Transmission, distribution hiccups stall 2020 power generation projection

Absence of adequate infrastructure for transmission and distribution of power across the gas-to-power value chain, if not effectively tackled, may prevent Nigeria from achieving its target to increase power generation to 40 gigawatts (gw) by 2020, BusinessDay investigations reveal.

The projection, according to the National Integrated Infrastructure Master Plan, suggests that Nigeria as the largest economy in Africa by GDP is expected to increase generating capacity to 3gw in 2015, while it is expected to further triple to 105gw in 2025 before reaching 164gw in 2030. This system expansion is expected to eliminate current electricity poverty and raise electricity per capita from the current extremely low level of 140Kwh to 1,110kwh in 2015, 5,000Kwh in 2030.

Analysts observe that tackling transmission and distribution hiccups in the next couple of years leading to 2020 is the right step to achieving this. They however note that to monster the required investment under this current circumstance may be difficult unless things improve by way of clearer government incentives for investment.

Industry watchers are of the view that electricity supply or the lack of it will remain a very sensitive issue with several political and economic sophistications, as the questions that continue to beg for answer among industry watchers is, will Nigeria ever attain effective power supply to grow the economy?

Achieving 40gw of electricity in the view of Dolapo Oni, head, energy research, Ecobank Development Company (EDC) Nigeria Limited, is simply not possible owing to the fact that there are critical issues that need to be addressed.

According to Oni, “There are several issues that need to be addressed on the distribution side of power. For the whole power/energy sector to work, people must pay their bills. People don’t want to pay estimated bills and people don’t want to pay bills for power they don’t get. So, people need some sort of orientation.”

He further points out that generation is always an easy part of the mix because going from 7,000 megawatts to 20,000mw can be achieved within four years. He is however concerned that if Nigeria generates the power but can not sell it or can not transmit it, then it is redundant “so there are several issues that needs to be fix before we can think of achieving going from 7,000mw to 20,000mw.

“We should not expect that much of a change. There might be improvement in terms of generation because there are still several generation plants ongoing, and there are plans to build coal power plant construction, which have started already. There are plans to build more gas power plants; there are plans to increase output from some of the existing ones.”

Oni is optimistic that a lot of things could change between now and then, but the most important thing is for government to provide an environment of stability and certainty of exchange rate risk and remove the reliance on crude oil

Claudius A. Awosope, an industry expert, points out that the mobilisation of the financial resources to support a dramatic scaling up of generating capacity, more than twenty-fold in another four years will be a major challenge, stressing that this must be situated within the context of the risks that would impact the industry.

“Risks associated with investment to strengthen power supply networks in both the short and medium term as investor/producers and the state is essential for efficient allocation of resources in the industry for a sustainable electricity future in Nigeria and the sub-region,” Awosope says.

Wumi Iledare, director, Emerald Energy Institute, University of Port Harcourt, Rivers State, observes that projected year for achieving the increase in power generation is only four years away.

“2020 is only four years from now, the administrative set up and industry governance structure is not in place to make this happen.

“Perhaps, a 20gw dream within the next four years is a more realistic dream and even with that I hasten to opine that we have a weak governance structure for the oil and gas industry to make it happen,” he says.

The immediate past Nigerian government had planned to spend $18 billion to increase power generation, transmission and distribution by 2018. In the summation of analysts, this amount is enormous given industry experience.

They however opine that though this financial requirement is daunting, it is achievable. Only to the extent that the right institutional framework, policy consistency, appropriate incentive structure and security of investment and input would guarantee the required flow of investment.

Both domestic and foreign investors and producers have important roles to play in achieving a sustainable electricity future in Nigeria.

Industry watchers however observe that the problem with investment is a case of where is the money going to come from, because where the money comes from determines how long you can keep the money, what kind of investments you can make with the money and how much of the money you can get.

They point out that sourcing the money outside the economy would mean target foreign direct investment in form of private investors to come and drop the money, however noting that foreign investors would not want to come into the economy as long as there is risk of exchange rate losses.