In 2023, Late President Buhari signed a constitutional amendment that would allow states to be able to generate, transmit and distribute electricity. Few months later, President Tinubu followed up by signing the New Electricity Bill 2023 making it an Act which provides the Legal and institutional framework within which the Electricity Industry will be run going forward. What this has done is to allow states to be able to make laws and issue licenses to companies that will eventually become market participants in a state-run electricity market in collaboration with the existing national electricity market managed by the federal government.
Considering the above and given the various articles written by concerned stakeholders and qualified person regarding the implications of the amendments from a legal, economic, and commercial angle, this article seeks to explain the technical implications of running an electricity market under the current structure using two sub-nationals Lagos and Rivers states as cases studies.
Lagos state under the current national electricity market structure gets power form the National Grid through two distribution networks (Ikeja Electric and Eko Distribution Company ), on the transmission side out of eight regions under the national grid managed by the Transmission Company of Nigeria (TCN), Lagos state is covered by Lagos Region, a Regional Control Centre located at Ikeja West which is one of 3 regional control centers. Lastly Egbin power thermal power plant is the only plant delivering power to the National Grid located in Lagos. In terms of resource planning Lagos hosts a few independent Power Plants that are providing power to Lagos State facilities under contract with the Lagos State Government.
To effectively run an electricity market Lagos state government has commissioned a policy document which seeks to enable the government license an Independent System Operator through the Lagos State Electricity Regulatory Commission. The job of the ISO will be to work with potential market participants to design and operate an electricity market.
A state electricity market (SEM) with an ISO could be set up the address the most critical issue of the Electricity Supply industry in Nigeria which is reliability power at the right price. The Mission of the ISO should be the development of a reliable electricity market this includes running an efficient energy and ancillary services market, ensuring grid reliability as a not for profit organization that reports to the State government. Ancillary Services Markets are centralized markets for procuring of Ancillary services for future or current operating hour. These can be independent of energy markets or cooptimized with energy sales in the energy market.
The Ancillary services include regulation reserves, Spinning and non-spinning reservices, black start , reactive power/ voltage Control etc The National Electricity Regulatory Commission (NERC) initiated a process to procure spinning reserves in 2018 but after concluding the process approval was not given for the contract to be awarded. With state participation in the electricity industry focused on reliability, this kind of procurement processes could be resolved more quickly as some states are closer to load centers and can quickly use regulations to enable participation and contribution from market participants that have the ability and capacity to provide these services to the market in the short to medium term with fewer stakeholders involved and given that some states are well funded and don’t have to deal with a lot of the socio-political factors that are associated with tariff adjustments to accommodate the cost of these services which might have been the reason the procurement process led by NERC was never approved. The State ISO can work with market operators by lowering the threshold for participation such that a hand full of medium sized distribution level connected resources can participate competitively in providing ancillary services.
From the illustration above it is important to note that to achieve reliability, the State Grid would need to be isolated from the National Grid, please note that to Isolate does not mean disconnect as the optimal goal of isolating the state grid is for the ISO control center to be able to maintain its own System frequency control using SCADA and energy managements systems that will be procured to support the market. This means also that there must be some form of collaboration that allows the State ISO to optimally engage in bilateral trade via Tie lines with the National Electricity Market currently run by NBET. Tie lines allow for bi-directional flow of power between interconnected grids. The market collaboration can start with metering all tie points between State Grid and National Grid which if we use the planned Lagos State Electricity Market, the metering points are from Egbin and Ikeja TS out of the state towards other states and then onward to the NCC in Oshogbo with another Tie line from Ikeja West going out of country to Benin for the West African Power Pool (WAPP).
The medium to long term goal of the State Electricity Grid will be to have sufficient generation and transmission/distribution capacities to meet its reliability, security and stability obligations, a major responsibility of the ISO. Written by Shehu Umar. Utility and Telecoms techology Expert