Renewable energy refers to energy that is produced from natural resources that are naturally replenished and do not run out over time. These sources include sunlight (solar energy), wind (wind energy), water (hydropower), biomass (organic materials), and geothermal heat (heat from within the Earth). Unlike fossil fuels such as coal, oil, and natural gas, which are finite and release harmful emissions when used, renewable energy sources are sustainable and environmentally friendly.
One of the key advantages of renewable energy is that it produces little to no gas emissions or air pollutants, making it a cleaner alternative for powering homes, businesses, and industries. Nigeria has traditionally relied on hydropower as its main source of renewable energy.
However, over time, the country has gradually expanded to include other sources like solar energy, leading to the rise of small-scale solar solutions for homes, businesses, and industries. This article explores the legal framework governing renewable energy in Nigeria.
Laws Governing Renewable Energy Projects in Nigeria
In Nigeria, the power to make laws on electricity matters is shared between the federal and state governments. This is because electricity covering generation, transmission, and distribution, is listed under the Concurrent Legislative List in the Nigerian Constitution. As a result, both levels of government can take steps to develop the power sector within their jurisdictions.
Below are a few laws that provide a legal framework for renewable energy in Nigeria:
1. The Electricity Act 2023
The main law that oversees how electricity is generated, distributed, and sold in Nigeria is the Electricity Act. This Act lays out the rules for how the Nigerian Electricity Supply Industry (NESI) operates and has opened up the sector to private investors. This means private companies can now participate across the entire electricity value chain from generation to supply and related services.
Notably, the Act includes specific provisions on renewable energy. Sections 165 to 167 outline how renewable energy should be developed and used, what commercial activities are allowed in that space, and what incentives and standards apply to encourage its growth.
2. Electric Power Sector Reform Act (EPSRA) of 2005
The Electric Power Sector Reform Act (EPSRA) of 2005 serves as the foundational legislation for Nigeria’s electricity sector. It was enacted to restructure the power industry. This was done by allowing the creation of successor companies to take over the responsibilities, assets, liabilities, and personnel of the former National Electric Power Authority (NEPA). One of the key objectives of the Act is to promote a competitive electricity market in Nigeria.
A major highlight of the Act is the establishment of the Nigerian Electricity Regulatory Commission (NERC), which is tasked with overseeing and regulating the generation, transmission, and distribution of electricity across the country. Under Section 96, the Act grants NERC the authority to develop and enforce regulations necessary to implement its provisions effectively.
In line with its mandate, NERC has introduced several regulatory policies and frameworks to guide the operation and development of the energy sector. Some of these regulations include:
a. NERC Mini-Grid Regulation (2016)
This regulation applies to mini-grids with generation capacities of up to 1MW. It governs the roles of owners, operators, users, and other stakeholders involved in these systems. A mini-grid refers to an electricity supply system that serves multiple customers and can function independently or connect to a distribution network. Developers of such systems must register or obtain permits to operate.
b. NERC Renewable Energy Feed-In Tariff (REFIT) Regulation (2015)
Aimed at encouraging investment in renewable energy, this regulation sets fixed tariffs for electricity generated from renewable sources. It sets a national target to generate at least 1,000MW from renewable sources.
c. Nigerian Electricity Management Services Agency (NEMSA) Act
The NEMSA Act establishes the agency responsible for enforcing technical standards in the power sector. Its duties include inspecting, testing, and certifying electrical installations, meters, and equipment to ensure safety and reliability in the electricity supply.
d. National Electric Power Policy (2001)
This foundational policy outlines the reform and liberalization of Nigeria’s electricity market. Its objective is to create an efficient and economically viable electricity supply system capable of meeting national demand.
e. Renewable Electricity Policy Guidelines (2006)
Issued by the Federal Ministry of Power, these guidelines aim to promote a reliable and sufficient electricity supply, encourage private sector involvement, and guide renewable energy projects across generation, transmission, and distribution.
f. National Renewable Energy and Energy Efficiency Policy (NREEEP) (2015)
Approved by the Federal Executive Council, the NREEEP provides a roadmap to improve access to clean and modern energy. It supports energy security and climate goals while promoting the development and management of renewable electricity generation infrastructure.
g. Environmental Impact Assessment (EIA) Act, Cap E2 LFN 2004
This Act mandates an environmental impact assessment for any project likely to significantly affect the environment, including renewable energy projects. Section 2 requires developers to register such projects with the Federal Ministry of Environment before commencing operations.
Are there any Recent Developments in Nigeria’s Renewable Energy Laws?
Yes, Nigeria has recently made significant development in updating its renewable energy laws and policies to support sustainable development, attract investment, and enhance energy access. Here are some of the most notable developments:
1. Electricity Act Amendment (2024)
In February 2024, President Bola Tinubu signed the Electricity Act (Amendment) Bill into law. This amendment mandates that electricity generation companies (GenCos) must either produce power from renewable sources, purchase renewable energy, or acquire instruments representing renewable energy generation. Additionally, GenCos are required to allocate 5% of their previous year’s operational expenditures to the development of their host communities.
2. Tax Incentives for Renewable Energy
The House of Representatives passed tax reform bills eliminating Value Added Tax (VAT) on renewable energy equipment and compressed natural gas (CNG). This initiative aims to reduce costs and encourage the adoption of clean energy technologies. Furthermore, efforts are underway to provide legal backing for the Renewable Energy and Energy Efficiency Policy (NREEEP) adopted in 2015, which seeks to boost renewable energy use, improve energy efficiency, and reduce greenhouse gas emissions.
3. Partnerships with International Organizations
Nigeria has actively partnered with international organizations to expand its renewable energy capacity and infrastructure. These partnerships bring funding, technical expertise, and policy support. Key examples include:
- World Bank and African Development Bank (AfDB): Support rural electrification and off-grid solar programs.
- SEforALL (Sustainable Energy for All): Helps Nigeria in creating energy access roadmaps and mobilizing investments.
- Germany’s GIZ and USAID/Power Africa: Provide capacity-building, technical assistance, and support for clean energy initiatives.
- International Renewable Energy Agency (IRENA): Assists Nigeria in shaping policy and planning frameworks aligned with global clean energy goals.
These collaborations aim to reduce energy poverty, diversify the energy mix, and fast-track the country’s transition to a low-carbon economy.
4. Upstream Petroleum Decarbonisation Requirement
Effective January 1, 2025, the Nigerian Upstream Petroleum Regulatory Commission requires all applicants for oil licenses and permits to demonstrate low carbon emissions and possess a renewable energy program. This policy aligns with Nigeria’s commitment to achieving net-zero carbon emissions by 2060 and promotes the integration of renewable energy sources into oil and gas projects.
These developments demonstrate Nigeria’s commitment to expanding its renewable energy sector, reducing carbon emissions, and providing sustainable energy solutions to its population.
Conclusion
As earlier discussed, renewable energy is energy obtained from naturally replenishing sources such as wind, solar, biomass, small and medium-scale hydroelectricity, and tidal or wave energy. These energy sources are known globally for being clean and safe for the environment.
In Nigeria, the Electric Power Sector Reform (EPSR) Act of 2005 is the main law that guides the energy sector. Even though laws and policies for renewable energy are improving, dealing with licenses, rules, and financing can be complicated.
This makes legal support very important for everyone involved, from developers, investors, the government, and users. For more information on renewable energy laws and how they apply to your business or project, kindly contact the law firm. They are here to answer your enquiries.
