Post Privatisation: Nigeria’s Stranded Power Rises 263% To 3,742MW

Contrary to expectations, there are indications that Nigeria’s electricity sector has recorded huge set back since the private sector take-over seven years ago.

Data obtained by Vanguard Energy last weekend shows that volume of stranded power has risen by about 263 percent to 3,742 megawatt (MW) as at end 2020, from 1,031MW it recorded when the power plants were handed over to private investors in 2013.

Stranded power represents available energy capacity which could not be generated, transmitted and distributed in the value chain due to system failures.

It also indicates poor level of investment in the value chain especially the Electricity Distribution Companies, DisCos, that could have strengthened power supply and utilization.

The stranded capacity of the nation rose by over 100 per cent to 2,735MW in the first year of privatisation, before dropping to 3,373MW in 2016.

Average generation

However, the nation’s average power generation rose to 4,050MW, from 3,184MW indicating 27.2 per cent over the period under review, meaning that not much has changed in terms of actual power generation by the Generation Companies (GenCos) in the past seven years.

A breakdown showed that the average power generated in 2014 (the first full year post-privatization) was 3,419MW.

In 2015, the average generation rose by 5.46 per cent to 3,606MW, showing an increase of 187MW, while in 2016, the average power generation dropped by 9.40 per cent to 3,267MW.

However, power generation recovered with about 10.89 per cent rise in 2017 to 3,623MW, and also recorded another increase of 6.65 per cent to 3,864MW in 2018, before dropping again in 2019 by 2.12 per cent to 3,782MW.

The data also shows that in 2020 the average generation rose by 7.08 per cent to 4,050MW.

Installed capacity

However, Nigeria’s generation capacity increased from 4,214MW to 7,793MW, indicating an increase of 84.93 per cent during the period.

ERGP target

Although this output represents the peak performance, it indicates about 22.07 per cent underperformance against the target of 10,000MW set by Economic Recovery and Growth Plan, ERGP. Also, the current output represents a huge gap against the national requirement, currently estimated at over 20,000MW.

In its target obtained by Energy Vanguard, the nation’s Economic Recovery and Growth Plan, ERGP, stated: “The ERGP aims to increase power generation by improving operational capacity, encouraging small-scale renewable projects and building additional generation capacity. Medium term, the ERGP aims to ensure the delivery of at least 10,000 MW (on-grid and off-grid) of operational capacity by 2020 by optimising the existing installed capacity available for generation, addressing gas supply issues including vandalism and completing major gas infrastructure lines for power.”

Limited distribution, others

Besides, an investigation by Energy Vanguard showed that, the nation lacks adequate capacity to transmit and distribute 7,793MW available generation to consumers nationwide.

Specifically, the Transmission Company of Nigeria (TCN), which puts its capacity at 8,100MW, added that it can only wheel an average of 4,00WM for distribution.

In a recent statement obtained by Energy Vanguard, TCN General Manager, Public Affairs, Ndidi Mbah, also stated: “The Transmission Company of Nigeria has once again successfully transmitted another all-time peak of 5,584.40MW recorded by the power sector on Thursday, January 7, 2021, at 21:15hrs. This is 24 hours after the previous peak of 5,552.80MW was recorded on Wednesday, January 6th, 2021 at 20:15hrs that was equally transmitted.”

She added: “This latest all-time peak transmitted, surpasses the last peak generation of 5,552.80MW transmitted by TCN by 31.60MW. The management of TCN assured that it will continue to work hard to ensure efficient transmission of power generated on the nation’s electricity grid.”

Like the TCN, the Electricity Distribution Companies, DisCos, can only deliver about 4,000MW to consumers because of poor and limited facilities.

Mr Aaron Artemis, Special Adviser, Media and Communication to the Minister of Power, Mr Sale Mamman, in an interview with Energy Vanguard, said: “The Nigeria power sector is a market chain, where the generating companies, generate electricity through gas and hydro plant and send to the TCN, who now transmit to the different DISCOs in the country. The various problems and losses would be greatly reduced when investors increase their capacities to generate funds as well as invest in new facilities to deliver adequate electricity to consumers nationwide.”

