DisCos and energy transition: Are they ready for renewables?

By: Pelumi P. Aluko-Olokun

NIGERIA’S electricity distribution companies (DisCos) face a pivotal moment. The global energy sector is experiencing its most rapid transformation in over a century, with renewable technologies such as solar photovoltaics, wind farms, and small-scale hydropower increasingly forming the backbone of modern energy systems. According to the International Energy Agency (IEA, 2024), global renewable capacity grew by nearly 50 per cent in 2023 alone, marking the fastest growth rate in history. For countries that move quickly, this transition offers opportunities to secure cleaner, cheaper, and more reliable power. But for Nigeria—where over 90 million citizens still live without consistent electricity—the fundamental question is not whether DisCos should embrace renewables, but whether they are structurally and operationally equipped to do so.

Energy transition is now an essential economic goal rather than a distant objective. According to the International Renewable Energy Agency (IRENA, 2024), renewables are currently the cheapest new power source in many areas, including parts of Africa. Besides cost advantages, Nigeria’s reliance on gas-fired power makes its grid vulnerable to fuel price changes, vandalism, and supply issues. Moving to renewable energy offers an opportunity to decentralise power generation, reduce technical losses, and help cover the 8,000 MW power shortfall. The core issue in Nigeria’s power sector stems from its very design. DisCos were privatised in 2013 with the goal of enhancing service quality and increasing connections. However, a decade later, they continue to struggle with high ATC&C losses, often exceeding 40 per cent (NERC, 2024). Challenges such as low metering, outdated infrastructure, and liquidity shortages hinder DisCos from investing in grid upgrades needed for renewable energy integration. Additionally, the current market setup provides few incentives for DisCos to embrace distributed renewable energy projects. Since most of their revenue depends on urban, higher-paying customers and tariffs do not always cover costs, DisCos may view renewables as a threat to their existing revenue rather than an opportunity for sustainable growth.

This issue is not exclusive to Nigeria. In South Africa, utilities also encountered resistance to decentralised renewables, worried about losing revenue from “prosumers” who produce their own electricity. Nonetheless, regulatory changes like net metering, feed-in tariffs, and dedicated grid modernisation funds have gradually shifted utility incentives to support renewable energy. Nigeria can learn from these approaches, adapting them thoughtfully to its own context.

Bridging the readiness gap

A transition-ready DisCo must have three capabilities:

1. Technical readines:  Modern grid infrastructure with capacity for two-way power flows, real-time monitoring, and storage integration. 2 Financial resilience: Access to affordable capital, improved tariff structures, and reduced ATC&C losses to fund upgrades. 3. Regulatory alignment: Policies that