Rise in Off-Grid Power Generation in Nigeria
In 2024, a significant number of bulk electricity consumers in Nigeria opted to disconnect from the national grid and generate their own power. According to data from the Nigerian Electricity Regulatory Commission (NERC), at least 24 entities received licenses for off-grid generation, while another 22 were approved for captive power generation. In total, these 46 organizations could produce up to 289 megawatts of electricity.
The NERC issues permits for captive power generation to companies and institutions that aim to operate their own power plants for internal use rather than selling electricity to third parties. This shift has been driven by persistent power outages and unreliable grid performance, prompting many businesses and academic institutions to take matters into their own hands.
Key Players in Captive Power Generation
Among the entities granted licenses for captive power generation are several well-known companies and educational institutions. For instance, SweetCo Foods Limited received approval for a 1.50MW plant, while African Steel Mills was granted a 20MW capacity. Armilo Plastics, Royal Engineered Stones, and West African Ceramics Limited also received approvals for smaller capacities.
MTN Nigeria Communication Limited secured a license for 15.94MW, while various universities such as the University of Abuja, University of Calabar, and the University of Maiduguri were granted licenses ranging from 3MW to 12MW. The Nigerian Breweries also obtained approvals for a total of 31.36MW across multiple branches.
Other notable recipients include the Nigerian Defence Academy, which was given a 2.50MW license, and Quantum Paper Limited, which received a 7MW permit. These figures highlight the growing trend of self-sufficiency in energy production among key sectors of the economy.
Off-Grid Licenses and Energy Sources
In addition to captive power generation, 22 off-grid licenses were issued, with a combined capacity of 151.214 megawatts. Golden Penny Power Limited was awarded the largest share, receiving a license to generate 113.20MW using gas. Daybreak Power Solutions was granted nine solar grid licenses totaling 24.51MW, showcasing the increasing role of renewable energy sources in Nigeria's energy landscape.
TIS Renewable Energy Limited obtained two licenses for gas-powered plants, totaling 12MW, while Auro Nigeria Private Limited secured a 1.5MW gas plant license. Gas-based power plants accounted for 126.7MW of the off-grid capacity, with solar contributing 24.51MW.
These projects span across various states in Nigeria, including Lagos, Oyo, Ogun, Cross River, Kaduna, Niger, and Abia, indicating a widespread shift toward decentralized energy solutions.
Grid Instability and Its Impact
NERC has attributed the growing reliance on off-grid generation to frequent power fluctuations and low supply on the national grid. The commission highlighted that grid frequency is a critical factor for industrial operations, as machinery is often designed to function within tight tolerance limits.
According to the Grid Code, the standard frequency for the grid is 50Hz, with acceptable deviations of ±0.5% under normal conditions. However, in 2024, the average upper daily system frequency reached 50.83Hz, while the lower bound was 49.28Hz, resulting in a range of 1.55Hz. This instability can cause damage to sensitive equipment and lead to commercial losses.
Voltage fluctuations also pose a risk to industrial machines. The average upper and lower operating voltage bounds for the transmission network in 2024 were 352.55kV and 299.42kV, respectively, exceeding the allowable limits set by the Grid Code. This indicates a significant deviation from standard performance levels.
Grid Collapse and Public Response
The national grid faced 12 collapses in 2024, leading to widespread power outages. These incidents have further eroded public confidence in the reliability of the grid, pushing more entities to seek alternative power solutions.
Notably, former President Olusegun Obasanjo unveiled a two-megawatt solar power project at the Olusegun Obasanjo Presidential Library in 2021, highlighting the potential of renewable energy. Since then, the number of companies opting for captive power generation has surged, particularly after the enactment of the Electricity Act 2023.
Concerns Over the Trend
The Minister of Power, Adebayo Adelabu, expressed concern over the increasing number of bulk consumers abandoning the national grid. He emphasized that grid connection remains a more reliable option compared to captive power plants, which are often more expensive.
Adelabu noted that despite generating more electricity, power distribution companies have not effectively utilized their allocated capacity, leading to financial challenges. He urged efforts to encourage industries to return to the grid, emphasizing the importance of trust and stability.
Similarly, Adetayo Adegbemle, Executive Director of PowerUp Nigeria, raised concerns about the impact of off-grid generation on grid stability. He argued that major consumers should act as "anchor tenants" to support a stable and cost-effective grid. Adegbemle suggested that bringing these companies back to the grid would be essential for long-term energy security.