Nigeria's new electricity act: What it means for climate change?

The new Electricity Act 2003, signed into law by President Bola Tinubu, will allow renewable energy providers to charge a cost-reflective price for what they produce for the first time, a development that could solve Nigeria’s costly electricity problems.

Households and businesses in Africa’s largest economy have turned to fossil-fueled generators, which consume approximately $14 billion per year and pose environmental and health risks, according to a report by Stears and Sterling, titled, “Nigeria’s State of Power: Electrifying the Nation’s Economy”

Despite abundant oil, gas, hydro, and solar resources, the country continues to experience severe power shortages. This is unfortunate because only 4,100MW of the potential 13,000MW generated by its existing power plants is available for distribution.

To change the narrative, President Tinubu signed the Electricity Bill 2022, effectively repealing the Electric Power Sector Reform Act 2005, which had been in effect for 18 years.

The fundamental goal of the act, according to analysts at Brickstone Africa, an infrastructure advisory service, is to create a market for renewable energy, thereby stimulating investment in the sector.

What new electricity bill says about clean energy?

Recognizing the importance of clean energy sources and in accordance with Nigeria’s Paris Agreement commitment, the new electricity act encourages the 36 states to close the supply deficit gap by exploring innovative energy mix solutions.

States can also diversify their generation mix by meeting their energy needs with abundant renewable energy resources located in their respective jurisdictions.

This development provides states with a one-of-a-kind opportunity and flexibility to address the perennial challenges affecting optimal electricity supply within their respective jurisdictions without relying on federal leadership.

States can use this to investigate innovative mechanisms for attracting investment for large-scale projects, such as concessionary-based project arrangements or Private Public Partnerships (PPPs) for state projects, as well as other viable financing options.

The Act also includes mechanisms to encourage investment in renewable energy projects, such as feed-in tariffs, which guarantee a fixed price for renewable electricity fed into the grid, and tax breaks.

The provision of the Integrated National Electricity Policy and Strategic Implementation Plan for the Power Sector is another major highlight of the new electricity bill.

The new electricity bill requires the Ministry of Power to prepare and publish in a federal gazette an Integrated National Electricity Policy and Strategic Implementation Plan to guide the overall development of the country’s power sector, which will be reviewed every five years.

The goal is to ensure the best possible use of a mix of renewable and non-renewable energy sources; mini-grids or stand-alone systems in rural areas, rural electrification, bulk power purchases, and local power distribution; public-private partnerships; and policies such as waivers and subsidies to promote renewable energy, among other things.

In terms of establishing clear guidelines for the licensing, monitoring, and supervision of market participants, the new electricity act establishes a framework to prevent anti-competitive practices and ensure a level playing field for all industry participants.

In addition, the act guarantees asset protection, the right to sell or transfer a licensee’s undertaking in the event of license revocation, and compensation in the event of any forceful takeover in the interest of national security.

How can the new electricity law fix Nigeria’s power woes?