New Direction Nigeria’s Power Sector?

Nigeria’s power supply industry has almost always been problematic. With the recent move to clean up the sector, Emmanuel Addeh asks whether Nigerians will begin to see results soon.

Power sector data suggests that Nigeria has just about 13,000 MW of installed generation capacity, largely dependent on hydropower (water) and thermal (gas) power sources distributed into 12.5 per cent and 87.5 per cent respectively for both sources.

However, of this figure, for years, only 3,500MW to 5,000MW is typically available for onward transmission to the final consumer, with the extensive losses attributable to weak infrastructure and a high occurrence of significant technical and non-technical challenges.

With one of the lowest annual consumption of electricity per capita, estimated at less than 150 kWh, giving rise to the use of alternatives like standby generators, the story of the power sector has been mostly less than inspiring.

Although, the electricity demand in the country continues to increase, many residents agree that supply has been abysmally low for as long as Nigerians can remember.

 The challenges are multiple. With over 20 grid-connected generating plants in Nigeria, many plants suffer from recurrent challenges such as maintenance and repair requirements, trips, faults and leakages that make them unavailable for evacuation to the national grid sometimes.

 The transmission segment of the electricity value chain remains fully government owned with the capacity to wheel just about 5,300MW of power or thereabout.

But even at that, due to generation constraints, less than this capacity gets wheeled. Underinvestment in building new infrastructure and lack of appropriate maintenance of the current infrastructure have constrained the transmission network expansion.

Added to these, the transmission network is beset with system collapse incidents (partial and total). For distribution, data shows a substantial percentage of technical losses before electricity reach the final consumer.

Whatever the situation, the reality today is that many Nigerians do not currently have access to as much power supply as they would want and when they do, it’s not reliable.

The World Bank estimated a couple of months ago, that the country would need to connect between 500,000 to 800,000 new households to electricity sources every year between then and 2030 to be able to achieve her targets of universal access to electricity for its citizens. 

According to the bank, Nigeria’s inability to provide electricity to about 80 million of its people meant that it is one of the least served globally.

LAYING THE FOUNDATION

Believing that a determined and motivated team will always find a way to mobilise resources and deliver on its assignment, Minister of Power, Abubakar Aliyu, in his first months of resumption, said he had put in place a goal delivery machinery which is operational.       

Having done this, the minister set to address some of the lingering challenges in the power sector, according to him, in a methodical, systematic, and proactive  manner.

In the short term, Aliyu said he would deliver the much-desired quick wins whilst still focusing on the long-term objectives of increasing the available power, improving the quality of services, attracting the much-needed investment and promoting efficiency, competition and growth.

In addition, a major plank of the administration, he said, was intensifying performance monitoring of the licensees and the licensing regime, especially their revised Performance Improvement Plans (PIP) to have a better understanding of why some critical stakeholders were performing below expectation.

With the primary policy aim of the administration to provide stable, good quality, reliable and affordable electricity for the people of Nigeria for domestic and industrial usage, the new head identified specific areas of conflict and tensions within the power industry value chain which are now being harmonised for greater synergy and alignment.

“We will soon begin to experience the imminent turnaround in the power sector. We are determined to deal with some policy issues, the legal and regulatory bottlenecks, and the human factors involved in the implementation and coordination of the power sector’s road map,” he stated.

Noting that it was clearly a work in progress, he assured that the viability of the sector was not in doubt, but admitted that it remains a capital-intensive sector and currently in need of massive injection of fresh capital.

In the main, he observed that service quality and sector illiquidity remain major issues, adding that government funding was no longer sustainable.

According to him, the immediate focus of the ministry was to create liquidity in the electricity market, improve services in terms of hours of supply, billing transparency as well as bringing consumer, operator and investor confidence back to the sector to attract foreign and local investment.

A RASH OF PROJECTS

The power industry thrives on continuous investment in new projects and infrastructure, to meet rising demand.

While the Kashimbilla 40MW power station has already started generating power into the national grid, the Gurara phase 2 being developed in partnership with the ministry of water resources, is expected to deliver 30MW to the grid when completed soon.

Other projects nearing completion are the Zungeru hydroelectric power project up for inauguration this year and is expected to deliver another 700MW of renewable power.

Added to those ones are the Katsina wind farm with a full capacity of 10MW which is already generating part of its full capacity on the grid as well as the Dadin Kowa’s 40MW power station which started generating power into the national grid under a concession with the private investor while the remaining regulatory and power purchase agreement issues are being resolved.

Furthermore, the Mambilla hydroelectric Power Project which was contracted in 2017 is taking off, the Transmission Company of Nigeria (TCN)’s transmission rehabilitation and expansion programme funded by various multilateral financial institutions is also on course.

Added to that is the implementation of the Presidential Power Initiative (PPI) of in which Siemens Nigeria and the federal government in 2020 entered into a power infrastructure revamp agreement.

Whereas the Nigerian Electrification Roadmap (NER) is a partnership that will expand Nigeria’s electricity capacity from the current average output 4,500MWh/h to 25,000MW.

“The first phase of the PPI is the upgrading and expansion of the vital infrastructure of the TCN and Distribution Companies (Discos) with the end goal of achieving 7,000MW,” a recent note by the ministry explained.

Under the current headship of the ministry of power, tens of projects to strengthen the entire infrastructure chain have now been approved by the Federal Executive Council (FEC).

At one of the recent approvals, Aliyu said contrary to the impression that nothing was being down to tackle epileptic power supply, the government was doing a lot to remedy the situation with more investments in the sector.

