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Nigeria’s electricity debacle

By David Ogah and Ikechukwu Onyewuchi
10 April 2016   |   12:20 am
The prevailing darkness across the country is far from being over, as players in the electricity supply chain seem to lack the capacity to meet Nigeria’s power expectations.
PHOTO: www.iroy

PHOTO: www.iroy

• GENCOs Producing A Quarter Of Nation’s Electricity Requirement
• DISCOs Unwilling to Invest In Distribution Infrastructure
The prevailing darkness across the country is far from being over, as players in the electricity supply chain seem to lack the capacity to meet Nigeria’s power expectations.

While the Electricity Generating Companies (GENCOs) are unable to meet the nation’s power requirement estimated to be 200,000 Megawatts (MW), according to figures given by former Minister of power, Professor Chinedu Nebo, the transmission companies and distribution companies lack capacity to bring to consumers the little production achieved at the generation companies.

The GENCOs are currently oscillating between 2,905mw and 5000mw, even with installed capacity of 12,522mw, out of which the Advisory Power Team in the office of the Vice President, which carried out a study in conjunction with Power Africa, say about 46 per cent of the generated power are lost during transmission and distribution, leaving only about 54 percent for national consumption.

Players in the electricity supply chain, the GENCOs, Transmission Company of Nigeria (TCN) and DISCOS appear to lack the capacity needed to play their respective roles effectively. While some of the generation companies, especially those that rely on gas for their turbines, continue to lament their inability to meet consumer’s expectations due to incessant vandalism of gas pipelines, the distribution companies are not willing to invest in modern infrastructure to reduce power loss.

A breakdown of generation according to electric system operators indicated that Ikeja DISCO receive 435.86MW; Abuja, 334.16MW; Benin, 261.51MW; Enugu 261.5MW;Ibadan, 377.74MW, Kaduna 232.46MW, Port Harcourt, 188.87MW and Yola, 101.70MW.

Former Managing Director of Ikeja Electricity Distribution Company, Abiodun Ajifowobaje, in a recent presentation, where he gave an update on the Nigeria Electricity Supply Industry (NESI), identified the myriad of problems in the industry.

According to him, the issues include serious gaps in power supply and availability, which is worsened by operators’ inability to determine the country’s actual requirement due to heavy and undetermined suppressed load; aging and obsolete equipment at all levels of the supply chain, and inadequate funding of the sector.

Others, he said, are poor energy management and revenue collection by distribution companies; zero safety awareness, as Nigeria has the highest death by electrocution in the world, as well as power equipment vandalism and ageing workforce.

He said it is unfortunate the power sector has not delivered on the promises for which it was privatised in 2005, lamenting the consequences of the still-born dreams that would have seen Nigeria out of underdevelopment.

Gas Issues
Nigeria is estimated to have the ninth largest gas reserves (at 180,105 bscf), but this has not been leveraged to meet Nigeria’s electricity requirements.

There is low production for the local market, which poses serious constraints and is insufficient to run gas-powered power plants amid sabotage of the pipeline network to supply the product.

Painting a picture of the sorry state of the industry after privatisation, Ajifowobaje said, “Recent figures show that Nigeria loses as much as nearly 3000mw due to gas constraints. This is apart from the expected 6,000mw from the Nigeria Independent Power Projects (NIPP).

“There is no clear relationship between the petroleum industry and the power industry, which shouldn’t be so. The International oil Companies (IOCs) are not willing to invest in gas infrastructure due to the regulated and uncompetitive prices being proposed by government. Nigeria is still plagued with high rate of pipeline vandalism that hinders the effective flow of available gas to the generation companies. The law is not strict on vandals who destroy the distribution infrastructure.
“Also, Nigeria loses about 630mw as a result of poor water management which affects the Hydro power stations in Kainji and Shiroro.”

According to the advisory power team in the office of the vice president, “Long-term under-investment and delays in the delivery of planned gas infrastructure have resulted in a shortage of gas-processing and pipeline infrastructure. Lack of investment in gas-processing facilities and failure to complete already funded projects are key challenges.

“There is also poor economics. Low domestic gas prices do not justify investment in gas development by upstream oil and gas companies. Recent tariff increases have improved the situation, but it is estimated by OPTS that further increases are needed to fund projects requiring new infrastructure, e.g., processing facilities and pipelines. In addition, gas producers are not consistently paid for the gas they supply because the generation companies do not receive full remittances from the Nigeria Bulk Electricity Trading Plc. (NBET), due to downstream collection issues.”

Transmission Hurdles
The TCN is managed by Canadian company, Manitoba Hydro International, and has a network, which consists of 159 substations with a theoretical transformation capacity of 19,000mw and 15,022km transmission lines, according to the advisory power team.

It is widely believed that the system is weather-beaten, rickety to meet the demands of demand and supply from the industry, even as ineffective maintenance and poor system management are seen as the major bottlenecks.

Noting that the Transmission Company of Nigeria (TCN) is plagued with many challenges and struggles with overloaded, aged and obsolete equipment, Ajifowobaje said though the installed capacity is about 7,000mw, the company can only wheel a meagre 4,000mw continually.

“There is lack of adequate funding for transmission infrastructure improvement. This is even more worrisome because government owned assets have been privatised. Also, while government reportedly budgeted N1b for transmission in the 2015, it needs over N1trn for capex alone. The lack of investment has also led to poor management of the available capacity, as there is no flexibility in the system,” he added.

Saying that there is constant vandalism of TCN lines, he noted, “TCN gets less than 60 per cent of its wheeling invoice from the Market operator (MO) on monthly basis.”

