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minigrid in Nigeria

progress made in implementation of Nigerian minigrid regulation

abdussalamyusuf
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minigrid in Nigeria

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  1. NERC’s 2017 Mini-Grid Regulations and Implementation Progress DR. ABDUSSALAM YUSUF NERC, Abuja Presentation at Nigeria Technical Workshop on Off-Grid Regulation, organized by NARUC/USAID at Reiz continental Hotel, Abuja on 24-26 April, 2018

  2. Contents 01 National Electrification Targets & Strategies 02 Removing Barriers to Offgridelectrifation 03 Mini-grid Regulation 04 Tariff Policy 05 Progress

  3. Introduction Generation Facility Status as at date Generation capability • Power stations • 28 Stations(3 hydro, 25 thermal) • 130 Turbine units 5GW for 180 million people • Units available : 81 • Units on bar : 58 Generation statistics as at 22nd April 2018

  4. National Electrification targets 90% 75% 2020 2030 • Required New connection: 10 million rural household • Required Capacity addition: 6,000MW • Required Investment: US$9 billion

  5. Strategies Ensure close co-ordination of rural electrification expansion with economic development objectives Encourage States and non-state actors to contribute to rural electrification Promote a full menu of rural electrification options Facilitate the entry of new market participants and continued development of local rural electrification grid Stand alone Mini-grid Renewable & Depletable Resource

  6. The New Paradigm • The new strategy will • reduce inequalities in access to electricity and the associated opportunities for increased social welfare, education, health and income generating opportunities. • it will be progressively demand-driven; with active private sector participation • Include PPP strategy areas not yet attractive for the private sector, • guarantees that the investor will recover all the cost of supply either from tariff or tax. • Will deploy the Rural Electrification Fund to achieve equitable regional distribution access to electricity

  7. REF The RE Fund consisting of contributions from government, electricity market, donors etc. in accordance with provisions of EPSR Act of 2005 will be used to : • bridge the gap between commercial viability and tariff affordability in remote rural communities, • buy down investment costs, risks and information barriers to public or private initiatives. • Support increased access (connections to grid and off-grid supply) but not consumption, through open competitive bids; • provide counterpart contribution of the total funding will other parties (distribution companies, local communities, business groups, etc.) would have to provide the rest. • The efficiency of REF operation will be measured by number of access created per invested subsidy amount subject to the satisfaction of regional equity requirements.

  8. Tariff Policy • In order to stimulate decentralised initiatives, projects must be commercially viable. • Tariff revenue must cover the costs to the service provider, allowing private capital to make a return on equity and finance the investment. • No Uniform tariffs across the country • Cost structure –Investment costs, financing  Customer categories • No tariff cap • Recover costs • Ability to pay by the population • No predetermined ROE • No Lifeline/Social tariff as part of the tariff structure

  9. In spite of the small size of off-grid electrification project regulation is required to address the main Barriers to Rural Electrification Investments. The pointers to this are contained in the following sub-sections of the EPSR Act 2005. Section 88(13c) - promote expansion of the grid and development of off grid electrification Section 70(8)- the commission may establish simplified procedure Section 96(1) & 96(2l)- Commission’s regulation to provide for the regulatory treatment of rural electric schemes and investments WHY REGULATING Off-Grid Project?

  10. THE MINI-GRID REGULATION

  11. Barriers to Private Investment in Rural Electrification Investors’ concerns Expansion scope Will competitors ‘steal’ good contiguous sites ? Profitability Will cost reflective tariff be allowed ? Stranded investment Would the main grid arrive too soon? consumers’ concerns Safety Would the mini-grid operate at the required safety standards Affordability Will it be not be too expensive ? Reliability How reliable is small scale utility ?

  12. Features of the mini-grid regulation • Up to date maps of the existing grid and mini-grids shall be made available on-line to the public • Permit • Streamlined for projects < 1 MW • Voluntary for projects < 100 kW • Exclusivity period : legal right to reserve a site subject to demonstrating progress • Tariffs: permission to charge cost-reflective tariffs • Quality of service • Dispute resolution framework • Options when main grid arrives

  13. What is a mini-grid? A mini-grid, in the context of rural electrification, is an integrated decentralized local generation, transmission and distribution system serving numerous end‐users that stand on its own separated from the national grid with an installed generation capacity below 1MW Only registration required but may opt for a permit Requires permit and minimum network standards

