UNPACKING THE LEGAL AND POLICY DIRECTION FOR RENEWABLE DEVELOPMENT UNDER THE LAGOS STATE ELECTRICITY LAW, 2024

INTRODUCTION

Recently, and in line with the Electricity Act, 2023, the Lagos State government passed the Lagos State Electricity Law, 2024 (the “Law”), which repealed the Lagos State Electric Power Sector Reform Law, 2018 and provides for the establishment and administration of the Lagos Electricity Market, henceforth.

Without a doubt, Lagos State is unique. Serving as a commercial hub for development in Nigeria, the Lagos State Development Plan 2052: a 30-year development plan that lays out the overall direction for the state from year 2022 to 2052 and provides an overall strategic framework and direction for the State’s development efforts, is already being implemented. It is therefore no surprise that stakeholders keenly awaited the passage of the Law, with plenty of optimism.

This article therefore unpacks the legal and policy direction under the Law, as it relates to the development of renewable energy in Lagos State.

KEY HIGHTLIGHTS

Renewable Energy Sources

Amongst other key objectives of the Law, the Law aims to establish a Lagos Electricity Market that is commercially and technically viable and facilitate investment and innovation in the Lagos Electricity Market, whilst also promoting the adoption of diverse, secure and environmentally sustainable energy sources in the State. The Law recognises the development and use of renewable energy as a key attribute of its objectives, by defining “Renewable Energy Sources" to mean energy sources that is renewed by natural processes, including solar, wind, water, biomass, biogas, geothermal, wave, tidal, and such other energy sources as may be prescribed by the Commission.

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Government’s Role in Promoting Renewable Energy Development

As may already be known, government ministries, departments and agencies (MDAs) make up the engine room of good governance in Nigeria and are therefore pivotal for both policy formulation and implementation in various states. In recognition of this poignant role of MDAs, the Law recognises the establishment of the Lagos State Ministry of Energy and Mineral Resources (“Ministry”), the Lagos State Electricity Regulatory Commission (“Commission”), and the Lagos State Electrification Agency (“Agency”), with different but interconnected functions and responsibilities in the Lagos Electricity Market, respectively.

Section 3(f) of the Law provides that the Ministry will undertake the responsibility of promoting the development and use of renewable energy sources for electricity generation in the State. Section 115 also places the responsibility on the Ministry in ensuring that the State performs an exemplary role having regarding renewable energy adoption. To this extent, buildings owned or occupied by the State or its agencies and bodies are required to utilise renewable energy sources for electricity generation and implement energy efficiency and demand side management practices. Additionally, the Ministry is to spearhead research and development activities in relation to renewable energy, energy efficiency and demand side management.

On its own part, the Commission is empowered by Section 18 of the Law to: promote the deployment of environmental friendly and climate efficient electricity solutions in the State; promote the utilization of renewable energy sources by licensees, market participants, electricity consumers and other stakeholders; promote the adoption of energy efficiency and demand side management; develop and enforce standards and guidelines for the design, procurement, construction, operation maintenance and utilization of generating stations; and in collaboration with relevant MDAs, formulate, enforce and review environmental, health, safety, quality and electricity consumer protection standards and measures for the Lagos Electricity Market. Section 19 also empowers the Commission to facilitate the adoption of clean and modern technology for the provision and delivery of electricity access to electricity consumers in the State and promote the provision of off-grid solutions for households, micro, small and medium scale enterprises in the State.

With respect to the Agency, Section 121 of the Law establishes it with the responsibility to amongst other things, promote the deployment of environmentally friendly and climate-efficient electricity solutions in underserved and unserved areas; increase access to electricity services for underserved and unserved areas and execute and implement the Off-Grid Electrification Strategy and Action Plan.

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The Lagos Integrated Electricity Policy and Strategic Implementation Plan.

The Ministry, in consultation with the Commission and relevant stakeholders, is required to develop and publish the first edition of the Lagos Integrated Electricity Policy and Strategic Implementation Plan (the “Implementation Plan”), to guide the overall development of the Lagos Electricity Market within six (6) months of operation of the Law. Section 45(2) provides that the Implementation Plan shall address the development of the Lagos Electricity Market, based on optimal utilization of power generation resources, including renewable energy sources. Notably, the Electricity Act, 2023 provides the indices for the development of a National Integrated Electricity Policy and Strategic Implementation Plan by the Federal Government. Thus, the Implementation Plan is likewise expected to be developed along the following basis:

a.?????? development of the electricity sector based on optimal utilisation of renewable sources of energy;

b.?????? captive generation or stand-alone system for the electricity generation for rural areas and non-conventional energy systems;

c.??????? rural electrification;

d.?????? public private partnership for access to electricity throughout Lagos State;

e.?????? implementation of waivers and subsidies that will stimulate the development of renewable energy;

f.???????? expansion of generation, transmission, distribution and supply infrastructure to assure the reliability of supply and minimisation of losses; and

g.?????? any other aspect of the Lagos State power sector, which requires development and policy direction, considering new global developments in the electricity sector.

