As Buhari Targets 10,000MW of Electricity

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After successive Peoples Democratic Party-led administrations failed to realise their power generation targets,Ejiofor Alike writes that President MuhammaduBuhari’s target of 10,000MW by 2019 can only be realised if his administration develops strategies to increase available generating capacity by addressing the challenges of gas supply, transmission and vandalism

With the solid foundation laid by former President Olusegun Obasanjo’s administration in the power sector to reform the sector and improve generation, transmission and distribution, the administration had set a generation target of 10,000 megawatts by 2007.

But he handed over only generation that was slightly below 3,000 megawatts when his tenure of office ended on May 29, 2007, out of the 10,000mw he had promised.
On assumption of office, the late President Umaru Musa Yar’Adua made power generation one of the pillars of his administration’s Seven-Point Agenda.

He revised downward the 10,000MW target set by Obasanjo for 2007 to what he thought was a more realistic target of 6,000MW for 2009.
Yar’Adua had during his campaign, promised to declare an emergency in the power sector but this promise was not fulfilled before he suffered health challenges that eventually took his life.

But by the end of 2009, the then Minister of Power, Dr. LanreBabalola, admitted that only about 3,500 MW of electricity was actually being generated from both Power Holding Company of Nigeria (PHCN) and Independent Power Plants (IPP) operated entities, and blamed gas supply inadequacy, sabotage, the Niger delta crises, among others for the failure of the administration to attain the target.

On assumption of office as acting President, Dr. Goodluck Jonathan had set a target of 5,000MW by December 2011, through his Presidential Task Force on Power, headed by Prof. Bart Nnaji, who later became Minister of Power.
However, the target was not met and Nnaji’s successor, Prof. Chinedu Nebo shifted the 5,000MW target to December 2014 and later January 2015 but it was still unrealisable.

But by the time 2015 ended, Nigeria’s generation was around 4,000MW of electricity.
After the previous administrations of Obasanjo, Yar’Adua and Jonathan failed to achieve generation targets, President MuhammaduBuhari has set 10,000MW for 2019.
It has been argued that setting frivolous targets to score cheap political points has been the bane of Nigeria’s power sector.

According to experts, setting targets without finding permanent solutions to funding challenges, gas pipeline vandalism, weak transmission infrastructure and perennial shortages of gas will not take any administration anywhere, as far as the power sector is concerned.
Under the capital spending plan for 2016 fiscal year, the Ministry of Power, Works and Housing got the lion share of N422.9billion in the budget.

It is believed that this funding is adequate given the fact that with the recent privatisation, only the Transmission Company of Nigeria enjoys federal government’s direct funding.

But the tackling vandalism and gas shortages should be a priority of this administration if the 10,000MW target set for 2019 will be realistic.

There is no doubt that Buhari’s target will be more realistic than the previous targets given the foundations laid by Obasanjo by way of enabling legislations and the power projects executed by Jonathan, which are well-positioned to boost generation to an all-time high if the perennial challenges are permanently tackled.

The country’s peak generation ever attained was 5,074.7MW, while national peak demand forecast is 17,720MW. The country currently has an installed capacity: 11,165.40MW but only an available capacity of 7,139.60MW.
The former Chairman of NERC, Dr. Sam Amadi and a former Group Executive Director (GED) in charge of Gas and Power at the NNPC, Dr. David Ige told THISDAY in separate interviews at the weekend that President Buhari’s 10,000MW by 2019 was realistic and achievable.

To Ige, the target is realistic and adequate in the sense that a significant portion of that target was almost already in place from a generation point of view, while a lot is being done on both transmission and gas supply, that can bridge the gap by 2019.

Ige said the federal government should incentivise the gas producers, which are mainly Nigerian independents, stressing that the key challenge they have is access to acreage.

According to him, the international oil companies (IOCs) sit on most of the country’s gas reserves, yet have not made meaningful contribution to the domestic capacity, whilst the Independents with less than 10 per cent of the available reserves are making the most contribution.

“ I suggest the incentives should include a more visible reward for those that contribute to the domestic market e.g. make more acreages available to the Independents, review the fiscal terms for gas for this category and adjust as appropriate to reflect the lack of robustness of their portfolios. Federal government must deploy more stringent criteria before renewing acreages for underperforming companies,” he added.

On the clamour for higher gas price as incentive, Ige, who is the Chief Executive Officer of GasInvest Limited, said the domestic gas price was adequate.

“It may interest you to note that on aggregate, the domestic gas price is higher than the transfer price to export. More importantly, the pricing of gas, beyond gas in the domestic obligation is done on a ‘willing buyer, willing seller’ basis, that is, market determined. What we need to address is the unsustainable and avoidably high cost of production (by the NNPC/IOC JVs’) of gas and oil. Efficiencies must be introduced so as to make Nigeria competitive. Price cannot be used as a mitigant for unchecked high costs,” Ige explained.

