‘We are in the phase of incremental power’
Babatunde Fashola, Minister of Power, Works and Housing, carries the nation’s burden of improving a good part of the infrastructure upon which rapid development depends. In this interview, the minister speaks of his vision to incremental power supply, steady power supply and shares his thoughts of activities in the pipeline to achieve the target
February is a month we remember with nostalgia, because power generation touched 5,000 megawatts and then a day or two after, crisis broke out in the Niger Delta. There has been some improvement in power recently. How did we get to this point.
I would like to say first that I salute Nigerians for their forbearance amid the difficult times they have had to deal with. That forbearance, for me, remains a lot of strength that we must harness for more productive purposes. I recall I once had to talk about the indomitable spirit of Nigerians.
Moving from there, yes it was quite tough just when we hit that peak and we were planning to ramp up, we had this major setback. Some people would have surrendered and said nothing could be done, but it brought out some of the innovativeness in our team.
However, let me be clear, by setting out the programme of activities in the road map that we are going to go with. We are not now targeting specific MegaWatts (MW) of power because it doesn’t profit people. It is for them to understand what the problem is and what the plan is, that the problem is solved. We decided that we just want incremental power from anywhere, so long as it is lawful, and add it to the grid. From there we can move to steady power and then uninterrupted supply. So we are in that phase of incremental power.
Let me also be clear that the relative stability that we have now is undoubtedly because of the increased rainfall. I would also be clear on what is different. Every year we have increased rainfall in a season, and rainfall means higher water levels. Water energy is our ‘fuel’. It is like gas for thermal and coal for coal power. When it is rainy season like this we have more energy to drive the turbines. But something is different between now and last year. You would recall that when I first became Minister, I went to a few hydro dams and stations. I visited Jebba, to commission the completion of the units that had not been maintained for over 30 years. The same thing happened when I visited Shiroro. There were maintenance and repair works going on there. All of that have been fixed. So between last year even if you had this rainfall, we won’t have the extra power that we are getting now. We are now getting about 405mw extra on the back of that maintenance programme, so that’s a point to note and we will get more because there is still work going on to recover and expand capacity to full installed capacity.
All of them were running at half and below half capacity on poor maintenance. Again let me also say very clearly, that the problems are not technical, they are man-made. Things that we should have done that we didn’t do. If you build a power plant for 35 years, you should maintain it every six years, but you don’t do it for 35 years. Same thing with Egbin, you remember I visited Egbin also, so these are the problems. You build a gas plant and you don’t plan the gas supply to it. You build a gas pipeline then you don’t plan the gas extraction. So they are human problems and we will solve them because we continuously probe and seek to open where the problem emanates and its causes. So it is not a lack of manpower or knowledge. It is just getting people on the same page to fix it.
I also want to say that we have extra power in Lagos because there is an embedded power solution, with a willing buyer and a willing seller. This is what we want to see more often. This was what was in the new tariff and not in the old tariff. Unfortunately, the court has stopped it. Now, just out of an act of faith, they are continuing because this is premium power between a disco and a seller and its 40 megawatts. Let me dimension 40 megawatts for you, it is a lot of energy. Just as you can see, 400 extra megawatts have made a difference nationally. That new power in Lagos is being injected into the Lekki Ajah area, but the price is over and above the current one. What this does is that it frees up the power that those who have signed up to that power will use. Now, the IPP in Lagos Island was just 5.4 megawatts and it powered so many places, because during the day, we were using it for schools and hospitals, courts and all of that. After courts shut down power at night, we move the light to the streets. One of the things I am trying to do constantly is to make it as simple as possible to understand the power situation by discussing it at street level, strip it of all its technicalities so that people can understand what we are doing and therefore come with us and play their own role. That is it in a nutshell.
Let me say that Nigerians should still hold their breath; we are not where we want to be because by early next year if we don’t ramp up power from other sources, the water levels will go down and we will have power reduction, not power outage. The hydro dams will continue to work because they have water in their reservoirs but they will use it sensibly.
Nigeria’s energy mix and incremental power
Again, it is important to make a point that every source of energy has its limitations. The hydro dams are prolific when there are high water levels, solar power is prolific during the day, but at night you have losses unless you now store it in inverters. Gas power plants are the most efficient ways to deliver very big power quickly, but its vulnerability is a broken pipe. Once you lose pressure, that’s it. Coal has its own limitations in terms of environmental issues. So no one is fail-safe. This takes us to the energy mix we announced 30-30-30 trying to increase solar, hydro dams and renewables.
What is happening at the moment to the hydro dams is that we are working with the IFC to finance an expansion of their capacity by doing 300megawatts each of solar, so that at low water level time, they will support.
All of these are going on simultaneously. All of these fall into our incremental power.
We are also talking to some coal developers, but we can’t close on the tariff because there is no transportation facility for the coal, so the cost of transporting the coal, is built into their capital expenditure. By the time we are looking at the tariff, we can’t pass it on to consumers and it is at the PPA level that NERC and NBET begin the protection of the consumer. That’s where it starts.
