Embedded power projects stall over turf wars

Embedded power generation, meant to help Nigeria resolve its power supply challenges, is facing significant take-off hiccups. Distribution companies are said not to be encouraging embedded power generators because they perceive the embedded power generators as taking away their most lucrative customers. This has created friction and is holding back the development of new projects, sources in the industry tell BusinessDay.

Embedded generation is electricity that is obtained outside the national grid through a bilateral agreement between the generator (that is the company that generates the power) and the distribution company.

The embedded power scheme is an arrangement between small producers, under an agreement for them to supply power to distribution companies, with agreed terms of tariff acceptable to both parties.

BusinessDay findings also show that disagreements on the issue of tariff, environmental agencies opposition of the proposed sites and challenges around irregular gas supply, are affecting the take-off  of embedded power operators.

Environmental agencies in some states believe “The siting of too many embedded power projects around the state is perceived as having some health implications because of their proximity to residential areas”.

Power experts see embedded generation as an important game changer in Nigeria’s attempt to bridge her power supply gap, over the short and medium period.

Industry players say that the key benefits of embedded power generation, notwithstanding the challenges, make it the most tenable option available for Discos to upgrade their services to consumers as it stands now.

Recently, no fewer than 14 firms emerged as possessing adequate technical and commercial capacity to participate in the first phase of the Eko Electricity Distribution Company (EKEDC) embedded power generation programme. However, at the moment, no further information has been heard about the firms, beyond the bidding process.

Oladele Amoda, Managing Director, EKEDC, was quoted as saying that the company is planning to generate about 474MW through the embedded power generation initiative, which would ultimately boost the distribution of electricity within its network.

Amoda said the project was part of continuing efforts by EKEDC to ensure its customers enjoy improved and reliable power distribution within its network, which would more than double its current allocation from the national grid.

According to him, “Following the receipt of NERC’s approval on the submissions tendered, EKEDC will then invite approved companies for final negotiations leading to the signing of Power Purchase Agreements (PPA) with them. Projects alongside the Embedded Power Generation program, are expected to be completed within the next 18 to 24 months, bringing about a most welcome relief to customers who have had to endure long periods of erratic power supply from the grid.”

He is of the view that with the active support of NERC for the company’s proactive measure, customers can indeed expect to enjoy the benefits of the privatisation of the power sector.

Although the EKEDC said it was still expecting a final go-ahead from the Nigerian Electricity Regulatory Commission in this regard, it stressed it would not hesitate to leverage the opportunity, following the dwindling power supply from the national grid to its network.

Amoda further said that embedded plants, located at Ijora, Ogijo and Apapa in Lagos State, would generate 170MW of power in all.

In addition, Amoda said the firm would be getting 100MW of electricity, following the recent rehabilitation of a 220MW steam turbine generator at the Egbin power station.

The repair, which came eight years after the system had become inoperable, brought the plant back to its installed capacity of 1,320MW.

“The rehabilitated and restored Unit ST-06 brings an additional 220MW to the Nigerian national electricity grid and will also bolster power supply to the Lagos metropolis, thereby improving socio-economic activities in the region,” the Egbin Power Plc said, in a statement.

A statement from NERC disclosed that the four embedded power generation licences issued by the Nigerian Electricity Regulatory Commission, have a capacity to generate 273MW nationally. According to the statement, “The licences were issued to Ikorodu Industrial Power Limited, Geometric Power Limited, Kaduna Power Supply Company Limited and Island Power Limited.

The Geometric Power Limited, with  licence number: NERC/LC/009, can generate 140MW at Aba, Abia State. Its initial licence was granted on December 7, 2006, and will expire in December 2016. But according to NERC, the tenure has been extended to December 6, 2021.

The Kaduna Power Supply Company Limited, with licence number: NERC/LC/067 issued on November 15, 2011, can generate 84MW at Kudenda Industrial Area, Kaduna State. The licence is to expire in November 2021.

Island Power Limited, with  licence number: NERC/LC/087 issued on the December 6, 2012, can generate 10MW at Marina in Lagos State. The licence is to expire in December 2022.

They generate electricity in smaller scale and give to the Discos directly. The power generation from the grid is allocated to Discos but embedded power is direct and it is between the company that is offering the embedded power and the Discos.

Industry sources reveal that DisCos are being a bit hesitant about the embedded power plants because of the kind of tariff that they want, as a result of the existing collection problems they are facing.

Analysts observe that the revenue collection in the distribution end of power sector remains an issue because the discos cannot meet up with the revenue target, consequently they are not able to pay the Transmission Company of Nigeria (TCN) the required fees and some of them are struggling to pay their banks, since they are unable to implement their capital expenditure (CAPEX).

With mounting debt, market payment statistics show that on a monthly basis, generation companies’ invoices amount to about N35 billion to N40 billion, out of which only about N7 billion is paid. The implication is that the debt profile of the Gencos is about N30 billion per month.

Investigation has shown that only 20 percent of the cost of power produced across the supply value chain is being paid for.

Analysts observe that issues around steady but unplanned dip in revenue projection of most power distribution companies owing to poor generation recently has further relegated the discussion of embedded power to the background.

 

KELECHI EWUZIE