Independent power projects in Nigeria are entities non-public utility companies operating and investing in power generation facilities for the purpose of power generation and sale in Nigeria. The private sector financed infrastructural developments have become the best alternative in developing economies and the reason being that although Nigeria is endowed with oil, gas and solar resources, it faces deep infrastructural challenges that need large financing that can only be sourced from the private sector. This challenge is faced squarely in the transmission, distribution and storage of the power generated in the sector.
The Nigerian government in the bid to increase foreign participation in the electric power sector commissioned the independent power projects (IPP) to generate electricity and sell same.
The IPP in Nigeria is primarily regulated by the provisions of the Electric Power Sector Reform Act and other ancillary regulations and guidelines.
ELECTRIC POWER SECTOR REFORM ACT 2005
The electricity industry in Nigeria has structures in place to encourage power projects in the country. The electricity industry is regulated by industry legislations such as the Electric Power Sector Reform Act as will be summarily discussed.
The Electric Power Sector Reform (EPSR) that was enacted in March 2005 is the main statutory legislation focused on electric power sector regulation in the country. The Act enables private companies to participate in electricity generation, transmission and distribution. It defines the structure of the electricity market and grants authority to the independent regulator created by the Act. The act established the regulatory body of the Nigerian Electrical Regulatory Commission (NERC) which has the power to make regulations relating to activities of the Nigerian electricity supply industry.
The EPSR Act permits the NERC to issue a license for a period of 15 years and also allows for renewal. It provides the legal framework of the power sector, including the privatization of the sector that was concluded in 2013.
Under Part II, Section 25(2) of the Act it provides that independent power producers shall sell electrical powers to trading licensees pursuant to contracts that allow for novation of rights and obligations of the trading licensees. The Independent power producers in doing power projects also sell powers and ancillary services to power distribution companies and eligible customers.
NIGERIAN ELECTRICAL REGULATORY COMMISSION
The Nigerian Electrical Regulatory Commission is the regulatory body in charge of granting a license to private independent power producers. The Commission has, in addition, developed a Regulation on embedded generation, which allows for power generation plants (including renewable energy) to be directly connected to and evacuated through a distribution network. It provides a window for investors, communities, state and local governments to generate and sell or utilize power without going through the transmission grid.
Other Regulatory Authorities:
Independent power projects are managed by independent power producers who own power plants. The NERC issues licenses to independent producers for the purpose of an increased power generation in the country.
Independent power projects are solutions of the Federal Government to combat power shortage in the country. Projects being developed are backed by investors that have international power project experience and proven track records of developing power projects in Nigeria.
Written by Energy & Power law Department at Resolution Law, Nigeria