Nigeria misses power targets

29 December 2015, Abuja – Chineme Okafor writes that other from few bright spots, Nigeria missed most of her targets in the electricity sector in 2015

Power4In Nigeria’s power sector, setting timeline-based targets for operators in the industry has never been out of place. Targets are often set for the industry but mostly, they are never achieved at their expirations, thus turning them into mere rituals.

For 2015, it was not a different development. The government during the  the year made known its desire for the sector, stating  its intention to see electricity generation ramp up to 5000 megawatts (MW) by September and then 6000MW by the close of the year.  But for too long and too often, promises of increased power supply such as this had been made and they never materialised.

Through the Nigerian Electricity Regulatory Commission (NERC) and other relevant government agencies in the sector, targets were set for operators in the generation; distribution; and transmission sectors of the country.

The distribution sector got its target,  to amongst other objectives,  deepen their consumers’ metering and expansion programmes. That way, the government expected that they would guarantee supplies to consumers as generation also improves.

It noted that these targets were part of the key performance benchmarks it signed with the Discos during the assets privatisation programme.

Similarly, the generation plants were asked to improve their generation capacities as gas supplies to them improves. Some of the Gencos heeded to this and have so far improved their generation capacities.

For the transmission sector, the government,  which still holds control over the Transmission Company of Nigeria (TCN) indicated its desire to see the country’s transmission capacity grow to take in expected generation growth. Extant transmission projects which were yet to be completed were also expected to be completed.

But few days to the end of the year, larger aspects of these marks are yet to be met. Other than a little  percentage growth in the generation capacity, other aspects of the sector have rather moved slowed down and perhaps off the expected marks.

Early benchmarks

Burdened by the decline in power generation even at the peak of the rainy season, the federal government in August 2015 rolled out what it called a “pragmatic and creative” short term approach to address challenges in the power sector, particularly the issue of adequate gas supply to thermal generation plants across the country.

The government from the new measures said then that it wanted to ramp up grid power generation and supply in the country by at least 5000MW within the next four months (December).

It set up an inter-ministerial meeting involving the ministries of petroleum resources, power, NERC, Central Bank of Nigeria (CBN), Nigerian National Petroleum Corporation (NNPC) to collectively work on putting out a lasting solution to shortages in gas supply to power plants and improve the sector’s general outlook.

Within the intervention framework, former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke stated then that overcoming challenges of inadequate gas supply was critical to the sector meeting up with the benchmarks.

She explained that successes had been recorded in sorting out outstanding issues around gas pricing regime as well as fast-tracking additional development of gas supply sources which would in the short term result to an addition of at least 370 million metric cubic feet per day (mmscf/d) of gas to the power plants.

Alison-Makueke also stated that as part of the new intervention, the CBN and the Bankers’ Committee had agreed to setup a Special Purpose Vehicle (SPV) to offset about N25 billion outstanding legacy gas related debts owed to gas suppliers by the defunct Power Holding Company of Nigeria (PHCN) while also working out further financial aid to the power sector.

This, she added, was expected to give confidence to stakeholders in the gas sector regarding their willingness to supply gas to power plants.

The minister equally disclosed that NERC had approved a new gas-to-power pricing benchmark from what used to be about $1.50 per mcf of gas supplied to $2.50/mcf and $0.80/mcf as transportation costs for new capacity. The benchmark according to her then reflected a realistic gas market parity.

In addition to the new gas-to-power price, NERC was also mandated to firm up suppliers’ commitments to give to the sector agreed quantities of gas for generation companies to ramp up their production.

Diezani stressed that gas supply projects that would help cushion the effects of gas supply shortages in the short term had been initiated by the ministry and were at various stages of maturation.

These projects included the Utorogu field expansion comprising accelerated workover of some wells and completion of the new gas plant that will give in 60mmcf/d, expansion of Oben gas plant and drilling of new wells to add 100mmcf/d as well as the re-entry of Odidi field and revamping of its processing plants and flow-lines to deliver 40mmcf/d.

Others she explained are the hooking up of already drilled oil wells in Pan Ocean’s Oil Production Licence (OPL) 275 to add 40mmcf/d, as well as a total of 130mmcf/d from the Nigerian Gas Company (NGC) in the eastern axis, Shell and Seven Energy.

“As you know, the problem of inadequate gas supply is one that has been ongoing for almost 20 years and was inherited by this administration. Since then, various interventions have been put in place to bridge the supply challenges.

“Although, gas supply has grown significantly in the last two years to about 1500mmcf, demand growth continues to outpace supply both in the power and non-power sectors. This mismatch has created a short term gas supply crisis,” Alison-Madueke said then.

She further noted: “Currently, about 750mmcf/d of gas is supplied to the power sector, resulting in an aggregate generating capacity of about 4000MW. However, various outages reduce the actual availability of power. Since November 2013, when the new owners took over the PHCN successor companies, concerns have continued to be raised about the quality of power supply.

“One of such concerns is the lack of adequate infrastructure needed for sufficient gas supply to the power plants. Had there been sufficient gas supply, current generation capacity would have crossed the 6000MW target today.”

Additionally, NERC concluded the review of the Aggregate Technical, Commercial and Collection (ATC&C) losses studies submitted by the distribution companies. This was followed by a review of the revenue requirement and tariff of the power sector, yet, the sector did not attain the marks.

Firming up the benchmarks

Shortly after government’s announcement of its intervention programme, the NERC in September went further to inaugurate a 14-man task force to push for the attainment of the 5,000MW amongst other targets it set for the sector.

NERC noted that the challenges of the sector had transmitted from inadequate gas supplies to the power stations, to transmission deficits.

The commission explained that attaining the 5,000MW in September and 6,000MW by December 2015 were the marks it set for the generation sector.

For the distribution network, NERC said that it was going to review its consumers’ metering plans for the distribution companies. It noted that expansion of the network was also going to be ramped up, adding that the Discos would have to improve on their commitments to consumers.

NERC said then that the operators were to be pushed to strengthen their networks for adequate load management, as well as the Transmission Company of Nigeria (TCN) to continue to strengthen the stability of the transmission network.

Its former chairman, Dr. Sam Amadi said then: “Most of our problems are no longer gas. We are setting up an internal committee to task us on the technical challenges and make sure that we get up to 5,000 megawatts (MW) fully delivered by the end of the month.

“They will concentrate on some issues of the identified issues around load management, technical challenges in the network. So, largely in the short run, getting to 5,000MW is not our challenge now but dealing with the distribution companies and frequency management is.”

The 5000MW generation target has not being attained, neither has the distribution companies improved immensely metering of their consumers in line with NERC’s regulation. The TCN has also not completed existing critical projects to boost transmission of power.

As at December 15, the country’s peak generation was 4343.6MW while actual energy that was sent out was 3914.74MW. These shortfalls were majorly linked to deficiencies in the generation, distribution and transmission sectors. They would all ensure that Nigeria will perhaps end the year below the 5000MW mark it set at the turn of the year.

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