Despite the sordid tales of Nigeria’s electricity sector, 2020 upstream power sector seems to have fared better in reducing systems collapse significantly.
However, huge difficulties persists in stranded power incidences which has resulted in a steady rise in losses in the industry while ensuring the perennial issue of inadequate power supply to industries and homes throughout 2020.
The power sector recorded five total collapses in 2020, as against 11 recorded in 2019.
The year had started with two successive collapses which occurred in January, but the performance stabilized in the remaining 10 months to date with just three collapses.
However, losses in Nigeria’s power sector rose to N619 billion in 2020, about 7.2 percent rise when compared to N575 billion recorded in 2019, due largely to the deficiencies in the nation’s power infrastructure.
In the first quarter of 2020, average energy sent out was 3,945 mwh/h, while 4,051mw were not generated due to lack of gas, thereby accruing losses of N176, 927 billion respectively. This is against the corresponding quarter in 2019, which had 4,089mwh/h of average energy sent out, while 3,127mw (not generated due to lack of gas), thereby accruing losses of N135, 108 billion.
In the second quarter of 2020 as against the corresponding year of 2019, average energy sent out was 3,987mwh/h as against 3,809mwh/h, while 4,304mw as against 3,313mw were not generated due to lack of gas, thereby accruing losses of N188,007 billion as against N144.698billion recorded in 2019.
Also, in the third quarter of 2020 as against the corresponding year of 2019, average energy sent out was 3,918mwh/h as against 3,559mwh/h, while 3,898mw as against 4,012mw were not generated due to lack of gas, thereby accruing losses of N172,124 billion as against N177,153billion recorded in 2019.
But in the fourth quarter of 2019, average energy sent out was 3,677mwh/h, while 3,930mw were not generated due to lack of gas, thereby accruing losses of N173, 567 billion.
However, in October and November of 2020, average energy sent out was 4,168mwh/h and 4,381 mwh/h, while 3,534mw as against a drop to 2,081mw not generated due to lack of gas, thereby accruing losses of N52, 580 billion and as against N29, 971billion recorded in November.
The burden of losses
Meanwhile, responding to inquiries on whose book the debt apportioned to all operators, Pioneer Executive Secretary of Association of Power Generation Companies, APGC, Dr.Joy Ogaji said, “NERC is better placed to answer. The truth is there is no such book. The risks are mostly left on GENCOs books
“A scenario where average generation only increased by 24 percent (766.49MW) over a period of seven years, despite a 136.91 percent increase in available capacity, has failed to translate to the expected sustainable economic development.
‘‘With a total available generation capacity of more than 8,100MW and maximum wheeling capacity of not more than 5,500MW, there is a continuous recurring instance of over 2,600MW idle generation.
“Nigeria is currently not facing a lack of generation challenge, but inability to fully utilise the existing capacity. This increment in stranded capacity has continued to serve as a disincentive for investment. Over the years, the GENCOs have been unable to contract unused generation capacity despite the staggered payment for power generated.
“Since privatisation, the GENCOs market invoice has never been fully settled. Since 2016, the DISCOs market remittances have been less than 30 percent; and as low as 20 percent for January to July 2020. This is saddening when one considers the various minimum remittance orders issued by NERC since the year 2019.
“Regrettably, relevant actions to take the sector to viability has been hampered by inactions and excuses. This has left the GENCOs in a difficult position.
“Consequently, the power Generation Companies, GENCOs are plagued with several challenges amongst which includes: Inability to raise the necessary funds for its operations thereby affecting Operation and Maintenance (O&M) obligations and commitments; and burden of Value Added Tax, VAT, payment on Gas which is not factored in the multi-year tariff order, MYTO.
“Also, is the inability to service outstanding loans, most which were obtained from commercial banks and which now appear on bank balance sheets as non-performing loans (NPLs), the inability to pay for Contracted Gas which has resulted in the shutting down of gas supplies to certain power plants, discontinued investors’ confidence and inability to expand their capacities
“The foregoing shows that the GENCOs are not faring well as they have been made to bear the brunt of the lack-lustre performance of the sector. GENCOs have been at the receiving end of the lapses and deficiencies of the Nigerian Electricity Supply Industry (NESI), as well as the seemingly insurmountable challenges of operating within the industry.
“The current liquidity challenge in the market has created a lot of uncertainty which continues to threaten the sustainability of the Market. It is currently difficult for the GENCOs to forecast their operations as well as their revenues.
Seven years after, the privatisation journey can best be described as a bleak anniversary, rendered gloomier still for Nigerians and businesses by the missteps and disarticulation by various stakeholders.”
Professor Wumi Iledare, Ghana National Petroleum Corporation, GNPC Professor & Chair in Petroleum Economics & Management, Institute for Oil and Gas Studies, Cape Coast, Ghana, called for the seedy passage of the Petroleum Industry Bill, PIB, to address gas supply crisis.
He said “Nigeria has a lot of gas resources about 600 trillion cubic feet (Tcf). It has proved reserves of about 207 Tcf. It produces about 6-8 Bcf per day, about 10 percent is flared enough to generate 3000+ MW of electricity.
Reacting to the persistence of system collapse in the power sector, Iledare lamented that the power sector if flooded with “Epileptic power supply, transmission losses, vandalism of pipelines, DISCOs inefficiency will limit the potential for economic growth.
Energy consumption grows an economy faster than energy production, especially, if the latter is mostly for export.
“Governance and pricing framework is key along the value chain. Another challenge is the market structure and conduct. The electric power sector with respect to power generation is more of oligopolistic in structure but the distribution is more of hybrid market structure tending towards a captive monopoly.
“Unfortunately, there seems to be a lack of understanding of this structure in terms of performance. Here lies then the issue that needs to be resolved! The power of Nigeria Electricity Regulatory Commission (NERC) is frequently undermined by economic populism of the National Assembly.”
