The global focus on transitioning to clean energy, as evidenced by the recent 28th meeting of the Conference of the Parties to the UNFCCC (COP 28) has placed significant demands on developing countries like Nigeria to enhance policy frameworks, reduce reliance on fossil fuels, and increase investments in clean energy. The need for reliable electricity is paramount for the survival and growth of any economy. However, low-income countries such as Nigeria continue to grapple with inadequate power supply, which hampers industrial and economic growth. To address this challenge and reduce reliance on fossil fuels, there is a critical need to empower and bolster investments in the renewable energy sector. The Rural Electrification Agency (REA) was established to ensure access to reliable electricity supply for rural dwellers, regardless of their location and activities, while upholding economically responsive tariffs. In addition, the Electricity Act of 2023 bequeaths upon the Nigerian Electricity Regulatory Commission ("NERC" or the "Commission") the responsibility to facilitate the development and utilization of renewable energy, with the aim of augmenting its contribution to the energy mix. To attract and encourage private sector investment in rural electrification, the NERC Mini-Grid Regulations, 2023, signed on 29 December 2023, was released to address stakeholders' concerns regarding main grid operators' potential takeovers, lack of clarity on charging cost-reflective tariffs, and consumer apprehensions about mini-grid safety. Furthermore, the REA signed a Memorandum of Understanding (MOU) with the Africa Mini-Grid Developers Association (AMDA) to attract and promote mini-grid development in Nigeria.

This article focuses on the impact of the mini-grid regulations and the REA-AMDA MOU on existing Distribution Companies (DisCos) and mini-grid operators, as well as the opportunities available to new entrants in the mini-grid sub-sector within the power market.

Significant Changes Introduced by the NERC Mini-Grid Regulations 2023

The NERC Mini-Grid Regulations of 2016 outlined the processes for applying for a permit for isolated mini-grid developers in unserved areas as well as the registration of interconnected mini-grid developers in underserved areas within a DisCo's network for mini-grids with generation capacities up to 1MW. These regulations covered various aspects such as accounting and reporting requirements, inspection of mini-grid operators' accounts, installation and maintenance of mini-grids, safety and environmental protection requirements, tripartite agreements, compensations on interconnection with a DisCo, determination of tariffs and other charges, exclusivity period and site reservation for mini-grid project developers, sale of electricity between mini-grid and main-grid, and compliance with permit and tripartite contracts.

However, the NERC Mini-Grid Regulations 2016, has been replaced by the NERC Mini-Grid Regulations 2023, which seeks to address stakeholders' concerns by introducing changes and new sections that have implications for both DisCos and mini-grid operators, altering the operational landscape and interactions between the two parties within the Nigerian electricity market as highlighted below:

  1. Confirmation and Consent from DisCos: The regulations mandate isolated mini-grid developers to receive confirmation and consent from DisCos within 15 business days, ensuring that the mini-grid investment will not interfere with the DisCo's network expansion plans. The process of obtaining confirmation and consent from DisCos by mini-grid developers seeks to mediate issues that could arise from the DisCo claiming rights to the unserved area.
  2. Submission of Proposals to DisCos: Under the mini-grid regulations 2016, a mini-grid developer could choose to submit a proposal to the DisCos in consideration of the development of an interconnected mini-grid, once an underserved area has been identified by either the developer or connected community and a notification made to the Commission. However, the mini-grid regulations 2023 mandates that the mini-grid developer shall submit a technical and investment proposal to the DisCo.
  3. Transfer of Mini-Grids Permit and Business: The mini-grids regulations 2023 allows mini-grid developers to transfer, assign, sell, or dispose any part of the business upon prior written consent from the Commission, accompanied by specific documentation and evidence of the technical capability or capacity of the transferee company.

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