On-Grid

Introduction
According to the Transmission Company of Nigeria, on-grid electricity demand is estimated at 25,790 MW, but only 4,800 MW of electricity is able to be transmitted, despite an installed capacity of 13,700 MW.
Updated in November, 2020
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According to the Transmission Company of Nigeria, on-grid electricity demand is estimated at 25,790 MW, but only 4,800 MW of electricity is able to be transmitted, despite an installed capacity of 13,700 MW. 

Different constraints such as grid capacity, break downs, water, and gas shortages are issues limiting the delivery of nearly 65% of its installed capacity to the end-users. As a result of the low energy supply, distribution companies are only able to deliver electricity to consumers for a few hours a day, with a national average of four hours per day.

The Nigerian government, as highlighted in its National Renewable Energy and Energy Efficiency Policy, has set an ambitious target to increase grid supply from its current 4,800 MW to at least 32,000 MW by 2030, with renewable energy providing 30% of this supply. The government, in a bid to meet its Renewable Energy target, has outlined several measures – some of which are competitive procurement programmes and public-private partnership tenders for private investors.

Grid Power Generation by Source: 2030 (45 GW)
Grid Power Generation by Source: Present (12 GW)

Electricity Generation Companies (GenCos)

on-grid_figure_1
© GIZ/NREEEP
on-grid_figure_2
© GIZ/NREEEP

There are currently 29 power generation companies producing power for the national grid. Three of these are hydropower plants, others are gas/steam plants.

The country has an installed capacity of about 13,000 megawatts (MW). However, the generation sub-sector is still troubled with infrastructural issues in gas availability and supply, and capacity evacuation. As a result, the current operational generation capacity is about a third of the installed capacity. This is mainly a result of pipeline vandalism, water availability for hydropower generation, and electricity supply infrastructure network constraints. Consequently, these constraints remain the basis for shortfalls in the available generation capacity. Thus, the average generation is currently at 3,949 MW, while constraints average 3,300 MW. It is noteworthy that about 73% of the power generated from gas, while the remaining 27% is from water (hydro).

Addressing these gas, water, and grid infrastructure challenges will utilise the constrained power, thereby increasing operational generation capacity to about 7,200 MW.

Nigeria’s power generation sector is managed by a group of power generating companies regulated by the Nigerian Electricity Regulatory Commission (NERC).

The power generation companies are saddled with the responsibility to generate electricity in Nigeria. Power generation companies came under operation as separate entities following the unbundling of the Power Holding Company of Nigeria (PHCN) in 2005 as part of the power reform process.

Among the power generation companies managing the 23 grid-connected power plants are successor companies of privatised power plants, Independent Power Producers (IPP), and Niger Delta Power Holding Company (NDPHC). Successor companies of PHCN dominate the grid-connected power generation companies. The IPPs include power generation companies managed by the private sector prior to the privatisation of the power generating sector, e.g. SPDC, AES Barges, Ibom Power, and NESCO.

Transmission Company of Nigeria (TCN)

The Transmission Company of Nigeria (TCN) is responsible for the provision of services in the fields of transmission, system operation, and market operation.

It was established on 1 April 2004 out of the defunct National Electric Power Authority (NEPA), which had been created from the merger of the transmission and operation sectors. 

As one of the unbundled business units under the Power Holding Company of Nigeria (PHCN), TCN holds licenses for transmission, electricity transmission, and system operations.

TCN is spread across the country with eight transmission regions in Lagos, Oshogbo, Kaduna, Bauchi, Shiroro, Enugu, Port Harcourt, Benin, and a National Control Centre (NCC) at Oshogbo. There is also a Supplementary National Control Centre at Shiroro and three Regional Control Centres at Benin, Lagos, and Kaduna.

Frequency and voltage recordings often exceed established norms. System collapses are caused (besides gas pipeline vandalism) by inadequate reserves and maintenance, and the lack of a comprehensive and modern Supervisory Control and Data Acquisition (SCADA) system that is required for real-time data to control and keep the balance in the power system.

Electricity Distribution Companies (DisCos)

There are 11 Electricity Distribution Companies (DisCos) in Nigeria. The coverage areas of the 11 companies are indicated in the map below:

discos_map_nigeria-01
© GIZ/NERC, Source: http://www.nercng.org/index.php/contact/discos, Nigerian distribution grid companies (DisCos)

Electricity Tariffs in the Nigerian Electricity Supply Industry

Generation Tariffs

The Nigerian Electricity Regulatory Commission (NERC) has determined that the price of electricity to be paid to generators in the Nigerian Electricity Supply Industry (NESI) will be at the level required by an efficient new entrant to cover its life cycle costs (including its short-run fuel and operating costs and its long-run return on capital invested). The Commission believes that in a market such as the NESI, where demand is higher than supply, the price of electricity should be at a level that allows efficient operators who have already invested in the market to make a reasonable profit, and attract new entrant investors.

