It also offered growth scenarios to guide robust decision-making. In Katsina State, the AI Method was used to develop a framework based on predictive assumptions, tailored to the state’s context. 

2. Analysing Existing and Committed Generation and Transmission Assets 

Analysing existing generation and transmission assets is crucial to assessing their current performance, potential retirement, and remaining lifespan. This step evaluates the operation of the primary grid and plans for future grid development. Key considerations include rural electrification, fuel switching, suppressed load, and load shedding, ensuring a comprehensive grid analysis. 

The findings from this process guide plans for expanding generation, transmission, and distribution infrastructure. The reliability and efficiency of existing and committed assets significantly influence sector investments.  

For Anambra State, without any existing power plants, Nextier bypassed the analysis of current generation assets. Instead, potential generation resources were identified for future development. In Katsina State, wind resources were highlighted, with the framework outlining steps for further analysis in alignment with the load forecast. 

3. Demand-Side Management (DSM) Programs 

Demand-Side Management (DSM) programs are strategic measures implemented by power providers, governments, and consumers to optimize energy use. These initiatives aim to enhance energy efficiency, grid reliability, and cost-effectiveness through methods like price signals, technology upgrades, consumer education, and supportive policies. DSM programs focus on energy efficiency, conservation, demand response, and integrating distributed energy resources. Examples include building codes, dynamic electricity pricing, distributed generation, energy storage, industrial energy audits, and public awareness campaigns. 

For Anambra State, Nextier recommended DSM programs aligned with potential generation resources to create a cost-efficient system while preserving resources. The team proposed setting DSM targets for short-, medium-, and long-term goals, paired with robust monitoring systems. Specific recommendations included adopting rooftop solar PVs, battery storage systems, and electric vehicles (EVs). In contrast, the Katsina State framework outlined general DSM programs that could be adapted to the state’s needs. 

4. Least-Cost Generation Expansion Plan 

A generation expansion plan estimates costs, including capital investments, power facilities, emissions offsets, maintenance, and supply interruptions. It ensures sufficient capacity to meet forecasted demand while optimizing incremental costs for reliable power supply. 

Reliability criteria—determined using deterministic and probabilistic methods—guide capacity planning, accounting for outages and load fluctuations. The plan evaluates existing and committed plants, identifies new candidate projects, selects suitable technologies, and conducts environmental impact screenings. 

Performance evaluations of generation units use historical data and benchmarks to ensure alignment with international standards, which also accounts for climate change actions. Integrating renewable energy sources is essential to meet Nationally Determined Contributions (NDCs). States must assess the grid’s ability to handle variable renewables and determine whether to connect these to isolated systems while factoring associated costs. 

Dominant renewable energy resources shape each state’s strategy. For example, Anambra prioritized solar and hydropower, excluding wind as a candidate, while Katsina incorporated wind resources into its plan. 

Scenarios are formulated and simulated using specialized software, integrating inputs like plant location, fuel requirements, operational costs, outage rates, Power Purchase Agreements (PPAs) provisions, and asset retirement schedules. These scenarios identify viable options to ensure adequate capacity throughout the planning period. 

In Anambra State, four scenarios, integrated with demand forecasts, provided insights into risks and policy implications. The result was a least-cost generation expansion plan that phased in renewable energy for cost efficiency and sustainability, optimizing resources for long-term reliability. 

5. Transmission Expansion Plan 

Top-ranked generation scenarios and load forecasts will shape the transmission expansion plan, accommodating predicted growth and generation plant operation criteria. Key factors include system security, frequency variation, load power factor, reactive compensation, fault levels, and network stability. 

The primary transmission network will be assessed to determine its capacity for shifting load patterns, integrating new generation facilities, and connecting load centers. Expansion planning requires a system model aligned with existing infrastructure, considering routing, voltage levels, O&M costs, and transformer station locations. 

The process evaluates areas for reinforcement and new facilities, considering site availability, environmental impact, and technical studies to ensure stability and reliability. Costs for these expansions will guide decisions on development plans included in the IRP, prioritizing those with the lowest capital and O&M costs. 

In Anambra State, the IRP identified short-term transmission reinforcements, such as the Onitsha-Ifitedunu 132 kV double circuit line, and a long-term plan extending to 2044. For Katsina State, Nextier recommended developing new transmission lines at 330kV or higher to meet future grid demands. 

The IRP’s flexibility, requiring updates every 3-5 years, ensures it remains responsive to state realities and macroeconomic factors, allowing for continuous alignment with evolving needs. 

6. Distribution Expansion Plan 

The distribution expansion plan is the final technical phase before compiling the IRP. It focuses on detailing the first five years and forecasting subsequent years. This involves reviewing distribution feeders connected to transformation stations for reliability, considering factors like configuration, load power factor, fault levels, installation dates, condition, O&M costs, and location. 

Like transmission expansion, the process includes identifying feeders for reinforcement and areas needing upgrades or new installations. Key considerations include route selection, power transfer capacity, right of way (ROW), cost analysis (capital investment and O&M), and environmental and social impact assessments. 

The distribution development plan ensures energy demand is met while planning for future needs. For Anambra State, the IRP outlines new feeders required for 2030-2044, accounting for capital and O&M costs. The overall goal is to create a least-cost distribution system that meets both current and future demand. 

7. IRP Preparation & Implementation 

The final IRP will compile the least-cost, top-ranked plan across generation, transmission, and distribution (inclusive of several distribution plans), followed by sensitivity and risk analyses to identify potential changes. Sensitivity analysis considers factors like capital costs, O&M costs, fuel prices, load forecasts, and discount rates, while risk analysis looks at load growth, fuel availability, and investment sources. 

The analysis results in priority recommendations for the IRP and two alternative plans, each with an accompanying annual capital investment plan to guide stakeholder investments. 

The state should prioritize project timelines, procurement stages, and structuring responsibilities across state agencies for practical implementation. This includes establishing mechanisms for power contracts (e.g., PPAs), construction regulations, and setting up a repository for relevant studies. Regularly tracking construction status, updating the IRP, and ensuring stakeholder involvement will be key. 

In Anambra State, key recommendations for prompt implementation include creating an independent system operator (ISO), a bankable commercial framework, and a standardized contract template. Emphasizing stakeholder consultations and encouraging DSM programs are also crucial. 

Implementation priorities will vary by state based on their unique goals and growth objectives. For example, states prioritizing small/mini grids may adopt different planning methods. In some cases, utility companies may be required to develop their own IRPs aligned with state objectives. Still, Nextier’s outlined process provides a comprehensive framework for all approaches. 

Written by: Elohozino Okpowo & Engr Emmanuel Ogwuche 

For feedback and enquiries, send an email to nokwedy@thenextier.com