Are you an investor doing business or intending to do business in the renewable energy space in Nigeria? If yes, then this information is for you. Although renewable energy (i.e. solar, wind, biomass, small hydro) is relatively new in Nigeria, over the years, more interest has been given to this energy sub-sector by the government and investors alike as renewable energy sources are cheaper, non-diminishing, and environmentally friendly.
The main legislation governing renewable energy in Nigeria is the Electric Power Sector Reform Act 2015 which established the Nigerian Electricity Regulatory Commission (NERC) and gives the body regulatory and licensing oversight over power generation, transmission, and distribution in Nigeria.
What you should know about generating Renewable Energy (RE):
- Does selling solar panels and related electricity generating equipment require a license? No. Selling solar panels alone does not qualify as RE generation and therefore a license is not required;
- When is a license required from NERC? RE plants generating less than 1MW will not require a license (although a permit will be required) whilst those above 1MW will require a generation license;
- What generation license will be suitable for my business operation? You will require an off-grid generation license where you intend to sell power to individual buyers. An on-grid generation license is required where you wish to dispatch power through the national grid. An embedded generation license would be suitable where the power generated is to be directly connected to and evacuated through an electricity distribution system or company.
What are the requirements for obtaining a generation licence?*
In addition to the standard company documents, business plan, and project finance documents required by NERC, the following will also be required:
- A completed application form for a generation licence;
- Environmental Impact Assessment certificate and Waste Management Plan;
- Approval from the Ministry of Water Resources (for hydro plants);
- Off-take Agreements or Arrangements (such as a Power Purchase Agreement).
* Please note that this list is not exhaustive.
What are the investment incentives for RE in Nigeria?
Some of the incentives are stated below:
❑ Guaranteed purchase of power generated – Electricity distribution companies are mandated to procure 50% of the total output of a (on-grid) RE plant with a capacity between 1MW and 30MW while the Nigerian Bulk Electricity Trading Company (NBET) is to procure the remaining 50% (as contained in the Feed-in Tariff Regulations for Renewable Energy Sourced Electricity in Nigeria).
❑ RE plants fall under the Pioneer Status Incentive list and therefore enjoy tax holidays of up to 5 years.