Energy : Nigeria’s Problem is Transmission Rather than Power Generation
Nigeria’s power generation companies (GenCos) in the past five years lost a whopping N1.2 trillion to poor capacity utilisation and the country’s inability to transport over 21,184.62 megawatts of electricity to end users.
With a peak suppressed load of 25,790MW on the grid, while peak generation hovers around 5,375MW (indicating that about 21 per cent of the suppressed grid load is met), Nigeria’s power generation capacity might substantially remain stranded in the face of load rejection by electricity distribution companies (DisCos) due to infrastructure and collection problems.
Statistics exclusively obtained from the GenCos showed that since the power sector was handed over to private owners, average generation capacity in the country stagnated at around 3000MW, though available generation capacity went from about 4000MW in 2013 to above 7000MW in 2019.
In 2015, while available generation capacity was 6,616.28MW, average generation stood at 3,606.05MW, even as stranded generation was 3,010.24MW, bringing losses to N214.93 billion. Available generation capacity as at 2016 settled at 7183.59MW. Average generation stood at 3,266.79MW, while stranded generation was 3,916.80MW, thus creating a loss of N279.66 billion.
While available generation capacity was 6,995.37MW in 2017, average generation stood at 3,622.64MW and stranded generation was 3,372.72, creating a loss of N240.81 billion. In 2018, available generation stood at 7,384.37MW, average generation hovered around 3,864.15MW. A figure of 3,520.12MW was declared stranded while loss stood at N251,34 billion.
Unless the never-ending importation of power generating sets for homes and industries is addressed, the prevailing reality would continue to bedevil the nation’s economic outlook, increase environmental challenges in the face of global warming, stagnate the entire power sector and limit investment in the sector despite growing financial liquidity.
Also, available generation stagnated at 7,381.00MW in 2019. Average generation stood at 3,782.00MW but 3,599.00MW was stranded, making investors lose N256.97 billion.
While the Nigerian Electricity Regulatory Commission (NERC), last month, set a minimum remittance order for the country’s 11 DisCos, in a bid to reduce financial liquidity in the sector, the Bureau of Public Enterprises (BPE), in addition to the current losses by the GenCos, admitted that liquidity problem and an outstanding N1.4 trillion shortfall in the power sector demand urgent attention.
Coming at a time NERC is proposing to increase electricity tariff, the executive secretary of the Association of Power Generation Companies (APGC), Dr. Joy Ogaji, disclosed that GenCos were being owed an average of 68 per cent of their invoices every month.
“It is sad to know that increase in available generation capability was not met with increased average generation, i.e. GenCos were not fully dispatched. GenCos’ increased available generation capability has not translated to corresponding increase in power supply to consumers, so consumers in their generalisation believe the entire sector has failed.
“This has become a big challenge and an inhibitor to the Nigerian Electricity Supply Industry, defeating the effort of the GenCos in recovering unavailable capacities, considering the massive fixed charges incurred to keep such units available.
“DisCos’ remittances are still below 30 per cent and they consume more than 90 per cent of the power put on the grid. This is certainly not sustainable. So, in plain terms, every month GenCos are being owed an average of 68 per cent of their invoice,” Ogaji told The Guardian.
She noted that the situation had created a lack of trust in the power sector as the manufacturing and sector and others were settling for self-generation. According to her, the sector is faced with financial, operational, construction, market, macroeconomic, contract and regulatory risks.
She added that since decisions about investments in power generating capacity depend on expected returns and costs, the illiquid state of the industry and the fact that all plants are performing below optimum do not encourage the discourse of capacity increase or expansion.
When electricity is generated, the Transmission Company of Nigeria (TCN) is responsible for transmitting the electricity through networks to the distribution companies. The two arms of the market have repeatedly traded blame, pointing to a weak grid system and outdated distribution network as the reason for the non-utilisation of capability.
The Managing Director of TCN, Usman Mohammed, had vowed to push for the recapitalisation of DisCos this year, stressing that unless there is commensurable investment from the DisCos to match the level of generation, the sector might not work.
The pioneer Managing Director of Nigerian Bulk Electricity Trading Plc (NBET), Rumundaka Wonodi, blamed the prevailing situation on transmission and distribution inefficiencies.
