1. Introduction
The COP28 United Nations Climate Change Conference ended on a
historic note as representatives of nearly 200 nations unanimously
reached a pact to completely “phase out” the use of oil,
gas and coal by 2050.1 This is a remarkable milestone as
the world runs against time to checkmate the deleterious effects of
fossil fuels on the environment. At the heart of the global drive
to attain net zero in renewable energy. However, environmental
consideration is by no means the only reason for the call to
embrace renewable energy as it also boasts of an array of economic,
political and security benefits.2 While the 2050 target has
attracted a lot of plaudits, the admonition by COP28 President,
Sultan al-Jaber, on the need for countries to take concrete steps
to implement the pact is very instructive.3 It is on this note
that this article attempts to explore how recent trends in the
legal frameworks on electricity in Nigeria can make the country a
major player in the renewable energy industry.
2. Why Renewable Energy?
Renewable energy is energy generated from sources that are
constantly naturally replenished at a rate higher than the rate
they are consumed.4 This is in contradistinction to
fossil fuels (oil, gas and coal) which take millions of years to
form.5 The commonest sources of renewable
energy are solar, wind, hydro, biomass, geothermal heat and ocean
energy.6 There are several reasons why
renewable energy has become more fashionable. Some of these
are:
a. Environmental Benefits: As stated earlier,
there is now a consensus on the need to phase out fossil fuels due
to their harmful effects on the environment. The production and use
of these fuels not only contribute substantially to global climate
change through greenhouse emission, which now threatens our shared
existence but also more often than not result in air and water
pollution, damage to land due to mining, destruction of
biodiversity and associated health problems.7 In sharp contrast,
the adverse effects of renewable energy on the environment are much
less harmful8 so much so that it is otherwise
called clean energy.9
b. Economic Benefits: Renewable energy has
several economic benefits which makes it preferable to energy
derived from fossil fuels. For instance, the cost associated with
the generation of energy from renewable sources has been
consistently plummeting over the years.10 It has also been
projected that the renewable energy industry would create more jobs
than those that would become redundant as the world transitions
away from fossil fuel.11 Further, the funds that are
funneled into environmental remedial works and allied health
conditions as a result of the production and burning of fossil fuel
will become free and available to be channeled into other
productive ends.12 Another benefit is that sources
of renewable energy are more stable and predictable, thus making
them less prone to price volatility and supply risk such as what
was experienced in Europe and other parts of the world in the wake
of the war between Russia and Ukraine.13 Finally,
renewable energy makes for easy accessibility to energy, even for
rural dwellers, and it goes without saying that this will improve
the economic wellbeing of both individuals and the state.14
(not exhaustive).
c. Political and Security Benefits: Unlike
fossil fuels which are not evenly distributed, every country has
sources of renewable energy. This guarantees energy security as no
country will have to rely on another for its energy needs as is
currently the case. This also gives sovereign nations the much
needed independence in their relationships with others without the
fear of putting their energy sector in jeopardy. Finally, on this
point, renewable energy encourages energy democracy because of how
segmented it can be. It gives locals and consumers more control
over the energy industry.15
3. Renewable Energy and the Nigeria Electricity Supply
Industry (NESI)
Energy is required for heating, cooling, mobility, manufacturing
and to power appliances. Virtually all of these needs can be met by
electric energy which is a cleaner form of energy. However,
electric energy is only as clean as the sources from which it is
derived. Prior to the enactment of the Electricity Act 2003 (the
Act or EA hereafter), the generation of electricity from renewable
energy sources was largely governed by policy documents and
regulatory interventions of the Nigerian Electricity Regulatory
Commission (NERC or the Commission). For example, renewable energy
was mentioned just once in the repealed Electric Power Sector
Reform Act, 2005.16 Therefore, it is safe to submit
that the EA is the clearest legislative intervention yet in Nigeria
to promote the transition to renewable energy. For its worth, some
of the salient provisions contained therein which are very relevant
to the subject matter under consideration are as follows:
a. NERC to Support Development and Utilization of
Renewable Energy: While NERC has until the new legal
dispensation to a limited extent been promoting the incorporation
of renewable energy into Nigeria’s energy mix,17 it now has an
express mandate under the Act to support the development and
utilization of renewable energy in the NESI. To this end, NERC is
empowered to set technical guidelines to govern the operations of
renewable energy companies as well as commercial regulations and
guidelines to give the companies a competitive edge in the
electricity market.18 With the requisite willpower,
this will make renewable energy the major contributor to on-grid,
mini-grid and off-grid electricity supply in Nigeria.
