With a particular focus on the role of the Nigerian Electricity Regulatory Commission, DAMILOLA AINA highlights how regulatory frameworks and strategic initiatives help to accelerate the adoption of distributed renewable energy systems. By embracing these solutions, Nigeria has taken critical steps towards achieving energy sufficiency and improving access to electricity for underserved communities

As the national grid endures repeated and widespread failures, plagued by deteriorating infrastructure and chronic neglect, the push for renewable energy solutions has gained significant traction in recent years, especially in rural areas where access to reliable electricity remains challenging.

The power grid, which has experienced two major disturbances this year, seven collapses in 2024, and 140 series of grid collapses since its privatisation in 2013, is facing mounting challenges that are compromising its stability. These issues stem from a combination of technical setbacks, including gas supply shortages, delayed maintenance due to insufficient budget allocations, limited investments, and poor planning.

Industry experts reckon that liquidity challenges exacerbate the situation, driven by a non-cost-reflective tariff structure that discourages potential investors. The sector is further hindered by a lack of funding to address the metering gap, high Aggregate Technical and Commercial losses, substantial electricity debts owed by government agencies and paramilitary organisations, and widespread energy theft.

In addition to these technical and financial issues, the grid faces serious commercial and governance challenges, such as ineffective contracts, payment indiscipline, the absence of market payment securitisation, and resistance to cost recovery, as well as insecurity, vandalism, and community unrest. Furthermore, limitations in managerial capabilities, poor policy alignment with Federal Government programmes, and weak corporate governance culture are major obstacles to developing a well-established and reliable national grid.

The Nigerian Electricity Regulatory Commission report for 2024 revealed that the current power supply through the grid is inadequate, with a significant 10 gigawatts of unmet demand and some distribution companies experiencing a staggering 70 per cent non-compliance with their service level commitments. This highlights a severe gap in reliability and infrastructure performance. With an average grid supply of approximately 4 GW for a population of 230 million, over 80 million Nigerians still lack access to grid electricity, resulting in a heavy reliance on alternative power sources, particularly diesel- and petrol-run generators.

These captive generators, which provide around 24 GW of power, help bridge the gap between supply and demand for both businesses and households. However, the cost of power from these generators is more than twice the current Band-A grid tariff, placing a significant financial burden on users.

As Nigeria’s energy transition focuses on replacing these costly, polluting generators, distributed and renewable energy solutions are poised to play a critical role in addressing the supply shortfall and driving sustainable growth.

Recognising the significant potential for renewable energy development, with various opportunities to adopt sustainable technologies, the NERC, pursuant to the provisions of the Electricity Act 2023, has picked up the regulatory responsibility of promoting investment in grid-connected distributed energy resources, large-scale renewable projects, embedded generation, mini-grids (isolated and interconnected), and solar hybrid and captive projects, including rooftop solar and solar power plants, through regulation and licensing.

The EA 2023 empowers the commission to license and regulate all entities involved in electricity generation, transmission, distribution, supply, and trading (Section 34(2)(d)). It also mandates NERC to promote renewable energy development and increase its share in Nigeria’s energy mix (Section 34(1)).

To achieve this, NERC regulates the renewable energy sector through rule-setting, rate-setting, monitoring, dispute resolution, licensing, permit issuance, and registration.

The Commission enforces these policies through key regulations, including Mini-Grid Regulations (2016 & 2023), Eligible Customer Regulations (2017 & 2024) and the April 2024 Supplementary Order to MYTO 2024, which requires DisCos to source at least 10 per cent of their 2024 electricity supply from embedded generation, with 50 per cent of that coming from renewable sources.

The country has an estimated solar energy market potential of over 10 GW, wind energy potential of 1,000 MW and hydropower capacity ranging from 6 GW to 10 GW. To advance its clean energy transition, Nigeria aims to generate 30 per cent of its energy from renewable sources by 2030 under the Renewable Energy Master Plan. Additionally, the International Renewable Energy Agency projects $10bn in renewable energy investments over the next decade to meet the country’s growing energy demand.

