Added investments, policies in power sector will attract investors in 2024, say stakeholders
By Yusuf Yunus
A cross-section of stakeholders in the electricity sector of the economy have advanced the need for stronger collaboration that would lead to new investment directions toward the rejuvenation of the power sector.
The stakeholders, in separate reviews of the power sector for 2023 with the Business Intelligence (TBI Africa) in Lagos on Saturday, said that collaboration and investments remain key factors to tackling Nigerian’s electricity challenges
Dr Akinrolabu Olukayode, Chairman, Customer Consultative Forum of Festac/Satellite Town, said that the power sector in 2023 had been quite eventful, but also ladened with hydra-headed challenges.
Olukayode said that for the first time in the history of Nigeria, the sector experienced a total collapse of the national grid, adding that the man-made challenges had been multi-faceted.
According to the consumer boss, year 2024 is expected to be promotional than the outgoing in terms of increased capacity from the dwindling 3,000MW to 14,000MW and 40,000MW, respectively.
“I expect every customer on the network of each Discos to be metered digitally.
“I expect frantic renewal and replacement of obsolete installations engendereing frequent and incessant collapse,” he explained.
Olukayode, who is also a lecturer at the Lagos State University, Ojo, advised the government to focus on providing soft landing for customers through subsidy of meter procurement.
Equally, he advocated a moratorium to Discos through the Central Bank of Nigeria to enable them to procure electrical equipment.
He pleaded that the government should put a ceiling on energy tariff and intensify effort on prosecuting energy theft offenders.
Describing the value-chain (GenCos, Transmission and DisCos) as a novel idea but observed that it was established on faulty foundations.
“The commencement of the value-chain did not take cognisance of improving on the existing installation thresholds, evaluate the capacity, thereby using it to make a projection for improvement while engaging in guided operations.
“The assessment and evaluation of the national grid and other attendant installations for the commencement of the value-chain was shoddy and haphazard. That gave rise to the incessant collapse experienced this year.
“The reporting system from available data base is always manipulated for selfish reasons away from national interest.
“An independent body, preferably expatriate, should be allowed to do an independent assessment of our national grid so as to determine the area of strength and weaknesses,” he advised.
Olukayode said that the demographicstatistics-layout, structure, landmark and density from previous regime, which the value-chain built on was inaccurate, hence, inadequacies of coverages.
He advised that a scientific enumeration be carried out for hitch+free operation.
Olukayode commended the performance of the power sector, which he described as encouraging, suggesting that it could still be improved upon.
“I can only suggest as aforementioned that the statistics be re-worked to ensure accuracy in data and information system to enhance service delivery.
“Government policies through the Nigerian Electricity Regulatory Commission (NERC) has been sequel to reports and observations in operational activities. It is another way of saying that it is proactive,”
he noted.
Mr Lanre Elatuyi, an
electricity market analyst, said the Nigerian power sector had been eventful in the outgoing year,
although, with expectations of improvement in the coming year.
Elatuyi said that the sector reliability and excellent customer service are still far from being achieved.
According to him, it has been an eventful one because Electric Power Sector Reform (EPSRA) 2005 was repealed, and Electricity Act 2023 was enacted.
“The contradictory provisions in the Act have elicited debates among sector experts and stakeholders, and the conversations are ongoing, especially the provision for the establishment of State Electricity Markets.
“Another important landmark this year in the power sector is NERC’s guideline for Secondary Escrow Account Management for Bilateral Transactions, which provides an arrangement by which DisCos may directly enter bilateral transactions with GenCos.
“So, three Discos, namely Ikeja, Eko, and Abuja, were mandated to initiate bilateral contracts with GenCos as a precursor to market transition to wholesale competitive electricity market referred to as Medium-Term market in NESI.
“Average daily generation is still about 4,500MW, and available capacity is still around 6,400MW.
“DisCos load off-take is barely 4,000MW, and ATC&C loss is still over 40 per cent industry average.
“The metering gap has not been substantially bridged, and the liquidity issue still persists.
“The challenges are still there, and we can only hope that 2024 will be a better year for the sector,” he said.
Elatuyi said that power sector challenges are as many as anyone could imagine.
He said that there are challenges of gas availability and the delay in implementing the gas network code.
“There are unsettled debts owed gas suppliers, and gas sales to GenCos are on the best endeavour basis.
“Many generation plants are out due to maintenance issues because invoiced energy sales were never settled by the market.
“We are now faced with resource adequacy issues as available capacity is dwindling.
“We have issues around power generation dispatch and economic merit order which impact on wholesale electricity price.
“Power purchase agreements are not fully active, and even the partial activation agreement initiated over a year ago has failed to achieve the target set.
“Settlement of NBET’s invoice remains a big challenge, making some power generation companies struggle to meet their obligations to their lenders, carry out maintenance, and even pay salaries.
“At transmission, we have challenges around interface between GenCos and TCN and between TCN and Discos.
“We have issues of reliability with constant frequency excursions outside nominal values and voltage out the allowed thresholds.
