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MINISTER'S DIRECTIVE ON ELIGIBLE CUSTOMERS;

THE MINI-GRID REGULATION AND THE


POTENTIAL IMPACT ON THE CAPTIVE MARKET

DR. ABDUSSALAM YUSUF


NERC, Abuja
Presentation at the workshop on Developing and financing off-grid
solutions in the Nigerian Power sector, at Transcorp Hilton Hotel, Abuja.
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4th October 2017
Contents

01 Background/Legal Authority
02 Objectives of Eligibility
03 Eligibility and the New Market
04 Issues on the Consultation
05 Mini-grid Regulation
06 Impacts

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Background/ Legal Authority

S(27) of EPSR Act 2005 provides that the Minister may issue a directive
to the Commission specifying the class or classes of end-users that,
from time to time, shall constitute eligible customers.

These sources of generation capacity would in principle comprise


of generation licensees (successor GenCos and IPPs) and any
wholesale electricity trader licensed to buy and sell power.

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What is Eligibility?

A framework that permits


customers to purchase
electricity(Capacity and GENCOs Generating Companies

Energy) from a supplier of


their choice through a contract
at a price that may be
unregulated. It gives the TRANSCOs Transmission Company
TCN
customer access and the
discretion to choose from any
supplier outside the grid, at a
price and terms that may be DISCOs Distribution Companies

different from grid power

END-USERS

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Who Qualifies for Eligibility?
01 02
11KV/33KV

End User Connected 132KV/330KV End User Connected Directly on 33KV Network

03 04 >2MW

End User Connected directly to the GENCO


Customers on Above 2MW Capacity
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Present Market Structure-Pre Eligibility Future Market Structure-Post Eligibility

IPP
Successor GENCOs
IPP
Successor GENCOs
NIPPs capacity
Bilateral
Contract

Extra capacity
Contracts NIPPs Bilateral

capacity
Contract
Contracts

PPAs
PPAs
PPAs

Bilateral Contracts
PPAs
NBET
NBET
Contracts
Vesting

Contracts
Vesting
DisCos
Eligible
DisCos
Eligible Customer
Customer 6
Objectives

The declaration of eligibility of electricity customers is expected to facilitate


competition in the supply of electricity, promote the rapid expansion of
generation capacity and open up a window for improvement in quality of
supply.

Eligibility will encourage opening up third party access to transmission and


distribution infrastructure as a precursor to full retail competition into the
Nigerian electricity market.

Generation licensees may benefit from stable operation and efficiency due
to the flatter load profiles of eligible customers and possible lower
technical losses depending on the required interconnection

Eligibility will allow successor GenCos with excess capacity over and
above their contractual capacity with Nigeria Bulk Electricity Trading to
access underserved customers thus improving the financial liquidity of the
industry.

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Issues
Stakeholders comments received covered the following broad issues:
Third Party Access (TUOS & DUOS pricing)
Loss of Customers and Revenue
Tariff Rebalancing
Competition Transition Charges
Metering Requirement
System Operations
Proposed phasing of implementation
Contracting Parties
Appropriateness of Threshold and Implementation timelines
Appropriate Process for Exit, Notification and Switching Rules
Determination of stranded costs, exit fees and standby charges
Determination of consumption threshold for eligibility criteria
Provider of Last Resort in the event of third party failure be addressed
Proportion of new generation capacity to be contracted by Eligible Customers

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SUMMARY OF THE MINI-GRID REGULATION

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WHY REGULATING MINI-GRID?

Addressing Barriers to Rural Electrification


Investments

Slide 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 ?
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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 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
endusers 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
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 Discos 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


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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 Commissions website
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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 18


Applying Online
The application forms, the tariff simulation
tool and the Mini-grid regulation will be made
available on the Commissions website
www.nerc.gov.ng

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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.

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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.
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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.
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Market Impact
Increased generation capacity from small IPPs
Impact on Tariff of non-eligible customers
Impact on substations resource utilization
Impact on Disco revenue

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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
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