Lagos State set for electricity market, to distribute own power to residents

By Adebayo Obajemu

With the worsening power situation in the country, Lagos, the commercial hub of the country has suffered disproportionately, especially given the fact that the state consumes a third of the power output in the country. It was this concern to improve the power needs of the state that led to the Enron power project under the government of Bola Tinubu in 2002.
Although the effort fell through, the government has continued to adopt different stragies to increase the electricity generation in the state. During former governor Babatunde Fashola regime, the state embarked on massive power plant development which lit up Lagos, and restored social life.
Currently plans are in the pipeline for Lagos State Government to set up a state -owned electricity generation, transmission and distribution company to provide power for the over 20 million residents.
The detail of the plan was contained in the Lagos State Electricity Policy Consultation Paper signed recently by Engr. Olalere Odusote, Commissioner of Energy and Minerals resources. Many Lagosians and businesses have canvassed for independent power for Lagos given its position and place as the economic nerve centre of the country.
Dr. Mohammed Abubakar of the department of economics, Ahmadu Bello University told Business Hallmark that “there is no megacity in the world of the same size and economic stature as Lagos that does not have its own power; it is ridiculous and a failure of leadership.”
On the rationale behind the new initiative, the government stated that Lagos is the most important city in Nigeria, apart from its melting point position, it’s the commercial and business life wire of the nation, and thus in need of Independent power.
According to the government, this would be the state’s single biggest infrastructural and developmental challenge is power. The state, according to the document, depends entirely on Nigeria’s national grid for its public electricity supply.
It added that the two resident electricity distribution companies (Discos) – Eko and Ikeja – currently receive just about 1000mw from the national grid, for an average of no more than 12 hours daily, i.e., 12,000 megawatt-hours (MWh), for a population exceeding 27 million spread over a comparatively compact land mass.
The Babajide Sanwoolu administration stated that since the national grid supply was uneven and no more than half a day on average across the state; many of the residents have opted for alternative, self-generated electricity to drive their socio-economic activities despite its significant cost and environmental hazards.
The document revealed that the State’s Electricity Board (LSEB) conducted some research a few years ago, which demonstrated that 15,000mw of the estimated 45,000mw of alternative power supply in Nigeria was located within Lagos State alone.
With the daily energy need of 45,000 mw, the government argued that the state cannot continue to rely on the national grid alone for a sustainable, long term, socio-economic growth and significant growth of its citizens’ standard of living.
The government further affirmed that due to the continuous flow of new residential, commercial and industrial developments and investments (Lekki Free Trade Zone, the Dangote Refinery, Eko Atlantic Project, numerous housing schemes and estates and single unit homes being built), the State needed to establish the enabling environment for a unique electricity market that is separate from (or off) the national electricity grid, which is also connected with the latter.
The document also identified efforts of successive administrations of state to tackle the electricity supply challenge, but not with enough success to keep up with its urban growth and the demand that follows such growth.
Twenty years ago, the government proposed the Enron power barges in return for dedication of part of the output to Lagos Industries. Ten years later, the state promoted five Integrated Power Plants (IPPs) across the state to serve public assets and infrastructure.
Referencing the Manufacturers Association of Nigeria (MAN) economic review, the document revealed that manufacturers in Lagos which contributes 29.6% of the state’s GDP, experience a daily average of six power outages, with only about four hours of electricity. It stated that the reason for this capacity underutilization was not the absence of markets but the poor supply of electricity to the state.
The state’s fast-growing megacity is likely to double its population within the next 30 years, and can not solely depend for its electricity supply on an unreliable 6000mw national grid. It is, therefore under pressure to chart a supplementary or complementary course in seeking energy reliability for its citizens.
The document highlighted critical requirements needed for implementation of the holistic solution that delivers clean, adequate and reliable electricity supply within the geographical territory of the state and to all its demographic/customer classes, to include, enabling constitutional and legal framework; and integrated resource plan.
Others are autonomous, credible regulatory body; competitive and transparent procurement of generation resources; a bankable commercial framework; independent system operator; well-funded, well-managed generation, transmission and distribution players; and collaborative Federal and State Governments’ support for market growth/customer satisfaction.
The government however, noted that it is not unaware of the legal, engineering and commercial frameworks required to create a viable sub-national electricity sector that is entirely off-the-national-grid but nevertheless caters fully to the needs of its citizens. It was on the basis of this that the state assembly enacted the extant Lagos State Power Sector Reform Law of 2018.
That law was intended to provide a basis for significant private sector investment in the fledgling Lagos electricity market. It also provided for the Lagos State Electricity Board to take responsibility for driving “rural electrification” (a term whose definition is still imprecise).
Evidently, in spite of the presence of all the elements – constitutional/legal, engineering, commercial and financial – necessary to establish electricity market for the State, the law does not quite do enough to advance the state towards this vital strategic goal.
The state has therefore structured the legal framework, identified its strategic objectives, key stakeholders and players, market structures, delivery methods and a regulatory framework for market development/ operations and consumer protection.
It said, “The consultation paper is expected to seek a holistic solution to the State’s electricity supply challenges, in view of the continuous flow of new developments and investment in the state including, Lekki Free Trade Zone, a new airport, the Dangote refinery complex, the Eko Atlantic project, numerous new residential areas and housing schemes, as well as the tendency for urban planning to lag behind residential expansion.
