Administrative Law

Towards A Renewed Renewable Energy In Nigeria; An Overview Of The Electricity Act, 2023

ABSTRACT

The energy crisis in Nigeria is not only a discouraging factor for investors, it also opens floodgates for the use of unclean and non-renewable energy sources like fossil fuel. Under the Paris Agreement, Nigeria committed to the progressive aggressive climate action of drastically reducing greenhouse gas emissions by 20 percent through enacting and implementing climate-centric laws and policies. Consequently, the Electricity Act, 2023 (“the Act”) is a step in the right direction for checking the energy crisis, and providing a pathway for renewable energy use in Nigeria. Considering that the energy sector primarily contributes to global warming, this article holistically examines the extent to which the Act drives Nigeria towards the use of renewable energy and meeting its commitment under the Paris Agreement. It also notes the provisions in the Act which are strategically structured to attract foreign investment. In reviewing the Agencies established under the Act, this article identifies the duplication of functions across Agencies. Further, the researcher notes the insufficiency of the Act in reinforcing the integration of renewable energy into the Nigeria energy mix and recommends that subsequent policies emanating from the Act, considers a remedy in this light. This paper also does some comparative analysis between the American Renewable Energy Act of 2021 and the Act, with notable points for the Federal Government of Nigeria to adopt towards boosting renewable energy consumption in the country.

INTRODUCTION

As the world is moving towards the use of renewable energy, Nigeria must not take the back seat. The energy sector is the largest contributor to greenhouse gas emissions causing climate change in Nigeria. Hence, the need for climate centric policies cannot be overemphasized. Admirably, the Nigerian energy sector has seen a new light by way of the Electricity Act, 2023 (“the Act”) which was signed into law on the 9th June, 2023 and described as an Act to integrate renewable energy into Nigeria’s energy mix and attract investments. This article aims to examine the Act in light of the Agencies established under it and climate considerations, as well as its sufficiency or otherwise towards the goal[1] of the Paris Agreement on climate change.

AGENCIES

Five Agencies are established under the act, namely, the Nigerian Electricity Regulatory Commission[2]; National Hydroelectric Power Producing Areas Development Commission[3]; Rural Electrification Agency[4]; Nigerian Electricity Management Services Agency[5]; and National Power Training Institute of Nigeria.[6]

Nigerian Electricity Regulatory Commission (“the Commission”)

As the apex regulator of the Nigeria Electricity Supply Industry, this Commission is clothed with a number of responsibilities and powers[7] under the Act, some of which include;

  1. ensuring optimal utilization of resources for the provision of electricity services;
  2. promoting the development and utilization of renewable energy services and increase the renewable energy to Nigeria’s energy mix.
  3. licensing and regulating persons engaged in the generation, transmission, system operation, distribution, supply and trading of electricity;
  4. maximizing access to electricity services by promoting and facilitating consumer connections to distribution systems in both urban and rural areas;
  5. promoting competition and private sector participation in the post-privatized power sector, when and where feasible.

Commissioners of the Commission shall be appointed from across the six geo-political zones[8] in Nigeria and shall hold offices for five years[9] or four years.[10] This provision is admirable for being indicative of a regional inclusivity that can foster national unity. Other issues regarding the remuneration and expenses, meeting, staff, reports, audit of accounts, procedure and proceedings of the Commission, conditions of appointment of commissioners as well as their remuneration, vacation of office, amongst others are provided for under Part V of the Act.[11]

National Hydroelectric Power Producing Areas Development Commission (“N-HYPPADEC”)

Also referred to as “N-HYPPADEC” under the Act, this body shall have as its member-States, any State in Nigeria where hydroelectric power is generated. Member-States of the N-HYPPADEC according to the Act are Benue, Kebbi, Kogi, Niger, Kwara, Plateau, Gombe, Kaduna, Nasarawa, Taraba. These States also represent the communities affected[12] by the activities of hydroelectric power generation. Functions of the N-HYPPADEC are the formulation of policies, schemes and survey to develop the hydroelectric power producing areas and its people, accessing and reporting on projects funded in the hydroelectric power producing areas to ensure optimal use of the funds, amongst others.