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Renewable Energy, Energy Efficiency and Demand Side Management (DSM) Strategy and Action Plan

Section 116 of the Law provides that within eighteen (18) months from its commencement date, or such other extended period as may be approved by the Governor, the Ministry is required to develop a Renewable Energy, Energy Efficiency and Demand Side Management (DSM) Strategy and Action Plan (“Renewable Energy Plan”) for the State. The Renewable Energy Plan is required to be reviewed, amended or modified from time to time, but at least every five (5) years from the development of the first edition.

The Renewable Energy Plan is also expected to provide for a minimum of the following matters:

(a) the State’s short, medium and long-term renewable energy, energy efficiency and demand side management targets and incentives;

(b) the role of the State in incentivising and creating an enabling environment to encourage utilisation of renewable energy sources for generation of electricity, promoting energy efficiency and demand side management measures;

(c) programmes to encourage the utilisation of renewable energy sources for generation of electricity, adoption of energy efficiency and demand side management practices;

(d) the role of key stakeholders in the implementation of the strategy and action plan;

(g) a monitoring system for data collection and impact tracking, including assigning responsibility for the specification, collection, storage, maintenance and supply of relevant data on renewable energy utilisation, energy efficiency and demand side management measures and practices; and

(h) annual reviews, audits and reporting of relevant measures introduced by the State.

The Renewable Energy Plan and any revision, amendment or modification shall be subject to the approval of the Governor and shall be published on the Ministry’ website.

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Licensing

Section 49 of the Law provides a person shall not construct, own or operate any undertaken in the State or in any way engage in generation, transmission, distribution, trading, supply of electricity, system operation or the provision of such other activities or services relating to supply of electricity above 1MW, without obtaining the necessary licence or permit. As such, within three (3) months of the passage of the Law, operators within Lagos State must apply to the Commission for a licence, in such form and manner specified by regulation and upon the payment of a prescribed fee. Notably, the period between the Commission’s receipt of an application and the date the Commission notifies the applicant of its decision to grant or refuse the grant of the licence, shall not exceed three (3) months from the date of application. It is noted that the three (3) months' timeline is an improvement on the six (6) months period for which licences are required to be approved with the Nigeran Electricity Regulatory Commission (“NERC”). Needful to mention also that it shall not be a defense that an operator holds a licence issued by any other body to undertake the relevant regulated activity.

Remarkably, by virtue of Section 178 of the Law, licences, permits, authorisations, etc, held by pre-existing licensees prior to the commencement of the Law, shall remain valid for the remainder of its period of validity and be deemed to have been issued by the Commission. However, the Commission may amongst other things:

a. require a pre-existing licensee to make necessary registration with the Commission; or

b. if it deems it necessary in the public interest to do so, issue an interim licence to a pre-existing licensee for a specified period.

Thus, renewable energy companies such as Daystar Power, which has been at the forefront of helping to solve the energy crisis facing businesses in Nigeria and therefore licensed by other regulatory agencies before the passage of the Law, will not be required to immediately go through administrative rigours to procure replacements for its existing and valid licences.

The above notwithstanding, Section 50 of the Law empowers the Commission to, on its own accord, or upon application by an operator, exempt an operator from the requirement to generally or unconditionally obtain a licence, subject to such terms and conditions as the Commission may determine. The particulars of any such exemption will be published on the Commission’s website. Additionally, issued licences shall be valid for a period of ten (10) years or less, as prescribed in the licence by the Commission. Renewals of such licence be applied for six (6) months before the expiration of the licence and such licensee shall show cause as to why the application should be considered by the Commission.