“Our strategic objective in Lagos State must be to build an electricity system that enables our collective prosperity and customer satisfaction in an environment that fosters the innovation, easy adoption of current and future technologies.
“In order to achieve electricity sufficiency and reliability; we realise that electricity, as a manufactured commodity, is best provided commercially, that is, within an organised, orderly market, by private sector players; recognising always that there must be special focus on providing the same universal access to the vulnerable and disadvantaged populations at the base of the societal pyramid.”
Highlighting the Enabling Constitutional/Legal Framework that can legalise the establishment of a viable, State-focused electricity system the document noted that such a framework must be situated under the 1999 Constitution.
It said, “ the State Government takes its bearings from Section 14 of the Concurrent Legislative List of the 1999 Constitution as the foundation for creating a proper legal and commercial framework for a Lagos-centric electricity market. Section 14 provides: ” A House of Assembly may make laws for the State with respect to:
(a)electricity and the establishment in that State of electric power stations;
(b) (b) the generation, transmission and distribution of electricity to areas not covered by a national grid system within that State;
(c) and (c) the establishment within that State of any authority for the promotion and management of electric power stations established by the State.”
“It should be noted that Section 13 of the Concurrent Legislative List, which sets out the ambit of the Federal Government’s powers does not specifically mention “distribution” as a sector for which the National Assembly may make laws, similar to the specific inclusion of “generation” and “transmission” therein.
“ We take this to mean that the “electricity” sector is peculiarly left to local and sub-national entities to manage, which accords both with engineering sense and the constitutional/legal practice in large federal jurisdictions like Nigeria, such as the United States and India.
“Furthermore, Section 14 of the Concurrent Legislative List requires the interepretation of a number of key words and phrases. First, we read “electricity” in Section 14(a) as a general word or matter that is disjunctive from “the establishment in that State of electric power stations”.
“It is in this regard that the State Government proposes to enact a comprehensive law with respect to “electricity” in the State. This is all the more so taking into account the literal meaning of Sections 16(1)(d), 16(2)(b) and 16(2)(c) of the 1999 Constitution and the fact that electricity is itself a matter on the Concurrent Legislative List.
“These three provisions, we believe, make it clear that “electricity” is not a “major sector of the economy” such as would preclude State Governments from making comprehensive laws for the provision of electricity within the boundaries of their respective States.
“The earlier-noted point that “distribution” is not mentioned in Section 13 emphasises this point. Second, is the question whether Lagos State is “covered by a national grid system” within the context and expectations of the 1999 Constitution.
“If covered and its derivative, “coverage”, are defined as mere presence of electricity wires in the State, then Lagos is covered. On the other hand, however, if we consider that the national grid delivers daily average capacity of less than 1000MW to the entire population of Lagos State and all its commercial, industrial and human residents, as compared to the alternative backup capacity resident within the State (at least 15 times what the national grid delivers) then this coverage must be seen as so grossly inadequate that it in socio-economic terms, it is almost non-existent.
“The State Government is convinced that the constitutional requirement or expectation that the national grid system will “cover” all areas, and therefore, all residents of Lagos State, has not been met.
“The national grid system has historically, particularly since 1999, not being capable of supporting Lagos State and its enterprising citizens to develop an “efficient, dynamic and self-reliant economy” (see Section 16 (1)(a), 1999 Constitution).
“In determining that Lagos State is not “covered by a national grid system”, we assume:
a. Population estimated at 27 million individual, commercial, industrial and other residents (schools, research institutes, street lighting, religious places of worship, etc)
b. Current average daily capacity delivered via the national grid = 1000MW or 1GW c. Current average daily energy availability via the national grid = 12 hours d. Required daily energy availability = 24 hours e. Required daily capacity at = 9,000MW or 9GW (or 300MW/0.3GW per million residents).
“This Administration believes that coverage ought to be measured not by the mere physical presence of a single generating plant, transmission assets and distribution assets connected in Lagos State to a national grid system. Instead, a more functional definition, as is the global standard, is by a simple energy-based per capita formula of capacity multiplied by availability.
“If so, we will realise that the national grid delivers to Lagos residents barely 12,000 megawatt hours (MW/h) or 12 gigawatt-hours (GW/h) daily or 444 watt-hours (less than 1 kilowatt-hour) per person per day; when in fact it ought to deliver a minimum of 216,000 megawatt-hours or 216 gigawatt-hours daily or approximately 8 kilowatt-hours per person per day.
“Evidently, the State receives barely 5.5% of its required electricity supply needs from the national grid. The rest is self-generated by the citizens and residents of Lagos themselves, particularly the business community.
“By no standard of definition can this be defined as “covered by a national grid system”. Rather, it is a case study in extreme energy inefficiency.
“Another way to appreciate the dire situation in Lagos is to note that the entire energy stock for Nigeria delivered via the national grid system to all consumers in Nigeria (assuming a daily average 4,500MW of which 80% is delivered to all 11 Nigerian Discos for an average 12 hours daily) is 43,200 MW/h daily.
In 2014, this stock of self-generation was measured by the Lagos State Electricity Board at 15,000MW of capacity, over three times the capacity nationally available from the public electricity grid today.
The Lagos Integrated Resource Plan (IRP) will meet future electricity demand by establishing the availability of fuel and electricity generation resources that are available within the State.
However, it is also a non-negotiable strategic necessity that the Lagos IRP will require that any energy solution deployed in the State must be environmentally-friendly and climate efficient. The use of distillate fuels such as petrol, diesel and LPFO over the decades to power socioeconomic activity has had incalculable polluting and environment-damaging effects.

(With reports from EnergyDay).