Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

To construct and operate a generation facility, the developer must apply to obtain a generation licence from NERC. In addition to the licence, the following authorisations are required:

  • certificate of incorporation and memorandum and articles of the company duly registered in Nigeria;
  • evidence of registered title for the land acquired for the project;
  • environmental impact assessment performed by the National Environmental Standards and Regulations Enforcement Agency (NESREA) and the relevant state agency where the plant is located;
  • environmental and social impact assessment, especially for projects seeking funding from international lenders and DFIs;
  • development or building permit for the construction of the power project - this is issued by the relevant state building control agency in the state where the power plant is being constructed; other state-specific approvals may be required depending on the location of the power plant;
  • Evacuation Certificate from the TCN for on-grid projects;
  • Permit for Storage of Chemicals and Petroleum Products issued by NESREA;
  • Permit for Disposal of Petrochemical Effluent issued by NESREA;
  • Permit for Waste Disposal issued by NESREA;
  • Air Quality Permit issued by NESREA;
  • Ground Water Licence issued by NESREA;
  • water licence for hydroelectric projects;
  • permit to survey pipelines route for thermal generation facilities granted by the Minster of Petroleum Resources and processed by the Department of Petroleum Resources;
  • oil pipeline licence for thermal generation facilities granted by the Minster of Petroleum Resources and processed by the Department of Petroleum Resources;
  • business permit (where developer has foreign participation) issued by the Federal Ministry of Interior;
  • pioneer status certificate and foreign investment approvals issued by the Nigerian Investment Promotion Commission where the project involves foreign participation;
  • financing agreements or letters of intent to fund the project from a reputable bank;
  • work permit and expatriate quota from the Nigerian Immigration Service where expatriates will be employed;
  • certificate of capital importation from an approved finance institution (where the investors are non-Nigerians) to satisfy NERC that the applicant is capable of meeting the project’s capital requirements;
  • certificate from the National Office for Technology Acquisition and Promotion, certifying registration in respect of transfer of technology contracts;
  • compliance with the Market Rules, Grid Code, Metering Code, health and safety regulations and other regulatory instruments issued by NERC; and
  • annual compliance audits on the activities of the generation company and reports to be filed with NERC.
Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

GenCos connect to the transmission grid subject to the Grid Code. The Code contains the day-to-day management operating procedures and principles governing the development, maintenance and operation of an effective, well coordinated and economic transmission system for the electricity sector.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

The government sees renewable energy as an important part of diversifying the country’s energy mix. A number of policies have been developed over the years which have enhanced government’s pursuit of renewable energy as an additional means to solve the electricity challenge the country faces. Some of the policies that have been passed by the government to encourage alternative energy sources such as renewables are:

  • Electric Power Sector Reform Act 2005 - the Act provides the legal and regulatory framework for the sector. It is the principal law for the regulation of the sector;
  • Roadmap for Power Sector Reform 2013 - the Roadmap’s targets for renewable energy technologies which contribute to the overall target to achieve 18 per cent of electricity generated from renewables by 2025 and 20 per cent by 2030 are: small-hydro: 2,000MW (600MW in 2015); solar photovoltaics: 500MW; biomass-based power plants: 400MW (50MW in 2015); wind: 40MW and electrification level of 75 per cent in 2025 (60 per cent in 2015);
  • National Renewable Energy and Energy Efficiency Policy - the policy consolidates the objectives of previous policies. The policy was developed by the Federal Ministry of Power in 2013 and 2014 and was approved by the Federal Executive Council in 2015 with an objective to develop power generation through renewables and energy efficiency capacity by 2020;
  • National Renewable Energy Action Plan - the National Action Plan presents the expected development and expansion of renewable energies in Nigeria in order to achieve the national target under the Economic Community of West African States (ECOWAS) Renewable Energy Policy, thus Nigeria’s contribution to the overall ECOWAS target of 23 per cent and 31 per cent renewable energy in 2020 and 2030 respectively. It contains existing and currently planned measures with which the national target is to be achieved; and
  • Rural Electrification Strategy and Implementation Plan - 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 grid and off-grid approaches from renewable and thermal sources in rural areas.
Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Nigeria is a signatory to the Kyoto protocol and has in place a National Policy on Climate Change and Response Strategy for implementing climate change activities in the country. The Policy is a framework for tackling environmental challenges occasioned by global changes in climate. It is expected that this Policy will enhance Nigeria’s abilities to meet her obligations towards reduction of emission of noxious substances in the environment. The policy envisages a shift away from fossil fuel or coal-generated energy towards renewables as the resources to meet the local growing energy demand using clean technologies.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

There are no specific regulations to support electricity storage, including research and development of storage solutions. However, the regulatory framework does not discourage it.

Several pilot projects, surveys and studies have been undertaken under the supervision of the Energy Commission of Nigeria (ECN), which has registered five energy research centres. Centres dedicated to renewable energy and energy efficiency include:

  • National Centre for Energy Research and Development at the University of Nigeria, Nsukka (responsible for research in solar and renewable energy);
  • Sokoto Energy Research Centre at Usman Danfodiyo University, Sokoto (also responsible for research in solar and renewable energy); and
  • National Centre for Hydropower Research and Development at the University of Ilorin (responsible for research in hydropower).
Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

The government has taken steps to encourage nuclear power plants in Nigeria. Towards this, the Nigeria Atomic Energy Commission (NAEC), which was initially created in 1976, was reactivated in 2006 with the mandate to develop the framework and technical pathway to explore, exploit and harness atomic energy for peaceful application in all ramifications for the socio-economic development of Nigeria. The objective of NAEC is to fast-track and act as a catalyst in the process of development and deployment of nuclear power plants for electricity generation.

The Commission has also developed a National Nuclear Power Development Program. Through the Program the Commission developed a National Nuclear Power Road Map which was adopted by the Federal Executive Council. The Road Map entails generating at least 1,000MW by 2017 and 4,000MW by 2027.