Weak governance, funding hurdles may hamper 2019 power generation aspiration
The stifling effect of a weak governance structure in the power sector coupled with slow investment funding from key industry players are major hurdles that may frustrate the desire to increase power generation to 10,000 megawatts by 2019, according to BusinessDay findings. Industry experts observe that achieving the ambition as contained in the Federal Government 10,000mw Transmission Capacity Plan will require over $10 billion capital expenditure (CAPEX) over the next few years leading to 2019, for the Nigerian power sector to work.
They observe that with weak governance structure for the oil and gas industry, which manifest in poor financial resources to support a dramatic scaling up of generating capacity, there is no way the10,000mw projection will materialise. Recent figure shows that Gencos require up to $4.2 billion to refurbish plants and increase output, the Discos require about $1.8 billion to improve distribution efficiency and minimise losses, while the Transmission Company of Nigeria (TCN) requires about $3.8 billion to upgrade existing infrastructure and develop new ones to meet required transmission capacity.
There are several issues that need to be addressed on the power distribution side, for the whole power/energy sector to work, Dolapo Oni, head, Energy Research, Ecobank Development Company (EDC) Nigeria Limited, says in a discussion with BusinessDay. Oni observes that generation is always an easy part of the mix, because going from less than 5,000mw to 10,000mw can be achieved within two years. He is however concerned that if Nigeria generates the power but can not sell it or can not transmit it, then it is redundant “so there are several issues that need to be fix before we can think of achieving 10,000mw.
“We should not expect that much of a change. There might be improvement in terms of generation because there are still several generation plants ongoing, and there are plans to build coal power plant, as constructions have started already. There are plans to build more gas power plants; there are plans to increase output from some of the existing ones.”
He says further that the amount of capital investment required to achieve this is not available now under the current circumstance, unless things improve. To him, “The key thing is watching how transmission and distribution shape up in the next years, then that goal starts to look like a reality and even for that goal, you can not just go from 5,000mw to 10,000mw.”
Analysts believe that risk associated with investment to strengthen power supply networks in both the short and medium term is essential for efficient allocation of resources in the industry for a sustainable electricity future in Nigeria and the sub-region. They are optimistic that a lot of things could change between now and the year 2019, but the most important thing is for government to provide an environment of stability and certainty of exchange rate risk and remove the reliance on crude oil.
Wumi Iledare, director of Emerald Energy Institute, University of Port Harcourt, Rivers State, observes that the projected year for achieving the increase in power generation is only three years away.
“2019 is only three years from now, the administrative set up and industry governance structure is not in place to make this happen,” Iledare says.
Ayodele Oni, a specialist in international energy investment law and policy, reiterates that Nigeria’s power sector has had a long history of under-investment in its energy value chain.
According to Oni, “Factors such as low tariffs, poor regulatory oversight, vandalism of gas infrastructure and weak governance had played different roles in further compounding the Nigerian power sector problems.”
He commends government for the step taken in the past few months in the power sector, however, he posits that for the projection to gain traction and materialise there is need for government to be more radical in harnessing the potentials of same – including conducting an overhaul private sector involvement and taking a proactive approach to dealing with the militating power sector challenges.
“It is quite laudable that the Federal Government of Nigeria has unveiled its five-year plan to boost power transmission capacity from 5,500mw to 10,000mw in the next three years. The plan targets transmission capacity of 8,200mw by 2018 and 10,000mw by 2019,” he says.
He is however concerned that a goal without a plan is just a wish, saying if the right approach is carried out it is expected that the plan will ensure not just expansion, but also promote a more flexible transmission system.