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
1
on 24-26 April, 2018
 Contents

01 National Electrification Targets & Strategies

02 Removing Barriers to Offgrid electrifation
03 Mini-grid Regulation
04 Tariff Policy
05 Progress

2
 Introduction
Generation Facility Status as at date
Generation
Power stations capability 5GW
for 180 million people
• Units available : 81
• 28 Stations(3 hydro, 25 thermal) • Units on bar : 58
• 130 Turbine units

Generation statistics as at 22nd April 2018

DETAILS MW
PEAK DEMAND FORECAST 23,030
GENERATION CAPABILITY 7,628.7
UNITS ON BAR CAPABILITY AT PEAK 5,502.8
PEAK GENERATION 4,884
PEAK GENERATION TO DATE 5,222
MAXIMUM AVAILABLE CAPACITY TO DATE 7,652.6
3
National Electrification targets
90%
75%

2030

2020
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
Stand alone Mini-grid grid continued development of
local rural electrification

Renewable & Depletable Resource

5
 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
 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.

7
 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

8
WHY REGULATING OFF-GRID PROJECT?

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

Slide 9
THE MINI-GRID REGULATION

10
Barriers to Private Investment in Rural Electrification

Investors’ concerns
Expansion
Stranded Profitability
scope Will cost reflective
investment Will competitors tariff be allowed ?
Would the main grid ‘steal’ good
arrive too soon? contiguous sites ?

consumers’ concerns
Safety
Would the mini-grid Affordability
operate at the required
Reliability Will it be not be too
safety standards How reliable is small expensive ?
scale utility ?
11
 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

Slide 12
 What is a mini-grid?
Isolated Mini-grid <100
A mini-grid, in the context kW
of rural electrification, is
an integrated Only registration required but may opt for a permit
decentralized local
generation, transmission Isolated mini-grid
and distribution system >100kW and <1MW
serving numerous
end‐users that stand on its Requires permit and minimum network standards
own separated from the
national grid with an Interconnected Mini-grid
installed generation >100kW and <1MW
capacity below 1MW
 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

Slide 14
 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

Slide 15
 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
Isolated Mini-grid <100
kW
Only registration required but may opt for a permit
Isolated mini-grid
>100kW and <1MW
Requires permit and minimum network standards
Interconnected Mini-grid
>100kW and <1MW
Requires permit and minimum network standards
 ISOLATED MINI-GRID <100KW
With No permit
With a permit
• Mandatory Registration with • Voluntarily elect to
NERC obtain a permit

• No Permit obligation • Entitled to exit

compensation
• No exit Compensation
• Must Comply with
• May deviate from distribution Distribution codes
codes
• Secure tariff based
• To quit within 2 month of approved model
Disco arrival
• Health & safety codes
• Must comply with Health & compliant
safety standards Your Logo
 ISOLATED MINI-GRID DEVELOPMENT PROCESS
• Identify site
1 • (outside of Disco’s approved Expansion plan)

2 • Establish contact with community

• Sign 12 month exclusivity agreement with

3 the community

• Collect building permits from municipality,

4 • ESIA from Ministry of Environment

• Apply to NERC for permit or registration (as

5 required) and tariff approval

• Install, commission, operate

6
INTERCONNECTED MINI-GRID PERMIT PROCESS
• Identify Site
1

• Sign Exclusivity
2 agreement

• Sign Tripartite Agreement ( Minigrid

3 Developer-Community-Disco)
• Agree on network usage fee and
usage conditions

• Obtain approval of tripartite

4 agreement/permit from NERC

• Install, commission, & operate of mini-grid

5 system
 REQUIRE DOCUMENTS FOR PERMIT APPLICATION

Company Site title Relevant maps

Registration/Incorporation documents and drawings
papers

Contract between the

ESIA approvals Building Permit (if build Community Representative &
of powerhouse is Mini-Grid Operator/and Disco
required)

All documents are uploaded on the online tool on the Commission’s website
20
 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)
 Mini-grids and the
Arrival of the National Grid
 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

Abuja, 18 July 2017 page 23

 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

24
 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.

25
 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.
26
 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.
27
List of On-going minigrid Projects
Project Location State PV Popullah/Connectionsdeveloper
Akpabom Akwa Ibom 40.95 200 GVE & Akwa Ibom State
Onono-Anam Anambra State 40 200 GVE
Onono-Anam Phase 2 Anambra State 79.5 300 GVE
Okpechalla/Atachile Anambra State 27 100 GVE
Umon Island, Biase L GA Cross River State 800 71 CREDC
Kolwa Gombe State 37.8 200 GVE
Kolaku Gombe State 46.8 350 GVE
Ayaba Gombe State 17.55 150 GVE
Bisanti Niger State 37.8 280 GVE
Swasun Niger State 40.95 240 GVE
Tunganjika village, Magma LGA Niger State 100 6000 Nayo Tropical Technology Ltd

Bisanti-katcha Niger state 34 3000 GVE Projects Ltd

Gbamugbamu, Ogun State 85 3000 Rubitec Solar Ltd
Angwan Rina & Demshin Plateau 180 6000 GVE Projects Ltd
Angwan Rina Plateau State 52.65 346 GVE & Plateau State Govt

Demshin Plateau State 52.65 352 GVE & Plateau State Govt
Egbeke-Etche River state 9 4200 GVE Projects Ltd
Umuagwu Rivers State 6.84 86 GVE
Umuokwu Rivers State 10.65 120 GVE

Umuode Rivers State 10.65 120 GVE

kurdula village Sokoto State 90 800 GoSolar Africa

28
 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;
 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
30