FirstPower has a most perplexing problem for a Nigerian business: too much electricity. In a country with an enormous power deficit, where grid power is only available for a few hours each day, its 14-megawatt power plant in Ijora, an industrial hub in Lagos, has been ready since early 2015. It cannot be brought online because the local distribution company (Disco) – the regional government granted monopoly – has no incentive to “play ball”.
Despite the recent privatisation of Nigeria’s power sector, the electricity industry has not been deregulated. Rather, the old state distribution behemoth was carved into “Nigeria’s 11 primary Discos [which] are monopolies”, as the Nigeria Electricity Regulatory Commission (NERC) admits. As a result, competing private plants are routinely denied permission to distribute by the NERC.
The scale of Nigeria’s grid-electricity deficit is daunting. The rough metric for emerging markets holds that developing economies need about 1,000 MW per million people in order meet demand. This suggests that Nigeria at the present time would need substantially north of 100,000 MW to slake its thirst for electricity. On the best day, Nigeria’s grid generates 4,800 MW. On occasional terrible days, the number dips below 2,000 MW. Reasonable estimates of “suppressed demand” in the city of Lagos alone are north of 10,000 MW.
Simply, regulation is the problem. Rather than pin our hopes on a few white elephant projects for the national power grid, we must enable small increments to come online through quickly-deployable, private off-grid efforts – “eating the elephant one bite at a time”.
The solution to Nigeria’s power crisis lies in the small-scale projects that already exist. Many people and institutions generate extra power in large enough increments to partially alleviate the power crisis. Whether it’s the mattress-foam factory on the outskirts of Lagos that tried and was barred from selling its excess 13 MW to its neighbours, or a vegetable oil refiner in the Niger Delta that only needs 2 MW of the 6 MW that it has installed and which would happily sell the rest to nearby industry, I have encountered about a hundred such producers in just the last year.
The often-touted solution, the power grid, won’t save Nigeria for two reasons.
First, despite reassurances from government officials that the country is on the cusp of a massive and sudden rise in the generation capacity of the Nigerian grid – they euphonically chant “20,000 MW by 2020″ – the arithmetic does not add up.
Even if by December 2015 Nigeria could struggle to a reliable capacity of 5,000 MW, and then managed to increase the growth rate of its electricity grid – historically under 5 per cent a year – to the same growth rate of 7 per cent that a developing India managed, we would still generate only 7,000 MW by 2020.
Indeed, the “fastest sustained growth rates” in any power sector’s history came from industrialising Vietnam and China, but matching these countries at 14 per cent would give the Nigerian grid only 9,500 MW in 2020 – 10,500 MW short of a target that most acknowledge would only begin to solve the problem.
Second, practical hurdles further hamper grandiose efforts. To achieve the 20,000 MW by 2020 plan that government has avowed, Nigeria’s grid capacity would have to grow despite the bottlenecks of federal ministry approvals; Power Purchase Agreements from the government-run Nigeria Bulk Electricity Trader; the gas supply, processing and transportation problems that plague large domestic projects; and necessary government sovereign immunity waivers – all before plant construction and vital transmission upgrades. To achieve even limited success we would have to grow our grid at over 32 per cent each and every year – a whopping two and a quarter times better than China managed during its boom times.
The truth is that large power plants simply take too long. For example, the 450 MW Azura power plant that was recently given approval with much fanfare has already spent six years on the drawing board even before construction will begin next year – the plant will not be completed and commissioned until 2018 at the earliest.
Thus, we must change the way that we regulate power, and allow hundreds of small projects that can be deployed quickly.
The regulator needs to make a fast track that takes fewer than six months to allow those who want to generate and distribute power to willing buyers to do so. As Eyo Ekpo, a former NERC commissioner, pointed out: “We didn’t privatise because we wanted better management – we privatised because we wanted growth!”
In that spirit, Nigeria must look at the excess power that lies idle and give licences to its entrepreneurs willing to take up the slack.
We have just had the second anniversary of the power privatisation. We must acknowledge that Nigeria’s solutions lie not in the privatisation of power assets of uncertain quality and provenance. They lie in the deregulation of the industry so a multitude of existing small projects can put excess resources to work – and then build more.
Timi Soleye
Soleye is president of CRYO Gas & Power. He lives in Lagos.
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