Electric Power for Nigeria in 2014

We continue this week with our year 2014 in focus piece. To prepare a concise piece, I received assistance from Chike Mogbo and Okpanachi Adaji (both directors of Lubari Power).

CAPACITY BUILDING

Inadequate human capital currently plagues Nigeria’s electric power sector (inexperience with modern technologies). Whilst major capex investments have been targeted for upgrade or replacement, the lack of quality human resources could pose a major challenge to achieve the desired goals and ultimately threaten the materialization of the intended financial and social benefits.

Nigeria’s vision of being a top 20 country by the year 2020 with target of 40,000MW installed generation capacity will require augmentation of capacity across the value chain including equipment manufacturing, fuel/feedstock resources, construction, project operations and management (O&M).

Currently, much of the trained manpower is being derived from the former crop of technical staff of the now un-bundled Power Holding Company of Nigeria (PHCN). There is a general consensus that to sustain anticipated growth, the Nigerian Power Industry needs to attract and develop fresh talent, with different levels of skill and aptitude, to assume roles in engineering, managerial and leadership disciplines.

A disabler to skilled manpower availability is the deficiency in training infrastructure; although, a few institutions have taken initiative to mitigate the knowledge gap in the power sector by initiating the development of skilled individuals. One of such institutions is the National Power Training Institute (NAPTIN) which for example currently runs a training program with the first set of 243 certified electricity engineers graduating late last year.

This shortage of manpower with adequate competency is a significant detriment to the decision making capabilities of organizations. This hampers the ability of industry players to adapt and grow, especially during this dynamic/evolutionary period of the Nigerian power industry.

Efficient operation of the new power and distribution companies demands that significant investments be directed towards the cultivation of indigenous capacity. The availability of competent industry professionals will be important to satisfy the labour shortage as Nigeria’s electric power sector enters its expansion phase. Managerial talent should be oriented to the commercial, social and environmental facets of the industry.

Infrastructure

The current transmission line consists of approximately 11000km of 330kV and 110kV, which has a wheeling capacity of only 4600MW as stated in part 1, mainly due to the fact that the last transmission line was built in 1987, so  huge power losses exist.

For example if the GENCOS can produce up to 10000MW of power by the end of 2014, with the current infrastructure in place, Nigerians would still not be able to enjoy constant electricity until there is an overhaul in the transmission system and addition of new lines to increase the capacity of power that can be transmitted.

The distribution network is also very weak and obsolete; even finding spare parts would be a challenge. Again most transformers are currently at over capacity and protection systems are sized incorrectly which lead to frequent power outages in a wider region rather than isolating it to one section. The use of technology such as SCADA (Supervisory Control and Data Acquisition), to monitor the transmission and distribution line would help reduce time on electricity. If a transformer is down, the distribution company can quickly send maintenance personnel out to the site as quickly as possible

Alternative Power sources

For Nigeria to come close to achieving its goal of 40000MW by 2020, we need to consider alternative sources of power, rather than just being dependent on gas and hydro plants. A number of developed countries around the world generate about 50% of their electricity from coal power plants. Although, the initial cost outlay may be high, in the long run such plants are cheaper to run. Coal is also a viable option considering that Nigeria has component states endowed with coal and the cost of coal being only 1/5(one fifth) of other fuels.

More so the price of coal is relatively constant when compared to other fuels, because there isn’t a variety of market apart from power generation or steel industries. There is currently an estimated 1.8 billion tons of coals in the country and by utilizing this we can come close to achieving our goal of stable electricity in the country within the next couple of years.

Renewable energy such as solar and wind power should also be encouraged to add to our national grid and even for rural electrification projects. Less than 45% of the country is connected to the grid, so providing power to rural areas and small cities where demand is relatively low via renewable energy would definitely be a good idea.

Year 2014 is a very important year as the Transition Electricity Market would be declared and the private sector would begin to properly play in the electric power sector. Efficiency would be the name of the game as the tariff structure ties the rate of returns and profits to the level of efficiency. Whatever happens in the year would give a true indication of how close or far we are to getting to our destination as far as having an efficient power sector is concerned.

In spite of the substantial challenges that can very so often be experienced (and would indeed be experienced in the Nigerian situation) by players taking over formerly government-owned infrastructure in the electric power sector, following a sustainable path and having a sound implementation plan could lead to efficient and profitable operations.  Similar successes have occurred in correspondingly challenging markets and therefore, there are good examples which give comfort that the reforms in the electric power sector can succeed.

All said and done; we cannot afford to fail as the entire banking sector and economy are at stake as several billions of United States Dollars of investors’ (including bank depositors’) funds have been sunk in the reforms so far. For more details about the power sector in Nigeria, you may read the text, ‘The Nigerian Electric Power Sector: Policy, Law, Negotiation Strategy, Business’ by Ayodele Oni

Ayodele Oni (ayodeleoni@outlook.com) specializes in international energy (oil, gas, electric power & renewables) investment law. Follow me on twitter @ayodelegoni