Policy shift, new investments set to catalyze Nigeria’s electricity market
Nigeria’s electricity market is set to see a boost that will help resolve its liquidity constraints following a directive by the by the Federal Government through the Nigerian Electricity Regulatory Commission (NERC) that electricity generation companies can now sell power directly to customers.
On May 15, Babatunde Raji Fashola, minister of Power, Works & Housing, long frustrated with the antics of the electricity distribution companies who have failed to invest to reduce ATC&C losses, improve distribution infrastructure and improve collections, announced that generation companies (Gencos) could now sell power directly to eligible customers.
The eligible customers comprises of a group of end-users registered with the Commission whose consumption is no less than 2MWhr/h and connected to a metered 11kV or 33kV delivery point on the distribution network and subject to a distribution use of system agreement for the delivery of electrical energy. The next category are those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy.
The other category includes those with consumption in excess of 2MWhr/h on monthly basis and connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement.
The last category are eligible customers whose minimum consumption is more than 2MWhr/h over a period of one month and directly connected to the metering facility of a generation company, and has entered into a bilateral agreement for the construction and operation of a distribution line with the distribution licensee licensed to operate in the location.
This directive is however in line with Section 27 of the Electric Power Sector Reform Act 2005 which permits eligible customers to buy power from a licensee other than electricity distribution companies
Interestingly, investors are entering into negotiations with industrial clusters to provide them power through embedded generation that are to be powered by independent power plants.
A recent example is a new investment by Geogrid LighTec Ltd who recently unveiled plans for a 30 megaatts hybrid power plant to be sited on a 4,500 square-meter space inside Cadbury Nigeria property in Ikeja Industrial cluster and is partnering with Manufacturers Power Development Company to achieve the buy-in of manufacturers.
At the cost of $25million, the proposed plant is billed to run 70 percent on gas and 30 percent on diesel. To ensure that there is no down time; the company said the engines would be maintained at different times.
Geogrid has secured a license from the Nigerian Electricity Regulatory Commission (NERC) for 30MW of power for 10 years, the Environmental Impact Assessment (EIA) has been carried out, and the Lagos state government is partnering with the company on the right of way.
The proposed plant would deliver power either at 11KVA or 33KVA lines depending on transformers available to the customers. Geogrid’s value proposition is that customers would have the option of take and pay rather than the take or pay option. Both options are industry speak for paying for subscribed power whether you use it or not, or pay as you use, respectively.
Oweh Mba-Sam, coordinator of the Manufacturers Power Development Company (MPDC) speaking on the launch of the investment said that manufacturers already have about six similar projects running in different industrial clusters in Nigeria. Manufacturers in Nigeria say that 40 percent of their cost goes to providing power.
The sum of this situation is that it is ramping competition in the electricity market as monopoly granted the DisCos is being removed. Some experts say the losses to the Discos could be as high as 60 percent but competition will improve liquidity in the electricity market.
ISAAC ANYAOGU