States Declare Readiness to Sign Bilateral Power Contracts with Gencos, Target 9000mw Stranded Electricity 

–        Woo investors for modular-sized plants  

Peter Uzoho 

In furtherance of their active participation in the Nigerian power sector as empowered by the Electricity Act 2023, the 36 states of the Nigerian Federation have indicated their readiness to sign bilateral power contracts with willing generation companies (Gencos) in order to get more electricity supplied to the people at the state level.

The states are particularly targeting taking up the over 9000 megawatts of power that is currently stranded, out of the country’s 13000mw generation capacity, due to inadequate wheeling capacity by the Transmission Company of Nigeria (TCN).

Speaking on behalf of the Conference of State Electricity Regulators during a panel session at the just-concluded Nigeria Energy Exhibition and Conference in Lagos, the Chairman of the Enugu State Electricity Regulatory Commission (ESERC), Mr. Chijioke Okonkwo, added the states were ready to play active part across the value chains of the Nigerian power industry.

He indicated the willingness of the subnationals to pay the full cost of power delivered to states by the Gencos, saying subsidy will be out of the equation as investors would be guaranteed full return on their investment.

Okonkwo pointed out that only about 4000mw out of the 13000mw of power generation capacity in the country is being utilised, leaving about 9000mw as stranded power. 

Like the Nigerian Electricity Regulatory Commission (NERC), he said the states such as Enugu were putting in place regulations to drive the growth of power development and supply as well as return on investment in the states. 

He added that Enugu State was not considering subsidizing energy consumption in the state and that the government wants their customers to pay the full value of having electricity delivered to them.

Okonkwo stated, “And while a lot of generation companies would rather have that energy go through the Nigerian Bulk Electricity Trading Plc (NBET), we are saying that let the redundancy or the excess that is not being delivered, signed up in the power purchase agreement with our support and deliver it to us, and we’ll pay the full value.

“We are ready to pay, we’re ready to have effective contracts with generation companies so as to increase supply 

“Why should there be fear inside the power purchase agreement when you’re being guaranteed the return on investment, the full value of what you’re going to deliver in the state? Yes, Nigeria is supposed to have approximately 13,000 megawatts in capacity, in which we are only circulating or distributing 4,000mw.

“So, the remaining 9000mw, we are ready to sign the power purchase agreement and every state is pushing along the same trend.

“Because we know that subsidies or subsidizing consumption is not sustainable. Therefore, there are too many areas that we could touch on.”

He said there were too many issues to talk about and hamonise in the implementation of the new power industry regime in the country, ranging from subsidies to contracting to promoting smaller generation capacities.

He said the states were ready for business, especially at the subnational and market capacities, beckoning on investors ready to take the risk and invest in the states to come and partner. 

According to him, such investors can start with the small generation capacity like a modular project with a room for scale up through paying the return on investment.

Okonkwo added, “So we want a situation whereby those that are actually thinking of coming into our state to set up their projects, deliver energy, compete with the subco on ground, because if there is no competition, then we do not have a market. 

“We have identified potential growth centers that are open to private sector developers to come and take advantage of. And we are pushing that, even access our regulations on our site.”

He said investors have the opportunity to raise concerns on any regulation they are not comfortable with so that an adjustment can be made to enable their business.

According to him, such investors or partners could be a part of the development process of subnational electricity markets across all the states in the federation, while complementing what is happening at the wholesale electricity market.

Okonkwo, however, pointed out that the wholesale electricity market being controlled and managed by the federal government was never going to cease, explaining that the wholesale market will still exist to complement what is being done at the state level.