Power Generation in Nigeria
Power generation in Nigeria dates back to 1886 when two (2) generating sets were installed to serve the then Colony of Lagos. By an Act of Parliament in 1951, the Electricity Corporation of Nigeria (ECN) was established, and in 1962, the Niger Dams Authority (NDA) was also established for the development of hydroelectric power. A merger of the two (2) organisations in 1972 resulted in the formation of the National Electric Power Authority (NEPA) which was saddled with the responsibility of generating, transmitting and distributing electricity for the whole country. In 2005, as a result of the power sector reform process, NEPA was unbundled and renamed Power Holding Company of Nigeria (PHCN).
The Electric Power Sector Reform (EPSR) Act was signed into law in March 2005, enabling private companies to participate in electricity generation, transmission, and distribution. The government unbundled PHCN into eleven electricity distribution companies (DisCos), six generating companies (GenCos), and a transmission company (TCN). The Act also created the Nigerian Electricity Regulatory Commission (NERC) as an independent regulator for the sector.
At present, the Federal Government has fully divested its interest in the six GenCos while 60% of its shares in the eleven (11) DisCos has been sold to the private operators. The Transmission Company still remains under government ownership. The generation companies created following the unbundling of PHCN are:
|Installed Capacity (MW)
|Afam Power Plc
|Sapele Power Plc
|Egbin Power Plc
|Ughelli Power Plc
|Kainji Power Plant
|Long Term Concession
|Jebba Power Plant
|Long Term Concession
|Shiroro Power Plc
|Long Term Concession
The generation sub-sector presently includes 23 grid-connected generating plants in operation with a total installed capacity of 10,396 MW (available capacity of 6,056 MW) with thermal based generation having an installed capacity of 8,457.6MW (available capacity of 4,996 MW) and hydropower having 1,938.4 MW of total installed capacity with an available capacity of 1,060 MW. This comprises of the privatized GenCos, Independent Power Producers (IPPs) and the generating stations under the National Integrated Power Project (NIPP).
IPPs are power plants managed by the private sector prior to the privatisation process. These include Shell operated – Afam VI (642MW), Agip operated – Okpai (480MW), Ibom Power, NESCO and AES Barges (270MW).
In its effort to increase the level of power generation, the Federal Government in 2004, incorporated the Niger Delta Power Holding Company (NDPHC) as a public sector funded emergency intervention scheme. The company has a mandate to manage the National Integrated Power Projects (NIPP) which essentially involves the construction of identified critical infrastructure in the generation, transmission, distribution and natural gas supply sub-sectors of the electric power value chain.
In the generation sub-sector, NDPHC is expected to add ten (10) new gas fired power stations to the grid some of which have already been completed and commissioned, while others are at different stages of construction in different parts of the country. In total, the NIPP power stations will add about 4,774MW of power to the national grid network after completion. The NIPP stations are listed below:
- Alaoji (1,074MW) in Abia state,
- Benin (Ihovbor) (451MW) in Edo state,
- Calabar (563MW) in Cross River state,
- Egbema ( 338 MW) in Imo state,
- Gbarain (225 MW) in Bayelsa State
- Geregu (434 MW) in Kogi State
- Olorunsogo in Ogun state
- Omotosho (451 MW) in Ondo state,
- Omoku ( 225MW) in Rivers state.
- Sapele (Ogorode)
Some of the NIPP power stations have already been privatised while plans are under way to sell the rest to interested investors in order to increase private sector participation in the sector thus strengthening the reform programme of the government.
In furtherance of the reform programme, the Nigerian Electricity Regulatory Commission (NERC) has in the past licensed several private Independent Power Producers (IPPs) some of which are at various stages of project development. The Commission has also enacted the Bulk Procurement Guidelines that will ensure the efficient and orderly procurement of large capacity generation in the future. This will enable the Commission to effectively predict the amount of power that can be added to the grid every year.
The Commission has in addition developed a Regulation on embedded generation which allows for power generation plants (including renewable energy) to be directly connected to and evacuated through a distribution network. It provides a window for investors, communities, state and local governments to generate and sell or utilize power without going through the transmission grid. This also offers a means for DisCos to increase the amount of power available to sell while eliminating the transmission cost component of the tariff.
By implementing reforms, Nigeria targets 40,000MW generating capacity by 2020 and will need to spend approximately $10bn per annum on the power sector for the next 10 years to achieve this. In the post-privatized power sector, the Nigerian Bulk Electricity Trading PLC (NBET) purchases power generated by the GenCos and IPPs at agreed prices stated in Power Purchase Agreements (PPA) and resells to the DisCos who deliver the power to the end consumer
Opportunities in the Generation Sub-sector
- Power Consumed by Generating entity
- > 1MW
- No Distribution Infrastructure required
- Permit required from NERC
|NERC Captive Power Generation Regulation
- Plant directly connected to distribution network.
- > 1MW
- Power sold directly to DisCo through bilateral contract.
- Licence required from NERC
- Good for cluster of customers e.g. Industrial Estates
|NERC Regulation on Embedded Generation
- Plant is not connected to the national grid.
- Power is sold to an off-taker (Commercial or residential) through bilateral contract.
- Good for cluster of customers e.g. Housing estates, industrial customers, large installations of telco equipment
- There may be need to invest in distribution infrastructure
- Requires Licence from NERC
- Generation plant is connected to the grid
- Power is evacuated to the National grid.
- Suitable for large scale projects
- Requires PPA with the Bulk Trader (NBET)
- Subject to capacity need & system constraints.
- Requires licence from NERC
|NERC Generation Procurement Regulations.
|Embedded Independent Electricity Distribution Network (IEDN)
- For areas where there is presently no distribution network.
- Will connect to existing DisCo to be able to distribute power
- Possibility of ring fencing a section of willing paying customers of a DisCo
- DisCo will be responsible for installation and management of electricity meters
|Rural Off-Grid IEDN
- Isolated IEDN in a rural area not connected to any licensed distribution or transmission network.
- Rural area is defined as an area
- Will require to purchase power from a Generating Company through bilateral contract.
- Can seek financial support from the Rural Electrification Fund (which at present is non-operational).
- Requires license from NERC
|Urban Off-Grid IEDN
- IEDN in an urban area but not connected to any licensed Transmission network
- Separate tariffs to be approved by NERC
- Electricity Meters installation and management responsibility of investor
- Requires License from NERC