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- Introduction
The recognition that the national grid alone cannot solve the electricity supply needs of the entire country has continued to drive the reforms in the Nigeria electric power sector. With the amendment of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and the enactment of the Electricity Act 2023, all barriers to decentralisation of electricity supply was removed. The stage has been set, and states in Nigeria are now setting up their own respective electricity market and regulation within their own territories, signifying that national grid decentralisation has commenced. The Rural Electrification Agency (REA) established under section 127 of the Electricity Act 2023 is the implementing agency of the Federal Republic of Nigeria tasked with the electrification of unserved and underserved communities to catalyze economic growth and improve quality of life for Nigerians. The REA has consistently been fulfilling its mandate to promote, coordinate, and facilitate electricity access for unserved and underserved rural communities across Nigeria, primarily through renewable, off-grid and mini-grid sources.
The Mini-Grid Regulation 2026 provides even greater and more streamlined prospects to accelerate electrification, foster innovation, and protect investments in this space. Understanding the Mini-grid regulations 2026 is important to enable stakeholders take advantage of the opportunities, and manage risks in the renewable and mini-grid investment, development, and operational space.
- Impactful Investments through the Rural Electrification Agency
The Rural Electricity Agency (REA) has been in the news lately and has been doing significant numbers in terms of investment. The REA secured a further $2.65 billion in pipeline funding, and took on implementation of the Federal Government's ₦500 billion National Public Sector Solarisation Initiative. 1 With more than 390 communities covered in agreements to build Mini-grids in 2025, alone, the Distributed Access Through Renewable Energy Scale-Up programme (DARES), a $750 million World Bank-supported initiative targeting electricity access for 17.5 million Nigerians is also taking shape.2
REA has been intervening directly to assist investors and project owners with regards to Land access, access to finance, local approvals, regulatory coordination, and community buy-in, including liaising with the states to serve the designated communities with mini-grid projects across Nigeria. Manufacturing of panel and solar photovoltaic has also commenced in country. Lavene Photovoltaic Limited leads the way having commenced local production and exportation of panels to neighbouring countries.3 With these developments being anchored by REA, Nigeria has become a reference point for other nations seeking development funds from donors and investors.
- Highlights of the Mini-Grid Regulation 2026
The Mini-Grid Regulation 2026 is designed to make decentralised mini-grid solutions even more accessible. The regulations provide for capacity limits of up to 5MW for isolated and 10MW operating independently (isolated) or connected to the main distribution network (interconnected) in an area. Mini-grids essentially are decentralised electricity supply systems dedicated to a group of customers in a community or cluster of community or businesses.
- What investors should note
- Application and Scope Classifications
The regulations are applicable to isolated mini-grids with installed generation capacity of up to 5MW per site and to all interconnected mini-grids with installed generation capacity of up to 10MW per site. The increased capacity delimitation of the power that can be generated under the regulations for isolated and interconnected mini-grids shows clear roadmap to the developers, operators, licensees with regards to the kind of projects they can put their resources behind and in which community such projects will be sited. The Regulations will also enable business decisions, risk allocation and the respective rights and obligations of stakeholders on projects.
Isolated mini-grids are usually located in unserved or underserved communities or businesses while interconnected mini-grids are more likely than not to be located in communities or businesses with unstable grid service/supply. For proper synchronisation of distribution, section 6 (5-7) of the regulations provide that the Distribution licensee shall maintain and update a publicly accessible registry of areas classified as unserved or underserved for the purpose of these Regulations with Host Capacity Information provided to enable efficient mini-grid siting and development. The size of a portfolio of a mini-grid can also be amended by a portfolio filing providing incremental information to the regulator as a mini-grid registered or permitted under these Regulations. The filing proposes any expansion, design modification, change in technology, change in point of common coupling, or capacity increase as the mini grid developer shall apply to the National Electricity Regulatory Commission (‘NERC’ or ‘Commission’) for an amendment or conversion of its registration, permit, or approved Tripartite agreement, as applicable.