IN the next three months, the one-year contract extension offered Manitoba Hydro International of Canada to manage the Transmission Company of Nigeria (TCN) would expire.

While there are mixed feelings over the successes of the Canadian firm and its expertise to execute its mandate, the firm is patting itself on the back for having delivered.
But the national grid continued to witness turbulence, as the country recorded zero power allocation to the distribution companies in the last few days.

In the face of obvious fall in power supply nation wide, Manitoba insisted in its recent progress report to the ministry of power, that the network is now far better than when it came in.

“MHINL is pleased with the excellent progress achieved in three and a half years and looks forward to the opportunity to continue its commitment to improving the power supply in Nigeria. System collapses also reduced from 22 in 2013 to six in 2015,” the firm said.

The firm said in the report that the grid capacity has grown to 5,200 Megawatts, from 3,200MW when it took over.
The 2014 assessment carried out by government indicated that Manitoba performed below expectation.

Generation Issues
THE generation wing of the industry is also suffering from the effects of poor implementation of projects, as well as maintenance, gas and water challenges.

There are 25 power plants in the country connected to the grid system, which includes some run by generation companies of the old Power Holding Company of Nigeria and others in the National Integrated Power Project (NIPP) and Independent Power Producers (IPPs). Largely domiciled in the South of Nigeria, 85 percent of the plants are powered by gas and the rest is served by hydro technology.

The advisory power team says constraints in the industry cause losses amounting to about N1.4b daily.
More so, the existing facilities are operating below capacity and suffer from incessant sabotage on pipelines supplying gas to them.

For instance, as at the last quarter of 2015, the Egbin plant, with an installed capacity of 1320mw pumps 539MW into the grid; Olorunsogo gas with 335MW, does 189MW; Geregu with 450MW does 179MW and Kaingi with 720MW does 173MW.
Others are Olorunsogo NIPP with 760mw, but delivers 171 into the grid; Omotosho gas with 335MW supplies 163MW; Shiroro with 600MW, delivers 153MW and Geregu gas with 414MW with 131MW.

Distribution Concerns
THE distribution arm of the industry is plagued with issues of metering, tariff, inadequate supply and allocation from the transmission company and the Bulk Trader; as well as paucity of investment by the new handlers of the companies.

Although government has made demands for adequate metering of customers and fair tariff, the distribution companies complain of lack of funds occasioned by the low revenue and collection losses, even when some of them enjoyed increased revenue due to the metering of homes.
Noting that there is a power supply gap between what the distribution companies (DISCOs) get in relation to customers’ demand, Ajifowobaje said the estimated demand stands at about 12,000MW, as against the average available supply at about 4,000MW.

“A case-study is the Ikeja DISCO, which requires at least 1250MW to meet its customers’ demand, but only gets an average supply of between 370 to 425MW from the grid,” he said.

On the challenges with power distribution, he said the state of assets at the point, when private investors came into the picture, was considerably worse than was reported, adding that the facilities would require time and financial resources to be fixed.

On the state of funding in the sector, he said the electricity supply industry suffers a deficit of N25bn every month, adding that DISCOs only meet an average of 55 per cent of invoices issued from energy received from the grid.

“All players in the supply chain are owed huge amount in unpaid bills. This ranges from the gas suppliers to GENCOs to TCN to MO and NERC. Even the Federal Government’s N213b bailout fund was only partially disbursed. Only about 30 per cent of the fund had been dolled out as at December 2015,” he said.

He said the solutions to problems of gas availability could be solved with huge investment by government and the private sector, as well as enforcing competitive pricing for embedded and captive power investors.

He noted that there must be considerable investment in transmission infrastructure for ease of evaluation alongside incentives to embedded and captive power investors as stopgap.

On solving issues relating to funding of the industry, he said government should institutionalise cost reflective tariff for the DISCOs, ensure prompt payment for power services by its agencies, provide subsidies for gas and cross-subsidies for low-income earners, as well as low interest rates for funds for investment in the power sector.

“The Bureau of Public Enterprise (BPE) and the Federal Ministry of Power, Works and Housing should also enforce sanctions for investors who abuse purchase agreements,” he added. The distribution companies have been accused of not investing in their distribution network since they inherited it from the Power Holding of Nigeria (PHCN).

But the spokesman of Ikeja Distribution Company In Nigeria, Felix Ofulue, said although the electricity outfit has carried out some investment aimed at improving power distribution in its coverage area, the lingering challenges have made it impossible for the people to appreciate the level of investment by the company so far.

According to him, the company signed a USD 6.5million contract with its technical partner, Korean Electricity Company (KEPCO) to carry out enumeration of customers within its network last year.

“The project, which is known as Customer Enumeration Technical Audit and Asset Mapping (CEETAM) involves mapping the location coordinate of each of the electrical network entities from 132kv/33kv System Distribution Transformers and poles, and also carrying out customer and consumer indexing through door-to-door survey. It also includes indexing of Ikeja Electric’s distribution assets such as Power Transformers, Feeder Pillars, High Tension Poles and Distribution Transformers,” he said

The project, he said, created opportunity for the company to know the number of transformers and electricity equipment required in a given community and ways to address challenges faced by customers that would translate to improved power supply.

According to Ofulue, the project is facing some challenges, arising from connection and commercial losses.
“There is a lot of energy theft by consumers on the network and also inability to fully collect the monies (bills) owed by customers. There is also a huge funding gap in the sector. Other challenges include vandalism of infrastructure, inadequate supply from the national grid, overloaded transformers and feeders due to expansion without adequate provision for more power stations,” he explained.