A Review of the Nigerian Energy Industry

Consumers to pay more for alternative power

Power transformer10 June 2014, Lagos – The embedded power generation model being explored by the distribution companies to boost grid electricity supply in the country will make supply more reliable, but with added cost to consumers, stakeholders have said.

The model, which is fast becoming an option for some of the distribution companies, involved private producers generating electricity from small plants and selling directly to the Discos for distribution to consumers, contrary to the current system of feeding the entire quantum of generated electricity to the national grid, from where it is distributed to different parts of the country.

Apart from independent power producers, who are in the business to make profits, corporate organisations that are generating their own power will sell the excess megawatts to the Discos, which will be equipped with capacity to distribute more electricity to consumers and earn more revenue.

However, because the power will be sourced from the private sector, stakeholders say consumers will enjoy better supply, but at a premium, when compared to the grid source.

The decision by the Discos to embrace the embedded generation model follows complaints of the non-availability of sufficient power for distribution to consumers from the national grid.

The Managing Director, Ikeja Electricity Distribution Company, Mr. Abiodun Ajifowobaje, who spoke to our correspondent on the issue, said because of the challenges of getting power for distribution from the grid, the firm was already exploring new ways of generating power in order to satisfy customers within its area of jurisdiction.

He said the company did not have a power generation licence but was partnering with private sector players who had licences to do so.

Ajifowobaje said, “Of course, we should bear in mind that this will be reliable; but because the private sector will be supplying the power, the cost will be higher compared to what the government is giving (grid power). The greatest challenge we have as a company is not having enough power to sell.

“We at IKEDC need 1,250MW for our about 6,040 customers. Since November 1 last year, the average supply we have been getting from the grid is 360MW.

“Although this is our greatest challenge, it is also an opportunity. We are working towards new ways of generating our power. We have signed a Memorandum of Understanding with KEPCO already on this.”

The Managing Director, Eko Electricity Distribution Company, Mr. Oladele Amuda, confirmed that the firm was looking in the direction of the embedded generation model to serve its customers better.

He said, “We also plan to reinforce our network, and in addition to that, we are exploring new ways of bringing power to our network outside the national grid. So, we are going into embedded generation to supplement whatever we are getting from the grid.

“The grid is having some challenges now, but we want to overcome those challenges in a very short possible time.”

Explaining how the model works, Amuda said, “Embedded generation is electricity generation that you get outside the national grid through a bilateral agreement between the generator, that is, the company that generates the power, and the distribution company. The companies generate electricity on a smaller scale and give to the Discos directly.

“The power generated from the grid is allocated to the Discos but embedded power is direct and it is between the company that is offering the power and the Discos. It is a direct agreement. We will discuss with the companies on terms, tariffs and all of that, and then we will take power directly from them.

“In other words, embedded generation is just a supplementary power that is off grid. It is not coming from the grid. We have control over it and it is more stable than what we get from the grid. You know that grid power is subjected to system collapse and all other issues right now. But with embedded power, wherever we channel it to, it will be stable and our customers will have steady supply.”

Also speaking on the model, the General Manager, Legal Department, Nigerian Electricity Regulatory Commission, Mrs. Olufunke Dinneh, said NERC remained committed to developing new ways of generating power to increase its availability.

She said the essence of allowing the Discos to buy power directly from the private sector and sell to customers was to avoid possible bottlenecks that come with grid supply.

However, Dinneh stressed that the arrangement would be allowed to fly provided it would not disturb national grid arrangements and would not affect other Discos in different capacities.

She said the Eko Electricity Distribution Company was already exploring the option and that the commission had issued two licences to that effect.

“There is a need for an agreement between the Discos and Gencos on this issue. A regulatory framework has already been put up by NERC. We have continued to insist that all procurements must be done transparently,” Dinneh said.


– The Punch

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