Further, a Governing Council (“the Council”) is established[13] for the N-HYPPADEC, whose functions include making policies to oversee the affairs of the N-HYPPADEC and generally ensuring optimal performance of the N-HYPPADEC. There are also established for the N-HYPPADEC, several Directorates[14] including the Directorate of Legal Services and Directorate of Rural and Community Development. For purposes of monitoring the management of the fund[15] of the N-HYPPADEC and implementation of its projects, a Monitoring Committee is established under the Act[16]. It is worthy of note that this function of the Monitoring Committee overlaps with the function of the N-HYPPADEC to access and report on projects funded in the hydroelectric power producing areas to ensure optimal use of the funds.

Interestingly, an Advisory Committee is established[17] for the N-HYPPADEC which function is to appraise and advise the President on general activities and functions of the N-HYPPADEC at least once a year. This Advisory Committee is considered an unnecessary dissipation of funds and a duplication of Agencies and functions under the Act. In this regard, the N-HYPPADEC itself and the Monitoring Committee are sufficient to report to the President on the general activities of the N-HYPPADEC. More so, the timeline for the statutory function of the Advisory Committee is pegged at “at least once a year”, this reinforces that there is no need for this Committee as it can, at the very least, be set up when needed.

Rural Electrification Agency (“the Agency”)

The Agency is created for rural electrification – to provide electricity access to rural, unserved and deserved dwellers in Nigeria, as well as support the development and utilization of renewable energy sources and an enabling environment to attract investments. Other functions[18] of the Agency include creating public learning opportunities to educate interested communities, students and individuals on business venture opportunities available in electrification and renewable energy production and consumption; facilitating tax incentives, investment capital allowance and low interest loans for local producers of renewable energy products for electrification. There is also established for the Agency, a Governing Board (“the Board”)[19] to supervise the management of the affairs of the Agency[20] including the Rural Electrification Fund (“REF”).[21]

Nigerian Electricity Management Services Agency

Also known as “NEMSA”, this Agency for which a Governing Board is also established[22] to oversee its affairs,[23] shall take over the Electricity Management Services Plc incorporated in 2007. The functions of the NEMSA are enforcing statutory technical standards and regulations, and generally ensuring that all electrical equipment, materials and installations used in Nigeria are of the right standard, amongst others.

National Power Training Institute of Nigeria

This is the research centre for matters relating to electric power in Nigeria and possibly Africa, which serves as a focal point for human resource development and workforce capacity building. Also referred to as “the Institute” in the Act, this body is primarily responsible for manpower training in the Nigeria Electricity Supply Industry (NESI), amongst other functions.[24]

Similar to other Agencies under the Act, there is established for the Institute, a Governing Council which function[25] is the general management of the affairs of the Institute and particular control of the property and finances of the Institute. Notably, an Academic Board[26] is created to administer the functions of the Institute relating to training and certification.

CLIMATE CENTRIC CONSIDERATIONS

The Act[27] places a continuing obligation on the Commission and Independent System Operators (ISO)[28] to promote the generation of electricity from renewable energy sources especially in terms of granting generating licenses. Commendably, provisions to promote the contribution of renewable energy to Nigeria’s energy mix abound in the Act.[29]

Notable amongst these, is the responsibility of the Commission to award mini-grid licenses to renewable energy companies and grant them concessions of exclusivity to serve a specific geographical location, indicating the aggregate electricity to be generated from a site. The Commission is also empowered to introduce feed-in tariffs for small hydro schemes, co-generation power plants, solar and wind-based plants irrespective of their sizes within the terms of the tariffs, for up to 20 years with the aim of guaranteeing buyers and return on investment. Further, the Commission is mandated to support the Agency (Rural Electrification Agency) to achieve efficient rural electrification through renewable energy sources.

