NERC approves 450MW deal to prevent Zungeru plant closure

Nigerian Electricity Regulatory Commission (NERC), has approved 450MW power procurement agreement with Zungeru Hydroelectric Generation Company.

The directive, said to have been issued further to the Commission’s Order No. NERC/2024/044 on the “Transmission System Dispatch Operation, Cross- Border Supply and Related Matters” and in the overriding public interest of ensuring continuous improvement in the supply of electricity to Nigerians, was to ensure grid stability and to prevent shutdown of the newly completed Zungeru hydropower plant pending when it gets off-takers.

The NERC, in a directive signed by Musiliu Oseni, identified low generation as a contributing factor to the suboptimal grid dispatch on the national grid, resulting in electricity distribution companies struggling to maintain reliable service levels for end-use customers due to recurring grid imbalances.

The commission also observed that Zungeru Hydro Electricity Generation Company had successfully completed its initial capacity testing on May 15, achieving an average generation capacity of 600MW.

According to the NERC, the Zungeru power company, which currently has no contract with off-takers had indicated its decision to shut down the plant after the capacity test pending the finalisation of contractual arrangements with its prospective off-takers.

To avoid this, the regulator said it decided to ensure the power plant remains on the grid and continues to inject power to improve service delivery to electricity consumers in Nigeria.

As a result, the commission granted a special dispensation that permits the Independent System Operator of the Transmission Company of Nigeria to assume responsibility for the administration of settlement for power wheeled from Zungeru for an initial period of 105 days commencing from 0.00Hrs of May 16.

“Whereas Zungeru Hydro Electricity Generation Company currently has no contract and had indicated its decision to shut down the plant after the capacity test pending the finalisation of contractual arrangements with her prospective off-takers. The Commission, however, considers it necessary to ensure that the power plant remains on the grid and continues to inject power to improve service delivery to electricity consumers in Nigeria.

“Given the overriding public interest, the Commission has granted a special dispensation that permits the Independent System Operator of the Transmission Company of Nigeria to assume responsibility for the administration of settlement for power wheeled from ZHEGC for an initial period of 105 days commencing from 0.00Hrs of the 16th May 2024,” the NERC directive read partly.

To avoid the perpetual practice of limiting DisCos load offtake as a corrective mechanism for system imbalances, the commission “directs the TCN-ISO to enter into an interim energy sales agreement with ZHEGC for up to 450MW of energy and capacity to address the imbalances currently experienced between generation and offtake, thereby further strengthening grid management. The agreement shall be on a best-effort basis.

“The commencement date for the interim agreement is 16 of May 2024 and shall be in effect till the 31 of August 2024 in the first instance”.

On the administration of the agreement, the directive stated, “For every settlement cycle following the commencement of the agreement, ZHEGC shall invoice the Market Operator for capacity and energy based on the metered energy generated as contained in the Final Settlement Statement. The MO shall issue two settlement statements to the DisCos; one for the settlement of the transmission and market administration services. The second invoice shall reflect the energy from ZHEGC allocated to the DisCos on a pro-rata basis using the total energy offtake by DisCos for the month.

“The settlement for the energy supplied from ZHEGC shall be prioritised from the market revenue administered by Nigeria Electricity Supply Industry Stabilisation Securities Limited.

“NESI-SSL shall pay the Market Operator the full value of ZHEGC’s energy invoiced to the DisCos for onward payment to ZHEGC in line with the terms of the interim energy sales agreement.”

The reports has It that the Zungeru power plant is a major infrastructure project with the capacity to generate 700MW, making it the second-largest hydroelectric plant in Nigeria, behind the Kainji Dam.

The plant, situated on the Kaduna River near Zungeru in Niger State, is expected to produce an impressive 2.64 billion kilowatt-hours of electricity each year, which will account for approximately 10% of Nigeria’s total domestic energy requirements.

On May 2, Adebayo Adelabu, the Minister of Power, revealed that the completion of the Zungeru power plant has led to a substantial increase in power generation, now standing at 4,800MW.

“Let me mention that we have started seeing improvements in our generation output. In the past few days, the output has increased from 4,200MW to 4,800MW. What we experienced in February and some parts of March is not desirable when we had very low generation.

“What led to the increase in the past few days was the commencement of the operation of Zungeru hydroelectric power plant that just added 625MW to the national grid,” Adelabu had said.