The just concluded Future Energy Nigeria Conference for 2017 held at Eko Hotel and Suites, Lagos, Nigeria from 7 – 8 November has set a new dawn for the Nigeria Electricity Supply Industry (NESI). Engineer Idowu Oyebanjo, a UK Chartered Power System Engineer and MD, Idfon Power Engineering Consultants (iPEC), sets the tone for an industry wide historic shift in mindset for all Stakeholders in the NESI saying: “We must move away from talking about the known issues to proffering and implementing solutions”. He said he will expect that from now on, future power conferences in Nigeria will be solution-based.
The theme of the event aligns with the Power Sector Recovery Programme (PSRP) and FG’s plans to attract required investment from the private sector to ensure incremental, stable and uninterrupted electricity supply while promoting economic development opportunities across the country through the Economic and Recovery Growth Plan (ERGP). This can be achieved by focusing on solutions to practical issues surrounding financing power generation, transformation, transmission, distribution, supply, while diversifying the energy mix, closing the metering gap and increasing performance standards of all major stakeholders to mention but a few.
Apart from the strategic conference, the event showcased a pre-conference master class which provided financing options for Renewable Energy (RE) systems, detailing what financiers are looking for when funding a RE project.
The Strategic Conference
The Keynote address 1
What does the Economic Recovery and Growth Plan (ERGP) mean for the Nigerian Energy Sector?
Patrick Okigbo of Nextier Power in his speech highlighted the relationship between ERGP and PSRP while stating the conditions precedent that the Federal Government of Nigeria (FGN) must meet before the World Bank and affiliate financial institutions can borrow Nigeria the required 5.3 billion USD to combat the infrastructure, liquidity, and governance challenges the power sector faces. This, according to him, will require specific, strategic interventions by FGN and its regulatory agencies to reset the electricity market. To reset the NESI, immediate steps to take must include financial, operational (technical), governance and policy interventions.
The World Bank Group and others have stated time-bound conditions precedent for the disbursement of loans to FGN to include ensuring:
- A minimum of 4000MW daily generation capacity in 2017.
- DisCos’ performance and put in place credible business continuity plans in case DisCos fail.
- Proper sector governance by appointing qualified and competent professionals from the private sector to lead sector agencies and boards.
- Data driven processes for decision making across the sector.
- Sacrosanctity of electricity market contracts.
- A communication strategy that carries all stakeholders along and especially to have customer buy-in.
- An FX policy for the power sector.
- Increase in electricity access in the NESI using off-grid solutions.
- Private sector investment by removing all barriers to investment including the implementation of a cost reflective tariff.
In reaction to the speech, the audience was perturbed by the fact that Nigeria with an external reserve of over 30 billion USD is seeking a loan of 2.7 billion USD from the World Bank group. Engineer Idowu Oyebanjo recommended that investment should be made in the distribution networks while regional power grids should be established for significant penetration of embedded generation in every part of the country as soon as possible. He further recommended that for the PSRP and ERGP to succeed, there is an urgent need to put in place a Power System Architect, a multi-disciplinary team of technocrats from diverse fields to coordinate the implementation of the program.
Everyone agreed that the time to act is now.
Keynote Address 2
A critical review of Nigerian Power Sector’s Legal/Regulatory Framework – Areas for Legislative Intervention
For the first time, the Nigerian National Assembly co-located the Future Energy Nigeria event to focus on the broad energy portfolio by bringing the entire value chain together for frank and honest discussions on strategies for overcoming funding challenges, capacity building and knowledge sharing between IOCs and Independent participants in the oil, gas, and power industry in Nigeria.
Senator Enyinnaya Abaribe, a passionate, prolific and unassuming distinguished Senator and chairman, Senate Committee on Power, hits the nail on the head, quoting from the holy books saying: “For all have sinned and have fallen short of the glory of God”. He said we must avoid the blame game we have witnessed in the last few years and move towards resolving issues and implementing solutions. In his characteristic manner, he summarized, quite quintessentially, the challenges of the power sector, the solutions as well as made the promise that Nigerians will get the support of the Legislative chamber. He opined that the robustness of the discussions during the FEN 2017 conference means that a public enquiry on Legislative interventions in the power sector should involve all stakeholders from the FEN 2017 conference among others.
