Power wobbles despite $1.6 billion investments

At a peak of 5,459.50 megawatts, Nigeria’s power sector still wobbles with low transmission capacity seven years after privatisation. This is despite the $1.6 billion invested through the World Bank, African Development Bank (AfDB), and other corporations. The $1.6 billion investment is in addition to other budgetary allocations to key power infrastructure and other revenues generated by the government-owned Transmission Commission of Nigeria (TCN).

The TCN wheels power from generation infrastructure to distribution companies.Few days after announcing last week that the Nigerian power sector recorded an all-time transmission peak of 5.459MW, the TCN yesterday said a new national peak generation of 5,520.40MW was recorded on Friday, October 30, 2020, at about 9.15 pm. Usually, transmitted electricity is volatile and could either go up or down depending on the stability of infrastructure.

For a company, which had promised to boost transmission capacity to 20,000WM by 2020, stakeholders in the industry have decried the dismal performance of the sector, insisting the sector is far from projected goals. The World Bank is currently financing the Nigeria Electricity Transmission Access Project (NETAP) at the cost of $486 million. The project started with advanced procurement in 2017 and was approved by the board of the World Bank in February 2018.

The Abuja Transmission Ring Scheme is also being financed by the French Development Agency at the cost of $170 million. Lagos/Ogun Transmission Project is being financed by the Japanese International Corporation Agency (JICA) at $200 million. Northern Corridor Transmission Project is also being financed by the French Development Agency and European Union (EU) at $245 million. Nigeria Transmission Expansion project will be financed by the AfDB at $410 million.

Under the 2014 budget, about 62.4 billion was allocated to the power sector. Most of the fund was staked on the transmission to guarantee the success of privatisation. In 2015, about N8.8 billion was voted for the power sector, In 2017, N169.42 billion was voted for the power sector while about 129 billion was voted in 2020. The bulk of the fund was spent on power infrastructure.

TCN manages the electricity transmission network in the country, being one of the 18 companies that were unbundled from the defunct Power Holding Company of Nigeria (PHCN) in April 2004, the company was incorporated in November 2005 and issued a transmission license on July 1, 2006, as the only government entity positioned as a critical arm of the electricity market.

The Nigerian Electricity Regulatory Commission (NERC), once, said that the total transmission wheeling capacity of TCN was 7,500MW, with over 20,000km of transmission lines. But the commission lamented that at an average of about 7.4 per cent, the transmission losses across the network were high, compared to emerging countries’ benchmarks of between two and six per cent. The Guardian found that most of the donor-funded projects have been disbursed in part.

“The new national peak is a result of continued collaboration among players and the gradual increase in capacity in the power sector. On her part, with the current capacity of 8,100MW, TCN seamlessly transmitted, the new peak at a frequency of 50.11Hz through the nation’s grid,” General Manager, TCN Public Affairs, Ndidi Mbah, had said in a release last week.

She did not immediately respond to The Guardian’s questions on the dismal outlook of the transmission capacity. The telephone call was dropped in the cause of questioning and could not be activated afterward, as her telephone line became unreachable. There was also no response to text messages sent to her on the subject before filing the report last night.

A source, who is conversant with recent events in the sector, noted that most of the resources allocated to power were hardly released by the Federal Government. The source also noted that it had been difficult for the government to release its counterpart funding to back funds from donors and development organisations, stressing that unless a deliberate attempt was made, the sector would remain a shadow of itself.

Although Minister of Power, Sale Mamman, had said power generation in the country stood at about 13,000MW, with the peak national transmission, the implication is that much of the generated electricity will remain stranded, as only 5,520 gets to consumers.

PricewaterhouseCoopers’s Associate Director, Energy, Utilities, and Resources, Habeeb Jaiyeola, noted that transmission and distribution networks remained the weakest link in the power sector, adding that there was no reason to celebrate a dismal performance. Jaiyeola, who noted that improvement in transmission infrastructure should be a welcome development, insisted that there was a need to overhaul the transmission infrastructure.

“No celebration yet. More overhauling is needed for the transmission infrastructure. There is a loss in the transmission lines. Much of the power being generated is currently stranded; there is, therefore, a lot of work to do.’’

Mineral/Energy Resource economist and former president of the Nigerian Association for Energy Economists (NAEE), Wunmi Iledare, noted that the sector had performed below expectations in the last seven years, adding that it was illogical for the country to generate 13,000mw and wheel only about 5,500mw.

According to him, the difference between where the sector was before privatization (in terms of energy access) is marginal in positive terms. “So, one can infer that the 2005 Act has not delivered as intended, and requires rethinking. I am not suggesting bringing an end to privatization, but governance and decentralisation of the power sector,” he stated.

Iledare noted that, while per capita economic growth is symmetrical to per capita energy consumption, the case when rising generating capacity is running at a far slower pace than available capacity remained illogical.Convener of PowerUp Nigeria, Adegbemle Adetayo, noted it was shameful to celebrate the current output in grid performance.

He added that the sector had had more miss than hits in the last seven years. According to him, there is a need for a more robust institutional regulatory oversight and focus on an independent regulatory commission as well as regulatory compliance while enforcement of regulation needs to be improved.

Executive Secretary, Association of the Power Generation Companies, Joy Ogaji, noted that, irrespective of the turbulence of the Sector, the GenCos had, in addition to acquisition funds of $1 billion, invested over N1 trillion in capacity recovery, thereby increasing available generation capacity.

According to her, over a period of seven years, GenCos’ available generation capacity went from 3,427.50MW pre-privatisation to 8,120MW as of September 2020. “This signifies a 136.91 per cent increment in generation capacity; unfortunately, this has not translated to an increase in power supply due to the bottlenecks along the transmission and distribution value chain.

“A scenario where average generation only increased by 24 per cent (766.49MW) over a period of seven years, despite a 136.91 per cent increase in available capacity, has failed to translate to the expected sustainable economic development.’’ Ogaji said GenCos were plagued by the inability to raise necessary funds for operations. She added that payment of Value Added Tax (VAT) on gas was not factored into the tariff order.

Ogaji added that inability to service outstanding loans, most of which were obtained from commercial banks and which now appear on bank balance sheets as non-performing loans (NPLs), inability to pay for contracted gas, which has resulted in shutting down gas supplies to certain power plants, poor investor confidence as well as the inability to expand capacities were some of the critical challenges limiting generation companies.

Culled from Guardian