The Megawatts in Our Backyards: Why Lagos State Must Unlock The Massive Captive Power Capacity Available Behind High Wall

The Megawatts in Our Backyards: Why Lagos State Must Unlock The Massive Captive Power Capacity Available Behind High Wall

The problem? Most of these units are drastically underutilised. A factory might install a 2MW gas generator to handle its peak load, but for 60% of the day, it may only need 1MW. That excess 1MW—clean, synchronised, and ready—is currently wasted. In a city where SMEs are dying for lack of affordable and reliable electricity, this underutilization is economically irrational.

The real scandal is not the inadequate public supply. It is that we have allowed vast installed private captive generation capacity to remain trapped behind the fence line, unavailable to the wider market, even when their owners do not need all of it.

The power Lagos needs is already in Lagos. It is humming behind factory walls, idling in hotel basements, sitting inside industrial estates, hospitals, malls, gated communities and residential estates. In plain English, Lagos is sitting on a huge stock of expensive, underused backup power. Households with gensets are estimated to spend about N1.43 trillion a year on fuel, while diesel and petrol users in the commercial sector spend about N5.3 trillion annually.

The point is not to romanticise diesel fumes. It is to stop wasting capital. A megawatt that exists but cannot legally be utilised outside the owner’s premises is not just stranded power; it is a stranded investment. In a city where businesses, estates, hospitals and hotels have had to self-provide electricity for years, that is a luxury Lagos can no longer afford.

Thankfully, Lagos now has the legal room to act. LASERC’s own regulatory documents already cover licensing for generation, distribution, supply and trading in the Lagos market. However, its current rules still define captive generation as electricity above 1 MW consumed by the generator itself and “not sold to a third-party.” This is a definition that was borrowed from the Electricity Act and previous national electricity laws and regulations. That definition was useful at the start. It is now too narrow for a city that wants a serious electricity market. LASERC should move from a purely self-consumption view of captive power to a controlled excess-capacity export framework.

This is also the direction of travel in Lagos itself. The State Government has said it is pursuing expressions of interest for gas-fired, grid-scale solar and captive power projects aimed at injecting 6 GW into the Lagos electricity market. If Lagos can invite new captive projects into the market, it should certainly not ignore existing captive capacity already paid for by businesses and households.

LASERC must now develop a robust Captive Power Integration Framework that turns captive power into market power and wasted capital into usable market supply. In a city like Lagos, every idle megawatt behind a fence is not just wasted capacity. It is a policy failure.

What should the LASERC Framework do?

First, the framework should create a simple legal path for compliant captive producers and larger diesel and gas generator owners to sell verified excess electricity to defined end-user customers within the Lagos Electricity Market.

Second, it should separate serious dispatchable assets from nuisance machines. Not every smoky set in a backyard should connect to the market. LASERC should prioritise gas-fired plants, admit diesel only as a transitional peaking and emergency resource, and insist on emissions, noise, safety, metering, telemetry and maintenance standards.

Third, it should make the economics transparent: interconnection rules, wheeling charges, loss factors, settlement cycles, consumer protection and dispute resolution must all be standardised. This is not about replacing the national grid. It is about augmenting supply in Lagos and, in practical terms, reducing pressure on the grid.

Other jurisdictions show this can work. Emerging markets across the globe have used decentralised regulations to turn a power crisis into a surplus.

• Vietnam: In a span of just a few years, Vietnam went from power shortages to a solar boom by implementing aggressive Feed-in Tariffs (FiT). They allowed small and medium-scale producers to sell back to the grid, adding 9,000MW in a single year.

• South Africa (Cape Town): Faced with the failure of their national utility (Eskom), Cape Town launched a program allowing businesses and residents to sell their excess solar and generator power back to the city. The impact? Reduced “load-shedding” and a new revenue stream for businesses.

• India: States like Gujarat and Maharashtra have long allowed captive power plants (mostly in the steel and chemical industries) to feed their surplus into the state grid. This has stabilised industrial zones and reduced the burden on the central utility.

• Lebanon – It is no surprise that Lebanese are perhaps best known for selling power generators globally. This is so as Lebanon is powered by captive generators, which are allowed to sell excess capacity to designated neighbourhoods and buildings.

LASERC could consider at least two commercial models.

The first is what I have termed “Standard Offer Excess Capacity Purchase Model”. Under this structure, an eligible captive plant consumes its own power first and exports only surplus electricity under a LASERC-approved standard contract. The buyer could be the distribution utility, an approved market operator or a licensed supplier serving a constrained feeder. Payment should combine an energy price with time-of-day or locational reliability premiums so that power delivered when Lagos most needs it is worth more than power delivered when it does not. This model is simple, bankable and ideal for factories, malls, hospitals, universities, ports and large estates.