What do you think the new administration could do to address the challenges in the power sector?
There is no doubt that a lot needs to be done in the sector, but I may not agree that the power sector has completely failed. We have made some progress but we are still far from meeting the expectations of Nigerian consumers and businesses. The immediate past government, like the previous ones, promised Nigerians an adequate supply of electricity and even boasted of what they will achieve in four years, but after eight years in government, the average energy delivered to homes and businesses is 3200MW. I checked the daily allocation to the eleven Discos for some years now and the actual figure as of today is far lesser than what is being touted.

The next administration must set up a task force of experts in power system engineering, economics, data analysis, energy market consumer advocacy, IT, and market design with a good understanding of liberalized electricity markets to advise the government on policies and the impact of regulations on the sector.

They should, in collaboration with the regulator, engage a world-class firm in market design to help the market transit to wholesale competition so that we can have a contract-based market before we eventually attain retail competition. The market should be commercially viable to fund itself, hence the urgent need for a robust market design that ensures fairness to all market participants and provides incentives for long-term planning.

I think they should also review the activities of the distribution companies and assess if most of them should continue to cover their entire franchise areas. The focus must be on the reduction of their ATC&C loss.

Efforts must be doubled to ensure all customers are metered. If this requires continued involvement of the government in providing the funding for metering, it should continue with proper monitoring.

The independence of the regulator from the government and the regulated entities is of paramount importance. Government interference to achieve political goals must be restricted.

There must be the sanctity of contracts in the sector. If it is made clear that our energy market pays for energy and capacity, for example, there is no point in withholding capacity payments thereby curtailing investments in power generation.

Energy theft must be punished severely, so also estimated billing that is not according to regulatory provisions. Unpaid debts by ministries, departments and agencies of government-MDAs are a huge financial burden on the distribution companies. There must be a way deductions are made from the source to forestall further delinquency.

The need for training and capacity building for the workforce in the industry must be taken seriously. There must also be some measures to discourage corrupt practices in the sector

Lastly, there is a need for the regulator to enforce market rules and grid codes. Non-adherence has been a major setback in our electricity market.

How does the electricity crisis impact the economy?
Electricity as a critical input to economic activity is used to power factories, businesses, and homes. A reliable electricity supply has a positive impact on economic growth as businesses can operate more efficiently, and consumers can have access to a wider range of goods and services. This can lead to increased investment, job creation, and economic output.

Many industries in Nigeria have relocated to neighbouring countries and small businesses are closing down due to unreliable supply in the country and this has led to slow development, high unemployment rate, and lack of investments in the country. Increased energy spent on petrol, diesel and repairs of generator business owners is affecting business profitability.

It is also very concerning that despite the stranded power generation in the country, many customers especially the industries are not connected to the grid and it has been a major issue for the regulator.

As a solution, we need to revisit the eligible customers’ policy that allows some industries that consume up to 2MW to buy electricity directly from the Gencos. We haven’t recorded progress in the policy due to the cumbersomeness of the application process, and due to some issues around the determination of Competition Transition Charge-CTC, The cost of captive generation from diesel generators and gas plants has increased the overheads of many of our industries and this has negative impacts on them.

Also, grid reliability is a major concern for industries in the face of frequency deviations from nominal values. Many industrial machines are frequency sensitive and there is a big concern about the destructive impact of frequency deviations on their machines and production that may lead to huge losses. The grid operator must ensure system balance with adequate provision for ancillary services and an efficient balancing mechanism.

Our industries and factories also must be energy efficient and their facilities must have good power factor-PF. Inductive loads have impacts on the networks and power generation assets.

So, adequate provision must be made for reactive power compensation. For instance, installing power factor correction devices, such as capacitor banks, at the load side or strategic points in the power distribution system will generate reactive power locally, offsetting the reactive power drawn by inductive loads. By improving the power factor, the system becomes more efficient, reducing line losses and voltage drops.

Adequate metering of business premises is also needed to ensure that business owners are not being overbilled or under billed.

About two months ago, the Federal government passed a constitutional amendment bill allowing states’ involvement in all aspects of the electricity value chain. Do you think that is the way forward?
Frankly speaking, I don’t see this as the way forward as I am afraid we will be replicating existing issues in every state that decides to have an islanded power system. I think there is a more economically efficient way of achieving the goal of reliable electricity supply at least cost to the consumers by leveraging on the existing market structure and its trajectory instead of starting all over again at state levels. We need to understand that power projects are capital intensive and resources are scarce in the face of competing areas begging for government attention and dwindling government revenue.

The amendment does not align with the policy goals of the Ministry of Power and the goals set by the regulator to see the market attain retail competition shortly.

Many people talk about the national grid being too big to manage and I wonder what gives such an impression as our grid transmission line is barely 20,000km and the quantum of energy being distributed on the grid average is about 3200MW. Whereas the ERCOT-managing Texas energy market has almost 70,000km transmission lines and about 76,000MW capacity and no one is talking about a 76,000MW capacity grid too big to manage. Many Discos managing up to four states offtake less than 300MW, and with their ATC&C loss of about 48 per cent, they hardly make remittance of up to 60 per cent of their energy offtake.

The problem is not with the size of the grid, and no one has articulated in a convincing way how the state electricity market will address all the associated problems with NESI today.

I don’t think states that couldn’t provide ordinary drinking water should be saddled with the responsibility of regulating more complex electricity.

There have been projections on how this amendment will encourage investments and spur development, they are at best mere conjectures especially if you look at the level of FDIs many states have attracted in the last few years.

Mind you, most of the MDAs in the states are also owing DisCo’s billions of naira in unpaid bills.

The current market structure is set on a trajectory, and abandoning the course at this stage will send a wrong signal to investors about our policy inconsistency. There are Power Purchase Agreements that are recently signed with about 20 years tenor. How do we address the fallouts of breaches in contracts if NESI is balkanized?

The regulator, NERC. has recently mandated three Discos to initiate bilateral contracts with Gencos as the market transits to wholesale competition. How do you align this with the constitutional amendment?
There is also this flawed assertion that the amendment will lead to competition and that new entrants can even have parallel networks to the existing ones. This is a dangerous path to competition that will only set us back.

How many states in Nigeria can provide guarantees like the type that Azura has with the federal government to encourage investors to build power plants? What commercial models and degree of market opening will these states operate at the start? Vertically integrated monopoly, single buyer, wholesale competition or retail competition? What lessons have we learnt from states that have spent billions on building power plants without visible results? Has the electricity supply improved in Edo and Akwa Ibom states, for example?

I think States’ participation, if implemented very well, should be at the distribution level where each state can regulate only electricity distribution within their state boundaries. The national grid remains, and power generation is regulated by NERC, but states can also license embedded generation with a capacity limit determined by NERC. There is a need for massive investments in distribution networks and I believe we can have more players with fresh capital injection in this space to be regulated by each state. This can rapidly spur the development that will lead to the separation of the wire and energy business so that we can have full retail competition.