Impact on businesses

In its recent position obtained by Energy Vanguard, the Organised Private Sector of Nigeria, OPSN, stated: “It is fundamentally true that improvement in electricity supply in terms of tariff, quantity, quality, reliability, and efficiency in service delivery is critical to the growth and development of the private sector businesses, especially manufacturing.

“The is the major reason why the OPSN has followed with keen interest, all recent developments relating to issues of electricity supply, particularly the desire to put in place a cost-effective electricity tariff in the industry.

“For the records, private business operators in Nigeria, especially the manufacturing sector is already plagued by high cost operating environment arising from the poor regulatory environment, macroeconomic asymmetries and the high cost of energy.

This unfriendly operating environment is responsible for the oscillatory performance of the sector in the past few years.

“For instance, Electricity outages average about 10 hours per day, electricity expenses still constitute about 40% of the total cost of production and the average cost of self-generated electricity averages N119 billion in 2019 alone.

“Most worrisome is the fact that operators in the Private Sector, especially the manufacturing sector bear the burden of commercial and technical losses through very high monthly electricity bill that is largely estimated.”

Also, in a statement obtained by Energy Vanguard, the President, Lagos Chamber of Commerce and Industry, LCCI, Mrs. Toki Mabogunje, who complained about poor supply and arbitrary billing, called for adequate metering of consumers.

She stated: “This is the only way to engender the confidence of consumers in the billing process. Metering should be accorded a high priority.”

Privatisation

The sector was privatized in November 2013 with six power generation plants and eleven electricity distribution companies handed over to the private sector. The Federal Government retained control of the Transmission Company of Nigeria (TCN).

Experts

Nevertheless, in an interview with the Energy Vanguard, weekend, a former Chairman of NERC, Dr. Sam Amadi noted that the new generation peak is not an indication that the sector has improved significantly since it was privatized in 2013.

Dr Amadi who teaches law at Baze University, Abuja, pointed out that the sector is still as fragile as it was at privatization.

According to him, “Was the 5,500MW distributed to Nigerian households and businesses? So, all the peak transmission may not be a big deal if we cannot distribute 5,000MW.

“The price review is partly because DisCos sold less than 4,000MW in 2020. I think we should stop deceiving ourselves that we are witnessing any serious improvement. No, we are not. The system is still as fragile as it was in 2013”.

He added that, “we need to seriously review the policy direction and go back to the basics so that we can have a sustainable improvement in the network.

“The reason we cannot have a better power supply is because all the value chains are very weak and lack financial capacity and managerial competence to drastically improve the grid”.

Speaking in a telephone interview, Professor Adeola Adenikinju, Director, Centre for Petroleum Energy Economics and Law, University of Ibadan, said it was shameful that a 5,584MW generation peak was being celebrated in a country of 206 million people.

Adenikinju, a former President of the Nigerian Association for Energy Economics, pointed out that the sector has not shown serious improvement in the past seven years.

He, therefore, called for a policy rethink that would tackle the challenges facing the sector.

“I think it is a big shame and an indication of the not too successful privatization of the sector. It was a failure of publicly managed utilities before, now we have the failure of privately managed utilities.

“We really need to re-evaluate the whole privatization of the power sector if we are celebrating this with our population. If you look at our population of 2013 and you look at our population now in per capita term, what we have added generation wise will be very insignificant, that is if there is any addition at all”, he stated.

He observed that without breaking the jinx of poor electricity supply “there is no way we can actually, develop as a country. There is no way we are going to meet the target of reducing poverty by 100 million by 2030 or even getting this economy to grow at a rate that is greater than the growth rate of the population”.

He further stated that Nigeria needs to do whatever it takes to fix the sector, adding “we cannot be celebrating this, a country of over 206 million producing 5,600MW is not something we should be celebrating at all, and rather we should address the challenges”.

Conclusion

He added: “I think also that the DisCos (Electricity Distribution Companies) are not investing enough.”

Their commitment under the privatization is to ramp up investment to modernize the infrastructure at the distribution segment so that they can cut down on losses. The power sector is capital intensive and they have not invested enough. They need to do more.”

– Vanguard