Market framework

Definition of ‘renewable energy’

Is there any legal definition of what constitutes ‘renewable energy’ or ‘clean power’ (or their equivalents) in your jurisdiction?

The National Renewable Energy and Energy Efficiency Policy (NREEEP) defines renewable energy as energy obtained from energy sources whose utilisation does not result in the depletion of the earth’s resources. Renewable energy also includes energy sources and technologies that have minimal environmental impact, such as less intrusive hydros and certain biomass combustion. These sources of energy normally will include solar energy, wind, biomass, small and medium-sized hydro, geothermal, tide and wave energy.

Framework

What is the legal and regulatory framework applicable to developing, financing, operating and selling power and ‘environmental attributes’ from renewable energy projects?

The National Electric Power Policy 2001 outlines the framework for power sector reforms in Nigeria. The EPSR Act provides the legal and regulatory framework for the sector. It is the principal law for the regulation of the sector. The fundamental change it birthed was the privatisation of the government-owned electricity company and the process towards a completely liberalised market. The Act encouraged promotion of electricity generation from all sources of energy, including renewable energy by mandating NERC to create a level playing field in the Nigerian electricity market. The Act provides for licensing by NERC for any electricity generation of 1MW and above.

The Environmental Impact Assessment Act makes it mandatory for an EIA to be conducted on projects that are likely to have significant effect on the environment. A power developer who wishes to generate power through the use of renewable energy must submit an EIA report to National Environmental Standards and Regulations Enforcement Agency (NESREA). In obtaining a generation licence from NERC, the EIA approval certificate must be submitted to NERC

NREEEP outlines the global thrust of the policies and measures for the promotion of renewable energy and energy efficiency. It seeks to bring to the attention of policymakers the economic, political and social potential of renewable energy. It also recognises the multidimensional nature of energy and addresses diverse issues such as renewable energy supply and utilisation; renewable energy pricing and financing; legislation, regulation and standards; energy efficiency and conservation; renewable energy project implementation issues; research and development; capacity building and training; gender and environmental issues; planning and policy implementation. This policy on renewable energy and energy efficiency sets out a framework for action to address Nigeria’s challenge of inclusive access to modern and clean energy resources.

The Regulations on Feed-In Tariff for Renewable Energy Sourced Electricity in Nigeria (REFIT) provide the tariff framework for renewables. The Regulations apply to renewable energy sourced from wind, hydro, biomass and solar PV with a capacity of between 1MW and 30MW that is connected to the grid or the distribution networks. The REFIT set a target generation output cap from renewable sources at 2,000MW by 2020. The DisCos and NBET are obligated to purchase the power on a ‘must buy’ basis, thereby providing priority grid access to renewable generators. The projects that exceed the threshold provided by REFIT are to be procured by the bulk trader (NBET) through competitive tendering.

NERC Mini Grid Regulations (2017) aims to accelerate electrification in served and unserved areas but this is not limited to rural areas. The regulation is limited to distributed power of less than 100kW up to 1MW.

Government incentives

Does the government offer incentives to promote the development of renewable energy projects? In addition, has the government established policies that also promote renewable energy?

In recognising the need and value of electric power generation to grow the economy, the government has made certain incentives available in the form of tax reliefs for electricity generation, which also cover renewable projects. These include the Industrial Development (Income Tax Relief) Act geared at attracting foreign investment to Nigeria, where eligible companies can be issued with pioneer status certificates. Therefore, companies involved in independent power generation using gas, coal and renewable energy sources can be conferred with pioneer status, which exempts them from payment of income tax for between three and five years.

The incentives under NREEEP include:

  • tax incentives to manufacturers of renewable energy and energy efficient equipment and their accessories to promote widespread use including a five-year tax holiday for manufacturers from the date of commencement of manufacturing; and a five-year tax holiday on dividend income from investments on domestic renewable energy sources; and
  • incentives for importers to offer energy-efficient appliances and lighting through exemption from excise duty and sales tax; custom duty rebate for two years on the importation of equipment and materials used in renewable energy and energy efficiency projects; and provision of soft loans and special low-interest loans from the power sector development fund for renewable energy supply and energy-efficiency projects.

In order to promote renewables the government has over the years drawn up a number of policies.

Renewable Electricity Action Programme 2006

The main focus of this document is utilising all forms of renewable energy sources for electricity generation. It highlights potential gaps, technical assessments and the financial implications of utilising renewable energy and looks at the general overview of the potential for renewable energy technologies, and potential markets, elaborating on the development targets per technology, application and strategies for achievement. It sets out a roadmap for the implementation of the Renewable Electricity Policy Guidelines 2006.

National Biofuel Policy and Incentive 2007

This is meant to support a biofuel programme, with the aim of integrating the agricultural sector of the Nigerian economy, as a means of improving the quality of automotive fossil-based fuels in Nigeria.

NREEEP

NREEEP consolidates the objectives of the Renewable Energy Master Plan (REMP) 2005 and Renewable Energy Policy Guidelines 2006. It is a document developed by the Federal Ministry of Power in 2013 and 2014 and was approved by the Federal Executive Council in 2015 with the objective of developing power generation through renewables and energy efficiency capacity by 2020.

Rural Electrification Strategy and Implementation Plan (RESIP)

This is a follow-up to the Nigerian Rural Electrification Policy. The primary objective is to expand access to electricity as rapidly as possible in a cost-effective manner through the use of both grid and off-grid approaches from renewable and thermal sources in rural areas.

Building Energy Efficiency Code 2017

The national Building Energy Efficiency Code is a set of minimum standards for energy-efficient building in Nigeria. The objective is to reduce energy costs and wastage, and conserve available energy for utilisation where and when necessary in various homes, companies and public buildings.

Are renewable energy policies and incentives generally established at the national level, or are they established by states or other political subdivisions?

The 1999 Constitution of the Federal Republic of Nigeria places electricity generation, transmission and distribution on the Concurrent Legislative list. This allows both the federal and state legislature to make policies to promote the electricity sector. Though electric power falls under the concurrent list shared between the federal and state governments, the delineation of powers is not clear-cut. The existing policies and incentives have been established at national level.

However, state governments play a major role in land acquisition to private investors looking to establish power projects in the state. The key aspects to their role are for acquisition of land, consent for land usage and right-of-way surveys and assessments.

Legislative proposals

Describe any notable pending or anticipated legislative proposals regarding renewable energy in your jurisdiction.

There has been no notable pending or anticipated legislative proposal regarding renewable energy in the past one year.

Disputes framework

Describe the legal framework applicable to disputes between renewable power market participants, related to pricing or otherwise.

Currently, the electricity market is at the transitional stage. For on-grid power, transactions among participants are expected to be contract driven. Disputes arising ideally are to be resolved in line with the terms of the contract. Each contract provides the mechanism for settling disputes that may arise between the parties. However, current liquidity challenges in the sector have stalled this as payment obligations along the value chain are not being met. The government, being aware of the challenges arising from a number of issues including legacy debts predating the privatisation, huge technical commercial and collection losses on distribution network, non-cost-reflective tariffs and so on, has introduced measures aimed at resolving the issues.

Further to the above, the Market Rules establish a governance mechanism and provide a framework for dispute resolution between market participants. These rules have been framed by the market operator in order to establish the electricity trading system for the transitional and medium-term stages in the Nigerian electricity supply industry. The rules provide for a dispute resolution panel, which will be responsible for arbitrating and resolving disputes between market participants. NERC has appointed a Dispute Resolution Counsellor to administer the dispute resolution provisions of the Market Rules and 12 members to the Dispute Resolution Panel to hear and resolve disputes.