Other climate centric provisions of the Act in terms of driving the integration and impact of renewable energy include, the power of the Commission to offer incentives and support to independent power producers for investments in renewable electricity; develop light-handed measures for awarding renewable electricity concessions for the generation and distribution of electricity within set capacities; and provide standards and sitting guidelines for solar home systems, stand-alone solar PV, micro hydro and wind power.

These provisions are remarkable for possessing the tendency to attract investments, both local and foreign, in the renewable energy sector in Nigeria. Renewable energy companies and investors are called upon to utilize the available incentives, support and concessions to increase their business prospects while living green.

Further, Nigeria can borrow a leaf from the United States of America (“U.S”), where the renewable energy law is more climate-centric. The American Renewable Energy Act of 2021 (“Renewable Energy Act”) establishes a federal renewable electricity standard which is, the generation and increase by electricity suppliers, of their renewable energy generation each year by specified amounts such that by 2030, at least 70% of renewable electricity will have been generated. In 2019, renewable energy sources accounted for approximately 11% of total U.S. energy consumption and about 17% of electricity generation, according to preliminary data from the U.S. Energy Information Administration. In the U.S, renewable energy facilities need to get the approval of the Federal Energy Regulatory Commission (FERC) and/or specific state regulators or an exemption before they can operate.

Additionally, the concept of Federal Renewable Energy Credit is an innovative provision under the Renewable Energy Act, which Nigeria can emulate. This credit[30]represents 1 (one) megawatt hour of renewable electricity.The Commission under the Renewable Energy Act gives Federal renewable energy credits to retail electricity suppliers where renewable energy is generated with the help of payments from a retail electricity supplier as a result of a State renewable electricity program. Examples of these programs include; SolSmart, which helps communities across the country become “open for solar businesses” through no-cost technical assistance and national recognition;[31] and The Wind Program which offers resources to help State and local decision makers understand the benefits of wind energy as an affordably reliable renewable energy source and contributor to economic vitality and environmental quality.[32] The Federal renewable energy credit is definitely a booster to the retail electricity suppliers to work towards more renewable energy production, by pushing more payments to the State renewable electricity procurement fund. Nigeria can take advantage of this method of granting credits or other incentives to retail electricity suppliers considering that the Act in sections 63-65 demonopolizes the generation, distribution and transmission of electricity, across governments, individuals and companies, while prohibiting  inter-satate and trans-country transmission and distribution. This presents an avenue to increase competition in the Nigerian electricity market and attract renewable energy investors in that regard. Recognizing licensed independent power generators is both innovative and impressive. It is hoped that investors take advantage of this provision to generate renewable energy towards a greener Nigeria.

The Renewable Energy Act is not only admirable for encouraging renewable electricity generation, but also for creating a federal renewable electricity standard. This standard is such that creates competition among renewable electricity generators across the United States and provides the greatest quantity of clean electricity for the lowest price,[33] considering the richness of the country in renewable energy resources like wind, solar and the likes. Nigeria is as rich as, or even richer than the U.S in renewable energy resources, especially wind, but the absence of the political will to put these resources to use is what plagues the country. The wind resources available in the core northern parts of Nigeria remain largely untapped. There is therefore an urgent need for laws and policies to establish an agency and regulator for the operation and management of wind farms and other renewable energy sources in Nigeria, beginning with a resuscitation of the abandoned wind farm project in Katsina State.

CONCLUSION

The Act is a robust legislation and good attempt to increase efficiency in power generation, transmission, and distribution in Nigeria, save for the countable instances of duplication of functions amongst Agencies, as earlier examined. It is commendable for its provisions on renewable energy, and public education on the generation and use of renewable energy sources especially in the rural areas. It also stands out for allowing private individuals and companies generate electricity following procurement of the necessary licenses; a good demonopolizatiom that can attract renewable energy investment and boost the economy.

