NIGERIA’S PERENNIAL NATIONAL GRID COLLAPSE AND THE ECONOMIC UNDERBELLY OF NIGERIA’S ELECTRICITY GENERATION
“The National Grid is tenuous” this was the honest and succinct assessment by the Minister of Power at the just concluded interactive session organized by the Senate Committee on Power. National grid collapse continues to be a core challenge of Nigeria’s electricity market. The grid has collapsed a staggering 206 times since the sector was fully privatized on the 1st of November 2013. Total and immediate blackouts arising from a system collapse that affect electricity supply including core vital infrastructure such as hospitals and our sensitive military formations is a common phenomenon in Nigeria’s electricity discourse. Nonetheless, between March and April 2022, three collapses (equaling the total of 2021) have been recorded, which observers have described as a pointer to a more sinister issue.
The grid is for wheeling (dispatching) electricity generated by the Generation Companies (GenCos) through the infrastructure/powerlines of the Transmission Company of Nigeria (TCN) to the Distribution Companies (DisCos) who step down the wheeled power into components that can be safely used by consumers. Nigeria currently has twenty-three (23) power generating plants connecting to the grid with an installed capacity of 10,9396MW of electricity and an available capacity of 6,056MW (we however have a current generation less than 4,000MW). Typically, incessant grid collapse is caused by gas pipeline vandalism, line tripping, low water level for hydro plants, low gas pressure, abysmal utility performance, poor monitoring among others.
Since the grid has collapsed a whooping 206 times, you might be pressed to ask why the collapse 2022 is worth discussing. The answer to this is where it gets interesting. The TCN, who manages the grid, issued a press release after the 2022 grid collapse, where among other things, it all but accused certain players of sabotage, the GenCos of low power generation and blamed the vandalism that occurred between the Akwa Ibom and Calabar transmission towers (Odukpani/Ikot Epene 330kv double circuit line) for the outage. The report also fingered the Power Plants that had caused the collapse while clarifying its (TCN) only job in the electricity value chain to be wheeling of available energy. It referred to existing parts of the SCADA as moribund and damaged, coupled with an ineffective telecommunication network infrastructure.
But what is really at play? Explaining this would require a crash course in the electricity value chain. Nigeria sources a significant proportion of its electricity through gas-powered plants (meaning generation through the use of natural gas and turbines technology). As such, there is the need to introduce gas suppliers such Total, NGMC etc, as part of energy the value chain. The gas is typically transported through gas pipelines to the Power Plants (GenCos), who generate electricity for the Grid that is wheeled by TCN to the DisCos (Eko Disco, Enugu Disco, Kano Disco, IBEDC, AEDC etc) before getting to the consumers.
The revenue generated from the sale of electricity climbs up the value chain. But collection of this debt became a problem due to energy theft: meter bypass, losses occasioned by faulty TCN and DisCo lines, debt by government parastatals among others often subsumed as Aggregate Technical Commercial and Collection losses (ATC&C losses). As you might expect, due to the disparity between electricity DisCos receive and revenue collected, there is a huge financial gap that occasions losses up the ladder of the value chain. To combat this, the government introduced Nigeria Bulk Electricity Trading Company (NBET). NBET was tasked with acting as a bulk trader and a backstop to prevent payment default and to act as the manager and administrator of the electricity pool in the Nigeria Electricity Supply Industry (NESI). Unfortunately, NBET has been unable to promptly pay GenCos and consequently gas suppliers. Immediately GenCos default on their obligations to pay gas suppliers, they are cut off from supply, occasioning losses to them and breaching their agreements to their off takers down the line.
Back to the present, the grid collapse of 2022 was reportedly due to scheduled maintenance at Odukpani and Geregu and a pipeline vandalism of Total (a gas supplier). According to NDPH Company, Total energy, their gas suppliers for their Alaoji Power Plant declared a force majeure because of gas pipeline vandalism that frustrated operation. But there is an alternative opinion held widely but secretly by the majority of the electricity market players, regulator and observers. That the grid collapse was a protest.
A protest against the high indebtedness along the value chain. An indictment of the financial and regulatory failures of the electricity market and government. Perhaps a call for a Federal government bailout for the debt they are owed and subsequently their gas suppliers. Sabotage is not uncommon in this sector; a sector plagued by inaccuracies, half-truths, sensationalism and other forms of outright dishonesty. A case in point is the western axis gas pipeline that supplies the Power plants in Southwest Nigeria (Omotosho, Papalanto, Olorunsogo) and Ghana. Interestingly, there are reports of gas pipeline vandalism for the Southwest Powerplants leading to interruptions but an uninterrupted gas supply to the Ghanaian Powerplants further down the Nation’s border. Same Pipeline, different reports. What could be the reason for this contrasting reality? Perhaps the claims of sabotage and protest are not farfetched or we have something even more disturbing at play.
To the regulators and TCN, it appears the commencement of operation by Siemens (the German Energy Giant) would out rightly resolve the grid challenge. At an interactive session at the National Assembly, the Director of System Operations at the TCN and Minister of Power seemed to agree on this. It makes for an interesting read considering the German Chancellor all but indicated that the Siemens/Nigeria deal is dead in the water. Nevertheless, there is confidence and insistence that Siemens energy equipment to Nigeria are sea bound and would berth before the 1st of July 2022 and full-scale grid improvement operation to commence shortly after. While this remains a great development, a light at the end of the tunnel, keen observers are not so jubilant because of the Nigerian Customs and the Port bottleneck. For instance, equipment for the State government-backed NIPP project was delayed for over 5years until the interference of the Nigerian Senate. Also, the brouhaha of imported meters under the MAP scheme that were delayed by Customs over tariff increase makes for bad reading for the Siemens deal and the pace at which the Minister and TCN believe this deal would begin to bear fruit for Nigerians.
A major solution that has been proposed by the Ministry of Power is a new technology-driven surveillance system to prevent pipeline vandalism. By all indication, the pilot scheme for this operation would debut this year spanning the notorious Lokoja/Gwagwalada pipeline axis. In addition, only five (5) Power Purchase Agreements (PPAs) are guaranteed Capacity payments, this number has to increase significantly to improve the economic incentives for increased power generation. In a similar vein, the Senate Committee on Power has recommended for the Federal government to revisit the introduction of subsidy payment into the electricity value chain. This recommendation is merely papering over the cracks, perhaps this might be a temporary solution till the electricity market becomes financially self-sustaining and efficient.
LLB, LLM, MBL