Otunba Akinbo Akin-Olugbade, Managing Director, Kawai Technologies Ltd, who is also Chairman, Power Sector Group, Lagos Chamber of Commerce and Industry, LCCI, in this exclusive chat with Oredola Adeola, Regional Editor, EnergyDay Nigeria, among other burning issues around power sector, disclosed that if Nigerians truly desire an energy infrastructure that can keep pace with the current demand, the best option is distributed generation using renewable energy sources, and also a recourse to decentralized distribution. Excerpts.
How would you describe intermittent collapse of power which always leads to blackouts across the country? A recent figure says between 2015 and 2021 , a total of 139 was recorded. As a major stakeholder in the sector, what are the major issues?
There are a myriad of challenges in the power industry and the recent blackouts experienced are an offshoot of this. While a more direct answer is to attribute the blackouts to the inefficiencies of the transmission sub-sector, it will be an incomplete representation of the various issues that have bedevilled the sector since its privatization.
To give some context to this, Nigeria has approximately 8Gigga Watt(GW) of available or operational generation capacity; and an average of 5GW is wheeled through the grid to the end users.
The on-grid electricity demand is about 4 to 8 times more than the electricity distributed on the grid showing that production falls far short of the demand. Even the operational generation is not completely evacuated leading to stranded power.
On the other hand, unregulated self-generation from diesel and petrol generating sets is over 14GW, and while this may not be the best way to accurately estimate suppressed demand, these numbers reinforce a wide electrification gap that a centralized grid may not be able to catch up with in time to make Nigeria stand at par with peer nations in terms of electricity per capita.
In essence, the issues leading to the blackouts go beyond the technical constraints in transmission, but are a reflection of a bigger malady which is further proven by the imbalance between power generation and consumption.
What measures can be taken in the interim to mitigate against another collapse?
My response to this will be a two-pronged approach. USAID’s Power Africa says the energy access rate in Nigeria is 60 percent and you are aware that accessibility or availability doesn’t equate reliability. According to the Africa -EU Renewable Energy cooperation program, of the total energy consumed by Nigerian industries, only 4 percent is from grid-connected electricity, 96% is self-produced.
The Siemens AG and Federal Government Presidential Power Initiative has a mandate to increase the system’s end-to-end operational capacity to 7,000MW by 2021, but for the pandemic. This is laudable, but if we really want an energy infrastructure that can keep pace with the current demand, a quick win is first, distributed generation using renewable energy sources and second, decentralized distribution.
Distributed generation is the use of varying technologies to generate electricity at or near where it will be used, and it can ensure the delivery of clean, reliable power to customers and reduce electricity losses along distribution and transmission lines.
Photo Voltaic-solar panels in conjunction with other dis-patchable generating solutions can be used as the generating sources for mini-grid and micro-grid projects; particularly in locations that are un-served or under-served, but have the right irradiation for solar PV generation, and also the consistent economic activities to justify the investments.
Policies to encourage large scale investments in renewable energy and quick implementation of such solutions should be the focus to relieve the pressure on the main grid.
The second approach will be decentralized-distribution through regional grids for ease of control, and to have some autonomy within a grid which may or may not be connected to the national grid. We have provisions for this within the regulation through the Independent electricity distribution network license (IEDN), and franchising within the DISCOs; but it should be emphasized.
The regional configuration will help reduce system collapses and aid the easy participation of private sector in dealing with the national grid problems.
If you look at CBN’s interventions to DisCos , there is a proposed N120 billion, being capital expenditure (CAPEX) fund to improve infrastructure and enhance meter installation that would stabilise an efficient energy billing system.
What is the evidence that this fund made available to DisCos by CBN is not going to be another waste,considering that similar interventions in the past have not really improved the power sector?
Since the privatisation, the sector has experienced financial interventions through CBN. Several of these interventions were as a result of three broad reasons:
• Dearth of Investors in the sector
• Lack of cost reflective tariffs
Dearth of investors – no third party investor will be willing to invest if he’s not sure a business will survive in the long term. That’s the scrutiny players in the sector are faced with as efforts still have to be made to improve the infrastructure for a more efficient and eventually attractive market.
But to have a clear line of sight to a business’ ability to bring investors’ returns, cash flow becomes a litmus test – this leads me to my next point.
Illiquidity – The poor remittance levels of the DisCos have caused illiquidity challenges in the electricity market, because the DisCos are unable to collect enough revenues to pay their market costs. As a result, the upstream sectors – Transmission Company of Nigeria, the GenCos and gas producers are not paid in full for their costs. The GenCos owe the gas suppliers and the consumers equally owe the DISCOs.
Lack of cost reflective tariffs – Increased investment in metering will support the acceptance of a cost reflective tariff, which will in turn improve the sector’s attraction.
This justifies the CBN’s financing of the National Mass Metering programme (NMMP). With the advent of the service- based tariffs which is about ten months old, new-investors entry is expected and also improvement in efficiency by the DisCos.
The funds collected from the distribution companies will service the rest of the industry. It will be a good opportunity to come back to the drawing table a year after the implementation of the service-based tariffs to see how these tariffs have changed the business landscape for the sector.
The funds CBN made available are likely to be performance-based , and I am aware that remittance to CBN is one of the line item in the monthly invoicing by NBET to the DisCos, so I believe these facilities are being serviced.
In a broad perspective, how would you rate the Power privatisation policy of the Federation Government? Are we really making expected progress?
Privatization was only a first step to the power sector recovery. Many erroneously assumed that privatizing the power sector legacy assets would equate uninterrupted and reliable supply of electric power. It is an arduous process and the whole chain needs to become more effective so as to reduce the burden on the value chain’s collector – the DisCos.
The market will eventually transition to one that can stand without the support of the government in the form of subsidies and intervention funds. By then, the bulk trader (NBET) will have outlasted its usefulness and the sector players will be able to operate effectively through power purchase agreements.
The role that the government would play in the future will border strictly on policy formulation and regulation, but until then, the work to make the power sector attractive to investors will continue.