Unfortunately and quite regrettably, the Act did not do much to reinforce policy on the use of renewable energy sources. It provides[34] that the relevant Ministry shall within one year from the commencement of the Act, initiate the process for the preparation and publication in the Federal Government Gazette, of a National Electricity Policy and Strategic Implementation Plan towards the overall development of the electric power sector in Nigeria. Further, this Plan is expected to cater to energy production concerns through the optimal utilization of unclean and non-renewable energy sources like coal, natural gases and nuclear substance. This neither supports the spirit of the Climate Change Act enacted for Nigeria in 2021, nor the commitment of the Federal Government of Nigeria (FGN) at the 2021 UN Climate Change Conference (COP 26) to achieve net-zero by 2060 which is evidenced by the launching in 2022, of the Energy Transition Plan. It only underscores that the long term energy plan of the Act, is not absolutely climate-friendly.

The climate is changing and so do we in terms of our energy consumption. Consequently, Nigeria must totally move from fossil fuel to clean and renewable energy to meet the adaptation and resilience climate goals of the Paris Agreement.[35] Fundamentally, the need to keep global warming below 1.5 degrees Celsius requires the FGN to make and implement ambitious climate action policies.

While the Act is laudable, it is hoped that the subsequent policies that draw from the Act will be minded to prioritize clean and renewable energy sources for electric power generation. More so, if implemented efficiently, the provisions of the Act regulating renewable energy sources and energy efficiency will bring about a mitigation of the energy crisis in Nigeria and an overall economic prosperity of the nation.


[1] The overall goal of the Paris Agreement is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.”

[2] Pursuant to Section 33 of the Act.

[3] Pursuant to Section 82 of the Act.

[4] Pursuant to Section 127 of the Act.

[5] Pursuant to Section 172 of the Act.

[6] Pursuant to Section 185 of the Act.

[7] Pursuant to Section 34 of the Act.

[8] Section 35 of the Act.

[9] This applies to the Chairman of the Commission.

[10] This applies to the Vice-Chairman and other Commissioners of the Commission.

[11] See Sections 33-62 of the Act.

[12] Section 84(1)(b) of the Act.

[13] Sections 84 and 86 of the Act.

[14] Section 90 of the Act.

[15] This fund is established under Section 95 of the Act.

[16] Section 102.

[17] Section 92 of the Act.

[18] Section 29 of the Act.

[19] Section 130 of the Act.

[20] Section 134(1) of the Act.

[21] Established under Section 142 of the Act.

[22] Section 173 of the Act.

[23] Section 175 of the Act.

[24] Section 186 of the Act.

[25] Section 188 of the Act.

[26] Section 195 of the Act.

[27] Sections 80-81 of the Act.

[28] ISOs are operators licensed under the Act to take over the market and system operation functions of the Transmission Company of Nigeria (TCN).

[29] Sections 164-171 of the Act.

[30] Section 610 (a) (4) of the American Renewable Energy Act 2021.

[31] State and Local Renewable Power Resources, listed on the website of the Office of State and Community Energy Programs. Available at https://www.energy.gov/scep/slsc/state-local-renewable-power-resources Accessed on August 8, 2023.

[32] Ibid.

[33] Section 1(b)(1) of the American Renewable Energy Act, 2021.

[34] Section 3(1)(2)(a), Electricity Act 2023.

[35] The United Nations Framework Convention on Climate Change, 2015 (Paris Agreement) establishes a global climate adaptation goal of enhancing adaptive capacity strengthening resilience and reducing vulnerability to climate change.

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About Ebere Ndubueze

Ebere Ndubueze is a corporate lawyer practicing in Nigeria; climate change and energy researcher; member of the Nigerian Bar Association, and Associate of the Institute of Chartered Mediators and Conciliators. She can be reached via ndubuezeeberelene@gmail.com; +2348169008219