June 27, 2017

Power: 4,000 MW for December threatened

Power: 4,000 MW for December threatened

By Udeme Akpan & Prince Okafor
LAGOS — The Federal Government’s efforts to supply 4,000 megawatts, MW, of electricity by December 2017, may not be accomplished as a result of poor state of power stations, limited transmission facilities and inadequate distribution in the nation.

Minister of Power, Works and Housing, Mr. Babatunde Fashola, had early this month disclosed the commitment of the government to deliver 4,000MW of power to consumers nationwide.

The nation currently generates 3,307 MW, showing 693 MW below set target, barely five months to the end of the year.

The Advisory Power Team disclosed in its latest authoritative report that the sector was also haunted by inadequate gas and water management constraint, among others.

It said: ”On June 25, 2017, average power sent out was 3,398MWh/hour (down by 111MWh/h).The reported gas constraint was 1927MW. The reported line constraint was 98.3MW. The reported frequency management constraint due to loss of DisCO feeders was 445MW.

“The water management constraint was 0MW. The power sector lost an estimated N1,186,000,000 on June 25, 2017 due to constraints. Generation reduction due to frequency management (as a result of loss of DisCo feeder) in Omotosho II, Delta and Ihovbor NIPP.  Afam VI GT11, 12 & ST10 are out due to condensate along the gas pipeline, impeding 650MW of generation.”

Also, investigations showed that power transmission remains a herculean task because of major challenges, especially limited transmission facilities and inadequate funding.

Mr. Sunday Olurotimi Oduntan, Executive Director, Association of Nigerian Electricity Distributors, ANED, disclosed in a telephone interview that the vandalism of facilities that occurred too often was also a serious problem, leading to huge deficit.

He said: “No bank would lend you money unless your business is bankable. Let me re-state for emphasis that this liquidity crisis is a major threat to the power sector.

“The revenue shortfalls adversely affect the ability of the DISCOs to make capital investments in metering, network expansion, equipment rehabilitation and replacement, which are critical for service delivery.”

Impact on consumers

These and other problems have affected the generation, transmission and distribution of electricity to consumers nationwide.

Mr. Frank Udemba, President of Manufacturers Association of Nigeria, MAN, disclosed in an exclusive interview that the situation was critical.

According to him, with over 180 million people and huge manufacturing and other business activities, the country should be generating at least 180,000MW per day.

He quoted the World Bank report as stating that Nigeria’s electricity per capita was abysmally at 142 kilowatts, which when compared with the world figure of 3,104 kilowatts for the same year, was too small.

Udemba stated that the challenge of electricity supply was hydra-headed and the most singular core challenge inhibiting the projected growth of the sector.

According to him, this challenge finds maximum expression in inadequate supply of electricity and exorbitant and escalating tariff.

He said: “According to survey conducted by MAN in 2015, manufacturers, electricity supply averaged 7 hours per day with 7 times average of power outages per day in the year.

“Consequently, to sustain production, manufacturers have for years relied on self-generated electricity as an alternative source of power notwithstanding the associated huge cost estimated at N129.95 billion in 2016.

“In spite of the poor supply, electricity tariff has been subjected to indiscriminate upward review by the DISCOs and the Nigerian Electricity Regulatory, NERC.

“The ugly situation is usually that while a particular Multi Year Tariff Order, MYTO, subsists, another one is crafted and superimposed on the subsisting one. This is not manufacturing friendly and negatively affects the ability of consumers to maximize welfare .

“The share of energy cost to total cost of production in the sector in that year was 36 percent which is one of the highest in the world. The implication is that the locally manufactured goods are less competitive in relation to the imported ones. The poor electricity supply, the high cost of alternative source coupled with the FX challenges of that year is largely responsible for the output contraction and the lay-offs in the sector in the recent years.

“Well, it is possible to gauge the loss suffered by manufacturers arising from paucity of electricity supply and high cost of alternative energy source. Capacity utilization in the sector has barely been above 50 percent. 

