Stakeholders shine a spotlight on the new power deal between the Federal Government and German-based Siemens AG as the Nigerian electricity supply industry remains in crisis mode, ’Femi Asu reports
More than five and a half years after the Nigerian power sector was privatised, electricity supply has remained poor as the investors who took over the six generation companies and 11 distribution companies continue to grapple with the old problems in the sector including gas shortfall.
Total power generation stood at 3,372.0 megawatts as of 6.00am on Tuesday, according to data from the Nigeria Electricity System Operator, an arm of the Transmission Company of Nigeria.
The Nigerian Electricity System Operator put the nation’s installed generation capacity at 12,910.40MW; available capacity at 7,652.60MW; transmission wheeling capacity at 8,100MW; and the peak generation ever attained at 5,375MW.
According to the TCN, power generation is usually being limited by gas constraints, low load demand by Discos, line constraints and water management issues.
The nation’s power grid has suffered over 100 collapses (total and partial) since the sector was privatised on November 1, 2013.
The grid, which is being managed by government-owned TCN, has continued to suffer system collapse over the years amid a lack of spinning reserve that is meant to forestall such occurrences.
The sector is still plagued with problems of gas supply shortages, limited distribution networks, limited transmission line capacity, huge metering gap, electricity theft, and high technical and commercial losses, among others.
The financial viability of the Nigerian electricity supply industry remains the most significant challenge threatening the sustainability of the power sector, according to the Nigerian Electricity Regulatory Commission.
In a bid to fix the transmission and distribution infrastructure, the Federal Government and Siemens, on Monday, signed a power deal with the aim of modernising the nation’s electricity grid.
Nigeria and the German firm signed a Letter of Agreement on the Nigeria Electricity Roadmap, which resulted from the meeting between President Muhammadu Buhari and the German Chancellor, Angela Merkel, on August 31, 2018 in Abuja.
President Buhari said at the signing ceremony that it was evident that more work needed to be done to upgrade the transmission and distribution system, adding that the government was initially reluctant to intervene as the distribution sector had already been privatised.
He said, “There have been many attempts at solving the electricity problem in our country. Previous governments have explored state-funded solutions through the ill-prepared National Independent Power Projects. They also explored the installation of large emergency power projects. There was also the partial privatisation of the power generation and distribution sectors.
“These various interventions to solving the electricity problem have yielded an imbalance between the amount of power generated and the amount available for consumers. Despite over 13,000MW of power generation capacity, only an average of 4,000MW reliably reaches consumers. Now, we have an excellent opportunity to address this challenge.”
Buhari urged Siemens, Discos, TCN and the electricity regulator to work hard to achieve 7,000MW of reliable power supply by 2021 and 11,000MW by 2023 in phases one and two, respectively.
“After these transmission and distribution system bottlenecks have been fixed, we will seek in the third and final phase to drive generation capacity and overall grid capacity to 25,000MW,” he added.
The President and Chief Executive Officer, Siemens, Joe Kaeser, who visited Nigeria on Monday for the signing of the deal, said the project would be done in three phases.
“The Nigerian electricity roadmap is designed to significantly improve the availability of affordable, sustainable and reliable power supply in the country,” he told our correspondent in an interview.
He said the contractual and financial agreement would be discussed in the next few weeks “so that we can get started very quickly.”
The Managing Director and Chief Executive Officer, Siemens Limited Nigeria, Onyeche Tifase, said the company had been working with the government for almost a year in developing a road map for Nigeria’s electrification.
She said, “We signed a groundbreaking implementation agreement as a first step towards the firm deal to start a three-phase project to electrify Nigeria.
“Phase one ensures that whatever capacity is stranded in the grid now, about 2,000MW, will be evacuated to achieve about 7,000MW of power. Phase two enables further expansion of the grid to evacuate 11,000MW and phase three ensures that whatever balance of power generation and expansion of grid to achieve 25,000MW capacity will be delivered.”
Tifase said the project would have massive implications for the country as it would drive economic growth and industrialisation.
The President, Electricity Consumers Association of Nigeria, Mr Chijioke James, said consumers would always have a positive attitude towards all “genuine gestures of government or other stakeholders” to improve power supply in the country.
He said, “But because we are not privy to the details of the deal with Siemens, we are not in a position to actually criticise or make any constructive input to the deal.
“We believe that the Federal Government is on the right track by signing a deal with a reputable company to deliver electricity to Nigerians. At this stage, the signing is not the issue; we are much more concerned about the implementation of whatever is signed. Provision of the necessary funding and ensuring full compliance with the terms of the agreement are critical.”
The Director-General, Lagos Chamber of Commerce and Industry, Muda Yusuf, who described the liquidity challenge in the sector as a major issue, stressed the need for a holistic approach to solving the nation’s power crisis.
According to NERC, the challenge of poor remittance by Discos to the Nigerian Bulk Electricity Trading Plc has remained a serious concern as it is one of the main causes of the liquidity crisis facing the Nigerian electricity supply industry.
The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells through vesting contracts to the Discos, which then supply to the consumers.
Early this month, gas producers in the country lamented that power generation companies owed them a total of N1.3tn for the supply of gas to power stations.
The Market Operator, an arm of the TCN, recently said that power distribution companies owed service providers a total of N263bn.
The generation companies said sometime last year that they were owed about N1tn by the electricity market, saying this could lead to the shutdown of their plants.
Commenting on the Nigeria-Siemens deal, Yusuf said, “I am not sure the detail of the deal is available yet. So, one may not be able to comment in detail. For me, the project is not ambitious enough, given the acute power problem that we have in Nigeria. I think we should be more ambitious when we are talking about our aspirations as far as the power sector is concerned.
“But more importantly, we need to fix the fundamental issues before what is being discussed can crystalise.”
Yusuf cited the issues of tariff, technical and financial capacity of Discos and unpaid debts in the entire value chain of the sector.
He said, “I believe that we need a holistic approach to deal with the power issue. Let us decentralise the system because we cannot continue with this highly centralised model of power generation and distribution. So, a lot more attention needs to be paid to off-grid solutions. We need better policies on renewable energy to make it affordable for the citizens in terms of the cost of solar panels and batteries.”
The Head, Business Development, Siemens Limited, Oladayo Orolu, said, “The Nigeria Electrification Roadmap is a holistic approach to solving the power sector challenges. It’s a plan that does not leave any segment of the power sector behind and will improve the financial viability of the sector in the short term.
“Apart from plans to fix products, equipment and systems, it also contains a robust plan to improve capabilities of the power sector workforce through targeted technical training and build a pipeline of competent workforce for the future through Vocational Education Training. In essence, we are building both the system and people that will operate the system.”
The Nigeria Electricity Roadmap is similar to the Egypt megaproject and the Iraq electrification project recently awarded to Siemens.
In July, 2018, Siemens announced the completion of the Egypt Megaproject in record time, adding 14,400MW of power generation capacity in 27.5 months to Egypt’s national grid.
On April 30, 2019, Iraq and Siemens signed a framework agreement to upgrade the electricity grid of the country.
Under the first phase of the agreement, the two sides agreed to contracts worth €700m ($785m) for the construction of a 500 megawatt gas-fired power plant, the upgrade of 40 gas turbines and the installation of 13 substations and 34 transformers across Iraq. The projects are part of a plan to develop power infrastructure across the country that could be worth up to $15bn.
Authored By: Femi Asu