Electricity Act supports $100 billion ETAFA initiative – Report

The Q2 2023 Energy Focus report by George Etomi and Partners (GEP) highlights that the 2023 Electricity Act provides support for the $100 billion Energy Transition and Access Facility for Africa (ETAFA) project.

GEP states that the Electricity Act gives credence to the ETAFA initiative, which aims to fund decentralized renewable energy projects in Nigeria over a 10-year period.

This acknowledgement is evident in section 166 of the Electricity Act, which specifically directs the Ministry of Finance to implement tax incentives to encourage and facilitate the generation and consumption of renewable energy.

A part of the report stated:

• “The ETAFA initiative is aimed at providing 4 million new connections and reaching 20 million people across Nigeria. With over 40% of Nigerians (particularly in rural areas) lacking electricity access and the recent removal of the fuel subsidy causing a rise in costs for residential power generation, this is a welcome development.
• “One could assume the ETAFA’s initiative would largely benefit from both ends, as generating renewable energy becomes more financially viable and the consumption of the resource being incentivized by tax measures could lead to greater demand; and thus the $100 billion goal would be easier to attain.
• “Furthermore, the Act in section 1 states that there is clear intent to use off-grid renewable energy solutions to provide electricity to underserved rural areas. This fits in perfectly with the ETAFA’s initiative as it allows for more underdeveloped areas to benefit from renewable energy.”

More insights

Section 164 of the Electricity Act states that the Nigerian Electricity Regulatory Commission (NERC) will support the development and utilization of renewable energy and take necessary measures to increase the contribution of renewable energy to power generation.

The GEP report highlighted the following as directives by the Electricity Act to NERC, regarding Nigeria’s renewable energy industry:

• Provision of adequate fee regulations for the issuance of licenses to renewable energy generating companies to provide electricity to consumers.
• Issuance of technical standards and certifications to technical personnel participating in renewable energy projects.
• Provision of the standard for an all-encompassing power purchase agreement for marketing renewable electricity.
• Regulation of connectivity to the grid and distribution network for the sale of electricity generated from renewable energy sources.

The GEP report also highlighted the fact that the Electricity Act requires NERC to establish feed-in tariff rates for renewable energy-generated electricity. This is intended to promote investment in renewable energy generation as it would allow an above-market price for what renewable energy generators deliver to the grid.

Meanwhile, the tariff rate will be guaranteed for 10-15 years and reviewed every two years thereafter.

What you should know

GEP recommends that NERC takes the high costs of generating renewable energy into account when setting the feed-in tariff rates, incentives, and other means to promote renewable energy production and usage.

• GEP also recommends that it would be wise for major players in the energy generation space to increase their investments in renewable energy production, to take advantage of the incentives as would be prescribed by NERC.
• Under the Electricity Act, NERC will review the National Content Development Regulations for the power sector to address local content requirements for local skills acquisition, local production and assembly of solar PV components, deep cycle batteries, electro-mechanical components of Small Hydropower (SHP) technology, wind power, boilers and turbines for co-generation of fewer than 30 megawatts.