- Registration, Permits, and Mandatory Conditions
To prevent conflict of interest and a breach of terms of existing distribution licences or Independent Electricity Distribution Network Operator (IEDNO), another mini-grid developer, or any other person authorised by the Commission to provide electricity service in a particular area, section 7 of the regulations provides for the conditions and terms that must be satisfied before the Commission may grant permit to another isolated mini-grid. An existing licensee or permit holder has the right to object to a grant of another permit within its location or area of coverage by providing to the Commission verifiable evidence of investment or proposed investment to bring supply to the targeted customers in the particular location within a specified period of time.
An existing isolated mini-grid developer with 100kw hitherto installed capacity can apply to upgrade the permit to 5mw or 10mw using the form prescribed in Schedule 2 of the regulations. Section 9 makes detailed provisions for the proper integration of the new interconnected mini-grid project of up to 10mw installed generating capacity with the existing licensee’ feeder and technical interconnection protocols. For such a mini-grid to be interconnected, the duly authorised representatives of the community, the mini-grid developer, and the distribution licensee shall sign a Tripartite Agreement covering the transaction, and the Tripartite Agreement which will typically provide for retail tariff, Hosting Capacity Information, and System Impact Study etc., shall be filed with the Commission.
- Tariffs and other Commercial Charges
Tariff is a significant part of any investment in the electric power market and these regulations provide the use of the mini-grid tariff model or such other methodology as may be approved by the Commission in the determination of the tariff and the mini-grid developer or operator is to be entitled to compensation upon grid arrival in accordance with section 21 and Schedule 13 of the Regulations where applicable. The mini-grid permit holder is obliged to comply with the Act, terms and conditions of the mini-grid permit, the Tripartite Agreement, the agreement with the community or connected community as applicable, customer contract, the rules and regulations, as well as the decisions, orders, and directions of the Commission in relation to tariff. Compliance and proper account keeping practice are mandatory and necessary for proper inspection and tariff review and determination of Depreciated Value or investment valuation for other business purposes.
The Commission-approved model for mini-grid projects are bespoken for the investors, and it allows for technical, non-technical losses and project-specific losses. A mini-grid permit holder may also file for single tariff for the projects under its portfolio. This streamlines the regulatory approval processes giving investors a predictable approach. The model also allows the investors to consider Network Asset Use Fee; Cost of Energy charge; and any other charge expressly approved by the Commission and provided for in the applicable Tripartite Agreement, Interconnection Agreement, or Power Purchase Agreement, in fixing the billing, metering, settlement, estimation, reconciliation, audit, record keeping, and any annual reconciliation of MYTO-linked commercial components in respect of an Interconnected mini-grid commercial arrangement. Where project-specific situation requires it, the Commission may even allow a mini-grid project to depart from the provisions of the model just to ensure the viability of the project.
- Protection of Investment, Exclusivity, Robust Commercial Transition and Compensation Arrangements upon Arrival of Grid
Investments are protected under the regulations. The Commission maintains a public registry of exclusivity agreements, ensuring no encroachment on the exclusive rights to develop mini-grid projects for up to twelve (12) months, which can be extended upon progress by the community and the licensee. The Exclusivity agreements which require community engagement, proof of technical capacity, and milestone reporting protects and ensures no other permit or license can be granted or another project granted access to the site in which another developer already has a registered exclusivity with the Commission. Likewise, the mini-grid developer shall comply with or rectify the Non-Compliance with a Mini-Grid Permit once its attention is called to same or risk commensurate sanction from the Commission.
The regulations also make robust provisions for the transition of the isolated mini-grid project when the grid by the distribution licensee finally arrives at the location with various options. These options include converting the isolated mini-grid into an interconnected mini-grid; transferring all the distribution assets of the mini-grid to the Distribution Licensee or another approved operator; continued operation of the mini-grid under a service, franchise, energy supply, or other commercial arrangement agreed by the parties and approved by the Commission. Other available options are orderly decommissioning and exit in accordance with an approved transition plan or adopting such other transition arrangement as the Commission may approve.