“There is still no real-time grid visibility because we have no SCADA.
“Transmission loss factor is still high, and the grid still remains unstable, unreliable and constrained despite boasts of capacity expansion by the grid operator,” he said.
He added that “at distribution, the ATC&C loss is still very high. The DisCos are not bankable, hence, less access to capital for capacity expansion.
“Metering gap is still huge, and DisCos have no financial means to procure meters.
“The issue of cost-effective tariff is a never-ending one as assumptions in the Multi-Year Tariff Order (MYTO) methodology for setting tariffs are always at variance with market realities
“So, the challenges are many and I am not really sure how the government intends to address these challenges.
“This is a regulated industry, and the regulator must be given the needed independence to do their work.
“The government role is in policy setting and the policy objectives must then be complimented with market design that will ensure reliable, affordable and sustainable electricity supply to Nigerians.
“The new Electricity Act does not have a policy underpinning it.
“Though the Act provides that the Minister of Power should within a year come up with an integrated national policy, we can only wait and see if something will come up in the first quarter of 2024.
“I must be sincere that Nigeria needs to be helped. We should be sincere with ourselves that we really don’t have an in-depth understanding of the operations of a liberalised electricity market.
“There is no harm in engaging experts in market designs from all over the world provided we will allow them the freedom to do their work and follow all their recommendations.
Elatuyi said that it was hard to access each segment of the value-chain which he noted as one of the challenges with the Nigerian electricity market where blames are apportioned, while isolating the market stakeholders.
He said that in a vertically integrated power system, answering this question was easier than in a liberalised market where the action or inaction of one of the players impacts other players.
According to him, a flaw in market design and regulations can spell a doom for a market player.
“All the market players have different objectives and are faced with different economics, so having an optimum balance and fairness in the whole value-chain has been problematic.
“This is the essence of embracing the concept of game theory in an electricity market; for the sake of answering the question.
“I will say power generation is not really the issue in Nigeria as we have installed capacity of over 14,000MW, though, dominated by Open Cycle Gas Turbines with thermal efficiency of about 35 per cent.
“Investing in more efficient plants in Nigeria can be suicidal in the face of low dispatch, frequent start-ups, and poor remittance that will impact on cost recovery.
“Despite the reducing available capacity, the GenCos in Nigeria are still trying. It is still a miracle how many of the plants are still surviving.
“There are a lot of ongoing projects in transmission though controversies are around the claimed capacity by TCN.
“There seems to be a lot going on in capacity expansion and less on reliability. There are also claims of resource allocation based on biases and not economic rationale.
“But it is obvious recently that TCN is getting funding for many projects all over the country, “he explained.
Elatuyi said: “We are expecting a full deployment of the SCADA system in 2024, and we do hope that this will enhance grid reliability and power quality.
“We experienced grid collapse this year, and I would have expected a report on these incidents to be made public.
“It is very difficult to access their performance as we still have issues with frequency and voltage fluctuations.
“This is why many industrial customers with frequency-sensitive machines still depend on the captive generation.
“The DisCos are still indebted to their lenders and lack access to capital for network expansion. ATC&C loss is still high, and the metering gap is still huge.
“Many consumers are still placed on estimated billing, and compensation for service failure on Service-Based Tariff is still a major challenge.
“Network capacity is still very constrained and we can’t really say we have achieved much in power distribution,” he added.
He said: “In renewables, I think there are some progress going on in adoption, though not on utility scale especially for solar and wind.
“The initial capital cost is still a challenge for many Nigerians, and we still have issues around the quality of solar panels being imported into the country.
“There are many ongoing projects in the rural areas and Rural Electrification Agency is driving adoption and engaging in many projects.
“There is the need for monitoring though as there are complaints that some of the projects on renewables are becoming moribund,” he added.
Mr Olubiyo Kunle, President, Network for Energy Reforms said that the entire 100 per cent equity stakeholding of generation, transmission and distribution component should be publicly listed on the floor of Nigerian Capital Market/Stock Exchange.
Kunle said that the present dominance of individuals, holding shares through third parties and shares by proxies should be discouraged.
He said that the present equity stakeholding of the present investors should be diluted by way of even the spread of the share capital vis-a-vis public subscription.
“At no point in time has there been any Public Notices Advertising Initial Public Offering ( IPOs ).
“If and when Government decides to do the needful, there will surely be a paradigm shift.
He said that the process must be bench-marked and standardized in a way that only financially and technically qualified entities are allowed to participate and hold equity.
“We can reduce the highest per block equity stake of the present investors to 10 per cent per individual group/ block equity stakeholding.
“And the remaining equity stakeholding/equity structure could be from public subscription.
“Government in the immediate and medium and long-term may have to disinvest or dilute her stakes, and concentrate strictly on regulatory Ecosystem.
“The present arrangement is more or less like a diarchy or a mixed bag of public/private equity.
“Budgets are over bloated, and the primary objectives aren’t to promote market competition neither are they promoting competitive electricity market.
“The current arrangement are tailored to rent- seeking and market monopolistic profiteering,” he added.
