The Nigerian Electricity Regulatory Commission by its order of April 30, 2024, announced the unbundling of the Transmission Company of Nigeria. This process is to be completed by August 31, 2024. The provision of electricity involves stages and different stakeholders at each stage. Electricity is generated (produced) by different generating companies, and transported in a large quantity by the transmission system (bulk carriers) to the point of end use by the distribution network (distribution companies), serving as the retailers. The infrastructure for these three broad stages is owned by different companies. The distribution network is owned by the distribution companies called DISCOs. The transmission network is operated by the TCN. The TCN also serves as the system operator and the electricity market operator.
The uniqueness of synchronous electricity grid operation is that the electricity supply must meet its demand at every point in time otherwise the entire system will shut down. In this regard, there is a system operator for the high voltage electricity transmission system, whose responsibility is to manage the electricity system to ensure efficient system operation. Although the role of the system operator is not directly consumer-facing, its activities affect the experience of the electricity consumer. One of the responsibilities of the system operator includes scheduling and dispatching generation units to ensure electricity production and coordinate generation units maintenance period to maximise energy supply. Another responsibility of the system operator is to schedule energy quantity on the different lines within the transmission network and manage congestion in areas of limited transmission capacity. A system operator is also expected to coordinate the hourly energy export/import to and from other countries. The purchase of necessary ancillary services to support system operation, enhance system resilience and prevent system collapse is another responsibility of the system operator. Also, defining the market rules to facilitate wholesale electricity markets and administer settlement payments is another responsibility.
In the Nigerian Electricity Supply Industry, the TCN has a department which oversees the system operation. The unbundling of the TCN is to create an independent system operator from the existing system operation department of the TCN as provided for in Section 7(3) of the Electricity Act, 2023. This also signals a development of Nigeria’s electricity market.
We can expect the new ISO to improve the market rules to enhance participation in the wholesale electricity market. This may include the creation of a market mechanism for procuring ancillary services and the creation of capacity markets. We can expect better connection processes for new electricity generation units that want to assess the grid.
The electricity consumer can expect the ISO to gradually reduce the occurrence of frequently experienced national grid collapse over the coming years. This is one of the ways by which the ISO performance will be evaluated. We can expect the TCN to henceforth focus on expanding and improving the transmission network infrastructure through targeted investment.
In conclusion, this unbundling is beneficial for all stakeholders in the NESI. It is important for the creation of a rule and contract-based electricity market and is a signal of the advancement of the Nigerian electricity market.