Funding requirement

Investigations showed that the power sector shortfall of N931 billion accumulated since 2015 has compounded the poor power situation in the nation.

This is as the Electricity Generation Companies, DISCOs, have not yet been paid N340 billion in the electricity market, thereby blocking further chances of getting enough gas to generate electricity.

The Power Sector Recovery Plan, PSRP, an ongoing action plan of the Federal Government in the power sector; captured the N931 billion shortfall to include, N458 billion tariff deficit (non-cost reflective tariff) and another N473 billion market shortfall (poor bills collection and technical losses) accumulated in 2015 and 2016.

The former Minister of Power, Prof Barth Nnaji, indicated that the 11 DISCOs needed to invest additional $7.7billion to upgrade their assets to provide the services required of them.

Nnaji, also Chairman, Geometric Power Limited, said each investor would need at least $700 million, saying they required investment to the tune of seven times the cost of the purchase of the assets.

The former minister, who was the keynote speaker at the Natural Gas Business Forum organised by the Nigerian Gas Association, NGA, in Lagos last weekend, advised the Federal Government to surrender its 40 per cent.

It was gathered the situation may not improve in a short term or medium term, as banks are generally reluctant to give loans to investors in the power sector.

The way forward

According to MAN, electricity is a strategic national product that should be handled with high level of efficiency.

It indicated that leaving such to a few stakeholders, without any commensurate investment in supply infrastructure and a national framework that will promote the industrial aspirations of the country, was not in the best interest of the nation.

It stated: “Even though the sector, especially the distribution aspect has been privatised, it is important that government finds ways and means of supporting the Discos until a stable, quality and reasonably priced electricity is available to the manufacturing sector.

“There is need for government to continue to offer integrated support to all stakeholders on the NESI value-chain i.e. manufacturers, GENCOs, TCN, and DISCOs in terms of finance and expertise.

‘’Apart from this, the government should give strong support to the development of IPPs, the Off–Grid and the Micro Grid initiatives so that electricity can be generated and supplied in pockets of clusters.”

Previous failed targets

Before now, the Federal Government had promised to add about 2,483 megawatts (MW) of electricity from renewable sources to Nigeria’s electricity grid by 2015.

Director of the Electrical Inspectorate Services, EIS, of the ministry, Abayomi Adebisi, had disclosed that the 2,483MW target for 2015 was a short term mark, while 8,188MW and 23,134MW were medium and long term targets for 2020 and 2030 respectively in the policy.

In his breakdown of the renewable electricity generation projections in the document, Adebisi had said that renewable energy was expected to contribute about 1.3 percent of Nigeria’s energy mix by 2015, while generation growths of 8 percent and 16 percent were expected between 2020 and 2030 respectively.

Also, President Muhammadu Buhari had said the Federal Government was intensifying efforts to complete a variety of outstanding power-related projects to remove existing pitfalls and lay the foundation for the generation of 10,000MW and 15,000MW in the short and long terms.

The President had said at the Diaspora Day 2015 celebration with the theme, “Diaspora and Nigeria Change Agenda,” held at the Banquet Hall of the Presidential Villa, Abuja.

Buhari, who was represented by the Vice President, Prof. Yemi Osinbajo (SAN), had said that the administration was aiming to consistently generate 5,000 MW of power daily by early 2016, adding that, this was a modest target from what was already available.

He had said that his administration is building a new Nigeria and that the effort requires the support and participation of its citizens both at home and abroad, and noted that Nigerians in the Diaspora had a lot of contributions to make in rebuilding the country.

“Permit me to take this opportunity to interrogate the place and role of Nigerians abroad in the Change Agenda of the Buhari administration. This is because we have embarked on the building of a bold new Nigeria and we need all hands on deck.”

“The time has come for talents from home and abroad to mix it up in patriotic zeal to fashion the Nigeria of our dreams. First, let me quickly lay out our medium to long-term strategy as a government. It is namely to build an economy led by a strong and responsible private sector,” he had said.