‘How to tackle power transmission challenges’
Dr. Lazarus Angbazo is the President and Chief Executive Officer, GE Grid Solutions/Energy Connections, Africa. In this interview with ROSELINE OKERE, he spoke on the challenges in Nigeria’s power sector and the role of the private sector. Excerpts:
Many countries are moving away from fossil fuel to renewables. Do you think Nigeria is prepared for this change, and what is GE doing in this regard?
GE’s perspective is that a diversified energy mix is really the best energy security policy that any country can have, Nigeria included. It just happens that Nigeria is really blessed with all of the energy resources.
Today, until solar and wind become more competitive with respect to pricing. We’ve got a comparative advantage with gas. So gas will still remain the base load, and we expect that hydro and solar will continue to pick up, particularly in solar, where we have stepped up our game quite a bit. We have to give credit to the government for signing Memoranda of Understanding (MoU) with the 11 developers. So, we are working with a couple of those developers in developing the power projects they signed MoUs for. Aside from that, we’ve signed an MoU with the Northern States Governors Forum, where we are developing jointly with two state governments in particular, Borno and Niger states. We will be developing 100 megawatts in those two states. In Borno, the project is split between the Maiduguri industrial zone, and the Maiduguri Water Board. In Niger State, we are looking at three sites in Minna, Bida, and Kontagora. We are working actively with them.
We are also working with the Rural Electrification Agency. They just launched hybrid renewables with diesel and storage back up for the electrification of Nigerian universities. That is a project that they publicly tendered. We’ve expressed our interest, and we have been very supportive of that initiative. That would be power that is off grid, fully integrated generation and distribution; connectable to the national grid or as stand-alone, but providing power to Nigerian universities and their catchment areas. That is another great initiative. There are also initiatives that the government is launching around mini hydros, we are taking a look at those as well.In 2017, a lot of Nigerians expected that things would turnaround quickly, but did not quite span out that way.
What is GE’s appraisal of the Nigerian energy sector, in terms of its current state, challenges and potential?
I think you know that GE has always had a long term perspective about Nigeria, so one year alone doesn’t really tell the story. But I will say quite frankly in 2017 that the challenges remained, but we also know the government put in efforts to address these challenges from the point of view of making sure that there is available and consistent power.
If you look around, there are quite a number of existing plant assets that the government still owns. We estimate that there is about a total of five gigawatts of installed generating power capacity that is idle or only available intermittently. Many administrations have invested heavily. So you have got five gigawatts of potentially available power, but only about one gigawatt that is unreliably provided. So the question is, how do you unlock this generated but unavailable capacity so that it translates to power on the grid for consumers? We are working with the government, both the minister and the chief of staff of the President, and also the Vice President’s offices for on an end-to-end solution. Here, we are looking at each of the bottlenecks along the electricity value chain from the end of the distribution networks, and TCN and of course the power plants and making sure that available power gets to the clusters.
That’s a great example of the mindset and thought process that is needed right now, shifting from looking at very segregated or isolated problems and looking at the system with an end to end approach to solving the power problems. If we can do that, it would be a huge lift, and that is just using what we already have.
This initiative coupled with some of the power projects that we are working on with some of the other developers out there as well as the renewables projects we just talked about; keep us positive about the future of energy in Nigeria.As CEO of GE Nigeria, You recently participated as a keynote panellist on the Future of Energy in Nigeria Forum, in Lagos, alongside other private sector thought leaders.
Can you share some of your highlights and key takeaways from that?
The panel’s focus was to get the private sector’s perspective on how to tackle the bottlenecks in the electricity value chain, starting with the liquidity issues, which is a very big one; particularly at the distribution end of it. We also looked at some of the major global trends impacting the industry, and as they affect Nigeria, all in the bid to move the sector forward.
The first obviously is that the demand for energy continues to remain very strong; and the gap between consumed electricity and power generated is still very large. The key question is: how do we bridge that gap by solving from end to end of the electricity value chain? So a few of the key takeaways, from the point of view of innovations that have to be adopted in the sector, would be a big focus on technology that can guarantee fast delivery of power. This is Fast power: either captive at the point of use, or delivered by leveraging existing infrastructure to be able to take the power to the load centres where you have the population and the industry clusters. You have a lot of eligible customers, who are able and willing to pay for electricity. The question is how can you bring relief to the whole system by delivering power to them?
Second point is the issue of financing. The big constraint has always been the bankability of projects in Nigeria. This has always been a challenge because of the huge upfront capital expenditure required. Part of the ideas discussed was, how do we create more flexible financing systems: whether it is through rent-to-own or managed equipment services or even proposals like leased equipment and deferred payment terms? Those were some of the ideas that were put on the table.
We also talked about the ability to leverage technology to improve power operations using digital solutions like asset performance management systems. This is an area where we are obviously leading in the industry. This will definitely allow the optimisation of existing assets so that you have reduced down time of systems, more uptime, more generation capacity, more availability, less load shedding, and less frequent incidents of blackouts.
