Cross section of participants at the Power Panel Session during the recent NAEC conference
…Electricity is generally subsidized
…25% of energy consumed is collected from the market
…TCN advocates revenue from electricity to equate energy supplied
…TCN drives the power value chain despite challenges
…Minister of Power to bring stakeholders in the value chain together to synergize
…Government should encourage industrialization with collaboration
Since 2005 when the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body to regulate power in the country, power has not improved and the electricity industry has failed to meet up with expectation in tandem with the reforms.
The plan of the reform was to ensure that power transcends across the country to enhance industrial growth especially Small Medium Enterprises, (SMEs) with employment. Therefore, as part of the reform, power was unbundled and sub-divided for effectiveness hence the private sector was involved to take greater chunk of it from gas-generation-transmission-distribution.
In the power value chain, gas, generation and distribution are handled by private operators while the government through Transmission Company of Nigeria (TCN) is saddled with transmission of power.
Notwithstanding, what seems to be a good gesture to meliorate the system further worsened it. Present state of power in the country is deteriorated leaving no sign of any reform as current power generated in the country hovers between 3000 to 3500 megawatts (mw). For the past five years, there had been bulk passing among power stakeholders within the value chain each blaming the other for poor electricity supply in the country.
Recently, at a conference organized by the National Association of Energy Correspondents (NAEC), in a panel session which comprised all the value chain in the power sector, issues bothering electricity and its dwindling nature were discussed by operators and regulators especially Generating Companies (GenCos), TCN and Distribution Companies (DisCos). As the blame game persists, Nigeria groans in darkness.
Explaining the roles that TCN has played including strategies put in place to boost electricity in Nigeria, General Manager Project Coordination, TCN, Engineer Ganiyu Aliyu who represented Mr. Mohammed Gur, TCN Managing Director, posited that plans are in the works to transmit power to Nigeria. TCN plans to upgrade electricity supply from 7000 to 8000 and going forward to 20000 megawatts in Nigeria.
He made it known that there are plans to take power stations to the north in order to expand transmission network. Electricity needs to be balanced; sometimes the GenCos are instructed to ramp down power generation. One thing about electricity, it cannot be bottled or enclosed like oil, generation is based on demand and request from the market. “If the demand is low, you can’t stop the power, you have to ask them to go down, if you don’t ask them to step down the generators will be shut or they will increase their generation and we will have system imbalance. This will lead to system collapse.”
TCN has asked DisCos to invest to its network, there are 737 interfaces with the DisCos and most of these interfaces are not protected. For instance, if it rains, network will be shut down because the DisCos have weak networks. The network cannot sustain power which is a major problem.
Aliyu noted that the northern part of the country especially in the north-east, some parts are about 1000 kilometres away from generating plants leading to poor quality supply coupled with insurgency.
Recently about five months ago, consumers’ electricity bills were increased and consumers are complaining of paying double of what they had been paying without any corresponding power supply.
Engineer Aliyu said generally, the government is subsidizing electricity and about 25% is collected from the market. Everything boils down to revenue collection. TCN is affected by low revenue hence 25% total power weight in the grid and the company has not been paid and this translates to its investment in the network. Sustainability of network can be attained if there is enough revenue base to support it. This is why cost effective issue is being raised by the value chain from generation to distribution. TCN advocates a system where the revenue gotten from electricity equates energy that is being given to consumers such that the system gets back what is sent out to sustain power.
A lot has been said about state of transmission network and the government has sought for foreign assistant to upgrade the network. When in the nearest future will the country attain a breakthrough point whereby TCN is no longer a bottleneck and all challenges phased out? And consumers should expect sustainable energy.
Aliyu spoke optimistically that TCN is doing a lot to improve its network and it has achieved a lot. Before, it is the weakest in the value chain but at present, it is leading in the power chain and others in the chain can attest to this fact.
TCN drives the whole electricity value chain despite challenges; it has solutions to problems confronting the power sector.
The TCN helmsman revealed that bilateral business follows conditionality from donors. Some request will be made and conditions must be fulfilled before funds are released. For instance, issue such as environmental-social impacts and technical studies, until they are solved, no fund will be assessed.
He added that at present, “TCN has an understanding with World Bank to the tune of $4.3 million to improve power supply in Nigeria and by 2022 the country will attain 20,000 megawatts.”
