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Does Nigeria Have a Net Metering Policy? Selling Solar in Nigeria

Along with the advancements in solar technologies, especially in the fields of battery energy storage systems (BESS) and solar panel efficiencies, people can benefit from the clean, solar power supply while making extra incomes by selling excess solar to the utilities.

Pioneering countries like the United States have a long history of allowing citizens to export any excess energy back to the grid following their net metering policy.

Nigeria leads the way in solar exploration and adoption in Africa. But does it have a net metering policy or other similar frameworks to bolster the use of solar? 

Rooftop Solar System in Village
"Rooftop solar in village" (cropped) by Marta Victoria is licensed under CC BY-SA 4.0 DEED.

Overview: What Is a Net Metering Policy?

Originated in the United States in the early 1980s, net metering is an electricity billing mechanism that enables consumers who generate their own electricity using renewable energy sources, such as solar or wind power, to feed excess electricity back into the grid and receive credits on their utility bills.

In the circumstances of self-generated solar, consumers use electricity generated by solar panels or stored in the battery during the daytime. Meanwhile, any excess electricity can be sent back to the grid. When at night or on cloudy days, consumers’ electricity meters ‘run backward’ or ‘record the exchange’ to provide a credit against electricity consumed from the grid.

This way, consumers are billed only for their ‘net’ energy use, which is the difference between the energy consumed from the grid and the energy produced by their solar systems.

Net Metering in the United States

Net metering was first implemented in Minnesota in 1983. As of recent years, about 41 states have net metering rules in place, although the specifics of these rules can vary widely by state, and utility company.

Some states offer a full retail rate for the surplus energy credited, while others may offer a lower, wholesale rate. Many utilities may charge consumers a small monthly connection fee for being connected to the grid.

Many net metering policies allow for the monthly rollover of credits. This means that excess energy produced in one month can be used to offset energy consumption in subsequent months. At the end of a 12-month period, any remaining credits are typically settled. Some states may pay consumers for excess credits, while others may reset the credits to zero.

Over the course of net metering adoption, several innovative extensions have also been rolled out in the country. In 2008, virtual net metering was introduced and allows multiple consumers to share the benefits of a single renewables system. In the past decade or two, the Time-of-Use (TOU) pricing scheme has been integrated and provides rates as per the demand status of the day. All these measures offer greater flexibility for both consumers and utilities.

Is There a Net Metering Policy in Nigeria?

Nigeria's solar industry originated in 1973, sparked by the oil crisis, which exposed the risks of fossil fuel dependence and spurred a global shift to renewable energy.

Over the past several decades, a series of solar and renewable energy programs have been launched in Nigeria to fuel the deployment of solar across the country, including the Renewable Energy Master Plan (REMP), the National Renewable Energy and Energy Efficiency Policy (NREEEP) and the Feed-in Tariff for Renewable Electricity, to name a few.

Therein, the REMP set an ambitious target to increase the supply of renewable electricity from 13% of total generation in 2015 to 23% in 2025 and 36% by 2030. According to the stats from GlobalData, five large solar power plants, with a total capacity of around 7.5 GW, are expected to come online over the next few years.

However, Nigeria’s renewable energy mix has long been dominated by hydro power, which is primarily supplied by large corporations or public utilities.

As per publicly available information, the concept of net metering was mentioned in Nigeria’s Multi-Year Tariff Orders previously, but it wasn't until last year that an initial plan on net metering was formally incorporated into the Electricity Act 2023.

Section 164 of the Act states that the Nigerian Electricity Regulatory Commission (NERC) should issue guidelines on the development and implementation of net metering for rooftop solar photovoltaic and small wind power systems in accordance with existing laws and regulations.

This, in other words, implies that a complete regulation framework and action plan for net metering have not been established in Nigeria yet. Net metering is by and large at its nascent stage. Unlike those large power plants that can sell solar power via power purchase agreements, average consumers in Nigeria do not find a formal channel to sell their excess solar power to utilities.

The Challenges of Net Metering for Solar in Nigeria

A net metering policy will not emerge on its own. Several key challenges need to be addressed in order to pave the way for net metering adoption.

Weaknesses in Infrastructure

Nigeria's power grid is not that stable, especially with frequent outages and technical inefficiencies in regions far from downtown.

Integrating distributed generation like solar via net metering can further exert pressure on the grid if not managed properly.

Additionally, the provision and cost-effectiveness of smart net meters, which are essential for accurately measuring bi-directional energy flow, remain a challenge.

Limited Capacity of Solar Systems

Net metering is tailor-designed for residential or small-scale solar projects. The absence of a robust local supply chain as well as the lower-middle income level make installing a large solar generation system a costly investment.

This leads to a not particularly large capacity of these systems, which primarily suffice daily electricity demand and usually do not have a considerable amount to be sent back.

The collectively limited capacity of these distributed solar systems has not formed a strong demand force to pull out an operational net metering mechanism within one year or two.

Administrative & Operational Challenges

Implementing a billing system that is capable of accurately accounting for energy generated, consumed and fed back into the grid can be complex for a relatively young market like Nigeria.

Plus, ensuring the accuracy of metering and billing processes is crucial to avoid disputes and maintain transparency, particularly among highly price-sensitive consumers.

Regulation & Policy Climate

Faced with a weakening economy, rising insecurity and deepening distrust in government and institutions, the government may lack an ideal climate to enact consistent supportive policies for net metering, which can create uncertainties for both consumers and investors.

The introduction of net metering may affect the interest of traditional utilities as there might be a threat to their revenue if it does not function as per expectations.

Conclusion

Looking back at the trajectory of the US’s net metering development, this mechanism reflects the maturity of the solar sector in one country as well as its broader social and economic circumstances.

While solar deployment and net metering are closely intertwined and can be accelerated simultaneously, Nigeria's current priority should be to continually reduce the cost of solar equipment and increase its accessibility. 

Savings on the upfront costs would be more attractive for average consumers now, and net metering is just one of several strategies to promote solar adoption.

When the infrastructure gets better improved and solar deployment reaches a milestone, any associated challenges regarding the regulatory, administrative and operational can be easier to address, coming with adequate nutrition for the development and adoption of net metering.

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