‘Distributed generation will increase access to electricity’
Ade Obatoyinbo is one of the major players in the private energy generation space and Managing Director of Cummins West Africa. In this interview with FEMI ADEKOYA, he talks about some of government reforms in the power sector. He believes that the use of embedded power plants will go a long way to solve Nigeria’s power issues, rather than the centralised system.
With energy demands rising beyond production and supply, what do you think can be done to bridge the electricity supply gap in the country?
Just thinking about Nigeria, the deficit is very clear and it has been there for some time. Nigeria is unique and there are many nations where this problem has been solved, so I am confident we can solve the problem. In mobile telephoning, Nigeria had a few 100 land lines to provide that kind of access to the whole country of several million at that time compared to the 200 we have now. It would have been difficult to lay the copper lines. What we were able to do with technology is leapfrog and go towards mobile phones which allowed all of us to be connected and we are quite a connected country today. By the same token while thinking about power, one of the things I mentioned earlier is that I do not believe that with the current state of financing in Nigeria, the cost of doing centralized power as well as what it takes to get the transmission grid ready will be the primary way to go. I believe what we call in Cummins, “Distributed generation” is the way to go. So, instead of a 450 megawatt plant in one central location to achieve 450 megawatt, we rather move into 10 megawatt plant or over 20 megawatt in order to achieve the same capacity. I think by doing so and localizing it, we can get supply significantly increased, but we also need the right tariff to drive that.
Regulations and policies to a large extent affect the level of interventions, innovations and investments considered by operators like you. What is your opinion of the policy framework in the nation’s energy industry and how do you hope to address these concerns?
I think the Nigerian government is moving in the right direction given the energy gap that we have. There are couple areas that I see the right moves being made and I think if the government follows through with courage, I think we would be in a better place. The first one that we have already seen is the change in the tariff regime starting in 2020. If you look at it today, the tariffs are what they call non-reflective of the true cost to provide energy, so investors therefore, will not continue to invest because they have no way of recouping their money. With the government having taken one bold step and I am sure there are more coming to rectify the tariff regime, I think that regulatory environment change will provide good impetus for more investors to come in to deliver us the power that we need in the country. Beyond tariff, the push towards allowing what they call the eligible customer regime, allows producers to be able to produce here, but there is an infrastructure that will help me carry my energy and deliver it 5 kilometres away and I can charge that customer. So that part of the regulatory regime being tweaked to make it work while also encouraging people to invest I think is a very big deal and we are already doing so today. If the government continues in that direction, I think we will see good uptake.
The world is looking at a movement away from fossil fuels to cleaner fuels like solar and wind, with some preference for natural gas. What is your position on this?
I think it is a good thing to our history as a company with a diesel engine manufacturing company, but a very long time we already realized that the environment is important and so when the impact of diesel on the environment became clear, we did two things. Firstly, as an organization, we diversified beyond diesel and moved to natural gas as well, because research and development for us is global and not just in one country. So, we have a range of natural gas engines; we make most of the robust gas engines today and those engines are already deployed in Nigeria and in fact we have continued our research and development in that area. We launched in March, last year, the HSK 78 engine. It is our latest most efficient natural gas engine and we think this is going to be a workhorse for us and we have also received orders for that engine for the Nigerian market; so we feel this is going to be a big deal and beyond gas, Cummins has launched a new electrification business.
We have also invested in several battery companies making different kinds of battery technology. We have invested in a fuel cell company making a different kind of proportion and energy source. In other words, we have started to diversify significantly, understanding that the future is beyond diesel, but while we remain a diesel world for now, we are revamping our diesel engines so that they burn as clean as possible and Cummins is a leader in that area.
Many power generating companies are already exploring renewables. What is the future for renewables adoption in Nigeria?
Absolutely, for us, I will just say a little bit about some of the renewable technologies. Hydro is considered a renewable technology. It is possible but at the moment, we are not doing anything in hydro, because water is a primary source and typically it will drive a turbine. Solar is similar, but it doesn’t drive a turbine, it is a photovoltaic and you take it out of a photovoltaic cell. If you look at all those areas, the Cummins view is that there are companies doing very well in all of those areas, so where we really come in is in the area of storage or fuel cells and the storage of the energy that comes from renewables is very important. This is why we have purchased companies working on and already having established battery technology, because we think that is where the intelligence is. For things like solar, there are many companies that have solar; what we will rather do is do the batteries, do the intelligent controller that can switch a hybrid engine say diesel or gas and solar during the daytime and we are investing heavily in that area as well, especially the intelligent controller. We will stay in that area, but we will collaborate with other companies who are in solar, wind, and hydro as it maybe to create integrated systems. That is where we think our role is.
How will you describe the Nigerian investment climate so far?
I was born and raised in Lagos all my life, but moved away and came back in 2012. The Nigerian investment climate has taken a few hits to be honest and I think some of those hits are temporary, some of the challenges revolve around just being able to predict the business environment, but we at Cummins feel very confident and we do not invest for one or two years, we invest for the long term. Our investment in India and China are paying full today, but those investments were done 40 or 50 years ago. We do not come into the market and expect magical things to happen in 12 months. It is a long journey and we believe that the Nigerian government has the will to create a business friendly environment and if you look at the ease of doing business metrics for example in two years in a row, we have seen some improvement so I think those things are yielding fruit if not today, but hopefully in the future
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