Nigeria’s electricity sector is on the cusp of a major shift with the Nigerian Electricity Regulatory Commission (NERC) pushing forward its proposed net billing framework.

The policy, designed to allow consumers with solar installations to feed excess power into the grid, is being hailed as a game-changer for energy access, reliability, and sustainability.

But it also raises tough questions about market dynamics, liquidity, and infrastructure readiness.

In this exclusive interview with Nairametrics, Chief Executive Officer of New Hampshire Capital Limited, Odion Omonfoman, explains the opportunities and risks tied to NERC’s plan. He highlights how the rise of distributed solar could reduce dependence on the national grid, create new revenue streams for businesses, and improve electricity access for underserved communities.

However, he warns that the greatest resistance may come from the Generation Companies (GenCos), who risk losing demand for their bulk power as DisCos and consumers turn increasingly to local, renewable sources.

Excerpts: 

Nairametrics: How significant is the proposed net billing arrangement of NERC, especially in the context of the energy transition plan for Nigeria’s energy sector? 

Odion: I think the first thing is to understand what it means in terms of what NERC is trying to do. I think what NERC is doing is that if you have solar panels or solar systems above 50 kilowatts and up to 5 megawatts, you can actually export that to the grid. You find out that people who have that level of capacity are usually active in businesses or other businesses that use those as power.

So, you’ve got commercial and industrial customers who are replacing their diesel generators with solar. So, NERC is now providing an opportunity for them to be able to sell their excess generation capacity from their solar. Or when plants are down over the weekend or at night, they can put that to the grid.

So that’s positive because you’re referring to concepts like distributed energy generation, which is closer to the end users as opposed to having to buy power from the national grid. So, it’s positive because then you don’t realise that excess power is not wasted, excess free power, and that these companies are currently not utilising, it’s not wasted. And then they can also earn some revenue from their current installation.

So, it’s positive, it’s massive because it also means that when they supply the local grid, those people don’t have to then rely on their own diesel generators or petrol generators. So, it’s something that definitely improves the environment.

And more importantly, it speaks to energy reliability and access, particularly for underserved areas that do not have a reliable grid.

Nairametrics: So, based on that, how do you think it solves the energy challenges, especially the liquidity aspect of the energy industry, based on what you said? 

Odion: Well, it doesn’t solve the energy challenges totally. It addresses some of the issues in terms of the availability of electrons for people to use.

So, the issues of liquidity and even technical issues would arise. So, we can solve that. The most important thing is that this is already a context that has already been spent by these companies.

So, for instance, if somebody wakes up one day and says, “I’m going to put 50 kilowatts to sell power to the grid, his first instinct is that he’s putting 50 kilowatts or up to 1 megawatt to spare power to himself.” It’s the excess that he must sell. So, this is like an extra, right?

So, we expect that from a liquidity perspective, it would mean that if they’re selling the power to the grid, or the disco rather, we would expect that the disco would have factored in means of making sure that customers are able to pay. We would also expect that the tariff, the two-way tariff system, the tariff that the local disco will charge the end-users, and the tariff that the power company, the prosumer rather, will set up the energy to the disco.

I would expect that the tariff structure is well-designed, where I’m sure that the customer, whoever is generating the power, is able to sell that excess. I don’t know whether I would be selling that exhaust because there are already some costs. I won’t factor in the cost of loss, the concept of loss.

But what I would be concerned about is the ability of the disco to pay for that power that has been sold to the disco. This would then mean that the disco must ensure that technical losses are minimal, and that customers or consumers who sell power are metered, resulting in high collection efficiency.

Because it’s not going to be in the wide area, I would expect that. I mean, it will be in the very local area, maybe on the feeder, or even something smaller than the feeder. So, I guess the Disco can improve collections along those lines and make sure they’re able to pay for the power that they buy from the entities.

Nairametrics: How prepared are the Discos, in your opinion, to handle the complexity of integrating the prosumers into the national grid? 

Odion: That’s a multimillion or billionaire question. Are they really prepared in the first place? Because I think the biggest challenge still in place is the ability of the local distribution network to import the power into the network in a manner that does not trip the network, number one.

I believe it would be useful to effectively distribute that power to end users and then make sure the power is consumed. There would also be issues of the customer injecting into the disco network. Is the feeder that they are putting the power feeder technically okay?

Is it reliable? And can the feeder take the additional generation that’s injected into it? So, the technical issues, the interconnection issues, are where the tariffs lie.

The quality of the existing local distribution infrastructure is another big challenge. I don’t think the ability or willingness of customers is a factor. It’s about the ability of discos to ensure that they collect what they sell to customers.