To have the chairmen of the committees on power from the Senate and House of Representatives, His Excellency Senator Enyinnaya Abaribe and Honorable (Chief) Daniel Asuquo at the event proves that the Law makers in the country are aware of the problems in the power sector and are willing to tackle them head-on. Senator Enyinnaya Abaribe reiterated the relationship between the GDP of a nation and the quantum of electricity supply. He asked the question: What is the most efficient way to produce and let Nigerians have safe, secure, reliable and sufficient power? Engineer Idowu Oyebanjo responded that the creation of regional grids with the transmission network left in position for interconnectivity and economic transfer of electricity where possible is the veritable means to achieve the required progress in NESI. On the subject of RE, he maintained that all energy sources will be included in the future energy scenario for NESI. A separate legislation on RE is already before the National Assembly and a public enquiry about it should be expected pretty soon.
The Lawmakers promised that the inputs arising from the deliberations from this conference will be used to engage appropriate arms of the government.
Unbundling of the Transmission Company of Nigeria (TCN)
A search beam into the activities and role of TCN as the weakest link of the NESI brought the need for improved operational efficiency. Some stakeholders believe that with TCN remaining in the hands of the government with other segments of the NESI in private hands, full privatization or concessioning of the transmission network is inevitable as we move along towards the full liberalization of the Nigerian electricity market. The idea of concessioning the transmission network was deemed inappropriate in the short-to-medium term but can be considered in the medium-to-long term planning of the development of the power sector reform program.
Everyone agreed with Engineer Idowu Oyebanjo that a regional grid system with the transmission network used as and when required (for example as an interconnector) is the surest way to realize the immediate objectives of both the PSRP and ERGP. Continuing with investment in the transmission network will have a limited impact compared to using same funds to strengthen the distribution networks.
The Technical Workshop
- Reducing Distribution Losses
The reduction in the aggregate technical, collection, and commercial (ATC&C) losses in the NESI is fundamental to the survival of the electricity market and therefore the realization of incremental, stable and uninterrupted power supply in Nigeria. A systematic approach based on the output measure technique is about the only means available in the world of power systems to achieve a performance driven development of an efficient and functional electricity distribution system in the NESI.
This was a major focus in the technical workshop with Engineer Idowu Oyebanjo as the chairperson. In his opening remarks, Engineer Oyebanjo posited that an efficient, resilient, and financially healthy power sector is required for the sustainability of the NESI. With the levels of technical and non-technical losses in the power sector, the entire sector can become grounded. However, speakers at the technical workshop gave insight to well-prepared solutions that can assist with the reduction of losses on the distribution networks.
Speaker: Oladipupo Bello, Managing Director, Adroit Metering Services Limited, Nigeria
Topic : Resolving Challenges of Standard Transfer Specification (STS) in Nigeria through ‘Hosted” services.
Outline of points
- Losses from payment systems and internal processes of DisCos largely ignored and can be significant.
- Ghost Vending is popular in the market but NERC appears to be unaware of it or at best not doing anything to stem the tide of the ugly occurrence. This is a situation where third parties who have access to the STS codes of DisCos carry out illegal sales of tokens.
- Robust monitoring an oversight by NERC is absent even as the illiquidity and debt profile of the NESI grow astronomically.
- Knowledge gap in the sector is alarming and should be addressed.
- A data driven system of processes must be implemented in NESI immediately to ensure that most information do not go unrecorded.
- The previous NERC commissioners know a little about power systems. Too many Lawyers and “fancy bureaucrats” leading a sector as important as the power sector. Significant progress expected from the current crop of NERC commissioners with a larger proportion of engineers.
- Corruption is the bane of the power sector as well as the larger society. Everyone everywhere looks for a way to exploit the system. The collusion of staff of electricity companies with consumers to by-pass meters, the paradox of estimated bills, entrenched poverty in the society, the believe that electricity should be a social service to be provided by the government, poor network infrastructure are some of the highlighted reasons for having up to 50% losses on the power network.
In summary, in view of the technicalities involved in resolving the multi-faceted and multi-dimensional challenges facing the DisCos, we hereby encourage the DisCos to embrace third-party applications such as the STS which is an open standard for pre-payment systems. If adopted as an industry strategy, we believe this will take the burden of responsibility from them because it is obviously more complex than they can handle.
- Speaker: Prince Olaoye Ghaffar, CEO, De Apps Technologies, Nigeria
Topic : Using technology to stop power theft by e-metering.
Engineer Idowu Oyebanjo expressed his concern over treatment of patents in Nigeria as innovative solutions for electricity theft his team has designed will require patent rights to be observed in Nigeria, otherwise, the required innovation and technological solutions will not come the way of NESI.
