Nigeria adopted the vertically unbundled reform. They seperated generation from the grid and left an independent grid that can contract both state generation and private generation. Nigeria allowed for the both state and private generation activities, which fostered the collaboration with private generators (mostly independent power producers) – to generate and distribute electricity across its 36 states.
It all began when major issues within the Nigerian power sector, principally concerning power outages and unreliable service, compelled the Nigerian government to take radical action. It then enacted the Electric Power Sector Reform Act of 2005, which called for the vertical unbundling of the Nigeria Electric Power Authority along functional lines of generation, transmission and distribution and retailing and the incorporation of the various business segments as successor companies, and a method for the transfer of assets, liabilities and personnel to these successor companies, which are to be subsequently privatised.
The Nigerian national power utility company was unbundled into a series of 18 successor companies: six generation companies, 12 distribution companies covering all 36 Nigerian states, and 1 national power transmission company created from the defunct NEPA. Subsequently, between November 2013 and November 2014, the privatization of all the generation and distribution companies was successfully completed, while the government retained ownership of the transmission company. This unbundling paved the way for an ambitious privatization program to be carried out by the Bureau of Public Enterprises in Nigeria.
On 30 September 2013, following the privatization process initiated by the Goodluck Jonathan regime, PHCN (Power Holding Company of Nigeria) ceased to exist. In its stead, the Nigerian Electricity regulatory Commission (NERC) was formed. The independent regulatory agency, as provided in the Electric Power Sector Reform Act of 2005 was tasked with monitoring and regulating the Nigerian electricity industry, with issuing licences to market participants, and with ensuring compliance with market rules and operating guidelines.
The reforms were designed to be implemented through four stages of development, including:
- the interim period, which began in November 2013 and involved the allocation of sector cash deficits across all market participants before expected tariff reviews;
- the Transitional Electricity Market (TEM), when the Nigerian Bulk Electricity Trading (NBET) actively traded bulk power – as a buyer from generation companies (GenCos)/Independent Power Producers (IPPs) and resellers to distribution companies (DisCos);
- the medium-term electricity market, which involved the cessation of NBET and the novation of contracts between NBET and GenCos/IPPs to DisCos. At this stage, the DisCos will commence direct purchase of power from the GenCos/IPPs for onward sale to the consumers; and
- the final market, with bilateral contracts between electricity buyers and sellers at all levels, and a central balancing mechanism through the creation of a spot electricity market.
Prior to privatisation (unbundling) of the sector, generation of electricity was controlled mainly by the government. In this regard, the government owned and managed three hydropower plants and seven thermal power generating stations. But with the unbundling, private investors are now encouraged to apply for generation licences under the Act and set up independent power plants. However, there has been setbacks and barriers hindering the successful implementation of the reforms. As noted by a publication by DLI Paper:
“Despite the establishment of the Multi-Year Tariff Order (MTYO) in 2015 as a tariff model for an incentive-based regulation of electricity prices from time to time over a 15-year period, the end user tariff has not been cost reflective. The MYTO was established as part of the drive for privatization and to ensure that prices charged by licensees are fair to customers and sufficient to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation. The lack of cost-reflective tariffs has led to a huge sector cash deficit, which does not provide any investment incentive to private sector owners. This situation is further worsened by the inability of the NERC to implement reviews in order to alleviate the volumetric risks associated with the MYTO generation assumptions. The lack of cost-reflective tariffs has also adversely affected the performance ratio of DisCos in recent years. There has also been a lack of effective governance and enforcement of rules and policies in Nigeria’s power sector, which has led to a mismanagement of funds, poor revenue generation and inefficient collection.
Nigeria’s power sector is ridden with a lack of proper funding and dwindling income. The sector is also facing myriad structural problems that continue to hamper growth such as a shortage of gas supply for thermal plants, a high level of unpaid electricity bills and the country’s outdated and poorly maintained transmission network, which the government still owns but has put under private management. Also, the existing transmission network cannot handle more load than current peak electricity production. Furthermore, many of the new power operators have struggled to make progress, especially as they have had to contend with aging facilities requiring substantial investment to upgrade and expand.”
Investment in off-grid renewable energy presents an attractive option for investors for a country like Nigeria where most of the population either have no access to the grid or are unable to afford a connection to the grid. Off-grid solar energy can provide access to lighting and, in some cases, mini renewable-based electricity generators can provide long hours of electricity. Closer cooperation should also be built between investment promotion agencies in the region in order to enhance access to information on investment opportunities across the region. Contracts must be strengthened and guarantees provided, in order to boost investor confidence in the market.
I recently fininshed a course – Regulation for the Energy Access (SDG 7) from the Florence School of Regulation and will be sharing my learnings from time to time via posts.
ABOUT THE AUTHOR
Glory’s life goal is to be a positive part of people’s lives and make good impact. She’s passionate about economic development of Nigeria and work in the field of renewable energy and environmental sustainability to promote Nigeria’s economic growth through job creation and education. She is the founder of Climate Smart Nigeria which promotes Climate Change Education in Nigerian institutions and provide capacity building on renewable energy technologies. In October 2018 she set up the Renewable Energy Technology Training Institute (RETTI) where she is also the Chief Instructor. The institute grooms the next generation of efficient installers and entrepreneurs with a focus on women who will serve as a competent workforce for the renewable energy industry and provide solutions to Nigeria’s prevalent energy problems as entrepreneurs.
Under Glory’s leadership, RETTI recently lauched eight short ONLINE COURSES to assist people wanting to get into the energy sector especially renewables.
Glory has published four books to promote the knowledge of climate change and renewable energy; Something is happening; Our world is changing; Understanding the Basics of Climate Change– for Secondary Schools – The Concept and Science of Climate Change – for the general adult public, A short thriller story – The Year Ran Mad – which depicts the impact of climate change on livelihood for Primary schools and The Girl who saw tomorrow, a short novel for secondary school – amzn.to/2TEYB1u.
She is the recipient of several local and international awards and recognitions which include (a) Nigerian Star from the US Mission in Nigeria (2018), (b) The Nigerian Energy Champion Prize from the Nigerian Energy Awards (2015), (c) President Obama’s Mandela Washington Fellowship Award (2015), (d) The Young Energy Professional of the Year Award by Nigeria Energy Awards (2018), (e) A Foremost Woman in Renewable Energy award recipient (2017); (f) Environmental Award of Excellence, Environmental Community Development group (2014) In April 2019, Glory was selected
as one of 15 African female business leaders to attend United States Government’s launch of the OPIC 2X
Africa and meet with advisor to President of USA – Ms. Ivanka Trump and the Ethiopian President – Ms Sahle-Work Zewde.
In the course of her work she has met and shared platforms with a number high profile personalities and leaders at the national and international levels, including President Barack Obama, US Senator Chris Coons, Advisor to President Trump, Ms Ivanka Trump, Gov. Jack Markell of Delaware USA, Ethiopian President – Ms Sahle-Work Zewde, The USG Undersecretary for Energy – Mr Mark Menezes and
former Vice President Ebitu Ukiwe of Nigeria.
She is a consultant for Nigeria’s largest renewable energy event, the Nigerian Alternative Energy Expo. She was a former Vice President of the Mandela Washington Fellowship Association of Nigeria (MWFAAN), and is currently an active member. She’s an alumna of Abia State University, Nigeria, The Lagos Business School, University of Delaware, USA, European Energy Institute and The Florence School of Regulation, Italy.
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