Tackling transmission, gas supply challenges in emerging power sector

With the completion of the privatisation of the successor companies created from the unbundling of the Power Holding Company of Nigeria (PHCN), the nation’s power sector reform has reached the next most crucial phase, the Transitional Electricity Market (TEM) stage.

The payment of the remaining 75 percent of the bid prices on August 21, 2013, has entitled preferred bidders to take full possession of the 15 PHCN unbundled assets, which include 10 distribution companies (Discos) and five generation companies (Gencos).

The success of the privatisation programme depends largely on the transmission infrastructure and gas supply to power plants, analysts have said. They noted that there is a critical need to rebuild the dilapidated transmission network and tackle the uncertainty in gas supply to existing and upcoming power projects.

Last week, Chinedu Nebo, minister of power, said the Federal Government had designated $1.6bn for the expansion of power transmission facilities in the country.

He said a substantial part of the fund came in form of loans from the World Bank, African Development Bank and Chinese Exim Bank as well as proceeds from the Eurobond sales.

The minister had recently said that nothing less than N335 billion was needed to have a robust super national grid network that would ensure uninterrupted and steady supply of electricity.

It would be recalled that upon his appointment, Nebo acknowledged that there were a number of challenges facing the power sector that have continued to hinder effective service delivery of electricity to Nigerians, noting that transmission of electricity remained one of the greatest challenges in the power sector.

“What we have as a problem that is very significant is the transmission; to be able to evacuate what is being generated and what we anticipate will be an addition to the grid towards the end of the year. We are working on that,” he had said at the end of a recent meeting of the Niger Delta Power Holding Company (NDPHC) presided over by Vice President Namadi Sambo.

Scott Desmarais, partner, at research and business intelligence firm McKinsey and Company, had stated, at the BusinessDay Power Conference in December last year, that transmission was critical to the reform of Nigeria’s power sector, adding that if the nation got it right, electricity would significantly improve.

The minister is expected to give priority attention towards increasing transmission capacity to ensure that the expected increase in generating capacity is not left stranded for lack of evacuation capacity.

The Transmission Company of Nigeria (TCN), which is the link between the electricity distribution companies and the power generation companies, was contracted to Manitoba Hydro Company last year.

It is imperative for the TCN management contractor, which is responsible for significant investments in the expansion, reliability and stability of the network infrastructure, to take full control of the company.

It has been said in many quarters that the Federal Government needs to expedite action on its plans to build a new super transmission network, which among other things, will help to evacuate power from the generating plants.

On the gas challenge, the federal government had affirmed plans to triple power generation capacity by 2015, as more domestically produced gas will be earmarked to fuel power plant, rather than for export.

A long-awaited reform of the gas sector is hoped to reduce the current shortfall of gas supply for power plants. The power sector is currently paying a subsidised price of around $1 per million metric British thermal units (MMBtu), while the non-power is charged $2/MMBtu.

Gas supply shortage is expected to abate by 2016 as new gas supplies will be available through the Oben-Oben gas pipeline from gas upstream developments at southern swamp, Forcardos Yokri, and Ogidi.

With the reform, the government plans to turn the gas sector into a value adding sector, underpinned by increased domestic gas production.

By: Femi Asu