Nigeria suffers from low power generation, inadequate, weak transmission and distribution infrastructure-Eke
The power sector in Nigeria has been envisioned by pundits as a nightmare especially with the Electricity Distribution Companies (DisCos) that has held the masses in the jugular through the instrumentality of estimated bills in contrast to pre-paid meters. Gentechnews, Editor, Tony Nwakaegho held this Exclusive interview with an energy expert, Uchechukwu Eke, PhD, on the intrigues in the power sector in Nigeria as well as the way forward. Excerpts:
The energy sector has been enmeshed in controversies. What are the infrastructural constraints across its entire value chains from fuel to power distribution chains in the country?
Power generation, transmission and distribution Infrastructures are critical to power generation, transmission and distribution. If there is any infrastructural deficit in any of the segments of the power supply chain, the entire chain is affected. Thus the inefficiency of a power supply chain with infrastructural deficits in all the three segments as is the case in Nigeria can be enormous.
Nigeria’s power generation infrastructure in terms of generating plants is inadequate. The infrastructural inadequacy in the power generation subsector is such that the country has an estimated generation capacity of only about 12,522 megawatts (MW) of which Thermal plants contribute 10,142 MW and Hydro contributes 2,380 MW. Of the estimated generation capacity, effective generation hovers between a paltry 4000 MW and 6000MW, which is grossly inadequate for the population. The reason for this is not farfetched. Building and maintaining power plants are capital intensive activities; hence availability of capital ranks highest on the list of factors that contribute to the success or failure or failure of a power project. We recall that because of government’s dwindling finances, inflow of private capital was a major reason along with expertise that government privatized the defunct NEPA. For a number of reasons, including bankability of projects and liquidity crisis occasioned by inability of discos to pay for power, the Gencos in Nigeria have ceaselessly complained of lack of capital as a major factor militating against their effort to increase their power generation capacity.
Gas-fired power generation plants constitutes about 70% of Nigeria’s installed generation capacity, thus making reliable gas supply imperative for effective power generation and plant capacity utilization. But the reality is that though the country holds the largest gas reserve in Africa, she faces an acute gas-to-power supply problem characterized by unreliability and insecurity of supply. While unreliable gas supply is caused by inadequate gas gathering, processing, transmission and distribution infrastructure, there is also the issue of vandalism of gas pipelines which relate to security and also leading to gas supply disruptions. Perhaps it needs be highlighted that a major reason there is inadequate gas-to-power supply infrastructure in the country, is the focus of the International Oil Companies (IOC) on the production of gas for export in the form of LNG while neglecting gas production for domestic market.
In the case of the Hydro plants, there is the problem of poor water management leading to fluctuations in water levels and associated generation capacity fluctuations.
Transmission is the link between power production and distribution. Without transmission, power generated will be stranded at the plants and will not reach the distribution companies. Unfortunately, transmission infrastructure problems in the country are threefold; insufficient transmission system capacity resulting in overloaded transmission system; weak transmission system resulting in incessant collapse and frequent vandalism of critical system components.
The distribution segment of the Nigerian electricity value chain is not spared the challenges of infrastructure constraints. Since this is the segment that interfaces with the citizens, the challenges of power distribution almost overshadows the challenges of generation and transmission. The constraints include inadequate and obsolete distribution networks i.e., distribution lines, substations and transformers; inadequate metering of customers leading to estimated billing of unmetered customers. The infrastructural constraints in the distribution segment of the electricity value chain are so bad that distribution companies resort to tasking customers to provide some or all of the equipment required to supply them with electricity.
Do you think that the design of the power sector reform makes the viability of the distribution companies (DISCOs) critical to the long term sustainability of the sector?
The sustainability of the power sector can only be attained if each of the three segments of the value chain, generation, transmission and distribution is viable. Hence it goes without saying that the viability of the DisCos is critical for the long term sustainability of the power sector in Nigeria. Whether the design of power sector reform as captured in the Electric Power Sector Reform Act (EPSRA) 2005, guarantees the viability of the DisCos, is therefore the crux of the matter. Opinions can vary here. My take is that the power sector reform act recognizes the importance of the viability of the DisCos and provided enough mechanisms to guarantee it. Chief among the mechanisms is the Multi-Year-Tariff Order (MYTO), which ensures that the DisCos have cost reflective tariffs that will guarantee their profitability and therefore viability. The act also provided for the establishment of the National Electricity Regulatory Commission (NERC) as the sector regulator and charged it with the responsibility of implementing the MYTO. If there is any issue, such will rightly not be associated with the reform act but with the regulator (NERC).
What is your take on the issue of the Discos insisting that communities contribute money to replace their obsolete or damaged transformers in their area before power supply can be restored?
I had earlier said that the reform act is very generous to the DisCos. This generosity is often taken for granted by the DisCos, to the point of taking advantage of the customers as in the case of compelling communities to contribute money for equipment needed to provide them with electricity. Recall that these equipments become the property of the DisCos immediately after purchase. It is absurd to have the regulator, look the other way while this illegality is executed against captive customers it was also supposed to protect. There is no section of the EPSRA that protects the DisCos from such brazen extortion. Imagine what the reaction of the petroleum industry regulatory agency, the Department of Petroleum Resources (DPR) will be, should a time come when drivers begin to complain that petrol stations are asking that they pay for the installation or repair of their pumps before petrol can be sold to them. If the DPR condones such act, it will amount to a case of regulatory failure as is the case of NERC.
