Prior to the power sector privatization program in 2013, the Federal Government of Nigeria (FGN) launched the Power Sector Roadmap 2010 and set as a target, the attainment of 40GW of reliable power supply by 2020. Almost a decade afterwards, the country still grapples with epileptic power supply despite the sector being privatized.
The installed generation capacity is about 13GW, available capacity is 7GW, while what is distributed by the Distribution Companies (Discos) to over 190 million Nigerians (Households, Commercial and Industrial Users) has not gone beyond 5.3GW which was the peak generation attained in February 2019.
By 2017, the Economic Recovery and Growth Plan (ERGP 2017-2020) of the FGN placed the power sector infrastructure expansion program as a priority agenda of its economic growth plan trajectory. This was followed by the Power Sector Recovery Program (PSRP 2018), specifically designed to address the policy and financial issues bedeviling the power sector of Nigeria. The PSRP adjusted the target of delivering 40GW to a more realistic 10GW (on-grid and off-grid) of operational capacity by 2020.
Realizing that existing power sector assets are inefficiently deployed and are unable to deliver the set targets, Siemens AG and FGN recently expressed intentions to collaborate in order to unlock the network bottlenecks in the Nigerian power sector. This effort has been articulated in the Nigerian Electrification Roadmap, 2019 (NER) which will be analyzed in light of some lingering issues in the Nigerian Power Sector.
STRUCTURE OF THE ROADMAP
The Nigerian Electrification Roadmap (NER) is structured in three phases, set to span a period of six (6) years (2020-2025), during which the power sector system upgrade and capacity expansion would deliver 7GW of operational capacity in the first phase, 11GW in the second phase and 25GW in the third phase. Each of these phases requires several projects that have been identified to unlock the respective set targets.
1. Proposed Phase 1 Projects
From prior simulation studies undertaken by Siemens on the Nigeria Electricity Supply Industry (NESI), it was discovered that there exists stranded operating capacity of 2GW, which limits the available wheeling capacity from 7GW to 5GW. It is anticipated in this phase to unlock the 2GW of stranded supply due mainly to the in-feed capacity bottleneck of 132/33kv interface between TCN and DisCos, via the upgrade of the transmission and distribution networks (T&D) to deliver the 7GW to end-users in the short-term, thereby accelerating quick wins for the sector.
Although there are no exact timelines for this phase, it is hoped that in the short-term between 2019 and the end of 2020, end-users should enjoy stable and reliable supply of 7GW. Interestingly, the main projects in this phase will require the deployment of some of Siemens’ product offerings such as containerized GIS substations x 11, mobile substations x 10, additional transformers, compensation system x1, 140 km of transmission lines, Siemens’ product offerings to 14 substations, and upgrade of 26 existing substations, deployment of SCADA with Siemens’ Spectrum Power 7 in implementing grid automation, and the deployment of Siemens’ Energy IP platforms in implementing national metering infrastructure project. It is expected that once these costs have been agreed to by the FGN, effectuated by a more effective Co-operative Agreement, Siemens will begin the manufacturing of the equipment needed to deliver on this phase.
2. Proposed Phase 2 Projects
Following the successful implementation of the phase 1 projects, additional projects for phase 2 will be undertaken to strengthen and expand existing capacity in order to unlock additional 4GW to attain the target of 11GW by 2023.
This phase will entail rolling out further T&D infrastructure upgrade to attain the 11GW capacity, which is the current distribution capacity of all the DisCos, aimed at making more power supply available to end-users.
Essentially, the main projects in this phase will be the SCADA deployment for the 11 DisCos, Embedded Power projects (Siemens based SGT 40MW suggested as pilot project in Abuja) and support of existing North East Transmission Infrastructure upgrade (NTEP2). In addition, Siemens proposes in this phase to support the current flare gas projects/program (Gas to Power) by setting up gas processing/treatment facilities to unlock the needed 15GW of power for the third (3) phase.
3. Proposed Phase 3 Projects
Based on network studies and load demand, this phase will focus on projects that will expand existing transmission and distribution assets for additional capacity required to attain the 25GW target by 2025.
Essentially, Siemens aims to support the AKK pipeline project as well as the four power plants expected to be built by the FGN along the pipeline project with the aim of delivering a total of 4.5GW. The proposed power plants will be located in Abuja (1350MW), Kaduna (1350MW), Kano (1350MW) and Lagos (450MW), while the balance of 9.5GW is anticipated to be closed by other Independent Power Projects located in different parts of the country based on power demand.
In addition to the foregoing, Siemens proposes to provide operations and maintenance (O&M) services to TCN and DisCos for up to a period of 60 months after the commissioning of the T&D projects.
CHALLENGES TO THE IMPLEMENTATION OF NER
Non-Cost Reflective Tariffs
The PSRP projects that not less than $1.5Billion annually will be needed over the next five years to fill the power sector infrastructure deficit in Nigeria, which effectively translates to about $7.5Billion over the estimated period. However, delay in reviewing the MYTO 2015 and the non-cost reflective tariffs have constrained investment and growth of the sector, resulting to a tariff shortfall of N1.4 trillion as at March 2019, which is the sum technically owed to the DisCos. Consequent upon this deficit, each of the DisCos’ capital expenditure has been significantly impaired which translates to lack of deployment of smart metering infrastructure in order to enhance revenue collection efficiency for the NESI and lack of investment in their respective networks to strengthen reliability of power delivery to end-users.
Prior to recent developments, the success of the NER was unclear given that the back-end challenges of tariff mismatch and revenue collection had not been addressed by the regulator. However, in August 2019, NERC released a minor review of the MYTO tariff order (2015) and minimum remittance order for 2019, which would trigger cost reflective tariffs when implemented in 2020 subject to certain pre-conditions. This would in effect positively impact the implementation of the Roadmap which seeks to
address the challenges of adequate metering infrastructure that was occasioned by the ensuing deficits and shortfalls hinged on non-cost reflective tariffs. It is expected that the seeming concerted efforts to introduce significant reforms in the NESI would result in the bankability of the NER.
The Roadmap fails to holistically address the challenges plaguing the generation segment of the value chain. Although reference is made to the need to increase generation capacity, no direct strategy is provided as to the modalities of achieving the proposed increased capacity which is expected to factor the existing bottlenecks and the proposed solutions for the viability of the sector, given the interconnected nature of the NESI value chain.
High ATC&C Losses
The Aggregate Technical Commercial and Collection (ATC&C) losses in the NESI have been significantly high, eroding almost half of the asset value of the power system. The implementation of the NER aims to reduce the losses encountered by the DisCos whilst expanding generation capacity. This is quite a logical approach, however the costing for the Siemens led projects have not been arrived at or finalized with the approval of the FGN. Although the German Export Credit Agency (GECA), has reportedly expressed willingness to bankroll the financing of the Siemens’ project under the NER, it remains to be seen how this development will play out in terms of securitization of the assets. Perhaps the details will be spelt out as the journey of implementing the NER unfolds.
The NER is commendable on the part of the FGN. However, the success of its implementation will depend on a holistic stakeholder approach in addressing the lingering issues across the NESI value chain.