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Manufacturers opt for cluster plants to tackle energy cost

By Femi Adekoya
22 May 2017   |   4:31 am
Low output and high input costs are pushing more production firms to opt for independent power projects (IPPs) in industrial clusters. They say the strategy is to enhance sustainable electricity supply.

Nigeria factory

Low output and high input costs are pushing more production firms to opt for independent power projects (IPPs) in industrial clusters. They say the strategy is to enhance sustainable electricity supply.

According to the manufacturers, the move became necessary having waited on electricity distribution companies to provide steady power supply to no avail amid high energy costs with which they have had to contend.

Besides managing expenses, the move will also see to the return of more industries and increase capacity utilisation which has been at a low ebb in recent times. And ultimately, the idea would also lead to the creation of more jobs for Nigerians and reduction in prices of goods.

Data from the Manufacturers Association of Nigeria (MAN) show that members enjoyed an average power supply of seven hours in the first half of 2016, as capacity utilisation fell below 45 per cent.

Flour Mills Nigeria Plc, Lafarge Holcim, Tower Aluminium, Cadbury Nigeria Plc among others now rely solely on power plants for energy. The new move by MAN will see many industrial clusters adopt the same strategy and co-share excess generated energy with small-scale industries to reduce costs.

To achieve their power generation and distribution plan, the manufacturers explained that new transmission lines may be created for users within the clusters, adding that MAN has the support of the Federal Government, Nigerian Electricity Regulatory Commission (NERC) and other stakeholders in making the project a reality.

The plan was unveiled at the signing of a Memorandum of Understanding (MoU) between MAN and one of the independent power developers for the pilot phase of its IPPs, Tower Aluminum Nigeria Plc.

The chairman of Manufacturers Power Development Company Limited, a subsidiary of MAN, Ibrahim Usman, noted that the poor power supply in the country was seriously affecting the manufacturing sector, hence the partnership geared at developing small capacity IPPs in its industrial clusters.

He explained that the project, which is in the pilot phase and expected to kick off with an industrial estate within Henry Carr in Ikeja, will enable manufacturers to manage their energy generation and consumption gain as well as strategise for power mix like solar, wind, waste-to-energy and biomass in capacities between five and 15 megawatts.

On the challenges that may arise with the implementation of the project, he said the pilot phase would assist operators in deploying the project on a larger scale.

Usman, who is also the vice president, North-west Zone of MAN, said the manufacturers would deploy incremental power generation strategy based on needs assessment in order to ensure that industrial clusters’ power demands are met.

According to him, the MAN IPP pilot scheme will start in areas where gas is available like Lagos, Ogun and Rivers states, while solar energy would be deployed in the northern region of the country.

His words: “There is no one model for all as different states have different needs. Talks are ongoing with strategic partners to deploy liquefied petroleum/natural gas in locations like Abuja, Kano, Ibadan, Enugu and Nnewi. It is going to be a case-by-case model for industrial firms. There are foreign technical partners willing to establish smaller capacity solar farms of five to 10 megawatts, even as waste energy will not be left out.”

On the modalities, Usman had at an earlier forum explained that off-taker industries would be full financial members of the association, as they will have the opportunity to enjoy friendly tariff, especially where multi-lateral donor agencies sponsor some key elements of the projects.

He added that subscribing members would have to show proof of capability and credibility to pay for the energy that they would consume.

The Group Finance Controller, Tower Aluminum Nigeria Plc, Ramesh Biswal, promised to bring his company’s experience in power generation to bear on the project, adding that the pact will be implemented and power delivered within the timeline.

“This is not a pilot project for us because we have been generating our electricity before now. With the MoU, we hope to repeat the feat through incremental power and supply industrial firms within our cluster with constant and quality power,” he stated.

MAN President, Dr. Frank Jacobs, had told The Guardian that the productive sector remains troubled due to various challenges in the operating environment.

“The absence of conducive manufacturing environment and basic infrastructure would continue to draw back the sector, except something urgent is done to reverse the situation. Power is a major cost for manufacturers and they will explore opportunities where it is cheaper to produce their goods,” he noted.