• Friday, April 12, 2024
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BusinessDay

Weak transmission, DisCos’ struggles plague power sector

FG to penalise DisCos supplying less than 20 hours of electricity to Band A customers

Nigeria’s national grid has struggled so far this year, presenting clear evidence of the rot that has worsened the blackouts being experienced by households and businesses across the country.

The country’s electricity value chain – generation, transmission and distribution – is deeply troubled and the operators’ inadequacies are often explained as systemic collapse.

The power sector was privatised in November 2013, with the federal government handing over the distribution and generation companies to core investors.

“Unfortunately, since the conclusion of the privatisation, distribution companies (DisCos) have emerged as the weakest link in the electricity value chain, grappling with substantial operational hurdles,” analysts at CSL Stockbrokers said in a note on Wednesday. “The DisCos often struggle to match the capacity provided by the generation companies (GenCos), leading to idle capacity for the GenCos.”

They said the incapacity of DisCos to efficiently evacuate the power generated by Gencos, coupled with their subsequent failure to pay for the minimum electricity they eventually distribute, results in both technical and economic losses.

Read also: FG committed to end estimated billing in power sector – Adelabu

“This scenario leaves GenCos without adequate compensation for the electricity they generate, and end consumers suffer from insufficient electricity supply,” they added.

Discos are currently grappling with significant operational challenges, including outdated and obsolete networks, inadequate maintenance of network equipment, deficient customer data, low meter penetration, and limited investments due to poor revenues and a lack of external funding, according to CSLS.

Despite the recent strides of listed companies Geregu Power Plc, Transcorp Power Plc and the incoming of Nigeria’s long-awaited 700-megawatts power plant project, Zungeru hydropower plant, experts said Nigerians might not see significant relief from power outages anytime soon.

“Challenges around transmission and distribution of electricity will hobble the efficacy of Nigeria’s newly commissioned Zungeru Hydroelectric Power Plant, the country’s fifth largest generating facility, going by installed capacity,” Africa Oil & Gas Report, an energy intelligence publication, said.

On paper, the Zungeru hydropower plant is estimated to generate about 2.64 billion kilowatt-hours of electricity a year, representing 10 percent of Nigeria’s total domestic energy needs.

Zungeru lines up after Egbin (1,320MW), Sapele (1,020MW), Transcorp (972MW), Ughelli (900MW), Kainji (800MW) in terms of nameplate capacity, but none of these plants delivers to the consumer their capacity limits, for reasons often outside their control.

Data sourced from the Independent System Operator by BusinessDay on the national peak demand forecast on Wednesday revealed that the country has grid installation capacity of 13,014.14MW, while the power generated stood at 3,929.35MW as of 6am.

Meanwhile, the country’s continental peers, Egypt, and South Africa, generate 58,818MW and 58,095MW respectively in 2023.

“The drags to generation capacity have largely reflected issues around gas constraints, routine maintenance, and technical mechanical faults,” analysts at Cardinal Stone Limited said in their latest 2024 report.

Read also: REA, EY to collaborate on sustainable energy access with states & DisCos

“In particular, the legacy lack of liquidity and payment assurance (especially for gas suppliers) was a major bane to generation and the capacity to carry out routine maintenance of machines, with the latter cascading to unscheduled outages,” the report added.

Nigerians are grappling with electricity shortages, with the situation compounded by the incessant vandalism of power assets in the country.

The Transmission Company of Nigeria (TCN) said that Tower 70 along its 330KV Gwagwalada-Katampe transmission line was vandalised recently, leading to the reduction of bulk power supply and volume of power into Abuja by 250MW.

“These issues limit the extent of investment and utilisation of existing infrastructure, leading to frequent disruptions and hindering the sector’s ability to provide reliable and consistent electricity supply,” analysts at Meristem said in a 2024 report.

It added, “The constant threat of equipment damage not only incurs high maintenance costs but also deters potential investors.”

TCN also disclosed that vandals destroyed two transmission towers supplying electricity to parts of the North East last December, leaving Borno and Yobe without supply.

Despite challenges, the electricity distribution companies (DisCos) have seen their incomes soar, according to findings by BusinessDay.

Data from the Nigerian Electricity Regulatory Commission (NERC) showed the total revenue of the DisCos reached N782.58 billion in the first nine months of 2023, up from N598.86 billion in the same period of 2022. This represents a 30.7 percent increase in revenue for the DisCos.

Analysts say recent reforms to improve cash returns including hiking tariff and ramping meter supply are having some impact.

However, Nigeria’s power generation has continued to hover below 4,000MW for years. The creaking grid has collapsed either partially or totally two times this year, largely due to the dearth of spinning reserves – an excess capacity meant to compensate for shortages.

BusinessDay’s findings showed the latest figures on the daily load summary of DisCos indicate that the firms failed to distribute about 1,769.91MW of electricity between February 1 and 14, 2024.

Olu Verheijen, special adviser on energy to President Bola Tinubu, said DisCos are grappling with an estimated capital deficit of N2 trillion (about $2.5 billion) and require fresh investments to revive the industry struggling to adequately supply power to over 200 million citizens.

Read also: FG to sanction inefficient DisCos

“We need to set policies that facilitate reorganisation and recapitalisation and bring in new partners with new capital,” Verheijen said in an interview with Bloomberg early this year. “The recapitalisation will accompany plans to make electricity tariffs cost-reflective, which will improve the liquidity and viability of the power sector.