Promotion of Renewable Energy Development

One of the key hallmarks of the Law is the robust provisions it has on the intended development of renewable energy, alongside responsibilities placed on its MDAs in this regard. Amongst other provisions, Section 117 and 118 of the Law generally provides for:

a.?????? long-term, stable and favourable tariff methodology for electricity generated from renewable energy sources;

b.?????? guarantee for the transmission or distribution of electricity generated from renewable energy sources;

c.??????? priority access or guaranteed access to the State grid of electricity generated from renewable energy sources;

d.?????? priority for the dispatch of electricity generated using renewable energy sources;

e.?????? transparent and non-discriminatory rules for the connection of a generator of electricity from a renewable energy source to the State grid;

f.???????? certification or qualification schemes for suppliers and installers of renewable energy and energy efficiency equipment or systems.

g.?????? renewable energy purchase obligations for trading licensees and supply licensees.

h.?????? the development of model contracts or mandatory terms for utilising electricity generated from renewable energy sources.

i.???????? public awareness on the benefits and costs of generating and utilising electricity from renewable energy sources; and

j.???????? regulation requiring electricity generating plants or any class thereof located and utilised for any purpose in the State employing distillates as fuel, to transit to gas or renewable energy sources within six (6) to twenty-four (24) months from the effective date of the regulation.

This not only shows the positive disposition towards renewable energy but also exhibits the bold and important posture taken by Lagos State in giving credence to its renewable energy ambitions.

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Host Communities Development Trust Fund.

In a bid to legislate corporate social responsibility by power generating companies, Section 174(2) of the Law provides that power generating companies licensed by the Commission shall set aside two percent (2%) of their annual operating expenditure for the preceding financial year for the development of their respective host communities, that is communities situate in the area of operation of power generation companies. The sum shall be contributed to the Host Community Trust Fund (“Fund”) which shall be set up by the Commission and shall be utilised for infrastructural development projects within the host communities as may be identified by such host communities. The management of the Fund shall be by trustees approved by the Commission. Therefore, the power generating companies will only be required to pay the requisite amount as at when due, and nothing more.

This provision may be an attempt to mirror a similar provision in Section 89 of the Electricity Act, 2023. However, it is notable to mention that the Electricity Act, 2023 provision (as amended) only applies to power generating companies in member states of the National Hydroelectric Power Producing Areas Development Commission, which was established to formulate policies and implement the development plans for hydroelectric power-producing areas.

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Forthcoming Regulations

Section 117 of the Law empowers the Commission to make regulations and issue guidelines, rules, directives, decisions, orders and notices for the effective implementation of the provisions of the Law. It is therefore expected that in the coming months, certain regulations and directives which will guide operators in the Lagos Electricity Market will be released. Particularly, regulations regarding the application criteria, procedure, information requirements and documentation for licences; duties, powers, rights and obligations of licensees; the procedure for inspection, testing, certification, monitoring and assessment of electricity installations, networks, systems, equipment, facilities and instruments in the State; prescription of mandatory emissions standards and limits in respect of the use of distillates which are safe for electricity generation; procedures for monitoring, mitigation and enforcement; and regulations regarding the method and manner for fixing, reviewing and adjusting tariffs and tariff structures for services provided, amongst others, are expected to be released.

Offences, Enforcement and Dispute Resolution

Section 160 of the Law provides for the establishment of the Power Enforcement Unit which shall be under the Agency and shall be responsible for carrying out activities that are necessary to prevent or punish the commission of offences created under the Law, including taking actions such as inspection, search, seizure, testing, and arrest. In all, what is clear is that Lagos State means business, as the Law contains fines and imprisonments for various electricity-related offences. Of significant note is the provision of Section 49(7) which provides that contravention of the requirement to obtain a licence where required will generally elicit, upon conviction, a fine not less than One Million Naira (N1,000,000.00) or custodial or community service sentencing of six (6) months, or both. With regards to the settlement of disputes, Section 179 of the Law provides that the Commission shall take steps to facilitate the amicable and expeditious resolution of disputes, including through collaboration with the Lagos Multi-Door Court House. It is noted that while this provision does not totally exempt the involvement of regular courts in the settlement of disputes, it is expected that regulations more properly guiding the dispute resolution procedure would be subsequently rolled out.

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CONCLUSION

Since President Bola Tinubu signed the Electricity Act, 2023 into law, to empower state government, companies and individuals to generate, distribute and transmit electricity, States in Nigeria began the process of taking control of the regulation of electricity services within their jurisdiction. Despite previously having its own electricity law, Lagos State has joined in the new era of decentralised electricity market regulation, devoid of the Federal Government’s monopoly, thereby laying a strong foundation for economic growth, industrial development, improved quality of life, and environmental sustainability. The Law expectedly mirrors global direction towards cleaner energy and with the Nigerian grid having failed 12 times already in the year 2024, one could not have asked for a later time than now, for this important legislative landmark, especially for a commercial hub such as Lagos State. Whilst further regulations and directives are expected to follow to ensure full administration and enforcement of the Law, residents, businesses and renewable energy operators in Lagos can at least be excited for what the future holds. Indeed, the future is that of clean energy for all. Let the work begin. “Eko oni baje ooo".