1. GREEN MINIGRID REGULATORY REFORM: TRENDS AND APPROACHES *By
Engr. Okon N. Ekpenyong
Director
(Linkages & Consultancy)
Energy Commission of Nigeria
*Paper Presented at the WORKSHOP 4 OF THE AFRICA CARBON FORUM Held at the UNITED NATIONS CAMPUS, Nairobi, Kenya, on Wednesday. 11th April, 2018

2. Outline
Introduction
Overview of Nigerian Electricity Regulatory Reform
Mini-Grid Regulation:
The Trends
Approaches
Conclusion

3. Overview of the Nigerian Electricity Regulatory Reform
1896
1929
The Nigerian Electricity Industry (NSI) started
1st private Nigeria Electricity Supply Company created
1972
2001
National Electric Power Authority (NEPA) created
State-owned monopoly with serious inefficiencies
National Electric Power Supply Policy (NEPSP) – 2001 – to establish efficient electricity market through full privatization
Create all the necessary structures required to form and sustain an electricity market in Nigeria
2005, 2010,
2013/2014
Electric Power Sector Reform (EPSR) Act 2005 enacted
NEPA unbundled: 6 Gencos, 11 Discos and 1 Transco and sold – sales completed 2013/2014
Nigerian Electricity Regulatory Commission (NERC) established
Nigerian Bulk Electricity Trader (NBET)

4. Stakeholders Involved
NERC proposed regulations
Consultations with
Energy-related Government Agencies
Relevant persons or groups of persons,
Licensees
Consumer groups,
industry practitioners
Potential investors and
other interested parties who maybe affected by the regulations.
Town Hall Meetings were organized in strategic places
public meetings and
written representations.
Regulations signed into law by NERC’s Chairman

5. Introducing the Mini-Grid’s Regulations
On 24th May 2017, NERC enacted Mini Grid Regulations to regulate “any electricity supply system with its own power Generation Capacity (under 1 MW), supplying electricity to more than one customer”
almost 50 per cent of the population have limited or no access to the grid
Nigeria has the highest potential of off-grid business opportunities in Africa
the main grid neither extended to isolated areas nor meet electricity demand reliably
Nigerian economy is mainly powered by small-scale, inefficient, polluting and noisy generators (10–15 GW) operated by individuals

6. Key Elements of the Nigerian Mini-Grid Regulations
Segmentation of Mini-Grid Regulations
Registration
Permit
License
Tariff setting
Compensations when the main grid reaches the mini-grid

7. Mini-Grid Regulation Approach: Less than 100 kW
Isolated:
Developer identifies an Unserved Area
Developer submits On-line registration application to NERC
Interconnected
Developer identifies a community that is:
underserved
willing to pay higher tariffs than for the main grid;
Developer signs a tripartite contract with:
Local DisCo and the Community containing
Usage Right
Construction and Ownership Right for additional infrastructure
Tariffs for purchase and sales to DisCo and the community;
Developer sends online registration application to NERC
Developer submits proposal to DisCo
NERC gives decision within 30 days upon receipt in both situations

8. Mini-Grid Regulation Approach: 100 kW – 1 MW
Permit for 100 kW – 1 MW
Isolated:
restricted to unserved areas, except when local DisCo gives written consent for an underserved area not assigned to another IEDN
Developer
identifies an unserved area,
signs an agreement with the community;
submits online permit application,
Submits confirmation of non-interference with DisCo's 5-year expansion plan or DisCo’s written consent, and agreement with the community to NERC
Interconnected:
restricted to underserved areas
Same as registration, except that the developer sends online permit application to NERC
NERC gives decision within 30 days upon receipt in both situations
Developer that is awarded a grant by the REA must reach and sign a Grant Agreement with the REA within 6 weeks. The Grant Agreement does not affect the permit application

9. Approach to Tariff Setting
The NERC designed a MYTO tariff calculation tool for mini grids
The model is based on the original MYTO methodology that NERC uses to set DisCos’ tariffs
The model for mini grids does not include transmission costs

10. Approach to Tariff Setting
Less than 100 kW
Isolated:
Developer sets tariff through MYTO calculation tool or agreement with the community
Interconnected:
Developer agrees with the DisCo and the community
NERC approves or rejects
In Nigeria, there is no national uniform tariff, but rather a uniform tariff setting methodology based on MYTO that “allows a licensee that operates efficiently to recover the full costs of its business activities, including a reasonable return on the capital invested in the business”.

11. Approach to Tariff Setting
100 kW – 1 MW
Isolated
Developer must use MYTO calculation tool to determine tariff, and attach calculation spreadsheets to its application
Interconnected
Developer agrees with
the DisCo and the community on
Retail tariff
usage right for the DisCo’s network infrastructure
tariff for electricity generated by the mini grid and fed into the DisCo’s network
MYTO must be used only to calculate retail tariff, and calculation spreadsheets must be attached to the application
NERC approves or rejects

12. Compensation Regime
When the national grid ultimately expand to Unserved and Underserved Communities with Mini-Grid developers, the Regulations provide a compensation regime to cover such scenarios
This is in addition to the requirement that the expansion plans of the relevant Distribution Licensee be taken into account before the grant of a Mini-Grid Permit or approval of a Tripartite Contract.  

13. Challenges Challenges
In determining their tariffs, mini grids applying for a license are allowed a maximum of 10% of technical and 10% of non-technical losses
Ability to determine adequate compensation if main grid meets mini-grids
High tariffs for rural poor and their ability to pay
Logistic challenges due to poor basic infrastructure in communities
Inadequate financial capacity for RE investment.
Inadequate incentives for RE Investors
Political risks/instability
Insecurity/Vandalization

14. Conclusion
Inefficient On-Grid systems present a big opportunity for Nigeria’s off-grid market to expand in the coming years.
There are still many open issues regarding the practical workings of the Regulations.
It is therefore important that potential developers and investors seek guidance from regulators, when embarking on Mini-Grid projects in the NSI.

15. THANK YOU AND GOD BLESS