REGULATORY REQUIREMENTS AND GUIDELINES FOR THE REGISTRATION OF AN OFF-GRID DISTRIBUTION AND GENERATION ENTERPRISE IN NIGERIA

1.0 INTRODUCTION

1.1 This Article sets out the regulatory requirements and procedures for establishing an off-grid electricity generation and distribution enterprise in Nigeria, in accordance with the Electricity Act 2023 and related guidelines issued by the Nigerian Electricity Regulatory Commission (NERC) particularly the NERC Regulations for Application for License (Electricity). Off-grid electricity generation and distribution are critical in improving energy access in underserved or unserved areas and fall within NERC’s embedded generation and distribution framework

2.0 LICENSING REQUIREMENTS FOR OFF-GRID GENERATION AND DISTRIBUTION

2.1 Operators intending to generate and distribute electricity on an off-grid basis are typically required to obtain a generation and a distribution license from NERC unless the operation falls under licensing exemption thresholds (e.g., generation capacity under 1MW or distribution to fewer than 100 customers).

2.2 Mandatory Submissions for Generation Licence (Off-Grid/Embedded)

Applicants must provide the following:

• Completed application form.
• Certificate of Incorporation with Memorandum and Articles of Association.
• Registered title deed to the project site or documentary evidence of land ownership or rights (e.g., sale agreement, deed of assignment).
• Tax Clearance Certificates for the past three (3) years.
• A ten-year business plan including project description, financial projections, funding sources, and market study.
• Off-take agreement or arrangement with end-users or distribution licensees. (if needed)
• Environmental Impact Assessment (EIA) Certificate or evidence of submission to the Federal Ministry of Environment. For capacities under 10MW, details on effluent and waste management may suffice.
• Fuel supply agreement or letter of intent from fuel supplier and transporter (for fossil-fuel-based projects).
• MoU or letter of intent from the EPC contractor (if applicable).
• MoU or letter of intent from technical partners (if applicable).
• Financing agreements or a letter of commitment from a financial institution.
• Detailed project timelines for commissioning, including generation capacities.
• Technical specifications, including:
  • Total capacity per site
  • Number and size of generating units
  • Fuel type and terminal voltage
  • Rated power factor, noise levels, and reactive power capacity
  • System protection and waste management plan
  • Equipment manufacturer details
• Agreement or arrangement with the relevant Distribution Licensee for network use (if applicable).

 

2.3 Mandatory Submissions for Distribution Licence (Off-Grid)

In addition to general corporate documentation as stated above, the applicant must submit:

• Completed application form.
• Ten-year business plan detailing operational, technical, and financial aspects.
• Power Purchase Agreement (PPA) with a licensed generator.
• Retail agreement with end-users.
• MoUs or letters of intent from EPC contractors and technical partners.
• Financial arrangements showing project funding sources.
• Electricity demand forecast for the proposed area of operation.
• Project location with technical design documents:
  • Site map, single line diagrams, substation and control room layouts.
• Line voltage levels and connection points.
• Installation method (overhead/underground), pole types, and line lengths.
• Environmental Impact Assessment for the distribution infrastructure.
• Transformer specifications and connection agreements with TCN (if any).
• Impact assessment of connecting to the national grid (if applicable).
• Bill of Engineering Measurement and Evaluation (BEME).
• Protection equipment details.
• Health and Safety Policy.

 

3.0 MANDATORY CONTENTS OF THE BUSINESS PLAN

The business plan accompanying any application must cover:

• Company information: incorporation, shareholding, related businesses.
• Description of the electricity business: proposed service area, company experience, financial history.
• Financial projections (at least 5 years): P&L, balance sheet, cash flow, IRR, NPV, payback period.
• Project funding details: sources, structure, shareholder agreements, lender documentation.
• Assumptions: capacity, tariffs, CAPEX, OPEX, inflation, depreciation.
• Market study: supply/demand analysis, pricing strategy, off-take agreements.
• Technology and equipment details: specification, sourcing, maintenance.
• Site overview: location, dispatch arrangement, initial and future capacity.
• Organization and HR plan: staff roles, experience, expatriate positions.
• Risk analysis: political, business, financial risks and mitigation strategies

4.0 EXEMPTIONS FROM LICENSING

The Electricity Act 2023 and associated NERC regulations recognize several categories of exemptions to encourage small-scale and self-sustained energy solutions, while still maintaining regulatory oversight to ensure safety, reliability, and environmental compliance.

4.1 Captive Generation: Enterprises generating electricity exclusively for their own use commonly referred to as captive generation are exempted from obtaining a full generation license where the installed capacity is below 1MW. However, such enterprises are still required to register their operations with NERC.

4.2Mini-Grid Systems: Mini-grid developers operating isolated systems with a capacity below 100kW are also exempt from licensing but must register with NERC. For mini-grids with a capacity between 100kW and 1MW, a permit is required in lieu of a full licence.

4.3Embedded Generation: Embedded generators supplying power directly to a distribution licensee or operating within defined clusters such as residential estates, industrial parks, or commercial zones may also benefit from streamlined regulatory processes.

It is important to note that licensing exemptions do not equate to deregulation. All operators, whether licensed or exempted, must comply with applicable technical, safety, and environmental standards. This includes the obligation to conduct Environmental Impact Assessments (EIA), where required, and adhere to safety protocols enforced by the Nigerian Electricity Management Services Agency (NEMSA).