So those are the big challenges arising from this. And any disco that wants to go into this would need to make sure that those three aspects get addressed before they even consummate this. But the other weak point, which the NERC looks at, the C&I customer may not even need to.

If you look at companies, most companies are, I mean, they can sell to a next-door company. Right?

In other words, you don’t have them put on the local discos network. I know this is no longer net-futuring again, because net-futuring means I buy part of the grid, and I sell part of the grid. It has a bidirectional metre, and that’s what I pay.

If at all, there’s a payment, I have revenues. But beyond that, you should look at expanding such that these nearby entities are also able to get nearby customers, right? Using maybe dedicated infrastructure to disperse this power, excess power.

Nairametrics: So, what are the technical challenges to metering grid stability, interconnection standards that need to be addressed before NERC can put this regulation into use effectively? 

Odion: So, I think the technical challenges are pretty straightforward. For instance, if you talk about metering, you need to address the metering gap in that area.

First of all, you have a lot of customers who may not be metered. You can’t do this when you don’t have all your customers or users that are properly metered.

The second is, even if the company wants to export the power from a metering perspective, you need to have meters that are reliable in the manner that they can record the input and outputs, the import and export bidirectional meters, so to speak. I don’t know if that exists in this market, but in any case, that would be something to make sure we have accurate bidirectional metres.

And if you then talk about the elephant in the room, which is interconnection, as in interconnecting C & I, that’s the power generators, the facilities, bidirectional metres into the distribution network. There has to be a lot of integration to make sure that the power generated by the customer meets the technical requirements of the local grid.

In other words, both the threshold is okay, the correct threshold, and the other technical issues that should not affect the local grid or cause a destabilized local grid. We also need to make sure that the infrastructure to deliver the power to end users is really enhanced, because you can’t afford to pay for the power. So, they can’t afford to allow for leakage losses, technical losses, and all that.

And then, more importantly, the ability of the utility to make sure that the feeder itself, or whatever line you want to use, can take in the additional power.

Because feeders are from trains, and we also have a maximum load that they can carry. I would expect that this would be done at 11 kV levels, or maybe up to 11.5 volt levels. But you want to be sure that the infrastructure, right, they’re able to take in the power on that.

Particularly when you have multiple people, multiple companies, and multiple consumers that inject the power into it. And then lastly, there’s also protection. We talked about it, and we know we can’t stress this enough.

At the end of the day, we need to make sure that if the consumer’s facility has issues, those issues can be isolated from the local grid without disturbing it. Or if the local grid has issues, those issues do not flow back and affect the customer’s generation facilities.

You know, it spikes currents, it spikes all those issues. But it’s not a walk in the park. We have to go through that market.

We have to go through it several times. The last thing I’d like to say is that the biggest threat here is the GenCos.

The biggest threat that NERC will face here in this process will be the GenCos, because what that means is that the DisCos may no longer rely too much on the national grid to buy wholesale power. I mean, you have a lot of people putting 50 kilowatts, 1 megawatt, putting half of that, or even 30% of that, into the local grid. You find out that one company that will satisfy the needs of a lot of customers within that area will have to reduce its possible purchase of power from the national grid.

And then that also flows back to the national grid because you will then have GenCos who will be unable to generate power or use the entire available capacity and dispatch the entire available capacity to the grid. After all, nobody wants it. The grid, the local district already has enough supply from distributed energy resources. So that’s one downside to all of this.

I’ve seen that in actual markets that have embraced net metering. And the fact that several countries are rolling back net metering gives the adverse effects on the upstream side of the value chain, because at the end of the day, you find out that the fiscals are paying these guys a little bit more than they’re paying the main power producers.

So, it’s a big span, but look at the downsides. That doesn’t mean it’s greater. That also has to be considered when developing this thing.

One of the ways to manage it is they have to put a cap on what people can sell. So, people don’t go and develop one megawatt near their facility that only requires, say, 600 kilowatts. They’ve oversized it so that they can sell to the grid.

And they become automatic generators.

Nairametrics: How do you see Gencos reacting to this whole thing? 

Odion: Well, like I just said, the Gencos have always been like they do not react too favourably to it because it reduces their share of the constraint market. Keep in mind, there are 13,000 megawatts in the stock capacity. 13,000 to 15,000 megawatts in stock capacity on the grid.

We have consistently been able to generate and deliver about 4,000 megawatts. Right? The problem is we don’t have that metric of the number of all these batteries coming up to the national grid to go and build their own solar and PV systems, and then have that ability to sell a portion of that into the local grid.

