Fixing Nigeria’s electricity problem
The problem with power sector has remained largely unresolved in the three and half years of Muhammadu Buhari administration. It has rather been characterised by buck-passing by officers of his government.
The power sector is a volatile, uncertain, complex, and ambiguous environment. The industry is complex and is characterised by issues such as regulatory challenges, geopolitical pressures, environmental issues, and bad leadership, among others.
The ideal power delivery model for Nigeria envisages a transmission wheeling capacity that is at least 20 percent higher than the generation capability and a distribution capability that is at least 20 percent higher than the transmission wheeling capacity.
The generation companies have an available capacity of about 8,000 megawatts (MW), with a transmission system which can only transmit about 5,000MW and a distribution network only capable of absorbing about 4600 MW.
Due to sub-standard transmission and distribution system, generated power becomes rejected or is forced to be reduced to match the infrastructure that distributes this power to the customer, making GenCos operate below their optimum. The generation plants are now being run as regulating power reserves by TCN, via its subsidiary SO/NCC.
Experts have prescribed solutions such as procurement of regulating and spinning reserves as well as tools to manage the grid.
TCN has refused to put these in place but are forcing Gencos to operate outside factory capability.
The frequency of instructions to either increase load or decrease load and in some cases shut down has caused damaging stress to machine components. These instructions, reflective of the grid behaviour, are subjecting key electrical components of the power plant to operational stress.
All the thermal and hydro power plants are designed to operate optimally and efficiently at base load. Operating these plants far away from their base loads implies a reduction in efficiency or increase in consumption of gas (for the thermal) by as much as 15-20 percent (extra cost not recognized by NBET nor captured in the MYTO).
In all jurisdictions, the imperatives of power transmission networks cannot be over-emphasised. This is because the transmission network constitutes the vital channels of the entire power value chain. It goes without saying that the growth of the power sector is contingent to development of a robust and a non-collapsible transmission network. With the steady and commendable growth of power generation, both installed and available in Nigeria, it is only possible that what is generated can all be evacuated or transmitted. A more worrisome matter is the inadequacy of power evacuation infrastructure which is largely responsible for the recurring supply shortages in the nation. Transmission, which is the critical link of power supply with no fall-back option, is incessantly ignored due to multifarious reasons.
Joy Ogaji, executive secretary, Association of Power Generation of Nigeria, said the Nigerian Electricity Market (NEM) expects high performance from the transmission Company of Nigeria (TCN) since it enjoys all the necessary support from the government. However, the reverse is the case.
Ogaji said it should play central and neutral roles in complementing the NEM through efficient power evacuation. This is far from being the case at present. There are predominant system outages which are often said to be caused by the Discos to reject load.
“The market expects efficient and adequate control of the grid network by the system operations sub-sector of the TCN. This is not evident, given the fact that system operator (SO) is still using radio and telephone communications systems to control the grid in the 22nd century as against deploying SCADA.
“SCADA takes a big chunk of every year’s appropriation but at the end nothing comes out in terms of deploying SCADA. Poor communications system leads to the incessant system outages being experienced today. These outages take very devastating tolls on the Gencos who are not even considered for the associated deemed capacity”.
The executive secretary of Power Generation Association of Nigeria said by virtue of the Power Purchase Agreement between Nigerian Bulk Electricity Trading Plc (NBET) and GenCO Power Plc (GenCo), GenCo is entitled to invoice NBET for the capacity payment for each billing period upon receipt of the final settlement statement from the market operator, following the applicable billing period.
However, NBET has not paid GENCO for its available capacity since February, 2015.
The Legacy GenCos as well as NDPHC are yet to be paid accumulated deemed capacity. Capacity payments are global norms in the electricity supply industry and play critical roles in enabling the GenCOs optimise generation capacities, and making such capacities available when called upon. In every electricity market, there are integral parts of Power Purchase Agreements (PPA)-Must-Occur events (payment for nominated capacity, metered energy and deemed capacity).
More than four years after the establishment of NBET, what is evident to both international and local investors in the power sector is that NBET is deficient in the required capitalisation to meet its obligations. It also lacks the ability to provide adequate and sustainable payment securities backed by the Federal Government under PPAs.
The distribution sub-sector represents the area in need of massive infrastructural growth/development to enable the impact of gains in the generation subsector to be appreciated. Research has shown that nearly 35 percent of installed distribution capacity is not available real time, due to aged, overloaded and fragile infrastructure.
In recognition of the fact that the Discos are the only source of revenue into the market, there is need to engage them on the imperatives for improved billing and revenue collection as well as technical loss reduction.
Discos have repeatedly stated that a critical factor to improved revenue flows is tariff. In this regard, it must be noted that not all that is supplied is billed, and not all that is billed is collected (commercial and collection losses).