Why is it difficult for government to key into providing alternative power supply and even renewable energy in the country? What is the way forward?
Several alternative sources of electricity but are not equally economically deliverable at scale and time frame as Hydro and thermal plants. The capital outlay for a nuclear power plant can be enormous and the delivery time can be very long for safety reasons. As for coal the government may have keyed into global trend of deemphasizing coal for environmental reasons. Whether this is right is a matter for another day. We make use of what we have. China is still heavily utilizing their coal. As for renewable, particularly solar, government of recent is also keying into global trend by stepping up the mainstreaming of solar power into the countries energy mix. Several initiatives at promoting the development and installation of solar power are currently ongoing. One of such initiatives is the Solar Home System (SHS) programme under the Economic Sustainability Plan. The programme projects that 25 million non grid connected Nigerians by paying N4000 monthly over a 3-year period will own solar panels in their homes. This is a welcome initiative that should be replicated by the state governments, given that they are off grid and do not get complicated by grid regulations.
Promoting the mainstreaming of solar and other renewable power sources is the way to go. However to achieve the objective, the nature of power generated from renewable sources must be considered and required actions taken. One such consideration is that renewable power deployment needs to be preceded by energy efficiency. On its own energy efficiency is a source of power supply, because energy saved is energy generated. Secondly because renewable sources often fluctuate and the density of power generated is usually not comparable to other non renewable sources, efficient equipments that use less power are required. In other words energy efficiency accelerates the deployment of renewable electricity. The way to go therefore is for Nigeria to prioritize energy efficiency by vigorously implementing an energy efficiency programme as precursor to envisaged massive investment in renewable electricity. Unless this is done, the benefits of investing in renewable electricity will be lost on the altars of inefficient use.
How effective is the regulatory policy interventions especially that relates to tariff that balances the protection of electricity customers with the interest of the investors?
There has been loud outcry from electricity consumers of recent regarding electricity tariffs charged by DisCos and the frequency of adjustments. And of course this coupled with other actions of the DisCos that negatively affect the consumers have prompted many to wonders whether the sector regulator is actually there to protect the interests of consumers and investors or just the interests of the investor alone.
From all indications it appears that the regulator is under pressure to prioritize the interests of the investors over the interest of the consumers. This may not be unconnected with the complaints of the DisCos of incurring losses. While the cost recovery interest of the DisCos is critical to the sustainability of the industry, the interests of the consumers to affordable and quality service should also be protected by the regulator as provided for in the EPSRA.
Nigeria has witnessed a lot of grid collapses over the years, yet we supply electricity to neighboring countries that do not suffer power outages. What is responsible for Nigeria not being able to provide electricity supply to the masses round the clock except through rationing, among others?
Only a small proportion of electricity is supplied to the small neighboring countries in question. These small countries have small transmission and distribution infrastructure which they can maintain. The case of Nigeria is different. Nigeria is large in land mass and population and electricity has to reach all parts of the country. For this reason Nigeria needs huge investment in power generation, transmission and distribution infrastructure. Unfortunately the required investment is not forthcoming and the result is a country suffering from, low power generation, inadequate and weak transmission and distribution infrastructure. In other words, the electricity to go round the large population is simply not there, yet for the one available the infrastructure to take same to consumers is also inadequate and weak.
The metering gap in Nigeria has remained elusive right from NERC introduction of Credit Advancement Payment for metering Implementation,(CAPMI) to Meter Asset Provider (MAP) and now free metering. What in your view is the panacea to end this estimated billing that the Discos use to hold customers at their jugulars?
The metering gap in the country estimated at about 6 million is actually very enormous and equally requires a huge investment to fill. At inception in 2013, the DisCos had pledged to meter about 1.75 million customers every year. At that rate, the metering gap would have been solved by at most 2018. Unfortunately according to PWC, it would have required a capital investment of about N52.5 billion annually to achieve. The DisCos simply didn’t have that kind of money to invest only in metering even if somehow they preferred estimated billing.
NERC the regulator on realizing the difficulties faced by the Discos, intervened in very quick succession with Credit Advancement Payment for Metering Implementation, (CAPMI), Meter Asset Provider (MAP) and now free metering and yet the problem is yet to be solved.
The Meter Asset Provider (MAP) programme is a tested global best practice alternative meter financing that must be sustained and given time to yield the desired result. The good thing about it is that it relieves the DisCos from immediate direct capital investment in meter acquisition as they pay periodic rents. During a period of 24 months that may be allowed for MAP to be fully implemented, a strict application of the rules for estimated billing of customers should be enforced and violation adequately penalized by NERC.
Government has granted waiver of import duty on meters notwithstanding the local content law. Will such waiver not affect the local manufacturers of meters in Nigeria?
Examples abound from other sectors that when an import waiver is granted to importers fully manufactured goods, it affects local manufacturers who have to contend with local production constraints such as cost of power and raw materials. For an economy that is burdened by unemployment and low industrial capacity utilization, the waiver should rather be provided to local meter producers in the spirit of the local content policy, to help stimulate the economy.
Has government done the needful on the directive for free metering without first knowing the number of customers or their demographic characteristic for it not to end up as political patronage?
One would want to believe that a proper study was conducted to support the free metering programme. But if the programme was actually rolled out without first knowing the number of customers or their demographic characteristic, then there is no guarantee that its objectives will be met.
Uchechukwu Eke, PhD