If they can do that, what that means is that the power that the discos or the local distribution licence device has is because, at the end of the day, you need to balance the costs and the payments.

So if you were importing 100 megawatts on the grid and from C&I sources they can harvest 5 megawatts, the grid has lost 5 megawatts that might be small but by the time it’s 5 megawatts left, right, centre in different places you then realise that the generators on the national grid, they literally struggle to dispatch the entire available capacity because there is no demand from the discos.

So, you have to be balanced whether we like it or not. We are in an age where customers have now decided that they will take their fix into their hands.

Whether the national grid improves or not, there are other sources they can earn from it, and that’s what NERC is creating now, an opportunity for the alternative sources already installed to address local power access, electricity access, and provide more electricity to people.

So, it’s a good policy, but it has a downside for Gencos that are on the national grid, and they worry that discos already struggle with billing, metering, and collection.

Nairametrics: How can NERC ensure transparency and fairness in crediting prosumers? 

Odion: I don’t know how NERC will do that because the number of things that NERC should have helped with, they struggle with. There are estimated bills that are ongoing. NERC hasn’t been able to protect anybody.

There’s the issue of customers buying distribution infrastructure for discos. NERC has not been able to address it. So, in this instance, I don’t know how NERC will be able to do it, but I think it’s more about the utility because, at the end of the day, if NERC’s objective is more customers or is to create energy reliability and improve energy access to underserved areas, that should be its focus.

It is a disco that should then worry about how it will ensure that energy that is procured from these prosumers is consumed, and that can only happen if there is smart mid-range, and then there’s also more investment to ensure that technical losses are minimised from such interactions that they address. So, the Disco also has to realise what its investment is here.

But at the same time, the disco may also fight this, given that the people that, many people, and then guess what, they have to pay them back.

Commercial and industrial customers, who already have the conservation. The Discos may have to then balance the revenues that they are making from the sale of that power against what they will pay the C&I who has left their network, or who may not even have a network to maintain. So, it’s a very delicate balancing act, and I would say if not well managed, then all parties may not be able to pay the prosumer for the power generated on a net-neutral basis.

Nairametrics: So, you see Discos and Gencos basically coming up to fight against this policy? 

Odion: I see some discos and a few Gencos opposing this to the extent that they may feel threatened by one, reduced reliance on the national grid, and two, arising payment obligations to these prosumers, which may actually be more than what is generated from the sale of the power.

Actually, NERC fixes the tariff itself. So, the only way I think this will work is for the NERC to allow discos and e-prosumers to agree on the tariffs, as opposed to the NERC coming through imposing either the A, B, or C tariff kind of arrangement.

It should be something that the disco willingly decides, and unfortunately, I don’t have too much faith in these discos because they typically kill transactions for them, but I think that’s the only reason why we have, as opposed to net now setting tariffs.

Nairametrics: So why did you say they kill transactions? 

Odion: For me, discos are more of there’s an incentive for them not to sell power. They offer it. The current system gives them an incentive not to sell power because it also removes any form of accountability.

For instance, they’re not too accountable for commercial loss. They’re not too accountable for billing inefficiencies. Nobody holds that billing account for technical losses.

But if you do this private arrangement there, they will literally be held accountable because there’s no subsidy here, or they can’t push back that infrastructure to the government, or however they’ve avoided it. So, this will require a good level of accountability from them. It will require some level of investment from them.

So honestly, I see only serious Discos who really want to make an impact going into this versus the reality of the electricity market that we’ve come to build it.

Nairametrics: So those are all my questions, except do you have any other comments? 

Odion: Well, the only other comment I have is that we are moving to a state electricity market arrangement. So, what I would expect NERC to do is to set the basic framework so that states that want to implement it can take the regulations and adapt or adopt them within their local markets. So, NERC should also be careful not to impose because these forces were within the market of state electricity regulatory commissions, because these are not generation of the national grid.

So, I guess the best NERC can do is create a framework, either create a policy, or create regulations that do not impose on state electricity markets. So, state electricity regulatory commissions can, on their own, develop their own NERC between structures or adopt whatever NERC has done. But I think NERC should, as much as possible, refrain from trying to develop national regulations as opposed to developing a national framework for electricity regulators to decide this.

National regulations impose regulations on state electricity markets, which, under this scenario, NERC has no such powers to do. But if it then develops a national framework, then states can pick up that national framework, and they can either do their own framework or they can pick up the national framework, adapt or adopt it within their local markets.

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