He also raised the following questions in the introduction to this session:
- What are the major reasons why we have power theft?
- What categories of persons/strata of society are grossly involved?
- What solutions can be proposed?
- What findings do we have from research into the methodologies used by electric utilities in other less developed countries having similar issues?
Outline of points
- The perennial excuse of lack of affordability to pay for electricity consumed by citizens attendant to the general poverty levels in the society, sheer ignorance, impunity for theft, endemic corruption in the NESI and the wider Nigerian society, the believe that electricity should be provided as a social obligation from the government of an oil “rich” Nigeria are some of the reasons why power theft is rampant.
- Eradicating electricity theft will align with the objectives of both PSRP and ERGP as this will boost the economy.
- Power theft is not unique to Nigeria. Only the scale of widespread is alarming here.
In summary, electricity robbers make all consumers pay more and worsen the legacy of ongoing debts in the NESI. Unmetered customers involve in power theft but e-metering/smart metering is part of the solution.
Power theft is a global challenge, albeit to a larger scale in Sub-Sahara Africa. We can learn from the experiences of South Africa, Mozambique and Botswana on how to tackle this ugly headed cankerworm!
- Speaker: Franklin Ajaegbu, Programme Manager: Energy Efficiency Management, Port Harcourt Electricity Distribution Company, Nigeria.
Topic : Energy Efficiency as an underlying solution to energy deficiencies and collection losses.
This session discussed practical energy efficiency projects such as bulb exchange, enlightenment campaigns, energy audit, School-to-School training etc. The need for power system planning, load balancing and energy audit in realizing energy efficiency was discussed.
Resolving the Legacy of on-going Debts
During the stakeholders’ talk anchored by Dolapo Kukoyi, Partner, Detail Commercial Solicitors, an update was given on the constraints from the transmission and distribution networks leading to the ugly recurrence of load rejection in the NESI. The average industry debt in 2016 was put at 50% with a tariff deficit of 460 billion USD.
In reacting to this, Mr. Azu Obiaya of the Association of Nigerian Electricity Distributors (ANED) said we are in a big mess because of the lack of a cost reflective tariff as was promised DisCos prior to investing in the network business. He puts the cost reflective tariff to about eighty naira per unit as opposed to the thirty naira on average charged today. For example, the total market shortfall to August 2017 is 892 billion Naira at an average monthly shortfall of 47 billion Naira. This is because the DisCos only get about 30% of revenue collected. The market is a farce and should not have been declared. Every day is another legacy of debts for the next generation of Nigerians. The required investment to cause the change we want in the power sector will not come except we fix all the problems and issues that we have talked about in the last four years. He concluded by saying if we do nothing, we will still be talking about the same issues in the next five years.
When asked whether if a cost reflective tariff will solve the problem, Mr. Azu Obiaya did not respond but simply said investment had to be made.
Engineer Oyebanjo posited that the truth about a “cost reflective tariff” in the manner the DisCos want it will only mean lining their pockets because with the level of ATC&C losses on the network, no CRT will come to our aid.
On the issue of the current structure of the NESI, Mr Victor Udo, Senior Special Assistant to the Governor on Planning, Akwa Ibom State maintained that the idea of tinkering with the current structure to accommodate current realities and opportunities within the sector is a step in the right direction. Declaring the eligible customers, he says, will improve the performances of DisCos and increase the total aggregate generation capacity in the NESI. It is expected that there will be some investment in distribution system infrastructure, private sector participants will build power plants and licensed electricity traders will spring up. He stressed the need to allocate risks in the NESI and to articulate them with a view to derisking them. Such risks, he says include, the vandalization of gas pipelines, transmission network constraints, macroeconomic changes which affect the sector, regulatory uncertainties and induced changes, performance levels of DisCos to mention a few. On a positive note, the problems with the power sector present great opportunities for attracting investment according to Mr. Emeka Ofor of Nigerian Investment Promotion Commission (NIPC). Some of the latest incentives to attract investors to Nigeria include a tax holiday of 3-5 years and a pioneer status recognition.
The main questions to be answered include:
- Why is the NESI crawling?
- Why is the sector struggling since 2013?
- How did we get insolvency?
- Why don’t we have the required investment coming into Nigeria?
- What can be done to ensure that the DisCos meet their performance targets?
- What structure do we need?
- How will the eligible customer criterion be implemented in the NESI?
- Why are legacy debts recurrent?