Improved power for homes, SMEs as more corporates mull off-grid investment

Electricity supply to residential customers and small businesses will see a boost as the current increase in off-grid power solutions by large industries is freeing up power for low-end users BusinessDay has learn.
Faced with epileptic power supply, corporations are mulling the idea of building their own power plants, following the lead of corporations like PZ and Eleme Petrochemicals, that have built off-grid power systems – stand-alone power generation systems which provide industrial clusters with electricity through independent electricity distribution network systems including captive and embedded arrangements.
According to data from the Nigerian Electricity Regulatory Commission (NERC), about 25 licenses have been issued for off-grid power generation for over 300 megawatts of power and over 133 megawatts of embedded power
Last year, NERC issued 126 licenses to firms with a capacity for 35,314MW of on-grid, 428.12MW off-grid and 298MW embedded power generation. Large corporations like Dangote, Lafarge and some others have power plants set to come on stream by 2018.
Sources close to NERC tell BusinessDay that more companies are considering this option.
“If these businesses all proceed to establish their own off-grid energy solutions, of course there will be more power for residential use,” said a high-ranking energy expert, who craved anonymity.
Legal consultants at Detail Commercial Solicitors, say this could favourably impact the economy, “It could potentially transform the economy of these areas; increase profitability for the existing businesses; create jobs; and breed a crop of customers who are willing to pay for electricity supplied.”
The Manufacturers Association of Nigeria (MAN) has identified about 28 clusters for mini-grid modular plants ranging from 5 to 50MW in areas including Ogun and Lagos states. According Detail Commercial Solicitors, the mini-grids require capital investments in the range of about $40 to $400million.
BusinessDay findings reveal that already, residential electricity customers are seeing improved power supply. Data from the Nigeria Electricity System Operator indicates that peak generation this week hovers around 3,900 megawatts. A section of residents in Lagos who spoke to BusinessDay say there has been a noticeable improvement in power situation in their locations especially in major city centres.
“Electricity in my area has improved in the past few weeks, sometimes we sleep with it through the night,” said Akinola Yusuf, a staff of an insurance firm who lives on the Lekki.
Also Ben Ukoh, a printer in the Shomolu Printers enclave also said there has been noticeable power improvement. “Yes, power has improved recently and it is a big relief seeing that the cost of diesel is hitting the roof.”
Babatunde Fashola, Minster for Power, Works and Housing in November last year, unveiled the Federal Government’s road map for solving the country’s power crises which involves attaining incremental power wherever it can be found, achieving steady power and ensuring uninterrupted power supply.
“Our roadmap for change is premised on a simple but effective strategy of providing incremental power which will lead to steady power which will lead to uninterrupted power. I can confidently declare that this strategy is delivering results,” Fashola said at an industry conference in Lagos last month.
The Mambilla Power Station is already proving to be the most defining in the road to incremental power, potentially adding 3,000MW to the grid. Fashola told BusinessDay recently that Nigeria is set to clear a backlog of debt owed to power contractors from the previous administration which had led to the abandonment of over 900 containers of transmission equipment at the ports.
He also stated that government has further resolved some land and contractor disputes slowing down power sector projects and is working on others and was optimistic that these moves would clear the obstacles slowing down the build up of power supply and make for progress.
Experts have long stated transmission infrastructure remains the weakest link in the power value chain, and a dearth of investments in transmission infrastructure continues to hamper generation efforts, there’s optimism that current efforts in this regard will further improve supply.
“Constraints on the transmission and distribution value chain have continued to deny electricity customers the benefit of increased available generation capacity. Investments in transmission and distribution are lagging behind investments in generation. For further investments in generation to continue, investments in the transmission and distribution must meet up with the pace of investments in generation,” said Odion Omonfoman, energy consultant and CEO of New Hampshire Capital Ltd.
Some experts are also calling for diversification of off-grid solutions to include renewable sources. Rolake Akingugbe, head of energy and natural resources at FBN Capital said, “As independent power generation grows in Africa and grid electricity remains limited and unreliable, the economic attraction of renewable energy grows. While diesel generators have become the substitute default choice to grid electricity due to their low upfront costs, they are expensive to operate and maintain, due to high cost of fuel.”