In developed utilities, competitiveness has been introduced through market and regulatory reforms which facilitate consumers to select their preferred generators depending on tariff differences. Advanced metering technology makes this possible. More recently technological innovations arecreatingopportunitiesfor householdsandelectricityconsumers toexploreself-generationoptions apart from public grid systems. The available options range from conventional generators, solar and wind generators. An important incentive for self-generationisthatthedeployed smartmetering solutionsfacilitatethesaleof excessself-generated power back to the grid.
The liberalization of the states to generate, transmit and distribute electricity has subtly de-monopolized the long existing monopoly of the valuechainmakingwayforfreecompetitioninthe market through states. Possibly, some states will subsequently make investments in the power sector thatwill give rise to more electricity generation and supply. However, the question is, how much of additional generated power can be accommodated and integrated into the current Nigerian grid system?
Arguably, there may be a dire need for states to massively investinfurther strengtheningelectricity network infrastructure which has been one of the major causes of the unstable poor supply in many parts of the country. There are privately-owned distribution infrastructures that have been in use for over four decades, hence, the need for upgrade. Equally, some government owned power generating plants which are yet to be concessioned and the Transmission Company of Nigeria (TCN) require
significant capital outlay in order to upgrade the assets to the growing national power demand. Evenif therewassufficientgeneratedelectricity, in mostcases, thoseworn-outinfrastructuresmaybe incapableof accommodatingsuchload. Assuchwe seeexcessgenerated electricity, unutilized. Modern technology hasprovided grid supportand waysexcessenergy canbestored and utilized appropriately. This must be explored.
Given all these challenges and emerging opportunities, the most optimal way to leapfrog in the provision of improved reliable electricity is for the state governments to consider how the potential investors would leverage on existing NERC regulations in third-party investments, franchising andeligiblecustomer regulationsbeforeawarding investments in generation, transmission and distribution to new entrants. This way, legal hitches in utilizing existing infrastructure which are privately owned can be avoided.
Depending on how the states intend to operate, thesynergybetweenexistinginvestorsandnewentrantswillopenupmassivenovelopportunitiesand will also see a rise of consumers. This means producing consumers; if states allow individuals with capacitytogeneratetheirownpoweranddistribute. This can be a good foundation to usher in clean renewableenergysources. IncountriesliketheUnited Kingdom, innovative incentives (though limited in time) like feed in tariff, renewable obligation certificateswerecreatedtoencouragegenerationof clean power through renewable sources by individuals,
small and big companies alike. In fact, in the UK, some incentives like ContractforDifference, Smart ExportGuarantee, RenewableHeatIncentives, etc. that encourage, support and incentivize the generation and distribution of clean energy through renewable sources are still operational.
Additionally, job creation and employment opportunities will also be a consequence of the implementation of the powers of the state. The underlying economic, social and financial advantagesthatwillresultfromthisareenormous. Thus, liberalizingthestatestogenerate, transmitanddistribute electricity is a step in the right direction.
On the other hand, with all the positive impacts this recent amendment will likely bring to the sector, thefutureof existingGenCos, TCNand DisCos remainuncertain. Withtheprevious monopolistic nature of the value chain, the sector battled liquidity crises, etc. Operating within an open market structure leaves the fate of these market operators uncertain. Statesoperating theirown transmission networks may imply that the Transmission Company of Nigeria (TCN) which is the only body in the value chain that is 100% government owned and not privatized is now decentralized.
Furthermore, humancapitalflightmayalsobe one of the setbacks that the current market operators may experience as states will source experienced and capable individuals to manage the state powerinvestments. Declining collectionefficiency may alsobeexperienced especially whereconsumersareatlibertytoswitchfromoneelectricitycompany to another. Consequently, the modalities for operationsof thestateswithrespecttogeneration, transmission and distribution of electricity must be clearly stated by NERC, the regulator. NERC may have more work to do in terms of providing innovative guidelines for customers to switch or migrate from one network to another and not just allow it to be solely an internal affair of the state.
According to the World Bank, "Nigeria has the largest number of people without access to electricityintheworld". TheWorldBankfurther states that "the power sector has not been able to keep up withdemandorprovidereliablesupplytoexisting customers. BusinessesinNigerialoseaboutUS$29 billionannuallybecauseof unreliableelectricity". Optimistically, the implementation of this reform by states, especially if renewable energy sources are incorporated, Nigeria may witness a record decline in the number of people without access to electricity as well as see significant improvement in electricity supply, and ultimately boost the economy. However, the success is dependent on implementing business models that will promote synergy and collaboration between the existing distribution investors andthe new entrants toavoid potential rivalry that can lead to legal hitches.
Nnenne, a lawyer and renewable energy expert, writes via email@example.com_