Assessing Fashola’s roadmap for change in the power sector
The Honorable Minister for Power, Works and Housing, Babatunde Raji Fashola SAN, recently outlined his roadmap for change in the power sector in a public lecture on the Power Sector and the presentation of a book on the Fashola era, written by Opeyemi Agbaje, a public analyst.
The theme, “Nigeria’s Electricity Challenge: A roadmap for change” has been erroneously presented on social media as an unveiling of a new power sector roadmap by the Minister. This is not quite correct as it was not a roll out of a new road map for the power sector, but an update of the activities and strategic plans of the Power Ministry under his leadership in dealing with the challenges facing Nigeria’s power sector.
It is heartwarming that Fashola has chosen to be practical and realistic, by staying the course of implementing existing roadmaps in the power sector, even though he opts to take a different route. The roadmap for change include; achieving incremental power, following which we should aim to attain, steady power and perhaps uninterrupted power.
Achieving Incremental Power
In achieving incremental power, Fashola’s main goal is to look at solving the problems of the past and in addition, address the hitherto “small things” done poorly in the past, in a different way such “that every megawatt of power must be harnessed and made available to our people”. These small things include poor electrical installations, poor workmanship, use of sub-standard electrical materials, poor service delivery, theft and vandalization of electrical equipment and installations, electricity theft by electricity customers, court disputes and protests against the efficiency of the power sector in order to resolve grievances.
Resolving these issues by doing these things better would lead to a pronounced reduction in technical losses arising from poor electrical installation, poor workmanship and use of sub-standard electrician materials. These issues result to commercial losses which form more than 20 percent of losses in the Nigerian power sector.
Protests that seek to shut down electrical facilities, like the one recently carried out by the Electricity Union as a result of labor disputes with Ikeja Disco deny electricity customers of their right to electricity and constitute huge revenue losses.
Electricity consumers actually consume less than 2GWh of actual electricity generated, based on an average distribution loss factor of 50 percent. Addressing these issues alone will lead to more megawatt hours of electricity supply to millions of homes in Nigeria.
The road to incremental power rests on the following strategies:
Capacity recovery of existing generation units to their installed capacities by way of overhauling and/or carrying out maintenance on a turbine by turbine basis. Out of the 140 turbines in the country, less than 78 turbines are available for power generation. Key to this strategy is restoring the hydros; Jebba, Shiroro and Kainji to their installed capacities to reduce the dependence on gas fired power plants and impact of poor gas supply to these plants.
Resolution and settlement of court disputes that have held up power projects from either being implemented or completed. An example is the resolution of the Enugu Disco/Geometric Power dispute. This should free up 141MW of additional power to the Aba and Ariaria industrial areas within the coming months. Other notable court disputes are stalling the commencement of the 700MW Zungeru and the 3,000MW Mambilla Hydro power plants.
Providing necessary government support (financial guarantees, credit enhancements, etc) to new power projects to get them to financial close. The 450MW Azura IPP in Edo State is a good example.
Resolving gas supply issues by repairing vandalized oil and gas pipelines and delivering additional gas commitments to power plants, in collaboration with the NNPC and Ministry of Petroleum Resources. However, with the resurgence of violence and militancy in the Niger Delta, perhaps this may be a tall order.
Completion of existing power plants built under the NIPP that have gas supply. NIPP Gencos such as the 635MW Calabar NIPP and the 225MW Gbarain NIPP are due for completion and commercial operations before the end of Q2/Q3, 2016.
Diversifying our energy mix to include generation from solar, coal and hydro sources. This plan includes stimulating investments to reactivate old and disused dams with a potential to generate electricity.
Fast tracking the Rural Electricity plan by June 2016, which should unlock the completion of over 2,100 rural electrification projects in 2016 alone.
The roadmap for achieving incremental power also focuses on resolving the transmission constraints, which currently limits available power to 5,000MW. According to Fashola, while there are 126 transmission projects planned to address some of the transmission constraints, a good number of these projects are stalled for a variety of reasons ranging from transmission equipment for some of the projects being abandoned at the various ports, right of way issues for transmission lines, community compensation issues, contractor issues, court cases and funding issues. The Power Ministry intends to complete 47 out of the 126 projects within the 2016 projects that would deliver more power to consumers.
Attaining Steady Power
Even at 7,000MW, Nigeria would still not have enough power generation for its people. Attaining steady power supply means that power must be generated in excess quantities across Nigeria to meet demand and also to compensate for downtimes as a result of turbine maintenance. Thus the strategies under this plan are mainly to:
Add new generation capacities to the grid on a continuous basis. Having resolved the court disputes, the 3,000MW Mambilla hydropower project is central to attaining steady power.
Promotion of the captive and embedded power model to provide dedicated power to universities, teaching hospitals and industries.
Outside of increasing power generation, Fashola also harped on the importance of closing the metering gap and 100 percent metering of electricity customers, accurate reportage of power issues and accurate census and other data for energy planning purposes.
Uninterrupted Power
Having attained excess power generation, the next logical step, according to Fashola, is to ensure there is uninterrupted power. In this instance, it is more of human actions to sustain the continued provision of megawatts. Fashola puts forward the following as imperatives to ensure uninterrupted power:
Financial sustainability of the power sector by ensuring that electricity customers, particularly Government, pay their bills and also assuring service providers of payment for electricity provided.
Energy conservation and adopting energy conservation practices that reduces electricity wastages that is rather sadly prevalent even with the insufficient supply.
Our Assessment
It is a practical roadmap that builds on the existing structures and power sector reforms initiated in past administrations. Nonetheless, we must point out the following five things that would impact on the successful implementation of the roadmap for change:
The financial sustainability of the sector must be the first priority and focus. Investors want to see a clear path to recovering their investments in the power sector. Incremental or steady power will not happen if there is no financial sustainability of the power sector. For instance, all Gencos are being owed significant amounts running into billions. So also are the gas producers. These debts are hindering the ability of the Gencos to finance further capacity recovery and perform scheduled maintenance on existing operational turbines. To this effect, the N213 billion CBN intervention facility to the power sector must be disbursed to the Beneficiaries without further delays. Less than N65 billion of the Facility has been disbursed to date since February 2015.
Foreign exchange constraints should be addressed. The Power Ministry must work in concert with the CBN to fast track the prioritization of foreign exchange to the power sector for capital goods and services.
In the light of renewed hostilities in the Niger Delta, it is now imperative to actually commence the process of diversifying our energy mix by fast tracking the development of alternative sources of generation. Solar IPPs, Coal IPPs and Hydros must now be given full government support. Building our steady power aspirations mainly on natural gas supply from the Niger Delta is an unrealistic plan and a national security risk.
The successful completion of the privatization of the 10 NIPP thermal Gencos is also crucial to the success of the roadmap for change. Beyond the rhetoric of new IPPs, the NIPP process is the most certain pathway to attaining incremental and steady power.
The Power Ministry cannot do it all alone. It needs the Regulator (NERC) to be appropriately constituted without further delay. It also needs certain legislature to back up its energy policies. The Legislature needs to accelerate the passage of the Petroleum Industry Bill (PIB) to stimulate investments in gas exploration and production. Also, there has to be more stringent laws to penalize, rather than criminalize, energy theft.
With the signing into law of the 2016 Appropriation Bill (2016 budget), it is time to stop dwelling on the past and get to work now. As the Minister himself said in his opening remarks, “we must not dwell on the past so we can retain the capacity to focus on today and tomorrow”.
Odion Omonfoman is an energy consultant and the CEO of New Hampshire Capital Ltd. Please send feedback to orionomon@outlook.com
ODION OMONFOMAN