b. Prescription of Renewable Purchase Obligations and
Generation Purchase Obligations: NERC is also empowered by
the Act to obligate electricity generating companies (Gencos)
ensure that a particular percentage of the electricity produced by
each of them is from renewable sources.19 In a similar
vein, it may prescribe that a certain percentage of electricity
purchased by distribution and trading licensees shall be from
renewable energy sources.20 The Commission is further
enjoined to monitor compliance.21 However, it should be noted that
even prior to the enactment of the extant Act, NERC already came up
with an initiative of a similar nature vide the Feed-In Tariff
Regulations. By the said Regulations, the Commission set a target
for grid-connected renewable generation capacity to the tune of 1GW
by 2018 and 2GW by 2020.22 It thereafter allocated same
between the 11 distribution companies and Nigerian Bulk Electricity
Trading Company (NBET).23 A major drawback of the Feed-In
Regulations is that Discos and NBET cannot go above the upper
limits set for them by the Commission. This is at variance with the
tenor of the extant Act which encourages the integration of
electricity into transmission and distribution networks as much as
possible.
c. Introduction of Feed-In Tariffs for Renewable Energy
Companies: To ensure return on investments for investors
in renewable energy, the Commission is empowered to prescribe the
requisite tariffs to be charged on renewable energy taking into
cognizance the cost of production, the location of generation
plants, reasonable rate of return and the balance between the
interests of consumers and investors.24 The feed-in
tariff, which unlike what is obtainable under the Feed-In
Regulations, is applicable to plants of all sizes, guarantees
producers of electricity from renewable energy sources buyers under
long-term standard power purchase agreements which may have a
lifetime of up to 20 years.25 The Act goes further to prohibit
Discos from buying or negotiating a power purchase agreement with a
generator of electricity from renewable energy sources in a manner
that is inconsistent with the guidelines provided by the NERC.26
The feed-in tariff policy, if effectively implemented would
encourage investors to commit their funds into renewable energy
generation projects in Nigeria since it would provide a
considerable level of shelter to them from some of the risks
inherent in the production of renewable energy.27
d. Incentives for Independent Power Producers
(IPPs): To further encourage investment in renewable
energy, the Commission is empowered to provide incentives to IPPs
for investments in the generation of electricity from renewable
sources specified under the Act.28 It goes without saying that the
IPPs will be eligible to enjoy the benefits highlighted above in
addition to others as the Commission may deem fit. IPPs play a
crucial role in NESI by augmenting the electricity produced by the
Gencos and the National Integrated Power Projects (NIPPs).
Accordingly, adequate incentives for them will encourage IPPs to
key into the renewable energy agenda which will in turn expedite
the transition from fossil fuels.
e. Unhindered Access to Transmission and Distribution
Networks: Another remarkable provision contained in the
Act is that transmission and distribution companies are mandated to
upon request by a generator of electricity from a renewable energy
source within their respective coverage areas, promptly connect
them to their networks except where there is a reasonable ground
upon which such requests cannot be entertained.29 What is more, the
transmission and generating companies are required to upgrade their
systems at reasonable economic expense to onboard electricity
generated from renewable sources.30 Such upgrade must be done as
soon as practicable if so requested by a generator of electricity
from renewable sources31 provided that in either case,
the cost of such upgrade shall be borne by either the transmission
or distribution company and the generator of electricity from
renewable source in equal shares.32 By these provisions, electricity
derived from renewable energy can easily be wheeled from the plant
where it is produced for onward forwarding to end-users.
f. Mini-Grid License to Renewable Energy
Companies: The Act also clothes the Commission with the
power to grant license of mini-grid concessions to renewable energy
companies to serve consumers named area to the exclusion of
others.33 This will go a long way in
improving access to electricity, particularly in rural areas which
are not connected to a grid system.