I guess the last thing I’ll say on this is the growing incidence of renewables. This year alone, the total increase in generated power came from renewables globally. In Africa, we do expect that by 2040, more than 25 per cent of generated power would come from renewables. In Nigeria, we are talking largely about solar and hydro. As of today, hydro, although it is not very well understood, is a big component of Nigeria’s installed base. But obviously, it is intermittent power because of the seasonal nature of the rains. Now, we have very high generation capacity because Kainji, and Shiroro are operational and are doing fairly well. But as we go into the dry season, we’ll realise that obviously the intermittency of water supply makes renewables not necessary the base load but a critical part of the energy mix nonetheless.
The minister said the Transmission Company of Nigeria (TCN) has the capacity to transmit over 7000mw, and the Discos insist the capacity is there but the TCN is not dropping the power where needed. In the President’s 2018 Budget speech to Senate on November 7th, he said the country still faces challenges in transmission and distribution. How will you assess the transmission and distribution infrastructure in Nigeria, and how can GE support growth and a visible turnaround here?
The President is absolutely correct. There is shared responsibility for the lack of delivered power at the point of use. There are significant bottlenecks in the transmission network, and although they may be able to deliver power at certain interfaces with the distribution network, the distribution networks may not have the infrastructure in place to accept the power.
On the other hand, the distribution networks may have locations where they have willing buyers, but the transmission network interface at that point is unable to deliver the power. It is really disingenuous to even do the finger pointing because there is shared responsibility here. The initiative of tackling this problem with an end-to-end power solution as I have described to you, is really the initiative that we have put on the table of the Federal Government of Nigeria. It is so that for these clusters, where the Discos know they’ve got customers, and you know you have willing buyers of power, the stakeholders can walk backwards to a location of the power generation.
Do you see identifying eligible customers as a way of resolving this problem?
I think it can be a win-win for everybody, I think the concern that eligible customers will bypass the Discos is probably an unnecessary concern, because quite frankly, you have to work with the Discos because they are part of the distribution franchise. Also, the eligible customers are willing and are capable, and it will be a shame if we don’t provide a means through which we can enable the system, create a little more efficiency, and more competition to be able to actually deliver power. If you can take care of the eligible customers who can pay cost reflective market rates, then of course it gives the discos more capacity to invest in the rest of their network.
We still have liquidity crisis in the system, and many banks are exposed. How do we solve this issue?
It starts from the customer facing point, and I think the liquidity challenge starts with the Discos.
First of all, the remittance/collections are not water-tight and we need to work on how to actually increase metering so that they can improve their collections. Now this requires investments and some sort of intervention around this initiative needs to happen.
Secondly, there is a need for policies around marketing electricity and this is something the government can help with as well. Are the tariffs market based? Do they actually cover the operating cost of the Discos? I think a combination of all of those will help increase collection and the revenue generation of the Discos, and therefore improve the liquidity of the entire value chain because the Discos are not getting the money, and also the TCN and Gencos are not getting their money. If not fixed urgently, this problem may dry up investment in the sector. The Discos face considerable pressure to service their debts with the banks, and this is also a factor that is probably impeding their ability to invest today. I will say we basically have to do those three things to improve the collections infrastructure, and also significant education of the population that will trigger a culture change on people paying for their electricity, and then of course looking at the tariffs as well.
What are the specific electricity projects GE is involved in now?
We have been here for a long time! Today, about 70 per cent of the generation installed base in Nigeria runs on GE technology, and we are constantly working with power plants to improve operations and rehabilitate plants that have broken down. We have helped generate over 4,000MW of power in the last five years, comprising independent power projects like Ogorode, Benin, Omotosho, Olorunsogo, and Alaoji power plants.
I refer you back to the end-to-end initiative because we are taking a system-wide view, and actually saying that Gencos can optimise the assets they currently have, and ensure that these generation assets unlock the power that is generated but unavailable. That is a direct initiative that we are working with the Federal Government
We also talked about the off grid and renewables initiatives. I said earlier that GE signed an MOU with the Northern States Governors Forum, to build up a 500MW Solar Power project in a minimum of five states in the North. This is currently underway.
I think you saw recently that the QIPP project was signed. The PPO was signed between NBET and Black Rhino, Black Stone, and obviously GE is the technical partner for technology and equipment. We are very excited about that.
How do we solve the issue of cost reflective tariff since the electricity companies want an increase in tariffs, and the government is against it saying the economy is not stable?
There is a lot of education that needs to happen because today, all of us are paying for very expensive power. We all have to rely on diesel; and diesel to begin with is very costly, very unhealthy, and very unreliable. Compared to grid tariff, you are better off using central generation. If that is clear, you will understand that people are paying a market rate, which is significantly higher than what they would have been paying if it was central generation as opposed to reliance on diesel.
I can understand the political restraints around rapidly increasing the tariffs for central generation. I can also understand the concerns of consumers that if they start paying, would they actually start to get reliable power. There is a lot of education that needs to happen on all sides; the consumer side, power company side, and even on the government side. This is via dialogue across all the stakeholders, but this industry has to attract more investors otherwise it’s going to continue to grind to a halt.