Demand-supply imbalance in power industry: The need for strategic intervention

The power sector in Nigeria with its huge investment prospects across the value chain have failed to command investors’ confidence as operators continue to grapple with avalanche of challenges that have plagued the sector in decades.

A cursory look at the sector indicate that operators still grapple with challenges of poor plant maintenance, lack of adequate spare parts and vandalism of electric utilities across the country which in turn engenders poor operational performance.

Industry watchers observe that these hiccups no doubt account for why installed capacities which are grossly inadequate exceed actual generated capacity.

According to the World Bank, Nigeria’s per capita electric consumption is 142 kWh which industry experts opine is as a result of the long years of neglect and inadequate investments by previous governments which in turn accounted for dilapidated, weak and obsolete transmission and distribution networks, high technical, non-technical losses. They maintain that Nigeria will find it difficult to address the demand and supply imbalance in the power sector unless strategic measures are put in place.

Issues around the power sector

Energy experts observe that imbalance in demand and supply of electricity will always present a big challenge in Nigeria achieving her target for industrial growth and productivity.

Apart from the challenge of poor maintenance culture, Ayodele Oni, an energy experts in a recent article disclosed that ineffective regulations, inappropriate industry, market structure, unclear delineation of roles, duties and tasks, low level of technological upgrade together with abysmally poor maintenance and investments levels also contributed to the pathetic state of the sector.

Oni however hinted challenges like low tariff, poor revenue collection, gross inadequate metering, poor billing and electricity theft; must be urgently tackled by operators if not its effect will continue the trend of huge revenue losses.

Although, there are indeed challenges such as the poor grid network, challenges with gas supply, human capital and a few other challenges etc.

Seyi Fabode, CEO/ Co-Founder of Power2Switch in a recent article wrote that challenges in the power sector were as a result of neglect to invest in power infrastructure development and maintenance.

According to him, “There were no power stations built in Nigeria throughout the 1990’s. We failed at long term systems and needs planning because we were too busy just trying to survive”.

Strategies to solve power imbalance

In the opinion of Ayodele Oni, a strategic step towards addressing the demand-supply imbalance in power industry is to design a power policy that involves the central government.

He opines that the power policy provides comprehensive strategies for power sector reform and the political-will needed to sustain the reform process. “The policy is typically the starting point and provides the broad guidelines for the reform programme”.

Oni further said that following the development of a power policy, there is need for the enactment of relevant legislation necessary for implementing the said policy.

“This is necessary because policies require a legal instrument for their implementation”, Oni said.

With the enactment of the “Electricity Reform Act 2005 by the National Assembly, it is safe to conclude that the relevant legislation for the implementation of the policy has been put in place. The Electricity Reform Act provides a regulatory framework within which all the relevant institutional, commercial and other operational aspects of the Nigerian Electric Power Sector would function.

Oni was very emphatic when he disclosed that to experience real improvements in the Nigeria power sector; funds should be spent on Research and Development (R&D), on reducing electricity theft, particularly through the improvement of metering and reduction of damage to electricity equipment and infrastructure.

In his word, although, the Nigeria has stringent legislative provisions on arson and damage to electricity installations particularly in the Miscellaneous Offences Act, investors need to invest in technology such as remote sensing equipment and even security personnel to reduce damage to such equipment and installations.

“State of the arts technologies need to be deployed to help improve the electricity supply value chain. Apart from the foregoing, the training of personnel in the sector is very pertinent for the impact of the funds expended so far and that would be further expended, to be felt”, Oni added.

“Provision of electricity ranks very closely in importance to good governance because it is a big input into productivity growth, especially in the long run, which, in itself, is a strong driver of economic growth.

“If we increase the productivity of the average Nigerian, we increase the growth of the economy. Increased productivity result in greater money earned which in turn leads to greater money spent and improved credit flow within the economy”, Seyi Fabode said.

He further observes that current policies are structured to rebuild or improve old infrastructure and maintain less relevant business models. The good-governance experiment is currently ongoing in Nigeria; it’s time to begin the provision-of-electricity experiment with a clear view of the industry’s future.

Fabode maintains that there is a chance to start afresh in Nigeria, as the way electricity is generated, produced, stored and marketed is changing. There is a wider array of choices for generation as there are storage options which serve the needs of average Nigerian homes at less cost than the current diesel alternatives, and smaller companies can get into the business of producing electricity for different segments of the market.

“The distribution and transmission is provided by an asset owner who only collects rent on the usage of transmission lines. The oversight is provided by government entities that, based on a clear understanding of where value lies and where things are going, ensure that all parties play fair. The service provider, or marketer, ensures that the average consumer receives the optimal customer service because anything less means the customer can move to a competing business”.

He insists that this new business model solves the real problems facing the Nigeria power sector; generation and a focus on solving the problems of the past. And by the way, taking the future virtual utility approach also solves the problem that continues to plague the Nigerian economic mindset.

“It places the convenience and productivity of the consumer as the priority, because that is really the point of this whole industry; to provide electricity to consumers safely, securely and affordably. It isn’t rocket science, we just need to start taking our citizens seriously”, he added.

KELECHI EWUZIE