g. The Rural Electrification Agency: This
Agency was established to promote access to electricity to rural,
unserved and underserved communities.34 Due to the remote
nature of most of these communities, the mini-grid and off-grid
electricity options are preferable. It is on this note that
renewable energy becomes crucial since it can be easily sourced
from the aforementioned communities. The Act provides that the
Agency shall leverage renewable energy and collaborate with other
stakeholders in furtherance of its objectives.35 Further, the
Commission is mandated to support the Agency in its renewable
energy drive.36
h. Tax Relief and Incentives: The Federal
Ministry of Finance is obligated by the Act to introduce tax
incentives to promote the generation and consumption of electricity
generated from renewable sources in Nigeria, and in accordance with
the Industrial Development (Income Tax Relief) Act and other fiscal
policy framework foster such tax reliefs encourage investments in
renewable energy projects in Nigeria.37 Tax incentives is
one of the most effective methods through which governments the
world over attract investments into key sectors of their economies.
Therefore, investors and consumers alike will be more favorably
disposed to the production and consumption of electricity generated
from the renewable sources if they are guaranteed some form of tax
reliefs by the government.
4. The Role of State Governments in the Realization of
the Net Zero Goal
Before the historic pact at COP28, former President Muhammadu
Buhari, in November 2021, had pledged Nigeria’s commitment to
the attainment of net zero by the year 2060.38 In furtherance of
this objective, Nigeria launched an ambitious Energy Transition
Plan on 24th August 2022. The plan through which Nigeria
intends to reach net zero by 2060 requires a huge sum of USD $1.6
trillion, including USD $410 billion above projected usual
spending.39 According to the plan, to
achieve net-zero goals, about 220GW of solar, biomass and hydro
generation capacity, 90 GW of storage and 34GW of hydrogen systems
need to be built.40
Even with a combination of renewable and fossil fuel sources,
Nigeria currently has an installed capacity of about 18GW, while it
generates about 8GW.41 It goes without saying that all
hands need to be on deck to attain the goal of 220GW solely
generated from renewable sources and its associated infrastructure
by 2060, which in any case is 10 years later than the 2050 target
set at COP28. This is where state governments come in. Prior to the
recent constitutional amendment in March 2023, NESI was to a large
extent centralized, with state governments only having the power to
legislate on the generation, transmission and distribution of
electricity in areas within their jurisdictions that are not under
the coverage of the national grid. However, with the aforesaid
constitutional amendment vide the Fifth Alteration (No.17) Act,
2023, state governments are now clothed with the constitutional
powers to establish their respective state electricity markets.
Before the amendment, Item 14(b), Part II of the Second Schedule of
the Constitution of the Federal Republic of Nigeria 1999 (CFRN)
read as follows: “A House of Assembly of a State may make laws
for the State with respect to – (b) the generation,
transmission and distribution of electricity to areas not
covered by a national grid system within the
state…” (emphasis supplied). However, the phrase “not
covered by a national grid system” has been deleted vide the
above-named Alteration Act.
With the lifting of the constitutional impediment which hitherto
limited the powers of state governments in NESI to areas not
covered by a national grid system, it is expected that they would
start setting up their respective electricity markets without
further delay by enacting state electricity laws and coming up with
actionable policies that will promote the production and
consumption of electricity which is generated from renewable
sources. Such collaborative effort will obviously make
Nigeria’s net zero target more feasible.
5. Conclusion
There is now a consensus that the phasing out of fossil fuels is
inevitable primarily due to the adverse effects that their
continuous production and use have on the environment and human
health. As commendable as the COP28 Conference pact on the phasing
out of fossil fuels by 2050 is, the admonition by the COP28
President that “we are what we do, not what we say,”42
should be given a serious thought by all stakeholders. As the
largest democracy and economy in Africa, Nigeria must take the lead
by walking the talk. While there is still room for improvement, it
is commendable that some legislations and policies have been put in
place to usher in a power sector solely driven by renewables. What
is left is for the federal and state governments as well as other
stakeholders to put in place a conducive environment that would
promote a thriving renewable energy industry.
Footnotes
1.
Valerie Volcovici, Gloria Dickie and William James, ‘Nations
strike deal at COP28 to transition away from fossil fuels’
(Reuters, 14 December 2023) https://www.reuters.com/business/environment/countries-push-cop28-deal-fossil-fuels-talks-spill-into-overtime-2023-12-12/
accessed 14 February 2024.