In determining the option and valuation of the compensation payable, the following are considered: the value of the assets; the date of commissioning and the period of operation of the mini-grid project prior to grid arrival; the funding of the project from inception (whether grant-funded, donor-funded, customer-funded together with any attached conditions). Also considered are the approved tariff model and depreciation profile; the extent of capital already recovered; the residual useful life of the assets; and any approved minimum protected tenure, amortisation milestone, or contractual protection period etc.
- Fast-tracking Technical Operation per size of project
The regulations provide for streamlined technical compliance requirements as mini-grid project operators irrespective of sizes must comply with technical codes, health and safety guidelines, and environmental laws. Solar PV and battery mini-grids of up to 10MW, only require environmental screening and an Environmental and Social Management Plan (ESMP). Applicable customer contract, and any minimum technical and service standards prescribed by the Commission must be complied with along with customer charter ensuring transparent and reliable customer service and billing experience. The mini-grid permit holder shall maintain and disclose a customer charter covering minimum service profile, billing frequency, meter failure treatment, Distribution licensee connection and reconnection rights, outage communication, complaint channels, and service restoration expectations.
- Dispute Resolution Mechanism
Any dispute between the stakeholders is to be resolved by genuine negotiation and if unresolved within the stipulated timeframe, the commission finally adjudicates on same. Adherence to fair hearing and timely resolution of customer and other stakeholders’ disputes through a standardised and predictable approach gives the investors confidence in the system.
- Role of States Electricity Regulators
A number of states already established their own electricity market via their respective laws pursuant to the Electricity Act 2023 and further amendment of the Constitution of the Federal Republic of Nigeria, 1999 (as amended). Each state which already has its own electricity market is allowed to regulate the renewable and mini-grid laws within its territory - only seeking and obtaining support from NERC where that is necessary. Given that regulatory oversight has been devolved to the relevant State’s electricity regulatory body, the Commission can no longer regulate the electricity operations within the states that have established their own electricity market.
- What investors and stakeholders should note
The space has been further opened for investors to invest through the REA and the Mini-Grid Regulations to take positions in the unfolding decentralised electric power sector in Nigeria. With the predictable framework for project development, investment, and operations as laid out or enacted in these regulations, investors and mini-grid project developers, and funders can be guided through the risk mitigation, risk allocation, licensing, approvals, or negotiations with communities or businesses. Compensation mechanism, exclusivity of mini-grid site, and robust dispute resolution mechanisms to protect investors’ interests show that Nigeria is open for investment into underserved and unserved areas via renewable and mini-grid solutions.
- Conclusion
The reform commenced with the now repealed Electric Power Sector Reform Act (EPSRA) 2005, through which the industry was unbundled into generation, transmission and distribution and the Gencos and the Discos duly privatised is undoubtedly maturing. Through recent legislative shift, it has become clear that the over two-decade reform is sailing towards a decentralised industry in which states now establish their respective electricity market, and other investors now have the required legislative and market imperatives to invest. This author believes that market-driven tariffs, renewables and mini-grid projects (isolated or interconnected), including regional grids will be the way to ensure speedy electrification and ramping up of megawatts for faster economic development. Investors are welcome to participate in providing the mini-grid and renewable solutions to the Nigerian electricity market.
Footnotes
1 See ‘How REA’s Abba Aliyu is making Nigeria Africa’s off-grid energy blueprint’ at https://businessday.ng/energy/article/how-reas-abba-aliyu-is-making-nigeria-africas-off-grid-energy-blueprint/ accessed on 31st May 2026. See also, https://nep.rea.gov.ng/dares.html accessed on 31st May 2026.
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