In the bustling metropolis of Lagos, Nigeria’s commercial capital, a revolution is brewing in the energy sector. Lagos state, through its Off-grid Electrification Strategy and Action Plan, a brainchild of the state government, is poised to transform the city’s power landscape, paving the way for a brighter, more sustainable future.
Nigeria’s commercial capital currently generates an estimated 15,000 megawatts (MW) of electricity through diesel generators but a mix of gas-sourced power with off-grid solutions means that the Lagos Electricity Market plan could potentially double the size of the state’s economy.
To change the narrative, Lagos off-grid action plans hold immense promise. By harnessing a combination of off-grid solutions, it aims to double the size of Lagos’ economy and provide reliable, affordable electricity to millions of residents.
At the heart of the plan lies a bold vision: to achieve 1 gigawatt (GW) of solar photovoltaic generation by 2030. This ambitious target, if realized, would not only reduce reliance on expensive diesel generators but also usher in a new era of clean energy.
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To fuel this solar revolution, the Lagos State government has committed to investing $1 billion, alongside private sector partners. This substantial investment reflects the state’s unwavering commitment to a sustainable energy future.
The state said it will set up an electrification fund, empowered by applicable laws, with the Lagos State electrification agency responsible for its disbursement.
“It will be funded by a mix of public finance, including State Off-Grid Solutions budgetary allocations; private finance from institutional investors; donor and development institutions; multilateral finance institutions, and green and climate finance funds; and any other sources of finance as identified and designated by the state.”
The plan also states that Lagos may consider other relevant private-public partnership models, such as joint off-grid solution project finance, which can be achieved through a special purpose vehicle with the state’s contribution through land or capital sourced from the state’s electrification fund.
It added: “The state may also consider concession arrangements to off-grid solution providers in electrifying areas such as build-own-operate-transfer; build-own-operate; build/purchase-own-transfer; and power as a service.
“The state will explore appropriate models in its partnership with the private sector and support appropriate private sectors models such as Pay-As-You-Go and Lease-To-Own where relevant while encouraging gender and social inclusion.”
The plan’s impact extends far beyond solar power. It encompasses a comprehensive strategy to electrify unserved and underserved communities through off-grid solutions. This initiative, expected to create 40,000 jobs by 2030, will bring the benefits of electricity to those who have long been left in the dark.
According to the electrification plan, the 1GW solar off-grid solution will electrify 1.6 million households (36 percent of Lagos) and create 40,000 jobs by 2030.
“I think if well implemented, it should reduce the cost of doing business in Lagos, improve employment figures and inextricably increase commercial activities and reduce crimes,” said Ayodele Oni, energy lawyer, and partner at Bloomfield Law Practice.
The plan’s success hinges on a robust regulatory framework and a spirit of collaboration between the federal and state governments. The Lagos State government, drawing on its constitutional mandate, has established an autonomous regulatory body to oversee the Lagos power market operations.
The Lagos power plan’s potential extends beyond Lagos, serving as a beacon of hope for other states across Nigeria. Its innovative approach, blending traditional and renewable energy sources, offers a blueprint for replicating its success elsewhere.
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Lagos State will have an autonomous regulatory body and the plan is expected to be owned and operated substantially by the private sector with an independent system operator to manage new transmission.
The Lagos State government relied on Sections 13-15 of the 1999 Constitution, which earmarks electricity as an item on the concurrent legislative list, allowing for both the federal and state governments to legislate upon. With the new constitutional amendment, concerns about the Federal Government scuttling the process have eased.
At a consultative forum held last year, Olalere Odusote, the former Lagos State commissioner, and industry experts said the commercial framework of the electricity market plan, built on competitive tariffs, the involvement of private sector operators, and proposal to integrate off-grid energy solutions, make the power plan unique.
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The Lagos power plan seeks to use available energy sources in the state – gas and renewable energy sources – to attain at least 18 hours of supply daily over five years with growth in peak energy traded in the state, from 12,000-15,000MWh daily in December 2022 to 81,000MWh by June 2028.
This will lead to a significant reduction in backup generator emissions and the fostering of a natural gas market in Lagos through a programme to transit Lagos’ backup gen-set fleet from distillate fuels to cleaner gas fuels.
It will also incentivise licensees to adopt cleaner, commercially viable modern technologies power generation sources to deliver energy to residents of the state.
Lagos accounts for almost 70 kobo out of every N1 spent in Nigeria as well as over 53 percent of manufacturing employment in Nigeria, but it is only allocated 25 percent of power supply from the creaking national grid, leading to 50 percent capacity under-utilisation for industries.
“We get 25 percent supply allocated to us not because that is the proportion of our demand but that is by virtue of the national allocation formula. This means that the fortunes of Lagos will never improve until Nigeria’s fortunes improve in terms of power supply,” said Odusote in an interview with BusinessDay last year.
With a population estimated at about 20 million, Lagos is perhaps Nigeria’s most populous state but receives less than 1,200MW of supply from the national grid.
Reforms that were driven by the Federal Government since 2000 have focused on instituting a single, national electricity market, unbundling of the National Electric Power Authority and establishing the Nigerian Electricity Regulatory Commission (NERC) and the Rural Electrification Agency.
Eyo Ekpo, managing director of Excredite Consulting Limited, consultant to the state government, said in a presentation at the consultative forum that after the power sector privatisation in 2013, the country was bequeathed “an insolvent single buyer market that cannot flow cash for maintenance, let alone marshal adequate capital expenditure, thus leading to insatiably sucking up public funds.”
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“The outcome has been suboptimal results over the past 21 years and supply that has not gone much beyond a national average of approximately 4,000MW/48,000MW/h per day since 2015,” Ekpo said.
The Lagos State government considered eight factors as key requirements for a viable electricity market, including an enabling constitutional and legal framework; collaborative federal and state government support for market growth/customer satisfaction; and an autonomous, credible regulatory body and an integrated resource plan.
Others are a competitive and transparent procurement of generation resources; a bankable commercial framework; well-funded, well-managed generation, transmission and distribution players, and an independent system operator.
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