So contrary to what you hear on the street that they just agree anything, no, it is at PPA level that the protection of the consumer starts. So that’s generally the picture, but a lot of work is going on in terms of transmission work and in terms of our working with Discos to increase their distribution and metering. It’s one step at a time.
I also think that it is important to make the point that there are also liquidity issues, challenges from the way the transaction and privatisation of power assets was curdled together and the gaps in financing. The relative lack of independence initially where by presidential directive, NERC will issue a tariff today and change it at night because election was coming. So that has created a hole that we are managing. But we are going on and the problems can be solved. As long as we have people’s understanding and cooperation we will overcome them. You will see that we completed the Aswan dam solar power project which was at plinth level last year. This is consistent with our commitment that we will complete projects so that people can take value and that has moved on to our housing and road construction. We are just trying to make things work again.
How do we deal with the paradox of a population that is not so well informed about the need for a cost reflective tariff regime and a nation that is hungry for power?
I would answer that question in multiple ways. I think first of all I will pass that responsibility of education to you and your colleagues. I say this frankly, I think you journalists need to engage people who understand the sectors. Not just at a reportorial level but at research level, so that they can educate. So your correspondents who go to interview people in various sectors must be very senior and knowledgeable, so that they can ask questions and probe what they get and there can be follow ups. Not just listen to what anybody says but challenge them.
The second point I would make is that where we are now is also an opportunity that provides reflective thinking. I recently have gotten messages from people who tell me they haven’t bought diesel in the last five to ten weeks and that they are saving money now. By some reverse incidents, people are beginning to see that stable power is cheaper and they can begin to do their math. More of those who begin to do that will conclude that they are ready to pay more for this.
The third is that electricity is perhaps the only service we can’t store easily. So once it is produced the gas supplier is billing, the power maker is billing and the transmitter is billing. Because you can’t store it, somebody has to bear the cost when it is not used and that’s why I keep trying to make it as simple to understand as possible. Now we are talking to some of the Distribution Companies (Discos) too and we had meetings with them; meetings where I have spoken to them about service with a conscience. I heard that one of the big food chains in Europe, once they make a certain line of products and it is not sold within an hour, they take them off. It’s not because it has gone bad, but it’s not the quality they associated with anymore; so they bear the cost. I challenged the Discos that there must be service with a conscience. If at any time we see that there is a problem in the system and it is generic, we must sit down as businessmen to say we didn’t provide this service, can we bill people half or 30 percent. So that when in future we come back to say the cost of doing this business has gone up, they will reflect back at when they were not billed for low supply. Yola disco has already done that. Their Managing Director told me that they had very poor power in July and so they told all their customers that they were not billing them for July. Unless they had old outstanding bills, but don’t pay for July.
Last time electricity tariff was reviewed upwards, the court ruled against it. How are you going to cope
How we communicate what is going on to the general populace is very important. A tariff is never cast in stone. It is predicated on economic indices, like gas prices. When you add that to power generation, how does it add to the cost of labour of those working on the plants. How does the man who does that business balance his books, pay his debt and make profit. So we must explain to people that tariff has to be reflective of the total cost of the whole economy of power generation. Will you take half pay to work in a power plant because you want stable power supply? Therefore, we must pass on this cost. Tariffs are subject to periodic reviews and if those indices change, whether north or south, they become reflected in tariffs. The standard practice is to design a materiality threshold. Whether we take the tariff up or down, it would be because costs have been materially altered in the economy.
It is about time for another review under MYTO. Will the review go ahead after the court ruling?
That’s the job of Nigeria Electricity Regulatory Commission (NERC), not my job. I just sit over the process. To make this clear, unlike when the Ministry of Power produced electricity, sold it and transported it. Now it is largely in private sector control, while the Ministry plays a policy formulation function. NERC is the manager of the tariff and they let me know what they are doing as they progress because there is policy and the polity and there must be concord. This way, we know that if there is going to be a tariff review, the Ministry of Labour is involved because we know that there will be reactions from organised labour. Ministry of Trade is also involved because we know it would affect industries. After these, the Presidency is briefed and decisions are made. What we expect to happen is to come back to the table and talk to everybody again. The more people understand it, the better I think we would be. Some of the parliamentarians who questioned our position then have come back to say we now understand what is going on better and are asking how to move forward.
Again I hope that when tariff reviews are going to be discussed again, there will be much more participation and more understanding, because contrary to what was said, there were consultations. They were documented and I have the records. Perhaps because it was new it met some resistance. Old NEPA never called us to discuss tariffs, so that is the change. Even if we were invited to discuss with NEPA, we would probably be reluctant since there was no power anyway. I think people will participate more in the meeting this time. It is like when the National Assembly issued a notice for public hearing in 1999. How many people took public hearing seriously? Though compliance has increased now, not everybody still takes public hearing seriously. Ours is a similar process.