Solar Shift Challenges Nigeria’s Power Market

Nigeria’s electricity sector is entering a new phase as the Nigerian Electricity Regulatory Commission (NERC) pushes forward its net billing plan, a framework designed to let consumers with solar installations feed excess power back into the grid. The policy has been hailed as a bold step toward improving energy access, reliability, and sustainability. But while it holds promise for businesses and communities, it also poses tough questions about market balance, infrastructure, and how existing operators, especially the generation companies (GenCos), will respond.

Energy expert and CEO of New Hampshire Capital Limited, Odion Omonfoman, recently explained the opportunities and challenges tied to this plan. According to him, the biggest opposition is likely to come from the GenCos, whose traditional model of selling bulk power to the grid could be disrupted as more consumers and businesses generate their own electricity.

Omonfoman explained that the initiative mainly targets commercial and industrial consumers who already rely heavily on solar systems to reduce dependence on costly diesel generators. Many of these companies generate more electricity than they need at certain times, such as weekends or at night, when operations slow down. Under NERC’s new policy, these companies would be able to sell that excess energy to the grid rather than wasting it.

This arrangement not only benefits the businesses by creating an additional revenue stream, but it also improves supply in underserved areas. Communities that would otherwise rely on petrol or diesel generators could instead receive cleaner, cheaper solar power. In theory, this makes electricity more reliable, reduces emissions, and spreads access to more people.

However, Omonfoman pointed out that while this solves some problems, it does not address all of the challenges in the sector. Liquidity remains a key concern. For the system to work, distribution companies (DisCos) must have a reliable method of paying those who sell power into the grid. That requires better tariff structures and efficient billing systems. If these financial and technical issues are not resolved, the promise of net billing could easily collapse.

Another hurdle lies in the readiness of the DisCos themselves. Integrating multiple small producers into a grid designed for bulk power is a complex task. Technical questions remain: Can the feeders handle the additional input without tripping? Are the lines and substations reliable enough to distribute this power? Do the existing metering systems have the capacity to measure both inflow and outflow of electricity accurately?

Omonfoman stressed the importance of bidirectional meters that can record both consumption and supply. Without them, it will be impossible to fairly credit those who feed electricity into the grid. He also highlighted the need for stronger protection systems so that faults in either the customer’s facility or the grid do not damage equipment on the other side.

Beyond the technical aspects, the deeper concern is how GenCos will react. Nigeria’s grid has a generation capacity of about 13,000 to 15,000 megawatts, but in practice only around 4,000 megawatts is reliably delivered to consumers. If more businesses and communities begin generating their own solar power and selling the excess locally, demand for grid power will decline further. GenCos, who already struggle with low demand and payment delays, may find themselves sidelined in a market that increasingly values distributed, renewable sources over centralized plants.

This situation is not unique to Nigeria. In other countries, net metering policies have sometimes been scaled back because they created financial stress for large-scale generators. The concern is that while prosumers—individuals or businesses who produce as well as consume electricity—are compensated well for their contributions, the upstream suppliers are left with reduced revenue. To manage this, Omonfoman suggested that NERC may need to place caps on how much power can be sold back to the grid. Without such safeguards, companies could oversize their solar systems purely for resale, turning into small-scale independent power producers rather than just supplementing their own needs.

DisCos, too, may resist the policy. While they stand to benefit from having more electricity injected into their local networks, they also face the obligation of paying prosumers for what they supply. If payment obligations outweigh what they collect from consumers, the system becomes financially unsustainable. Omonfoman noted that Nigerian DisCos have a track record of inefficiencies in billing, metering, and collections. Unless these weaknesses are fixed, they could undermine the success of net billing.

Transparency is another sticking point. Many Nigerians are already frustrated with estimated billing and poor accountability in the sector. If NERC cannot guarantee fairness in how prosumers are credited, trust in the policy will be low. Omonfoman believes it may be better for NERC to create a broad framework and let DisCos and prosumers negotiate terms directly, rather than imposing fixed tariffs that may not reflect market realities. However, he cautioned that this would demand a higher level of accountability and investment from the DisCos, something not all are willing to commit to.

Another layer of complexity is Nigeria’s move toward state-level electricity markets. With states now empowered to regulate their own electricity industries, NERC must tread carefully. Omonfoman advised that instead of imposing national regulations, NERC should provide a flexible framework that state regulators can adapt to their local markets. This way, each state can design its own version of net billing that reflects its infrastructure, capacity, and consumer base.

In the end, the policy represents both opportunity and risk. On the one hand, it could help solve Nigeria’s chronic electricity shortages by unlocking the potential of distributed renewable energy. It could also empower businesses, reduce dependence on fossil fuels, and improve supply in underserved communities. On the other hand, without careful design, it could destabilize existing players, particularly GenCos, and create financial strains for DisCos who are already struggling to stay afloat.

As Omonfoman noted, Nigerians are increasingly unwilling to wait for the national grid to improve. Many are already taking matters into their own hands by investing in solar. NERC’s net billing plan recognizes this reality and seeks to turn private investment into a public good. But success will depend on balancing competing interests, strengthening infrastructure, and ensuring fairness in the system. If managed well, it could mark a turning point in Nigeria’s power story. If not, it may deepen the tensions in a sector already under pressure.