On the issue regarding Siemens contract that was signed recently between the Federal Government and the German company, local contractors are involved contrary to insinuations that the local companies are jettisoned.
According to Ganiyu, the Federal Government and Siemens are strategizing on how local contractors can be involved in the project in line with the country’s local content policy. Main engineering body in the country is also mounting pressure on the government to ensure that local engineers benefit from the Siemens power project.
Giving her own perspective at the power round table talk, the Executive Secretary, Association of Power Generation Companies (APGC), Joy Ogaji, stated that 80% of power generation currently today in Nigeria uses gas, “So, whenever we hear meeting on gas because major stakeholders are involved in the power sector, we are concerned.”
She advised that the new “Minister of Power should bring stakeholders together to synergize and work together with a working relationship with the Ministry of Petroleum because major feed stock for the power sector comes from the ministry.”
If the situation is not addressed or stakeholders cannot get right the country’s dream of having power increase whether 10,000 or 20,000 megawatts will not work despite the call for renewables. Renewable mix is good but the sustainability of Nigeria’s power needs come majorly from gas.
Ogaji said the system operation side of TCN shows that there is a demand for about 6000 megawatts. Looking at that demand shows that there is viability of gas to power in Nigeria.
Currently all the GenCos put together have installed capacity of 21,427 megawatts. But what is made available to Nigeria is 7500 megawatts, this figure in 2013 when the market was privatized till date what has been utilized is 3500 megawatts leaving behind 3000 unused.
According to Joy Ogaji, “If you look at the figure of what is now utilized, you will be discouraged as an investor in the gas to power value chain. If what is even available is not been utilized why do I go into gas?”
Ogaji stated that the demand for power in Nigeria is like a teenager struggling to be free from parental control. Therefore, there is an increasing demand given the technological advancement and Nigeria is one of the countries to be reckoned with.
If Nigerian youths are yearning for technology, the need and importance of power cannot be discountenanced. Viable sustaining power is needed in the country.
The agreement that was signed in the power sector has a promise of capacity payment and what is made available will be paid for. What is made available is 7000 while 3500 is being used in the country but what is being paid for is the energy component of 3500. The incentive is to take more gas and make power available but no synergy in part of government for instance, the policy document from the Ministry of Power projects 10000 megawatts by December and what the country uses is 3500.
Ogaji spoke on the Siemens road map that was recently signed between the Nigeria and Germany; it states that Nigeria will attain 7000 megawatts. Ogaji asked, 7000 of what? Because the country already had 7500 megawatts. “Is it the available they are talking about or installed? if it is installed, we have 13,427 megawatts, if we are talking about the actual, what is incentive for a GenCo to go buy gas will take to pay obligation. You will be given power that is not utilized and you don’t know when it will be utilized.”
There is need to work together with appropriate information because the power value chain is disrupted hence the DisCos, TCN and GenCos do not work in harmony. “Until we have a round table like we are having here with strong decision makers, with a strong political will, willing to make sure that power is available to Nigerians, there will be no head way, Ogaji warned.”
She noted that the expansion capacity of the 28 power stations of GenCos, each of them apart from their installed capacity is making plans for improvement. For instance, Egbin power station has capacity of 1320 megawatts and it has plans to expand to 5000 megawatts.
On why GenCos are not exploring other frontiers outside the urban areas, the current GenCos have been diversified and majority of the capacity available in the mainstream are in the renewables to explore other sources.
Out of the 7500 megawatts that is available only 3000 megawatts is being utilized. Looking at actual installed capacity 6625 megawatts do not provide money for GenCos.
The APGC Executive Secretary stated further that the available 3500, DisCos are able to remit paltry sum of 25% to the market, this means about 6625 megawatts is not being paid for. “Unfortunately, it is nobody’s business and no one cares to know about it rather than saying GenCos continue to ramp up capacity and if you don’t increase capacity you are saboteurs.”
Although TCN has made its intension known that it is expanding power from 7000 to 8000 then 20000 megawatts. Ogaji noted that the reality being seen by GenCos is 3500, “so whether it is TCN inability to give it to DisCos or it is DisCos inability to take it from TCN, we cannot tell. This is why we need coordination and leadership in the gas to power sector or the power sector as a whole.”
