Nigeria’s Bold Leap: 10% Renewable Energy Mandate for DisCos

Green Energy Transition: A New Dawn for Nigerian Electricity

by Adenike Adeodun

In a groundbreaking shift towards green energy, the Nigerian Electricity Regulatory Commission (NERC) has imposed a new mandate on all electricity distribution companies (DisCos) in Nigeria, requiring them to source at least 10% of their energy offtake from embedded generation sources, with an emphasis on renewable energy. Babatunde Osadare, the Chief Legal and Regulatory Officer at Ikeja Electric, revealed this significant policy change, emphasizing the importance of renewable energy in meeting Nigeria’s energy needs.

By the stipulated deadline of 1 April 2025, for instance, Abuja Disco must secure at least 61.1MW from embedded generation sources, half of which, amounting to 31MW, needs to be derived from renewable energy sources. This initiative marks a pivotal moment in Nigeria’s energy sector, pushing towards a more sustainable and environmentally friendly approach to electricity generation and distribution.

Osadare highlighted the challenges faced by the Nigerian electricity industry, which is heavily regulated with defined capital expenditure (CAPEX), operational expenditure (OPEX), return on investment, and revenue requirements. Historically, DisCos have struggled to generate sufficient revenue due to the inadequate supply of grid energy, leading to government interventions to cover the revenue shortfalls resulting from generation deficiencies. This situation has placed a significant financial burden on the government and has hindered the operational capabilities of DisCos.

To address this issue and reduce the exposure to revenue shortfalls, NERC has encouraged DisCos to explore alternative energy sources, particularly focusing on embedded and renewable energy sources. In line with this directive, NERC is closely monitoring the DisCos’ implementation plans to ensure compliance with the renewable energy procurement mandate. Furthermore, NERC has advised DisCos to take advantage of the World Bank-Nigeria Distributed Access through Renewable Energy Scale-Up (DARES) Programme. This initiative, backed by up to $750 million in financial and technical support, is designed to enhance Nigeria’s energy access and foster the adoption of renewable energy across the country.

The regulatory push for renewable energy is not just a mandate but a strategic move to diversify Nigeria’s energy portfolio, reduce dependence on non-renewable energy sources, and mitigate environmental impacts. This policy aligns with global efforts to combat climate change and promotes sustainable development within the Nigerian electricity sector. The involvement of various stakeholders, including the Renewable Energy Agency of Nigeria and State governments, underscores the collective commitment to enhancing energy access and transitioning to a more sustainable energy model.

The transition towards renewable energy represents a significant step forward for Nigeria, offering a pathway to bolster energy security, reduce environmental degradation, and support economic growth through sustainable practices. As Nigeria moves towards the 2025 deadline, the collective efforts of DisCos, regulatory bodies, financial institutions, and governmental agencies will be pivotal in achieving the ambitious goals set forth by NERC. This policy not only positions Nigeria as a leader in renewable energy adoption in Africa but also sets a precedent for other nations looking to transition to sustainable energy solutions.

Source: ESI Africa

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