With Nigeria said to be blessed with different renewable energy sources, investors and international development agencies have focused more on solar energy.

For instance, the European Union, with support from the German Agency for International Cooperation, invested €9.3bn to provide interconnected solar mini-grids to several communities in Nigeria.

Also, the Nigeria Sovereign Investment Authority announced an innovative partnership for a $500m Nigeria Fund to develop and finance distributed renewable energy projects to support mini-grids, solar home systems, commercial and industrial power solutions, embedded generation projects, and innovative energy storage technologies in the country.

The World Bank approved a $750m Distributed Access Through Renewable Energy Scale-Up Project for solar hybrid mini grids and operated solar hybrid mini grids in unserved (primarily rural and remote) and underserved (primarily urban and peri-urban) areas with high economic growth potential.

Similarly, the African Development Bank recently partnered with PowerGen Renewable Energy, alongside other international investors, to establish a scalable, distributed renewable energy platform, targeting the deployment of 120 MW of renewable power solutions for Nigeria and other African countries.

Beyond this, the regulatory commission has approved a total of 316 renewable energy projects with a combined capacity of 149 megawatts between 2019 and 2024.

Data obtained from the Commission showed that between 2019 and 2023, 286 mini-grid projects were granted permits and certificates, representing a total installed capacity of 36.8 MW.

The breakdown includes 271 isolated mini-grids, eight interconnected mini-grids, and seven solar-hybrid mini-grids.

A significant rise in mini-grid approvals was recorded, increasing from an average of six annually in 2019 and 2020 to 84 approvals in 2023.

In a further boost to clean energy development, the commission also issued licences for 30 embedded and captive generation projects powered by renewable sources between 2021 and 2024. These projects have a combined nameplate capacity of 112 MW.

The approvals reflect ongoing efforts to improve electricity access through decentralised and renewable energy solutions, with the Managing Director of the Rural Electrification Agency, Abba Aliyu, admitting that regulatory measures have played a key role in driving renewable energy adoption across Nigeria.

The agency said the improved regulatory framework has enabled it to forge strategic partnerships with private developers and government bodies. For instance, the REA has signed Memoranda of Understanding with five private firms to deliver a combined 1,265 megawatts of distributed renewable energy projects nationwide.

The REA also noted that its engagement with NERC has led to better regulatory support for mini-grid projects, improving implementation timelines and attracting more private sector participation.

The MD, speaking through the Media Director, Muntari Ibrahim, in a telephone interview on Monday, said, “The NERC has implemented several regulatory measures that have significantly enhanced the Rural Electrification Agency’s adoption of renewable energy in Nigeria.

“The key regulatory measures by NERC include an increase in the Mini-Grid Licensing Threshold. The commission raised the licensing threshold for mini-grids from 1 MW to 5 MW. This adjustment allows for larger renewable energy projects without the need for extensive licensing procedures, thereby encouraging private sector investment and accelerating the deployment of mini-grids in rural areas.

“NERC established regulations facilitating the development of interconnected mini-grids. This framework enables the integration of mini-grids with existing distribution networks, promoting efficient energy distribution and expanding renewable energy access in underserved communities.”

“These regulatory measures have empowered the REA to Forge Strategic Partnerships: The REA has signed Memoranda of Understanding with various renewable energy companies and government agencies to scale up electricity access. For instance, collaborations with five private developers aim to deliver a combined 1,265 MW capacity of distributed renewable energy projects across Nigeria.”

He added that the agency had made significant strides in project rollout under the improved regulatory environment.

“With a supportive regulatory environment, the REA has successfully deployed over 500 mini-grids and more than 1.4 million solar home systems, providing electricity to over 7.5 million Nigerians, including 300,000 women-led MSMEs,” he said.

Aliyu also pointed to ongoing cooperation with the Electricity Regulatory Commission as a catalyst for smoother operations.

“The REA’s engagement with NERC has led to better regulation for mini-grids, facilitating smoother project execution and increased private sector participation in renewable energy initiatives,” he explained.

He described NERC’s interventions as “instrumental” in driving renewable energy adoption in the country.