Delayed consent to NERC’s mini-grid law raises old worries

The Nigerian Electricity Regulatory Commission (NERC) has yet to conclude and pass into law its regulation to guide investments in mini-grid power systems, thus raising old doubts about Nigeria’s alertness to the direction of global electricity businesses.

Considered a facilitating piece of law, NERC’s mini grid regulation is specifically designed to accelerate electrification in areas without existing distribution grid. It is expected to promote investments in mini electricity generation and distribution.

The regulation which OGN gathered was yet to get the final consent of NERC’s board months after work on it was completed, would also protect investors in mini grid from major risks associated with investments therein.

These risks include sudden tariff changes (as tariffs are expected to have been agreed in advance by relevant parties); and stranded investments due to the connection of the main grid to mini grid in circumstances where the main grid has been extended to cover the mini grid area, and in which a fair compensation mechanism would be applied for the operators of the mini grid that decide to exit.

Until February 2017, NERC had no functional board for more than a year since December 2015, when the term of its last board expired. The new board is however looked on to sign off the regulation, but it has reportedly not made any known move on this since coming on.

Delayed approval holding back millions of dollars investments

Due to its non-ratification, even though the NERC had concluded an industry-wide consultation on its provisions, OGN gathered that potential investments running into millions of dollars in mini grid are being held back from materialising.

Industry sources told this publication that a couple of very sound renewable energy investors have being on the fringes for the NERC to pass the regulation into law, so they could move to achieve final investment decisions (FID) on mini grid projects they’ve identified as tenable.

They however noted that NERC’s delay with the regulation has continued to raise fears that this may yet again become one of the ‘Nigerian’ processes – a bureaucratic practice that often thrive on delays, slow response/actions to policy, and a sudden rush to accomplish ‘so much’ in so short a time.

They also explained that the sheer huge market size of Nigeria (more than half of the country’s 180 million population have no access to grid electricity) has helped to pacify these investors and kept them from completely turning away from Nigeria, but this cannot be for long.

Even local operators who had gained immense expertise in mini grid renewable energy solutions and are now looking to scale their operations to more than 1 megawatts, have also found the seeming lockdown a lot challenging.

“The mini grid regulation would come into law, and that would provide a lot more clarity and give us leverage to venture into areas that either have bad grid connections and which are also commercially viable,” said CEO of GVE Projects Limited, Ifeanyi Orajaka, whose indigenous firm hopes to leverage its operations with the regulation.

Mini grids have proven to work

But just in case the NERC and Nigeria’s government are in doubt of the role mini grids could play in improving energy access in the country, the International Renewable Energy Agency (IRENA) had allayed such fears in its latest publication on mini grid: policies and regulations for private sector renewable energy mini grids.

“In business terms, the case for either mini-grid or standalone systems to supply renewable power to underserved communities has never been stronger. Costs have fallen dramatically – over 80% since 2010 for solar photovoltaics (PV) – while technologies have continued improving. Renewable energy mini-grids have a proven track record of delivering cost-competitive electricity services in rural areas,” said IRENA’s DG, Adnan Z. Amin, to buttress its findings.

It also called on governments to shake off likely political encumbrances to setting up and backing proactive mini grid regulations, saying: “Governments have an important role in facilitating private sector participation.”

According to IRENA: “Mini grid development is closely tied to national policy decisions and regulatory frameworks. Supporting mini-grids requires an adaptation of the power system framework, traditionally based on a centralised model.

“Mini-grid solutions are diverse, and so are the accompanying business and financing models. In recognition of these specificities, a number of countries have turned to dedicated policies and regulations that cater specifically to mini-grid development.”

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