Mini-grid: Investors await NERC’s nod on revolutionary by-law

Regulation could put an end to Discos’ grips on networks

A revolutionary regulation which could put out of the hands of the existing 11 electricity distribution companies (Discos), their exclusive strongholds on their respective distribution networks is being planned by the Nigerian Electricity Regulatory Commission (NERC).

OGN understands that a draft of the regulation on mini grid investment has been considered by key stakeholders at two public hearings in Lagos on September 26, and Enugu on September 28, the last of the stakeholder consultation by NERC will however hold on October 4 in Kaduna.

When concluded and final vetting done by the NERC, its incoming commissioners will be expected to sign off the regulation to allow for economic investment in mini grids by willing investors.

At the moment, the 11 Discos have not being able to take electricity to all eligible consumers within their network coverage. The Discos have also failed to make quick expansion investments in their networks, these has seen consumers self-finance their connection to existing distribution networks.

The NERC had in exercise of its powers to make regulations produced the draft regulation for mini-grids in Nigeria. The object of the regulation is to accelerate electrification in areas without existing distribution network that are not served (“Unserved areas”) and areas with an existing but poorly electrified or non-functional distribution grid (“Underserved areas”).

It hopes to with the regulation, attract the participation of private sector, communities, non-governmental organisations in achieving nationwide electrification.

The regulation also seeks to minimise major risks associated with mini grid investments in the country.

Such risks which it will address include: sudden tariff changes, considering that tariffs would have been agreed in advance by the relevant parties; and stranded mini grid operator investments due to extension of main grid to cover the mini grid area.

The draft regulation provides that in such cases, a fair compensation mechanism would be applied for mini grid operators that choose to exit their operational areas.

It also provides for permit and tariff approval procedures which will ease the administrative burden on the mini grid operator, as well as ensure the process of obtaining the permit in a timely manner.

The draft regulation by NERC equally approved for up to 100kW permit for a mini grid distribution investment, and 1MW installed generation capacity permit, any capacity beyond these limits will however require a full licence from NERC.