Further information on generation tariffs is available at NERC.

Transmission Tariffs

The Nigerian Electricity Regulatory Commission (NERC) established the regulated Transmission Use of System (TUOS) charge to be paid to the Transmission Company of Nigeria (TCN), the entity that manages the national grid, by electricity distribution/retailing companies for the transportation of electricity from generators to the local bulk supply point(s) of the companies.

Further information on transmission tariffs is available at the Multi Year Tariff Order by NERC

Distribution Tariffs

Distribution/end-user tariffs reflect the costs of the entire value chain for the Nigerian Electricity Supply Industry (NESI), beginning with fuel for generation plants, on to wholesale generation, through to transmission, distribution, metering, and billing, and finally to the consumer. 

In the NESI, all end users of electricity, i.e. customers, are classified into one of five broad tariff classes as outlined in the table below. Customers are further categorised into tariff subclasses by the individual electricity distribution companies (DisCos), based on their average consumption of electricity.

 

Tariff Class Description
R Residential A customer who uses his or her premise exclusively as a residence i.e. house, flat, or multi-storied house
C Commercial A customer who uses his or her premise for any purpose other than exclusively as a residence or as a factory for manufacturing goods
I Industrial A customer who uses his or her premises for manufacturing goods including welding and ironmongery
A Special Customers such as agriculture and agro-allied industries, water boards, religious houses, government and teaching hospitals, government research institutes, and educational establishments
S Street Lights Street Lights

 

Service

New Tariff Class

Old Tariff Class

Lifeline

R1

R1

A

(Minimum of 20 hours/day)

A – Non-MD

R2, C1, D1, A1 (Single and three phase)

A – MD 1

R3, C2, D2, A2 Street Light

A – MD 2

R4, C3, D3, A3

B

(Minimum of 16 hours/day)

B – Non-MD

R2, C1, D1, A1 (Single and three phase)

B – MD 1

R3, C2, D2, A2 Street Light

B – MD 2

R4, C3, D3, A3

C

(Minimum of 12 hours/day)

C – Non-MD

R2, C1, D1, A1 (Single and three phase)

C – MD 1

R3, C2, D2, A2 Street Light

C – MD 2

R4, C3, D3, A3

D

(Minimum of 8 hours/day)

D – Non-MD

R2, C1, D1, A1 (Single and three phase)

D – MD 1

R3, C2, D2, A2 Street Light

D – MD 2

R3, C2, D2, A2 Street Light

E

(Minimum of 4 hours/day)

E – Non-MD

R2, C1, D1, A1 (Single and three phase)

E – MD 1

R3, C2, D2, A2 Street Light

E – MD 2

R4, C3, D3, A3

 

For specific tariff orders of distribution companies, see: https://nerc.gov.ng/index.php/library/documents/MYTO-2020/

For more information on the Multi Year Tariff Order (MYTO), see: https://www.nercng.org/index.php/home/myto

Eligible Customer Regulations

In November 2017, the Nigerian Energy Regulatory Commission (NERC) issued its Eligible Customer Regulations, declaring that certain electricity customers could buy power directly from generation companies after being declared eligible by NERC. These new arrangements are expected to open the flow of money and electric power in the sector, which has recently been bogged down by monopoly service and inflexible contractual arrangements.

Under the new regulations, eligible customers have the choice to interconnect directly with generators and bypass the distribution network entirely. They also have the option to enter into Power Purchase Agreements (PPAs) with generators and continue to receive power through the existing transmission and/or distribution network.

The regulations mark a key step in enabling growth and investment in the Nigerian electricity sector, which at present is challenged by unused capacity, underserved customers, and financial insolvency. The Nigerian power grid has deteriorated significantly due to underinvestment and aging infrastructure, which has hurt reliability and frustrated customers.

These regulations aim to provide a more effective way for key customers to connect to generation companies, and for generators to receive a dependable stream of revenue for that service – either by bypassing the grid entirely through direct interconnection with customers, or entering into bilateral contracts with customers while continuing to send power through the grid.

Read more about on-grid market opportunities