On his part, Amadi said the problem of generation was two-fold: access to adequate gas supply to generators and bankable contracts.

According to him, NERC had solved the main regulatory problem of gas supply, particularly pricing.
“What remains is to move quickly to contract-based trading; Let every generator have bankable contracts with gas suppliers and with bulk trader. Let Bulk Trader have bankable contracts with discos. Anyone who fails in the value chain bears the cost. Simple! With consumers now paying the cost reflective tariff there is no room for excuse anymore why we can’t march straight to the contract-based market. The excuse of revenue shortfall is better managed inside a contract market rather than outside. If we do these things very well and restore NERC to its statutory form and powers, then 10,000mw target is readily achievable,” Amadi explained.

“Clearly the target of 10,000MW is very achievable by 2019. That is not a tall target considering where the sector is now, but it is a reasonable one, as it is better to over perform. What is required to achieve that target is better project management. I have argued that the real challenge of the electricity sector reform now is project management and not necessarily change of model. We have a project management problem not a modeling problem,” Amadi added.

The former NERC boss noted that what the agency did in NERC in the last five years had guaranteed a stable electricity model even in the face of very acute problems of poor quantity and quality of electricity.

Tackling militancy/vandalism
Militancy and vandalism are twin evils that have crippled Nigeria’s power sector by disrupting gas supply to the power plants.

A Chief Executive Officer of an Exploration and Production (E &P) company, who did not want to be quoted, told THISDAY at the weekend that the problem of E &P companies was not the drop in oil price but production deferment.
“Last year, we suffered almost 100 days of production deferment out of 365 days in the year. We are just beginning this year and we have suffered almost 50 days. All the companies using Forcados pipeline have not been producing since the past six weeks but they are doing all they can to evacuate condensate gas to keep delivering gas to for power generation. If they have not been doing that, the current power situation would have been worse,” he explained.

Many analysts believe President Buhari’s administration is mishandling the Niger Delta crisis.
This administration’s first six months were devoid of vandalism of oil and gas assets but the honeymoon is over as destructive attacks on gas facilities have brought power generation to drop to an all-time low.

While some have aligned with government’s decision to go after agitators who vandalise gas infrastructure, others have suggested that the administration should opt for negotiations as the late President Yar’Adua’s administration did, which resulted in the acceptance of the Amnesty Programme by repentant militants.

Speaking on the issue of vandalism, Ige suggested that social engagement that will encompass inclusion and empowerment is inevitable in the Niger Delta.

According to him, force goes only so far, given the terrain and the capacity of the military.
He said global and local enforcement of the anti-corruption principle would gradually make it more difficult for those engaging in vandalism to corruptly enrich themselves via use of bank verification number and tracking of accounts.

Ige suggested technology deployment for surveillance of infrastructure and rapid response using drones, monitoring and classification of contractors for effective policing of contractors that may be colluding and rapid response repair system.

“Whilst much can be done to reduce vandalism, it may not be possible to eliminate it completely in the short term. Nigerian Gas Company and the IOCs in charge of infrastructure ought to have in place a rapid response and repair mechanism that minimises downtime from pipeline attack,” he added.

“Overall, I believe the target is realisable. If we did all that was possible to bring the many gas projects that are over 80 per cent complete to 100 per cent complete, you will be amazed how rapidly the story of power will change in Nigeria. Encourage and incentivise the Independents, engage the militants, outlaw community interruption of contractors working on government projects, address the payment challenge in the sector and clear all outstanding debts to gas suppliers. These are all very doable and the results will amaze Nigeria,” Ige added.

Transmission constraints
Though the country’s current transmission capability is 7,000MW, actual network operational capability is only 5,500.00MW, according to data obtained from the Transmission Company of Nigeria (TCN).
According to Amadi, “If we start implementing the tariff as proposed with its incentives for distribution efficiency, then we can be sure that Discos will be able to receive even 15,000MW by 2019.

“Then you go to transmission. Part of the tariff review is the change in transmission charges so that more investment can be made in transmission. If you marry better revenue with more efficient and less political management of the TCN you will be sure that TCN will wheel out over 10,000MW by 2019. But if we continue with business as usual you can’t guarantee this. But NERC’s regulatory framework guarantees this level of efficiency if enforcement is vigorous,” he added.

Amadi however, added that without appointment of commissioners, NERC would remain comatose, in spite of the hard work and best intentions of the management staff.

He called for massive investment on network to expand the capacity and also ensure quick response to line and fault clearing so that there are no downtimes in distribution of electricity.