  14. Why regulating mini-grid? • Major barriers against investment in mini-grid • Concerned that grid may arrive faster than expected, and all customers shift over to main grid. • Concerned that competitors might steal good sites (especially an issue when subsidies start to be available) • Lack of clarity about whether cost-reflective tariffs can be charged. • Customers need confidence that: • Mini-grid is safe • Power is reliable • Not too expensive

  15. Removing the Barriers • How does the mini-grid regulation Address these concerns ? • Permit • Streamlined for projects >100kW and < 1 MW • Voluntary for projects < 100 kW • Exclusivity period : legal right to reserve a site subject to demonstrating progress • Tariffs: permission to charge cost-reflective tariffs • Provides for • Quality of service • Dispute resolution framework • Options when main grid arrives

  16. WHAT IS A MINI-GRID? A mini-grid, in the context of rural electrification, is an integrated decentralized local generation, transmission and distribution system serving numerous end‐users that stand on its own separated from the national grid with an installed generation capacity below 1MW Only registration required but may opt for a permit Requires permit and minimum network standards Requires permit and minimum network standards

  17. ISOLATED MINI-GRID <100KW With a permit With No permit • Voluntarily elect to obtain a permit • Entitled to exit compensation • Must Comply with Distribution codes • Secure tariff based approved model • Health & safety codes compliant • Mandatory Registration with NERC • No Permit obligation • No exit Compensation • May deviate from distribution codes • To quit within 2 month of Disco arrival • Must comply with Health & safety standards YourLogo

  18. ISOLATED MINI-GRID DEVELOPMENT PROCESS

  19. INTERCONNECTED MINI-GRID PERMIT PROCESS

  20. REQUIRE DOCUMENTS FOR PERMIT APPLICATION • Site title documents Company Registration/Incorporation papers Relevant maps and drawings Contract between the Community Representative & Mini-Grid Operator/and Disco ESIA approvals Building Permit (if build of powerhouse is required) All documents are uploaded on the online tool on the Commission’s website

  21. Require document for permit application • Main Document • Registration/Incorporation papers • Site title document • Relevant maps and drawings • Contract between the Community Representative and Mini-Grid Operator • Environmental Impact Assessment • Building Permit only in case they need to build powerhouse (e.g. not applicable for container solution • all documents should be uploaded on the online tool)

  22. Mini-grids and the Arrival of the National Grid

  23. Arrival of Disco network Disco takes over the MG network Compensate the MG (salvage value of network + 1 year revenue) MG may take away its generation facility or become embedded/emergency generator Source: Diagram by Richard Engel and Chris Greacen, 2013

  24. Applying Online • The application forms, the tariff simulation tool and the Mini-grid regulation will be made available on the Commission’s website • www.nerc.gov.ng

  25. Screenshot of the Homepage Access to the Developer Page Search Engine Links to the Main Text and relevant Annexes The design presented here is not final.

  26. Mini-Grid Developer Space: Application Process (2/3) An application can only be submitted to NERC once : • all the relevant forms have been properly completed • the last pages of the forms including the signature have to be uploaded • all others documents have been uploaded • the tariff calculation has been performed (if required) A submission button will then be activated on the website in order to send the application.

  27. Mini-Grid Developer Space: Application Process (3/3) Once the developer has submitted its request: • the developer receives an email confirming the date of the submission. • NERC receives a notification and has, according to the regulation, 30 working days to process the application. NERC connects to the Online Tool to access and review the documents. • If the request is approved, an email is sent to the developer. In case of permit issuance, he is invited to retrieve the documents in exchange of the legal fee. • If the request is not approved, the developer is informed per email with a justification (e.g. document not compliant, wrong information in a form). The developer can then make the necessary adjustments and submit the request again. Once approved, the Online Tool displays the Status of the Project.

  28. List of On-going minigrid Projects

  29. CHALLENGES FACING MINI-GRID PROJECTS • Higher Tariffs compared to National Grid • Tariffs should be set to recover investment, operation and maintenance costs, management fees as well as the return on investment; • Higher distribution price – even with no investment related costs • Cost-reflective tariffs for mini-grid installations may be presumed as being high, however, the cost of unserved electricity is even higher; • Suboptimal Demand • Demand and ability to pay projections often present major viability challenges in planning the development of mini-grid projects; • Demand is difficult to accurately determine considering that the targeted population usually has limited previous experience with electricity consumption;

  30. THANK YOU Contact us at: Adamawa Plaza, Plot 1099 First Avenue, Off Shehu Shagari Way, Central Business District, Abuja Website: www.nerc.gov.ng E-mail: info@nerc.gov.ng

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