“The deficiency in supply is hurtful to our economy and we also know that because of the stranded power, NBET is reluctant to enter or activate the agreement it has with the GenCos. This is because NBET might have to pay for capacity. The biggest losers are the generation companies who have paid but cannot monetise,” Wonodi said. The loss, according to him, would impact the revenue of the sector already heading towards bankruptcy and hurt the nation’s economic indices.
Wonodi, however, expressed optimism that the recent agreement signed between Nigeria and Siemens of Germany could reduce the challenge if properly implemented. “That is one of the greatest things this government has done; trying to unlock and take out the bottleneck, and make sure consumers get better service,” he said.
He further decried the sector’s leadership challenge and regulatory interference, especially from the National Assembly and the Federal Government.
Expressing concern about the fortune of GenCos, PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, said: “Some power companies that could have used three to five turbines are running few because the system is unable to take on the load. Sometimes, they reduce generation from turbines because of the challenge. This affects the lifespan of the generators.”
According to him, Nigeria does not currently have power generation problem. Rather, the sector lacks the ability to use what is currently being generated.
Jaiyeola stated further: “While they’re ramping down periodically, the assets are losing value. The depreciation will keep increasing at a faster rate. Some of those assets are also reducing faster than they would if they were allowed to run without periodic ramping.”
Urging a sustainable solution, he asked the Federal Government to speed up its willing seller-willing buyer policy, to enable independent bodies to have direct access to the market.
According to him, government needs urgent solutions to bridge the infrastructure gap in transmission and distribution. “While we are having debate on new generation companies coming, they will also face all of these problems unless they are leveraging other ways,” he added.
Meanwhile, the committee set up by the National Economic Council (NEC) to examine the status of DisCos has called for memoranda from stakeholders and members of the public on how a final solution could be found to power sector challenges in Nigeria.
The Head of the Committee, Kaduna State Governor Nasir El-Rufai, disclosed this after a meeting of the council presided over by Vice President Yemi Osinbajo at the Presidential Villa, Abuja, yesterday.
El-Rufai said: “The electricity sector is complicated. There’s the need to go to the root of the problem. This nation cannot make progress without the electricity sector. We’re inviting memoranda from the public, to provide solutions to the complex problems.”
The governor, who was joined by his Ekiti State counterpart, Rotimi Akeredolu, said the committee had submitted its report to NEC. He explained: “On the status of the ownership of distribution companies, the committee met five times since its inauguration on 5th December. We have made some significant progress. We all agreed that the electricity supply industry is broken and the situation of the power sector is a national emergency that requires all hands to be put on deck to interrogate why the sector is not working for the overall progress and benefit of Nigerians.
“Nigeria has spent N1.7 trillion on the electricity industry since the privatisation of the sector. There is the will on the part of the committee members to really go into the root of the problems and speak to ourselves in an honest national conversation and find a way to fix this sector because this country will never make progress and will never create jobs until we industrialise with a functioning electricity sector.
“The problems in electricity are many. Capacity is one, perhaps. There are some that have shown lack of capacity. It is true. But there are many that are fantastic. So, it is very difficult to pass quick judgment.”
He continued: There are other issues. The entire sector is broken. The tariff is an issue and the way the privatisation was done is an issue to many. So, there are many, many issues. What we have agreed on is that there are fundamental problems in the electricity supply industry. And that you cannot privatise an industry and then over three years since privatisation, you pump in N1.7 trillion of government (money) into it. That is not privatisation.
“The Federal Government has supported the electricity sector with N1.7 trillion in the last three years and this is not sustainable. So, solutions must be found. Those solutions are not going to be nice. They may be painful. But the only way to solve the structural problems in the industry is to take some very difficult decisions.”
El-Rufai added: “Right now, we are listening to all the stakeholders. Of course, there is a lot of blame game. At the end of the day, we must have an honest conversation, as Nigerians, and know that unless we fix electricity, we cannot make progress. And this electricity is required not only in the cities but also in every home, every rural area. Today, there are 80 million Nigerians that do not have access to electricity. We cannot continue like this.”
*Source: The Guardian