Sunday, November 29, 2015

On The Just Concluded West African Power Industry Convention 2015

Matters Arising (Part 1)
By Idowu Oyebanjo

The just concluded West African Power Industry Convention (WAPIC 2015) event held from 23rd till 26th November 2015 at Eko Hotel and Suites, Lagos was a strategic hub for stakeholders looking for collaboration and joint solutions to the intractable challenges bedevilling the electrification of the West African sub-region. The main focus was the status of the Nigerian Power Sector reform. Some of the key conclusions from the event are highlighted below:

1. There is an urgent need for the new Minister in charge of Power to put together a team of technocrats with proven expertise to review the status of the power sector reform with a view to establishing and possibly dismantling bottlenecks in the entire value chain of generation, transmission and distribution of electricity in Nigeria. This team, which must be apolitical, will review existing laws, policies and processes as they affect the dismal performance of the reform despite humongous amount of investment in the last 20 years. Serving as a "system architect", it will take a holistic view of the entire system from end-to-end, ensuring synergies between parallel and hitherto conflicting activities which have more often than not led to policy reversals and summersaults creating thus far the volatility, uncertainty, complexity and ambiguity experienced in the Nigerian Electricity Supply Industry (NESI) to the sheer embarrassment of all stakeholders.

 2. To be able to sustain NESI, there is an urgent need for a clear focus on localisation and capacity development for the power sector work force by strictly implementing the Nigerian Content development regulation, establishing a power academy (university for the power sector) and apprenticeships that fit into the National Vocational Qualifications (NVQs Levels 1-6), as well as  provide funding for training and research grants focusing on specific areas of need of NESI.

3.  It was generally accepted that the portfolio of energy mix for generation of electricity should include renewable energy for off-grid connectivity under the existing rural electrification projects. A clear message that Nigeria should not and does not need renewable energy systems to meet the challenges posed by huge deficit in power it faces currently was passed. This was thoroughly reviewed in view of the scale of investment, expected impact and power system economics. Rather, as far as concentration of investment in fuel supply requirements to provide respite in the shortest possible time frame is concerned, gas must be made available to gas fired power stations dotted around the country to generate electricity for evacuation via a network of strengthened Transmission and Distribution Assets by technically qualified personnel working in the envisioned NESI.

*Fashola, Nigeria's Minister of Power 

4.     All stakeholders agreed on the need for a Cost Reflective Tariff (CRT) but disagree on the implementation as the process needs to be transparent in all ramifications. Also, customers must be metered and the provision for estimated billing abolished as it does no good to both network operators and consumers of electricity. There is a dire need for re-orientation and re-evaluation of the payment culture of consumers just as the menace of electricity theft must be curtailed to guarantee the survival of the reform process.

 5. Financial Intervention is a fundamental requirement for the power sector reform in Nigeria but disbursement must be by the output measure technique where financial intervention is linked to specific outputs expected in the overall performance and health indices of different items of plants on the power network over a given period of time. Scheduled payments to benefactors will be based on verifiable investment which translates to a quantum leap in electricity made available to consumers. This may be in the form of loan facility or percentage stake of government in NESI. Whatever the case, a lean on the shares of defaulting operators will be enforced as a means to guarantee performance.

    6.  Weak regulatory framework, issuance of many contradictory and unclear policies send the wrong signals to potential investors. Hence, there is need for strategic governance that ensures policies are well-thought through before they are made and the potential impact on the credibility of the reform process is evaluated before any policy reversal is mused. Today, a country like Ethiopia attracts foreign direct investment (FDI) and other investor funds ahead of Nigeria because large fund owners perceive Nigeria to be a risky place to do business. To reverse this ugly trend, governance and regulatory framework need to be strong, policies must be clear with appropriate legal and regulatory framework, contracts must be enforceable, projects must have commercial viability, and the Banking sector reform must continue until local Banks can access finance from international finance institutions (IFIs). To do this however, the media will also play a part in ensuring the country is projected positively to the rest of the world as the aforementioned changes are made.

      7.  The need for accurate and up-to-date data for NESI cannot be over-emphasised. The successful planning, operation, maintenance, protection and control of a functional electric power system depends hugely on data. The starting point is the data or information relating to the actual load demand and specific information relating to individual customers connected to the grid. In this regard, the 5.9 billion naira loan granted TCN recently by the World Bank is a welcomed development.

      8.  Network operators must embrace operational efficiency rather than requesting for an increase in tariff as this alone will not solve the problem on hand. As far as progress in the last 20 years is concerned, the quantum of electricity generated and transmitted for distribution before and after privatisation has remained roughly the same. Peak generation as at the end of December 2012 was 4,518MW and it is around 4,883MW now.

Therefore, in the short term, one expects Nigerian government to focus on training and human capital development, provide gas as a minimum to the NDPHC power plants and fix the liquidity problem within NESI. In the medium term, effort must be made to implement a 20,000MW (20GW) integrated energy system whilst capacity, security of supply of gas and electricity, power quality, customer service, and so on are to be long-term initiatives.

Idowu Oyebanjo, a power system engineer was a delegate and speaker at the conference.

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