Continuous grid collapse threatens SMEs’ power generation

When Majiri returned from Germany to set up a company in Nigeria that caters to women and men desirous to wear their hair natural, she took power and infrastructure for granted and now, it seems that she had made some serious business mistake when you look at the challenge businesses are facing over power failure.

The recent one of June 15 was another that resulted in operational challenges, which many have referred to as system collapse because power was seized between Jun 15 and 16 until the early hours of June 17.

“The Transmission Company of Nigeria hereby state that as a result of gas pipeline rupture on the 15th of June, 2018, as well as technical issues at the Shell gas wells on the 16th of June, there has been a sharp drop in generation into the grid by a total of 1,087.6MW, resulting in load-shedding nationwide, necessary to maintain stability of the grid” Ndidi Mbah, general manager, public affairs, Transmission Company of Nigeria (TCN) said in an email response.

“Inconsistent electricity provision raises the production costs borne by businesses. The entrepreneur is hurt by poor and underdeveloped transport systems, and wants the government to fix these problems to enable businesses have a breath of fresh air” Majiri Otobo, founder and CEO of Kuicare Limited, said.

Two days into 2018, Nigeria’s power transmission grid recorded a first major collapse January 02 night due to a fire incident on a gas supply pipeline leading to widespread blackout across the country, BusinessDay had reported.

“Regrettably, after a sustained period of increasing production and distribution of power since September 2017 to date, the Nigerian Gas Processing and Transportation Company Ltd (NGPTC) has reported a fire incident on its Escravos Lagos Pipeline System near Okada, Edo State on Tuesday, 2nd January, 2018,” said a statement from the ministry of Power, Works and Housing.

As a result of the incident, a shutdown of the pipeline supplying gas to Egbin 1,320MW; Olorunsogo NIPP 676MW, Olorunsogo 338MW, Omotosho NIPP 450MW, Omotosho 338 MW and Paras 60MW power stations were effected.

The sudden loss of generation due to interruption in gas supply from these stations caused the national transmission grid to trip off around 20:20on 2nd January 2018. The national transmission grid is owned and operated by the Transmission Company of Nigeria (TCN).

Nigeria generates 74 percent of its power from thermal power stations that require gas for fuel. The gas is produced by oil and gas companies overseen by the Ministry of Petroleum Resources. The gas is delivered to the power stations through pipelines owned and operated by Nigerian Gas Processing and Transportation Company Ltd (NGPTC), a subsidiary of Nigerian National Petroleum Company (NNPC).

“TCN and the generation companies are working to restore operation of the national grid. Once the national grid is restored output from the hydroelectric power stations and all other unaffected gas fired thermal power stations will be increased to the extent possible to minimize the impact of loss of generation from the affected power stations while NNPC takes necessary steps to restore gas supply,” said the statement in January.

People with deep knowledge of the sector say insufficient cash flows have significantly impaired the ability of electricity generating companies (GENCOs) and DisCos to recover all costs and generate appropriate return on investment.

BusinessDay investigations show that to make Nigeria’s electricity market competitive some urgent steps must be taken to push reforms in the sector further along market oriented lines. To find sustainable solution to the power sector woes, experts have suggested some steps.

Debts are accumulating at the Nigerian Electricity Supply Industry as only four of the country’s 11 DisCos, paid for supplies of power they received for transmission to their customers from the generation companies, GENCOs in January 2018.

BusinessDay’s check shows that that the highest percentage of revenue paid by the distribution companies for electricity received from the generation companies is 29 percent.

Total debt stock in the power sector is close to N800 billion, a source with knowledge of the matter told BusinessDay. Creative financial deals, backed by sovereign guarantees would be needed to free the power sector of this debt.

The government needs to give up its 40 percent equity holding in the DisCos. This could take place in stages. The 40 percent could be managed by a consortium and some commercial banks. However, the government will have to ultimately give up its equity entirely.

Transmission Company Nigeria (TCN) needs to be broken-up and privatised. Experts say this is necessary if the market is to be optimally deregulated.

In other countries where the electricity industry was formerly a government owned, vertically integrated, monopoly; the reforms have generally involved splitting the industry into separate generating, transmission and distribution sectors.

The transmission system often remains a government-owned common carrier, or is kept under extensive regulatory control as a natural monopoly. Stakeholders in Nigeria’s power industry say Nigeria’s TCN needs to be broken up into mini-privatised operations to make the system work.