2.Janet
L. Sawin and Freyr Sverrisson and Anna Leidreiter, ‘RENEWABLE
ENERGY AND SUSTAINABLE DEVELOPMENT: Accounting for Impacts on the
Path to 100% RE’ (July 2016, World Future Council) 8 https://www.worldfuturecouncil.org/wp-content/uploads/2016/08/WFC_2016_Renewable-Energy-and-Sustainable-Development.pdf
accessed 14 February 2024.
3.
Valerie (n 1).
4. United
Nations, ‘What is renewable energy?’ (United Nations) https://www.un.org/en/climatechange/what-is-renewable-energy
accessed 14 February 2024.
5.
Ibid.
6. See
section 232 of the Electricity Act 2023 (EA) where the phrase
‘renewable energy sources’ as ‘renewable non-fossil
energy sources like wind, solar, geothermal, wave, tidal,
hydropower, biomass, landfill.’
7. Janet
(n 2) 8.
8. United
Nations (n 4).
9. Lora
Shinn, ‘Renewable Energy: The Clean Facts’ (NRDC, 1 June
2021) <https://www.nrdc.org/stories/renewable-energy-clean-facts>
accessed 17 February 2024.
10.
Christine Lo, ‘Renewable Energy Costs Have Dropped Much Faster
Than Expected, But There’s A Catch’ (Forbes, 14 September
2022) https://www.forbes.com/sites/christinero/2022/09/14/renewable-energy-costs-have-dropped-much-faster-than-expected-but-theres-a-catch/?sh=3ea4d9c63164
accessed 19 February 2024.
11.
Omri Wallach, ‘How many jobs could the clean energy transition
create?’ (World Economic Forum, 25 March 2022) https://www.weforum.org/agenda/2022/03/the-clean-energy-employment-shift-by-2030/
accessed 19 February 2024.
12.
Janet (n 2) 13.
13.
Christine (n 10).
14.
Janet (n 2) 11, 12.
15.
Ibid, 13 – 17.
16.
Section 88(9)(c).
17.
See generally the Regulations on Feed-In Tariff for Renewable
Energy Sourced Electricity in Nigeria, 2015 (Feed-In Tariffs
Regulations).
18.
See generally section 164 EA.
19.
Section 164(f) EA.
20.
Ibid.
21.
Ibid.
22.
Paragraph 8(f) Feed-In Tariff Regulations.
23.
Paragraphs 8(h) & (i) and Schedule 3 Feed-In Tariff
Regulations.
24.
Section 164(L) and section 168(3) EA.
25.
Section 164(L) EA.
26.
Section 168(1) EA.
27.
Will Kenton, ‘Feed-In Tariff (FIT): Explanation, History and
Uses’ (Investopedia, 24 February 2021)
https://www.investopedia.com/terms/f/feed-in-tariff.asp#:~:text=A%20feed-in%20tariff%20is%20a%20policy%20tool%20designed,price%20for%20what%20they%20deliver%20to%20the%20grid
accessed 15 February 2024.
28.
Section 164(O) EA.
29.
Section 171(1) EA.
30.
Section 171(1)(a) EA.
31.
Section 171(1)(b) EA.
32.
Section 171(2) EA.
33.
Section 164(m) EA.
34.
See generally sections 128 & 129 EA.
35.
Section 129(1)(d) EA.
36.
Section 164(p) EA.
37.
Section 166 EA.
38.
Felipe Gaitán Michelsen, ‘Nigeria’s Energy
Transition Plan’ (The Energy Circle: September 26, 2022) https://www.energycircle.org/2022/09/26/nigerias-energy-transition-plan/
accessed 19 February 2024. See also section 1(f) of the Climate
Change Act, 2021 which sets a target for year 2060 – 2070 for
the attainment of net zero GHG emission.
39.
Nigeria Energy Transition Plan, ‘Financing’ (NETP) https://www.energytransition.gov.ng/finance/
accessed 14 February 2024. See also Felipe (n 38).
40.
Nigeria Energy Transition Plan (n 39).
41.
Deji Elumoye, ‘FG: Nigeria’s Installed Electricity Capacity
Stands at 18,000mw, Generates 8,000mw Daily’ (THISDAY, 3 April
2022) https://www.thisdaylive.com/index.php/2022/03/04/fg-nigerias-installed-electricity-capacity-stands-at-18000mw-generates-8000mw-daily
accessed 19 February 2024.
42.Valerie (n 1).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#Trends #Nigerias #Legal #Framework #Electricity #Net #Target #Renewables