While noting that the federal government has placed order for power equipment, the minister reiterated that Nigerians will soon see the outcome of the ongoing investments.

“As we’re all aware, a major problem we’re having in the electricity supply industry is to be able to evacuate sufficient electricity and distribute them.  That is to say, we have a very weak transmission grid and distribution segment of the value chain.

“We may not be having many problems with generation. So, unless we’re able to strengthen the electricity grid, which is nationwide, and to expand, and to be able to evacuate, what the grid can take to consumers, we will have a lot of problems ahead of us.

“So, what we’re doing currently through various and several  interventions is to be able to repair the grid by constructing new transmission lines, bringing in new equipment to replace the old ones at our substations. So, that will release more capacity to the distribution and leading to the customers,” he noted.

Among others, the approvals, roughly valued at N211 billion included the award of contracts for the construction of substations in Ikare-Akoko, Oke-Agbe, Ondo State, procurement of 1,500 drums of transformers as well supply of explosion and fire protection devices nationwide.

They also included, purchase of double circuit line in Ikere-Ijesa-Isu-Ilupeju towns, Ado, Ekiti State, construction of New National Control Centres in Oshogbo, Gwagwalada as well as construction work in Mando substation in Kaduna, Ogbomosho and Ganmo substation in Ilorin.

Also approved were major works in Lekki, Lagos, Malumfashi in Katsina, Ugba,  Zaki Biam, Buruku, among others.

LITTLE STEPS

In the power sector, there are a number of activities which require just implementation of policies. The reinvigoration of the eligible customer and related regulations whereby consumers contract for better services directly with willing Generation (Gencos) and service providers that are ready to make  investment to deliver better services is also ongoing.

The Meter Asset Provider (MAP) programme which has drawn private investors into metering provision as well as mini-grid policy regulation that allows underserved consumers to partner with investors and contractors to get better services are also on.

The second phase (phase one) of the National Mass Metering Programme (NMMP) is also expected to start  shortly, with bids already received from 45 local meter manufacturers to participate in the programme.

Recall that the phase zero of the NMMP had about 1 million electricity customers installed with free prepaid meters under the first phase.

“Reforms take time and require patience to implement, especially in a highly regulated sector like the power sector. I am confident that these reforms, when full implemented, will bring about the transformational change that we all desire to see in the sector.

“ We are very mindful of the various challenges and bottlenecks. I plan to face the challenges with a dogged determination an resolve. It is my belief that with the right focus, determination and teamwork, the power sector will experience a new lease of life,” Aliyu said recently.

IMPROVING CORPORATE GOVERNANCE

If there’s any major headache for the electricity supply industry in the country, it is the threat posed by their weak corporate governance framework. To this end, the ministry of power has supported the strengthening of that critical part of the sector.

The conflicts between the Discos and their creditors have recently led to the takeover of some power distribution in a bid to prevent their total collapse, but the ministry says this is a temporary measure.

From the Abuja Electricity Distribution Company (AEDC) which was taken over by the UBA to the recent changes relating to corporate governance in Kano, Benin, Kaduna, Ibadan and Port Harcourt electricity distribution companies, the push has been to halt the decline in discipline in the governance of the Discos.

“In implementing the changes, the ministry shall ensure that the changes in corporate governance do not impact on the service and stability of the Discos,” Aliyu assured.

In addition, there are also attempts to push for bills in the power sector, including the Electric Power Sector Reform Act (Amendment) bill, to confront perennial challenges of inadequate power supply in the country.

On recurrent power grid collapses,  the position of the ministry is that since collapses has not completely stopped for now, anytime it happens, bringing the grid back must be done in record time. This, it said it has done successfully repeatedly.

ARRIVAL OF MEGA TRANSFORMERS

Also in a bid to strengthen the supply system, Aliyu last week disclosed that the mega transformers the federal government ordered under the PPI have successfully undergone factory acceptance test.

He added that the first batch of the shipments which are expected to be made from the Siemens’ transformers factory in Trento, Italy, will start arriving Nigeria from September this year, noting that the test paves the way for Siemens Energy to start delivering the transformers to Nigeria.

The development came after the minister led a delegation to Germany in April, where he paid visits to Siemens Energy factories in Berlin and Frankfurt, and held meetings with the senior leadership of Siemens Energy.

He had also engaged the company on the need to fast-track the delivery of the early orders that it said will kick-start the transformation of Nigeria’s electricity.

“The successful factory acceptance test shows Nigeria’s engagement with Siemens Energy is on track. It also shows the federal government’s commitment to addressing Nigeria’s electricity challenges,” said the minister.

Recall that in December 2021, the Minister of Finance, Zainab Ahmed and Aliyu secured the approval of the FEC for €63 million for the procurement of equipment to boost power supply under the PPI.

The first phase is expected to provide 10 mobile power substations and 10 mega transformers that will be deployed across the country to boost and stabilise electricity supply, the government stated.

The first phase of the PPI seeks to modernise, rehabilitate and expand the national grid by investing in the electricity value chain, including generation, transmission and distribution systems.

“The Presidential Power Initiative (PPI) was set up by President Muhammadu Buhari  to engage the global energy giant, Siemens of Germany for the upgrade and modernisation of Nigeria’s electricity value chain to deliver stable electricity across the country.

“On electricity supply, the federal government is totally committed to improvement and will not be distracted,” the minister wrote separately on his Twitter handle,” Aliyu stressed.

If the current projects are seen to a logical conclusion, the reasoning is that Nigeria’s power sector woes may just be a thing of the past.