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?
Upper bounds on renewable energy 1
Nigeria’s tropical location provides the country with an abundance of renewable energy all year.
As a result, experts believe Nigeria, as Africa’s largest economy and with over 2,600 hours of sunlight per year (roughly 7 hours of sunlight daily on average), has the economic war chest and environmental conditions to tap into renewable energy power sources like solar.
“Nigeria has vast natural renewable energy resources which will be essential for the sustainable development of the country; however, at present these resources are very much underexploited,” findings from a 2023 report developed by International Renewable Energy Agency (IRENA) showed.
According to World Bank estimates, investing in solar-powered plants could provide electricity to nearly 80 million people who currently do not have it.
Experts believe that by maximising its renewable energy potential, Nigeria can significantly reduce emissions and help to mitigate the effects of climate change.
According to the IRENA report, Nigeria has a high solar resource potential, with an average annual global horizontal irradiation ranging between 1 600 and 2 200 kWh/m2, with the highest values (greater than 2000 kWh/m2) located in the country’s northern region.
“The potential for concentrated solar power (CSP) is also very significant with a potential of approximately 88.7 GW and is mostly located in northern Nigeria, where the direct normal irradiance is highest,” IRENA said.
According to the IRENA report, Nigeria has moderate wind potential, with average wind speeds at 10 metres (m) height ranging between 2.1 m/second (s) and 8 m/s, with the highest values (greater than 7 m/s) located in the northern part of the country.
The National Renewable Energy Action Plan (NREAP) aims to achieve 0.17 GW of grid-connected wind capacity by 2020 and 0.8 GW by 2030, according to IRENA.
Nigeria has a large hydro potential of approximately 24 GW as well as a small hydro potential of approximately 3.5 GW.
For the most part, this potential is yet to be realized. Nigeria had approximately 1.9 GW of large hydro installed capacity and approximately 60 megawatts of small hydro installed capacity in 2015.
Exploiting the vast potential of biomass resources in the country, particularly agricultural residues for power generation, will go a long way towards resolving Nigeria’s current energy crisis. While there are numerous biomass power generation options, this study only considers agricultural residues as feedstock for biomass power plants.