An evaluation of the Nigerian power sector in the last 3 months
Proem
Recently, issues around Nigeria’s recent economic outlook have taken center-stage and an appraisal of the present government is being undertaken by most Nigerians, especially as relating to energy issues- electric power being one of those. With oil prices down and an ‘oil price-drop’ induced recession (at least that is what most people believe) in the country, it may be noteworthy to evaluate the status of electric power supply.
This review is especially necessary considering that there is a strong correlation between electric power supply in a country and its economic growth. With investments in the electric power sector, especially by foreign investors, capable of boosting investor confidence and triggering improved liquidity which helps cushion the effects of the current recession, this review becomes more critical.
Government’s Commitment
Although, the impact is not being felt as speedily as the average Nigerian desires, the current administration has continued to show its commitment to ensuring an appreciable improvement in electric power supply situation. These improvements are important to Nigerians as a whole as same support improved profitability, increase productive activities, ensure a virile night-economy which supports job creation and sustenance.
In light of the foregoing, the writer takes a cursory look at the significant improvements in the power sector that have taken place in the last three (3) months.
Renewable Energy- Solar
One area the current government has focused on, in recent times, is renewable energy. The Nigerian government has continually doubled its effort to move from a fossil economy by increasing the ‘market share’ of renewables in the energy mix. The aim of the government is to achieve a 10% renewable energy for all new electricity connections by the year 2020.
The Feed-in Tariff Regulations for Renewable Energy Sourced has set a target of at least 1,000 megawatts (MW) of electricity from renewables by the year 2018. Thus, respective volumes of renewable energy procurement to different distribution companies such that it appears there is some attraction to invest in the sector, despite the challenges.
Nigeria has struggled with conventional power generation; thus, there is a need for a paradigm shift in order to ensure that renewable energy plays a critical role in power supply to the consumers of same.
Consequently, the Nigerian Bulk Electricity Trading Plc. (“NBET”) which is a federal government owned public liability company signed fourteen (14) Power Purchase Agreement within the last three (3) months. Although, there were, and still are challenges with pricing/ provision of development security, several steps forward, have been taken with respect to promoting the investment in and usage of renewable energy sources in the federal republic of Nigeria, a situation which was different just a few years ago.
To ensure profitability, however, despite the challenges of pricing highlighted above, many of these companies may need to consider costs savings mechanisms such as the construction mechanisms, contracting strategies, invitation of multilateral lending agencies, amongst other approaches which could reduce their costs substantially.
Management and Scheduling of Generation & Supply
Nigeria’s power sector has had a long history of under-investment in its energy value chain (i.e. generation, transmission and distribution). 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. However, it may appear that in some major cities in Nigeria, power supply to end users has improved in the last three (3) months. This is predicated on running the power assets efficiently, mobilizing all available resources, leveraging domestic resources, scaling up of generation and transmission capacities.
The System Operator which is saddled with the responsibility of generation scheduling, commitment and dispatch, transmission scheduling and generation outrage coordination, procurement and scheduling of ancillary services, amongst other functions, is an arm of the Transmission Company of Nigeria and has recently been ensuring an effective creation of a reliable system operation services to all market participants. It also appears that the System Operator has been working (the writer believes, more closely with the distribution companies) to ensure better scheduling and coordination, in particular.
The writer has always been of the view that with adequate schedule planning and management, the obvious effects of the somewhat inadequate power generation and grid capacity can be reduced. The writer is also of the view that commercial areas, for example, should have more power supply during the day whilst residential areas should have more power supply at night- quite logical. Nonetheless, the writer appreciates that there are areas with mixed-developments and that Nigeria’s planning system is fundamentally flawed but may be better to take steps than to continue to complain about the challenges and that appears to be what the System Operator, together with the distribution companies, is doing.
Push for a Virtual Pipeline System and Policy
There has been an alarming increase in vandalism of gas pipelines in the past 5-6 months within the oil rich Niger-Delta region of Nigeria which general serves as the transit region for a large portion of the pipelines. The group styled “the Niger Delta Avengers” has claimed responsibility for these attacks.
The devastating attacks to the oil and gas infrastructure have led to a further drop in power generation as a direct consequence of gas supply constraints. Thus, the federal government is considering a virtual pipeline system, to reduce reliance on the physical gas pipeline system.
The push for virtual pipelines has increased in the last three (3) months, with a number of foreign investors considering the idea and looking to come into Nigeria to provide support to industries and productive activities which rely on gas. Specifically, the power sector is expected to be a prime beneficiary of this idea if the private sector, together with the support of the government, sees this through.
Whilst the private sector seeks to invest in same, government does need to provide an enabling environment through good policies and incentives (fiscal and otherwise), improved road networks and a robust rail system together with proper planning.
The Launch of the Federal Government 10,000MW Transmission Capacity Plan
There is a popular quote that ‘a goal without a plan is just a wish’. Thus, it is quite laudable that the federal government of Nigeria, has unveiled its five-year plan to boost power transmission capacity from 5,500Megawatts (Mw) to 10,000Mw in the next three years.
The plan targets transmission capacity of 8,200Mw by 2018 and 10,000Mw by 2019. The transmission arm of the power supply value chain has been tagged the weakest link of the chain by operators.
The plan will ensure not just expansion, but also promote a more flexible transmission system. The intention is to achieve this, through breaking up the grid into regional networks. Further, the intention is that interconnection between the regional networks will be done to guarantee the required flexibility.
If the targets of the plan work were achieved, there is no doubt that it would boost stable electricity supply across the nation.
Conclusion
The government may be commended for what has been done in the past few months in the power sector, however, there is still a need to be more radical in harnessing the potentials of same; including conducting an overhaul of private sector involvement and taking a proactive approach to dealing with the militating power sector challenges.
Ayodele Oni