As Nigeria continues to face persistent power outages, a significant number of manufacturers and academic institutions, approximately 250 in total, have chosen to abandon their respective power distribution companies (Discos) and opt for self-generated electricity. Many of these organizations, which are major bulk electricity consumers, have turned to alternative power sources to ensure a reliable and steady supply of electricity.
This shift comes amidst increasing challenges in the national power grid, including high electricity costs, frequent grid collapses, and rising fuel prices. In 2021, former President Olusegun Obasanjo also abandoned the national grid, launching a solar power project at the Olusegun Obasanjo Presidential Library in Abeokuta, Ogun State. This move, costing approximately N2 billion, was hailed as a cost-effective solution.
Recent data from the Nigerian Electricity Regulatory Commission (NERC) revealed that these organizations are now collectively generating up to 6,500 megawatts (MW) of electricity. This figure surpasses the current national power generation, which hovers between 4,500MW and 5,000MW. The organizations involved have received permits from NERC to generate captive power, with some permits granted as far back as 2010, and the number of requests for such permits has notably increased since 2023 following the signing of the Electricity Act by President Bola Tinubu.
Captive power generation permits are issued to entities that wish to establish and operate power plants solely for their own consumption, without the ability to sell electricity to third parties. While some of these plants utilize gas, many have turned to renewable energy sources, such as solar. Among the largest captive power generators is the Dangote Group, which generates about 1,500MW of electricity. Aliko Dangote, the chairman of Dangote Industries, confirmed that the Dangote refinery alone has a 435MW power plant, capable of meeting the power needs of the Ibadan Electricity Distribution Company.
Other major firms and institutions with captive power generation include Pure Flour Mills Limited, Nigeria LNG, United Cement Company of Nigeria Limited, Total E&P Nigeria, Esso Exploration & Production Nigeria Limited, Flour Mills of Nigeria, and Lafarge Cement, among others. Several universities, including the University of Lagos, Obafemi Awolowo University, and Nnamdi Azikiwe University, also have captive power systems in place.
The Federal Government has expressed concern over this growing trend. Minister of Power, Adebayo Adelabu, noted that while captive power systems provide electricity, they are more expensive compared to grid power. The average cost of generating captive power ranges from N350 to N400 per kilowatt-hour when using gas, and up to N1,000 per kilowatt-hour for diesel-powered systems. Adelabu highlighted the government's efforts to restore confidence in the national grid, emphasizing that a stable and affordable grid is essential for encouraging bulk electricity users to reconnect.
The NERC has also pointed to fluctuations in grid voltage as a primary reason for the migration to captive power. Voltage spikes, dips, and brownouts can severely damage industrial equipment, prompting many firms to seek more reliable and stable sources of power. The regulator has stated that it continues to work with the Transmission Company of Nigeria (TCN) to maintain the voltage within acceptable limits to prevent further damage and encourage the return of industries to the national grid.
Experts have raised concerns about the long-term implications of this trend. Adetayo Adegbenle, Executive Director of PowerUp Nigeria, warned that the departure of large electricity consumers from the national grid could destabilize the system. He explained that the national grid operates on a demand-and-generation balance, and with the loss of so many high-capacity consumers, the grid becomes more dependent on residential users, which could lead to further instability.
Kola Olubiyo, President of the Nigeria Consumer Protection Network, also criticized the unreliability of the grid, stating that the persistent outages and system failures have forced industries to find alternative energy solutions. He argued that while off-grid renewable energy systems provide 24/7 power and enhance competitiveness, they come at a higher cost.
The Coordinator of the All Electricity Consumers Protection Forum, Adeola Samuel-Ilori, praised the manufacturers for seeking alternative power sources. He noted that many companies had already moved away from Discos years ago, citing poor service and high costs. He also suggested that individuals should be encouraged to adopt renewable energy solutions, as this would reduce the strain on the national grid and help mitigate frequent system collapses.
Despite these challenges, Samuel-Ilori pointed out that Discos still generate significant revenue through estimated billing, even though they fail to provide adequate service. He argued that if renewable energy options were made more accessible to the general public, the load on the grid could be reduced, leading to fewer outages and more reliable service.
The growing trend of captive power generation reflects the urgent need for reforms in Nigeria's power sector. While the government aims to increase power generation to 30,000MW by 2030, with a focus on renewable energy, the current state of the national grid remains a significant barrier to achieving this goal. Until improvements are made, many industries and institutions will likely continue to seek alternative sources of power to ensure their operations remain uninterrupted.
