Nigeria, with a population of over 200 million, or about half of the population in West Africa, battles the dual challenge of decades of energy poverty and climate change.
It is pertinent to emphasise the adoption of sustainable and environmentally friendly solutions in line with Nigeria’s Energy Transition Plan (ETP) to achieve net zero carbon emissions by 2060 and universal energy access by 2030.
Despite efforts resulting in incremental improvements, according to the World Bank’s Open Data, energy access remains a significant challenge, with over 85 million people without access to electricity. Lack of equitable access to adequate and reliable electricity results in billions of dollars in GDP loss and has stunted growth in the small and medium-scale enterprises (SMEs), the manufacturing sector, and other key sectors of the economy.
Businesses and individuals are forced to spend a large portion of their revenue on more expensive fossil fuel-generating units.
Until recent times, electricity was usually generated in a large power plant far away from its location of need and transmitted on power lines spanning hundreds of kilometres to its final destination for distribution to residential businesses and industries, incurring huge aggregate losses over complex systems called the grid.
Distributed Energy Resource DER is a game-changer approach, in particular the Distributed Renewable Energy DRE, where power is generated and distributed within areas where it is needed or close by using solar, wind, or biomass technology.
Past and present interventions
The success of benefiting local SMEs, Health centres, and farmers, creating jobs, acceptance by community stakeholders, encouraging gender inclusion while reducing reliance on fossil fuels using individual generating units by consumers within the commissioned 125 solar mini-grid projects and a few projects in the under-grid areas with support through the World Bank financed performance-based grant of the National Electrification Project NEP and potentially the newly announced Distributed Access through Renewable Energy Scale-up DARES which hopes to commit an ambitious $750 million in technical and Financial support – the largest ever investment in clean distributed energy of the world bank globally.
These efforts aim to take the number of mini-grids to 500 by 2030.
Recent regulations
The delisting of electricity as an exclusive federal item with an accent on the Electricity Act of 2023 and its amendments, and more recently, the transfer of regulatory authority from the National Electricity Regulatory Commission (NERC) to state Electricity Regulatory Commissions, as seen in Enugu, Ekiti, and Ondo, is meant to spur investment in these states.
Giving the state house of assemblies power to make regulations peculiar to their state on generation, transmission, and distribution of electricity for areas covered and not covered by the existing grid in their state. A more enabling investment environment has been created by strengthening the state regulatory agencies.
Investors’ and developers’ risk perceptions become lessened by working in tandem with their respective states of interest. More players and many investments in the nascent state electricity market are expected to be in distributed renewable energy.
The removal of petroleum subsidies and, more recently, the removal of subsidies for electricity customers on Band A of the Service-Based Tariff SBT for a more cost-reflective tariff makes investments in DRE more attractive and allows for a healthier market competitive comparison for end users and developers. This effort is expected to encourage private capital injection into low-risk DRE projects, especially by foreign clean energy investors.
Technical and structural edge of DRE
The beauty of the DRE solution is that it can be initiated and operated by contemporary power distribution companies after obtaining the necessary permits and approval.
Discos-DRE developer collaboration would enable Discos to fulfil the NERC obligation, which mandates Discos to procure at least 10% of their contracted energy from embedded generation and half of it from renewable energy sources by April 1, 2025.
For on-grid and under-grid areas, developers and Discos can collaborate using a power purchase agreement (PPA style or a sub-franchise model while incorporating a distribution use of services (DUOS to create a win-win for all.
Due to weather and seasonal events, renewable energy technologies experience energy demand and generation variation, where energy may be generated when it is not needed and not generated when it is needed, most commonly known as the Duck effect. Distributed renewable energy technologies are backed up with storage to provide them with stability and energy efficiency.
DREs provide the right redundancy and resilience for mitigation mechanisms against system collapse, vandalism, and grid power outages due to planned and unplanned maintenance plaguing the Nigerian electricity supply industry.
Project development cycle
Unlike other types of energy projects with project development cycles that could run into several decades, DRE provides a faster deployable solution within a few months to years of project development, all other things being equal, making it a right fit for Nigeria’s urgent energy poverty crisis.
Fast deployment of DRE also favours little variation in project key parameters obtained by developers in their feasibility studies.
Successful projects
Aside from the mini-grid spread across the country, an example of DRE projects is the Toto interconnected mini-grid by PowerGen Renewable Energy, commissioned by the Honourable Minister of Power Chief Adebayo Adelabu in December 2023. In his commissioning address, he called the project “a beacon of hope.”.
Call to action:
All stakeholders—energy access professionals, developers, investors, Discos, Rural Electrification Agency REA, community leaders, consumers, developmental agencies, regulators—NERC and states’ regulators alike—must be on deck for the sustainable scale-up of DRE projects for grid decarbonisation, resilient grids, and compacting climate change for the benefit of all.
Damilola Agboola, Clean Energy Project Development Expert, Lagos, Nigeria
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