Nigeria’s power generation companies (GenCos) in the past five years have lost a whopping N1.2 trillion(US$3.31billion) as a result of poor capacity utilisation and the country’s inability to transport over 21,184.62 megawatts of electricity to end users.
With a peak suppressed load of 25,790MW on the grid, while peak generation hovers around 5,375MW (indicating that about 21 per cent of the suppressed grid load is met), Nigeria’s power generation capacity might substantially remain stranded in the face of load rejection by electricity distribution companies (DisCos) due to infrastructure and collection problems.
According to the Guardian, statistics it obtained from the GenCos showed that since Nigeria’s power sector was handed over to private owners, average generation capacity in the country has stagnated around 3000MW, though available generation capacity went from about 4000MW in 2013 to above 7000MW in 2019.
In 2015, while available generation capacity was 6,616.28MW, average generation stood at 3,606.05MW, even as stranded generation was 3,010.24MW, bringing losses to N214.93 billion. Available generation capacity as at 2016 settled at 7183.59MW. Average generation stood at 3,266.79MW, while stranded generation was 3,916.80MW, thus creating a loss of N279.66 billion.
While available generation capacity was 6,995.37MW in 2017, average generation stood at 3,622.64MW and stranded generation was 3,372.72, creating a loss of N240.81 billion. In 2018, available generation stood at 7,384.37MW, average generation hovered around 3,864.15MW. A figure of 3,520.12MW was declared stranded while loss stood at N251, 34 billion.
Unless the never-ending importation of power generating sets for homes and industries is addressed, the prevailing reality would continue to bedevil the nation’s economic outlook, increase environmental challenges in the face of global warming, stagnate the entire power sector and limit investment in the sector despite growing financial liquidity.
Also, available generation stagnated at 7,381.00MW in 2019. Average generation stood at 3,782.00MW but 3,599.00MW was stranded, making investors lose N256.97 billion.
These development has triggered complaints from several industry players and consumers.
In an interview with the Guardian, Executive Secretary of the Association of Power Generation Companies (APGC), Dr. Joy Ogaji, noted that GenCos were being owed an average of 68 per cent of their invoices every month.
“It is sad to know that increase in available generation capability was not met with increased average generation, i.e. GenCos were not fully dispatched. GenCos’ increased available generation capability has not translated to corresponding increase in power supply to consumers, so consumers in their generalisation believe the entire sector has failed.
“This has become a big challenge and an inhibitor to the Nigerian Electricity Supply Industry, defeating the effort of the GenCos in recovering unavailable capacities, considering the massive fixed charges incurred to keep such units available.
“DisCos’ remittances are still below 30 per cent and they consume more than 90 per cent of the power put on the grid. This is certainly not sustainable. So, in plain terms, every month GenCos are being owed an average of 68 per cent of their invoice,” Ogaji said in an interview with The Guardian.
She noted that the situation had created a lack of trust in the power sector as the manufacturing and sector and others were settling for self-generation. According to her, the sector is faced with financial, operational, construction, market, macroeconomic, contract and regulatory risks.
She added that since decisions about investments in power generating capacity depend on expected returns and costs, the illiquid state of the industry and the fact that all plants are performing below optimum do not encourage the discourse of capacity increase or expansion.
When electricity is generated, the Transmission Company of Nigeria (TCN) is responsible for transmitting the electricity through networks to the distribution companies. The two arms of the market have repeatedly traded blame, pointing to a weak grid system and outdated distribution network as the reason for the non-utilisation of capability.
The Managing Director of TCN, Usman Mohammed, had vowed to push for the recapitalisation of DisCos this year, stressing that unless there is commensurable investment from the DisCos to match the level of generation, the sector might not work.
The Managing Director of Nigerian Bulk Electricity Trading Plc (NBET), Rumundaka Wonodi, blamed the prevailing situation on transmission and distribution inefficiencies.
“The deficiency in supply is hurtful to our economy and we also know that because of the stranded power, NBET is reluctant to enter or activate the agreement it has with the GenCos. This is because NBET might have to pay for capacity. The biggest losers are the generation companies who have paid but cannot monetise,” Wonodi said. The loss, according to him, would impact the revenue of the sector already heading towards bankruptcy and hurt the nation’s economic indices.
Wonodi, however, expressed optimism that the recent agreement signed between Nigeria and Siemens of Germany could reduce the challenge if properly implemented. “That is one of the greatest things this government has done; trying to unlock and take out the bottleneck, and make sure consumers get better service,” he said.
He further decried the sector’s leadership challenge and regulatory interference, especially from the National Assembly and the Federal Government.
Expressing concern about the fortune of GenCos, PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, said: “Some power companies that could have used three to five turbines are running few because the system is unable to take on the load. Sometimes, they reduce generation from turbines because of the challenge. This affects the lifespan of the generators.”
According to him, Nigeria does not currently have power generation problem. Rather, the sector lacks the ability to use what is currently being generated.
Jaiyeola stated further: “While they’re ramping down periodically, the assets are losing value. The depreciation will keep increasing at a faster rate. Some of those assets are also reducing faster than they would if they were allowed to run without periodic ramping.”
Urging a sustainable solution, he asked the Federal Government to speed up its willing seller-willing buyer policy, to enable independent bodies to have direct access to the market.
According to him, government needs urgent solutions to bridge the infrastructure gap in transmission and distribution. “While we are having debate on new generation companies coming, they will also face all of these problems unless they are leveraging other ways,” he added.
Source: www.energynewsafrica.com