Power Punch Implementing the Electricity Act 2023 by Doose Iortyom September 14, 2023 Published by Doose Iortyom The Nigerian power sector has witnessed several attempts by succeeding governments to achieve stability. The most recent attempt is President Bola Ahmed Tinubu’s enactment of the Electricity Act 2023 (EA). The EA marks a crucial step in establishing a comprehensive legal framework for Nigeria’s power industry. Fundamentally, the EA establishes a thorough legal and institutional framework for the Nigerian power industry in electricity generation, transmission, system operation, distribution, supply, trading, and consumer protection. Before this, there was the 1999 attempt by the newly elected democratic government to rehabilitate the Nigerian power sector. This rehabilitation resulted in enacting the Electric Power Sector Reform (EPSRA) Act of 2005, which the new EA repeals. The EPSRA birthed the statutory basis for the privatization of the power sector. A key step in this plan was the setup of the Power Holding Company of Nigeria (PHCN), subsequently unbundled into eighteen successor companies in 2013. Although PHCN was created to address the electricity deficit in the country, electricity access in Nigeria remained one of the lowest in Africa and the world. Some of the challenges of the EPSRA included poor operational performance, a lack of foreign investment, the absence of a long-term power development strategy, no attention to renewable energy exploitation and the inadequate implementation of reforms. These are some challenges the EA is set to address if properly implemented. The EA highlights significant provisions, including cooperation between regulatory commissions, state electricity markets, legal consequences for electricity-related offences, emphasis on clean and sustainable energy, clear regulatory power division, and establishment of an Integrated National Electricity Policy. The efficacy of every legislation lies mainly in its implementation. The ambitious provisions in the Act aim to establish an ideal electricity market in Nigeria. Nevertheless, it can disrupt the Nigerian Electricity Supply Industry (NESI) if ineffective. Therefore, capacity building and education are needed at varying levels of the electricity value chain to ensure success. The creation of state electricity markets will need to be structured cohesively to attract investments. The concern around the technical and financial ability of the various state regulators that will be created needs to be addressed to regulate these markets properly. The daunting question is: Will there be enough resources to do this in the short and medium term? These are some of the dimensions that states need to consider. The reforms in the EA are unlikely to be successful unless there is clarity on what the provisions of the EA are intended to achieve. Such clarity is needed to identify, for example, how the states exercise their powers, how existing national entities and citizens should adapt and respond, what the dangers are, how they should be mitigated, and what obligations. The highlights above spell out a need to close all gaps that hinder the seamless implementation of this Act to avoid misinterpretation, the risk of overregulation, and potential conflicts between the objectives of the Act. Finally, the importance of stakeholder engagement in Implementing the Electricity Act 2023 cannot be overstated. Relevant bodies must convene key actors together, address the existing challenges, and plan the implementation of the provisions of the Act. These actions should also include conducting knowledge-sharing sessions with countries like the United States and India, which have similar jurisdictions and multi-tier regulatory oversight on the energy sector. The EA, like every other legislation, is not perfect. However, The Act is a stride towards achieving a well-functioning power sector that meets the needs of consumers and promotes sustainable growth. September 14, 2023 0 comments 0 FacebookTwitterPinterestEmail
Power Punch The Off-grid and On-grid Utilities Tango by Omiesam Ibanibo August 15, 2023 Published by Omiesam Ibanibo Decarbonization has become a global priority. As a result, utilities in the Nigerian electricity supply chain must find innovative ways to transition to low-carbon electricity to achieve improved energy access and net-zero carbon emissions by 2060. Regulatory Overview The Nigerian Electricity Regulatory Commission (NERC) is the primary regulator of the electricity sector. The utilities in the Nigerian electricity value chain are partly owned and operated by the government and private companies. Section 80 and 167 of the Electricity Act (‘the Act’) 2023 mandates NERC to promote renewable sourced electricity and consider technology, financial viability, and impact on tariffs to ensure sustainably, respectively. Alongside this, section 164 of the Act further directs the NERC to develop and publish policies that: 1. simplify the licensing requirements for renewable energy service frameworks; 2. specify the responsibilities of renewable energy service companies in generation, transmission, and distribution activities for energy-generated capacity into the national grid and distribution network; and 3. provide guidelines for issuance on net-metering for roof-top solar PV systems, small wind power per the Act and renewable energy standards on installation, decommissioning and disposal of renewable energy accessories. The Challenge? The regulator is yet to show commitment to the objectives mentioned above. For instance, the NERC is yet to update the 2015 Regulations on Feed-in Tariff for Renewable Energy Sourced Electricity in Nigeria and provide guidelines on the rates that public utilities may charge for electricity generated from renewable per s.168 of the Act. The current regulation only prescribes feed-in tariff rates for the 2016 base year, which is problematic because s.169 of the Act stipulates that public utilities shall not demand a feed-in-tariff for electricity generated from renewable sources unless the billable rate has been approved and published by the NERC in the Federal Government Gazette and the mass media. As such, distribution utilities cannot buy or negotiate Power Purchase Agreements (PPAs) with a renewable energy generator unless they are under the guidelines published by NERC. On the other hand, critics may rebut this observation by highlighting the incentives for renewable energy participation as a signal of the sector’s commitment. Section 166 of the Act mandates the Federal Ministry of Finance to introduce incentives to facilitate the generation and consumption of energy from renewable energy sources. Some of the incentives include: 1. tax exemption: utility companies engaged in generating electricity from renewable energy sources are granted pioneer status (tax exemption) for the first three years, renewable for another two years; 2. duty allowance for imports and exports of renewable machinery and materials; 3. free custom duties for two years on the importation of equipment and materials used in renewable and energy efficiency projects; 4. guaranteed purchase of power generated – the Feed-in Tariff Regulation for Renewable Energy Sourced Electricity directs distribution companies and the Nigerian Bulk Electricity Trading Company to each procure 50% of the total output of a renewable energy plant; and 5. five-year tax exemption for prospective manufacturers of renewable energy machinery from the commencement date of manufacturing, amongst others. Although these initiatives are commendable, the bureaucratic challenges for decentralized energy projects to participate in the electricity market outweigh the incentives. Bureaucratic challenges such as complex licensing and approval processes and sub-optimal political priorities have delayed the seamless integration of off-grid renewable energy. Nigeria generates its electricity through thermal and hydro, resulting in heavy dependence on the oil and gas industry. The oil and gas industry is a dominant sector in Nigeria with influential personalities. Thus, prioritizing the mix of renewable systems to the national grid would result in a dip in profits, and such an outcome may not be ideal. Moreover, the Federal Government of Nigeria, in July 2023, unveiled a policy to propel gas investment of about $18 billion to offset Nigeria’s $1 billion gas legacy debt. Conclusion The power sector is crucial in achieving Nigeria’s decarbonization targets. Therefore, the NERC must take active steps to ensure that the integration of off-grid systems envisaged in the Electricity Act is implemented. August 15, 2023 0 comments 0 FacebookTwitterPinterestEmail
