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How unbundling of TCN will spark improved access to electricity

How unbundling of TCN will spark improved access to electricity

The Nigerian government’s plan to unbundle the Transmission Company of Nigeria (TCN) into two separate entities is raising hopes for a more efficient and reliable national grid, potentially leading to increased access to electricity.

On Friday, the Nigerian Electricity Regulatory Commission (NERC), acting under the provisions of the Nigeria Electricity Act, ordered the establishment of an Independent System Operator (ISO) to take over the market and system operations functions of TCN.

According to the order, TCN will retain its transmission service provider licence and continue to maintain power transmission infrastructure across the country.

It further stated that the Bureau of Public Enterprise (BPE) will incorporate the new company no later than 31st May, 2024 which would be called Nigerian Independent System Operator of Nigeria Limited (NISO).

Timeline for transfer

NERC noted that the new company’s shareholding subscribers will be the Ministry of Finance Incorporated (MOFI) and Bureau of Public Enterprise (BPE) but the final shareholding structure shall be subject to further consultation with government and other stakeholders.

Also, NERC mandated that the transfer of assets and liabilities from the TCN to the new company should be completed no later than 31st August 2024 as the TCN should relinquish its system operator licence at most 7 days after incorporation of the NISO.

Read also: NERC splits TCN, establishes new system operator

Experts take

Bayode Akomolafe, a global progam manager with General Electric said the new operator will manage electricity demand and supply, ensuring the delivery of electricity where and when needed, without bias, at the lowest cost possible, while ensuring reliability and avoiding grid instability and collapse in the process.

“This means that NISO will be responsible for dispatch management, international transmission, capacity management, and wholesale market in the near future, potentially signalling the near end of life for Nigerian Bulk Electricity Trading Plc, which currently oversees some of NISO’s functions,” Akomolafe said on his LinkedIn page.

He noted that this development is moving to a more liberalised market where NISO will be increasingly responsible for capacity auction, real-time energy market, ancillary services procurement, day-ahead market, spot market, reserve management, pricing and settlement.

“The separation of responsibilities between entities allows for a concentrated focus, with transmission services management predominantly revolving around technological aspects, while system operations are entrenched in energy economics,” Akomolafe said.

For Jide Pratt, country manager of Trade Grid, he questioned why NISO was held in trust by only the Ministry of Finance and BPE.

“Why can’t at least 40 percent be held privately so it has higher governance structures? The NNPC Ltd is a clear example of going this way but not achieving higher transparency or corporate governance. This sector needs to attract private capital and to get this done, in my opinion, some control must be ceded,” he said.

SBM Intelligence, an Africa-focused market intel gathering and strategic consulting firm said the weakest point in the Nigerian electricity value chain has always been transmission.

“Our view is that the breakup operationally should be such that grids are subnational, with a second company managing the interconnectivity and trade of energy between these subnational grids,” SBM Intelligence said in a note.

Read also: Nigeria recorded 20 national grid collapses in five years, says TCN

Role of new Electricity Act

The New Electricity Act has provided a clear path to the creation of the ISO and how the TCN will transfer the system operations functions to it.

By this order, the NERC, as the apex regulator in the power sector, is activating the provisions of the Electricity Act in that regard.

Until this order, the TCN has had two licences- one as a transmission service provider and the other system operator. The establishment of the NISO will leave the TCN with just one function- as transmission service provider solely.

Other countries

Australia: Australia unbundled its electricity transmission network as part of electricity market reforms. The transmission networks are managed by different companies in each state, such as TransGrid in New South Wales and Powerlink in Queensland.

Norway: Norway has unbundled its electricity transmission network, which is managed by Statnett. Statnett is responsible for the operation, maintenance, and development of the national transmission grid.

Germany: Germany has unbundled its electricity transmission network, which is managed by several Transmission System Operators (TSOs) such as 50Hertz, Amprion, and TenneT. These TSOs are responsible for ensuring the reliable operation of the transmission grid.

Sweden: Sweden unbundled its electricity transmission network, which is managed by Svenska kraftnät. Svenska kraftnät is responsible for the operation and development of the Swedish transmission grid.