Kunle said that moving forward, an individual or business group/entity should not be allowed to own more than 10 per cent equity stakeholding.
He said that the government through SEC, capital market and Nigerian Stock Exchange set out and enforce strict corporate governance benchmarks.
“There are lots of incentives for corruption and vested interests whose only objectives are how to keep the present arrangements in place as a cash flow.
“There is nothing that we need to say that we haven’t said over time.
“The Nigerian government and Nigerians know what to do if and when we are practically ready to do the needful,” he added.
In the view of Mr Simon Andrew, Managing Partner, Safe Renewable Energy Ltd., there are mounting concerns as Nigeria’s power privatisation process was expected to lapse on October 31, 2023.
Andrew said this has become more problematic following the decade-long crisis within Nigeria’s power sector.
According to him, for over 62 years, the country’s electricity value-chain, from distribution to generation and transmission, has been bedevilled with challenges.
“Meanwhile, the government attempted to break the jinx in the country’s ailing power sector, first with the establishment of the defunct 2005 Electric Power Sector Reform (EPSR) Act, then on November 1, 2013, the commencement of the privatisation process.
“Government commenced the privatisation of the Nigerian electricity distribution and generation companies in November 2013, benchmarked on a 10-year moratorium of operational licenses with the hope that the decision would halt the age-long power crisis.
However, a decade later, the problems of the power industry have remained unsolved, becoming a persistent clog in the wheel of progress for Nigeria’s economy.
The electricity distribution companies are battling with liquidity issues and low remittance compounded by the metering gap; still, the generation companies struggle with poor investment and transmission inadequacies, leading to incessant grid collapses.
For years, the country has struggled with 5,000 megawatts of electricity for a population of over 200 million people.
On his part, Adetayo Adegbemle, Convener and Executive Director, PowerUp Nigeria, said the review of the power sector privatisation agreement is pivotal to repositioning the industry.
“Things were unclear pre-privatisation, and many didn’t even know what to expect. So, it’s been a decade of learning for us all.
“The interesting thing about asking for reviews is that even without a ‘particular review’, the sector has been evolving.
“There are some low-hanging fruits like Metering of Consumers and all interface in the power sector, like Customer Enumeration and classification; balancing the mismatch between Generation, Transmission and Distribution.
“All these are low-hanging fruits that should be addressed immediately and would affect the sector”, he said.
However, Mr Adebayo Adelabu, Minister of Power in his Ministerial Retreat in December 2023 said that the Ministry was responsible for setting the strategic policy framework and an accompanying implementation plan for the provision of electricity in the country.
Adelabu said that the discharge of this vital mandate is guided by the provisions of the Electricity Act of 2023.
He said that without doubt, the existing policy framework, the National Electric Power Policy of 2001, stands as an outdated guide.
“This is precisely why Section 3(1) of the Electricity Act, 2023, mandates the Ministry to initiate within one year of this Act.
“The preparation and publication of an Integrated National Electricity Policy and Strategic Implementation Plan (INEP-SIP) in collaboration with relevant government bodies and stakeholders.
Adelabu said that on Electricity Market Design: the National Wholesale Electricity Market, State Electricity Markets and their various stakeholders, evolving franchisee arrangements, infrastructure requirements, and technical support.
He said the Electricity Act 2023 now allows, in line with the 1999 Constitution as amended, that states may establish the legal, regulatory and commercial frameworks for their domestic electricity markets.
“This must happen if we are to increase the geographical footprint of electricity supply and consumption for residents and businesses across Nigeria.
“This evolution from the single national electricity market to a dual structure comprising a wholesale market and potentially, several state retail markets, requires careful consideration of how the transition will take place.
“States, local government authorities and the current Discos must work together to invest in reinforcing and extending local distribution infrastructure in a way that enhances competition wherever possible.
“It will alsorecogniseg the equitable vested interest that that States have historically had in the shareholding of the Discos.
“State governments, in turn, must recognise that State-level policymaking and regulation is of value only if they attract investment into their domestic electricity markets.
‘For Nigeria to increase its GDP to a trillion dollar by 2030 as projected by Mr President, we must massively increase investments in electricity provision across the country.
” The Federal Government must work with the States and local government councils to increase the coverage and distribution of electricity across the country,” he added.
He said examining the key challenges to Nigeria’s electricity reliability should be through governance, adherence to rules, contracts and finance.
“One of the main objectives of the Nigerian electricity sector reform programmes, initiated over 23 years ago, is to make electricity available to consumers across the country with efficiency and consistency, which in turn to lead to general reliability and affordability.
“Even as electricity consumption per capital was at 140 KWh in 2021, relatively low in comparison to neighbouring countries and almost three times lower than the average for Sub-Saharan Africa.
“Nigeria is a case study in a deep electricity paradox. Nigeria has grown to become the host of probably the world’s largest fleet of diesel- and petrol-powered generation capacity that is utilised for base-load supply.
“Various figures have been mentioned, but it is safe to say that this fleet measures no less that 40,000MW of total capacity,” he said.
