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BusinessDay
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Again, Lagos mulls generating own electricity

The Lagos State government is again, considering a plan to provide universal electricity access in the state after previous attempts by past governments went nowhere.

To this end, the state’s Ministry of Energy and Mineral Resources has unveiled an electricity consultation paper from which a policy will be developed.

“The policy resulting from this consultation process is expected to drive development towards a future where security and sustainability of electricity supply is assured. It should also contribute to reducing carbon emissions and thus improve the living conditions of all Lagosians,” the government said.

It is proposing an ambitious Lagos Integrated Resource Plan (IRP), developed along with USAID Power Africa Nigeria Power Sector Programme, that will meet future electricity generating, transmitting and distributing power in the state from both gas and renewable energy.

Read Also: Osinbajo flags off solar electricity project for off-grid communities

The plan sets out to ensure, first, that future electricity solutions will be the most environmentally- friendly available; and, second, environmentally- damaging alternative power backup solutions will wherever possible be phased out of use or reverse-engineered to use cleaner fuels.

Under the plan, the government will establish an autonomous regulatory agency that will license participants to undertake market monitoring ensuring that prices charged by market participants are cost-reflective and fair to end-users.

The state will create a Lagos Electricity Market (LEM) expected to be owned and operated substantially by the private sector. It will primarily be charged with identifying clusters of credit-worthy wholesale and retail end-customers that will buy power from the Lagos grid and make sustainable arrangements for funding projects and personnel.

Lagos is also planning its own Independent System Operator (ISO) that will manage its grid’s connection with the national grid and take responsibility for all system planning generation and transmission resources and procurement of energy, capacity, ancillary, and other needed services that will facilitate competitive and least cost trading of electricity in the State for on-grid and offgrid generation sources.

The market will consist of generation companies utilising various sources of thermal and renewable energy, a transmission entity, an independent system operator (ISO), and distribution entities carrying on various aspects of the downstream, customer-focused service segment.

The state is also considering off-grid solutions such as standalone Solar Systems, and productive use appliances solar as well mini-grids, and other renewable energy systems such as wind, mini-hydro, waste to energy solutions.

With an average energy supply of 1,000MW delivered to the state by the Ikeja and Eko distribution companies for about 12 hours a day, for up to 27 million people, electricity constitutes the state’s single biggest infrastructure and developmental challenge.

The Lagos State Electricity Board (LSEB) conducted some research a few years ago, which demonstrated that 15,000MW of the estimated 45,000MW of alternative power supply in Nigeria was located within Lagos State alone.
It concluded that the state cannot rely on the national grid alone for a sustainable, long-term, socio-economic growth and significant growth in its citizens’ standard of living and disputes current estimates of unmet demand calling them ‘grossly understated’.

The influx of people and new businesses has led to new residential, commercial, and industrial developments including investments like the (Lekki Free Trade Zone, the Dangote Refinery, Eko Atlantic Project, and numerous housing schemes and estates and single-unit homes being built raising demand in the state.

All these will require new electricity capacity, beyond what is currently offered by the creaking national grid. However, analysts say the government will have to move fast and work collaboratively with stakeholders.

“It’s about speed and focus as time is limited, the new commissioner knows the pitfalls of the last administration efforts to deliver the ‘Light up Lagos project’ and will learn from it, the broad consultation is good,” said Chuks Nwani, an energy lawyer based in Lagos.

To achieve its objective, the state has drawn up strategies including an enabling constitutional and legal framework; an integrated resource plan; and an autonomous, credible regulatory body.

It will also develop competitive and transparent procurement of generation resources; a bankable commercial framework; an Independent System Operator; well-funded, well-managed generation, transmission, and distribution players; and collaborative Federal and State Government support for market growth/customer satisfaction.

Lagos accounts for over 53 percent of manufacturing employment in Nigeria, which alone contributes to 7 percent of the national GDP. Overall, manufacturing contributes 29.6 percent of the GDP of Lagos State.

However, capacity utilization for industries in Lagos has hovered for almost a decade below 50 percent, indicating huge potential for growth.

“The primary reason for this capacity underutilization is not the absence of markets but the poor supply of electricity to the State,” the government said.

According to the MAN economic review, manufacturers in Lagos experience a daily average of 6 power outages, with only about 4 hours of electricity.

The Lagos State government has made several attempts at tackling this electricity challenge over the years. First, by supporting the development of the Enron power barges in return for the dedication of part of the output to Lagos Industries about 20 years ago.

Ten years later, Lagos again promoted 5 IPPs across the State to serve LASG assets and infrastructure. This was followed by the enactment of the extant Lagos State Power Sector Reform Law, 2018 but these projects were largely unsuccessful.

Through the new power project, the state aims to depend less on an unpredictable and suboptimal national grid that currently delivers barely 20 of its actual electricity needs and displace dirty diesel generators.

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