The new Minister of Power being an engineer by profession is believed to have vast experience in power and is expected to put sanity and life back in the sector.
Ogaji expounded that the government and operators need to work together, “operators wouldn’t want a situation where they will read in the pages of papers about what government has decided about the business regarding power sector. There should be a synergy such that stakeholders and government will decide on the way forward without isolation on the part of the authority.”
Power is no longer free and electricity is not a delectation that cannot be paid for as some Nigerians think, “If you want it, you have to pay for it.” If asked how many people are paying for electricity, the response will be in the negative. How can GenCos continue in business if electricity is paid for?
Ogaji appealed to Nigerians to pay for electricity, “so that we can be at par or better than Brazil, this is not orange versus apple, this is orange versus orange in the Brazilian example.”
The GenCos boss decried that it had been a shame identifying with the power sector each time she had engagements outside the shores of Nigeria. The GenCos work tirelessly to ensure that electricity is generated across the country but they have not been getting in returns efforts put in place in terms of electricity generated.
She advocated for sustainable policy on the side of government. There is a policy lacuna in the energy sector. Energy Commission of Nigeria (ECN) is the policy making body for energy sector in Nigeria, but hardly acts or do anything that will project ideals of the power sector.
The General Manager, Communication and Public Relations of Niger Delta Power Holding Company Limited (NDPHC), Yakubu Lawal, was of the view that at present, the company is the largest capacity holder in terms of generation in the country. It has more than 3000 megawatts generated in the country.
Lawal made it known that challenges on the issue of gas is finance, the power market is nascent and young. GenCos rely on Nigerian Bulk Electricity Trading Plc, (NBET), for payment assurance scheme which is known as 701. This helps to sustain power supply in Nigeria because it makes the Federal Government to be able to pay liability which GenCos pay to gas producers.
He submitted that government has to support the system and therefore there should be collaboration among stakeholders to move the power sector forward. No chain can be left behind in order to avoid distraction, synergy among stakeholders will resolve issues bothering the system.
He stated that the GenCos support decision of TCN to seek for eligible customers that can pay for electricity in order to expand capacity.
SOLUTIONS FOR THE POWER SECTOR
Stakeholders believed that since industry operators know the challenges and issues bothering the power sector, if they brace up, the future of gas to power value chain in the country is bright. There is need to put efforts and hopefully, if there is synergy across the chain, the issues will be solved. They spoke with optimism that the gas to power value chain will work.
However, the reality is that Nigerians should know that gone are the days where electricity is taken for granted and seen as free. The new Minister of Power should enact policy that will enhance the power industry because policy is the bedrock that can enhance the power sector.
In the gas to power value chain, the commercial eco system has to be reviewed. The commercial perspective is significant, Ministry of Petroleum Resources and Department of Petroleum Resources initiated a programme known as National Gas Flare Commercialization Programme which is targeted primarily to take flares across the country. Government idea is to control flaring in the country while interested participants can take the opportunity to invest. It creates commercial opportunity for anyone interested in the gas space to monetize it.
The gas to power is viable but policy to enhance it should be done. The government has declared eligible customers so that at high voltage 230kv and multiple KV level, eligible customers can be supplied. This is in addition to what the DisCos supply in the market.
Notwithstanding TCN wants the government to make final policy on capitalization of DisCos, they lack both financial and technical capacities. To move forward and realize gas viability in the power sector, the DisCos should be recapitalized, bring in more investors who can fund and invest in the DisCos network so that they will be able to take more power from TCN and dividends can get to gas suppliers.
There is need for virile policy and sustainable initiatives to enhance the system which can be done by market operators and government agencies to pull all the stakeholders together and resolve the issues. There has to be different fora with a working session where operators in the sector will meet frequently and deliberate way forward. This will bring sanity back to the sector.
The gas to power value chain has huge prospects with huge opportunities. Government intervention is pivotal going forward but it cannot guarantee investors while the sector is sluggish hence it will not attract investors because it will not grow. Therefore, the country needs a contract-based industry for any investment.
If Nigeria wants a virile power sector, there has to be synergy among stakeholders in the chain such that no one will be working at cross purposes in order to supply power to the nation. The government should encourage industrialization with collaboration in the sector.
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