Ambitious But Doubtful Projection

Current developments in Nigeria’s electricity market do not support a recent projection by the Energy Commission of Nigeria that the country’s power generation capacity would shoot up to 100,000 megawatts by 2030, reports Chineme Okafor

During a recent interaction with journalists, Director-General of Energy Commission of Nigeria (ECN), Professor Eli Bala, revealed a forecast by his agency that power generation in Nigeria would increase to 100,000 megawatts (MW) by 2030. Bala said the projection would be possible with an annual economic growth rate of seven per cent and steady implementation of the national energy plan by the Federal Ministry of Power, Works and Housing. He, however, did not state if this projected growth was solely for on-grid power – electricity generated and supplied in the country by licensed operators – or it is inclusive of independent power generation sources, such as electricity generated by individuals and corporates for their exclusive use.

Optimism

Bala told journalists, “With the incremental power programme; every time, every year, we must have increment in power generation. We will also increase our capacity to transmit as well as the capacity to distribute. So, I think we are on course, although, it is not easy.

“Very soon, we will get to a level where we will have a 100,000 megawatt or 100 gigawatt by 2030, and the economy growing at the rate of about seven per cent annually.”

The ECN director-general explained that the legal mandate of the commission was to produce strategic plans and coordinate national policies, hence, the new projection, which is expected to be accomplished in 12 years.

He stated, “For you to have something, you must plan for it. If you look at the strategic plans we have produced, we produced energy master plan and, in particular, with respect to electricity generation.

“We were the first to articulate the various energy mix, including what I have told you; renewable and also the nuclear.”

In defence of the ECN projection, Bala said, “We made a plan in such a manner that we project by 2030, if the economy is to grow at seven per cent, we need nothing less than 100 gigawatts of electricity capacity. And also, you know our politicians want the economy to grow by double digit. If the economy is to grow by double digit, we need nothing less than 300 gigawatts by 2030. I think knowing what you want is a very important thing. If you don’t know what you want, you are going nowhere.”

But ECN did not provide details of how the country planned to grow its power generation capacity, which is currently about 7000MW, to 100,000MW, a striking gap of 93,000MW, in just 12 years.

Energy Master Plan

With regard to the energy master plan of the ECN, which was developed in 2014 and which Bala, perhaps, referred to in the conversations with journalists, the agency indicated its projection was predicated on the government’s plan to industrialise Nigeria by 2030 at which period an average of 115,674MW of electricity would be needed as the economy grows on a seven per cent GDP reference growth scenario. From this, the plan expects 80,560MW of the generation capacity to come from gas-based generation plants; 10,984MW from coal; 6,533 from large and medium sized hydro plants; 3,500MW from nuclear energy; 1,886MW from small hydro; 25,917MW from solar photovoltaics; and 29MW and 54MW, respectively, from wind and biomass.

ECN explained that in general, renewable energy sources would contribute 20 per cent of the expected capacity.

To accomplish this, the plan recommended a pool of financing choices to mobilise investments for the sector. It listed them to include fiscal incentives for investors; cost-efficient tariff to guarantee return on investments; concessionary feed-in tariff for renewable energy; and setting up of long term refinancing schemes for energy assets, in addition to provision of some risk protection measures.

Reality

The current conditions in Nigeria’s privatised electricity market, however, do not seem to support the above projections. With the existing standard power projects’ cost data, THISDAY discovered from a back-of-the-envelope calculation that it could cost Nigeria about $161 billion to build gas-based power plants that would generate 80,560MW of power. And this is based on estimates that it costs about $2 million to build a megawatt capacity gas-power plant.

Industry experts, whom THISDAY ran the calculations through, equally queried the possibility of Nigeria attracting such amount of money in the power sector in the next 12 years. Though preferring to remain anonymous in their scrutiny of the projection, the experts highlighted that barring Azura Power, which is developing a 450MW power station in Edo State, very few private sector led investments had come into the power sector since the privatisation exercise was concluded. They also pointed out that the electricity market had not progressed in the direction that could spur such huge investment into it in so short a time.

Besides, the finances of the sector have remained in tatters and too weak to support return on investments following the poor remittances of the power distribution companies.

“That is possible, but depends on how they factored their calculations,” one analyst said. “When you add all the generations in the country, and I mean your generators, my inverters, power systems of manufacturers, we can actually get up to 60MW at the moment.”

The source further said, “But if they did not make distinctions between grid connected and independent generation, then it needs to be interrogated. If it is what will be generated and delivered to the grid, then it is impossible.

“If it is the licensed operators that will do this, then it means that exponential growth at the base of 7000 megawatts today will be between seven and 10 per cent per annum. This means that between now and that time, we could be spending on the back-of-the-envelope calculation, $5 million per megawatts for gas power generation.

“You are looking for 75,000MW minimum of thermal, multiply that by $2 million per megawatts for generation cost, $1 million for distribution, $1 million for transmission and $1.2 million for fuel supply.

“Who has promised that money to Nigeria? These are not definite. But if you are looking for that, it means it is roughly $225 billion for 75,000MW for thermal alone. Where is the money coming from?”

Energy Forum

Even though the ECN has made its projection in the master plan, industry stakeholders would have an opportunity to query its contents and estimates, especially as it relates to renewable energy and off-grid power systems, at a forthcoming industry event organised by the Nigeria Institution of Electrical and Electronics Engineers (NIEEE). Tagged, the Nigeria Energy Forum (NEF 2018) conference, exhibition and capacity building workshops, its organisers told THISDAY it would focus on how best to transform off-grid and mini-grid energy access in Nigeria; improve efficiency in the country’s energy infrastructure; and search ways to finance clean energy in Nigeria.

NEF’s project leader, Dr. Oluwole Adeuyi, said in a note he exchanged with THISDAY that the Vice President, Professor Yemi Osinbajo, would be expected to present an executive keynote address on growth priorities for Nigeria’s power sector at the forum slated for April 17 and 18 in Lagos. Adeuyi noted that the Minister of Power, Works and Housing, Mr. Babatunde Fashola, had equally been invited to speak on Nigeria’s electricity infrastructure. According to him, the forum would also have leading and young Nigerian researchers and energy experts from Europe in attendance to ask questions on how well the country is doing in its power reforms exercise. 

Adeuyi said, “Across Africa, the key energy challenge is how to electrify millions of households, remote communities and small-scale entrepreneurs, as quickly as possible, using sustainable, affordable and safe energy sources.

“The energy forum aims to exchange knowledge, build technical capacity and promote innovative technologies for accelerating access to sustainable energy services in Nigeria and other African countries.

“The confirmed keynote speakers are Mustapha Bakkoury, President, Moroccan Agency for Solar Energy; Dr. Fuad Siala, Senior Advisor, OPEC Fund for International Development, Austria; Engr. John Funso Adebayo, National Chairman, NIEEE; Prof. Adeola Adenikinju, Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Nigeria; and Yuri Tsitrinbaum, CEO, Lumos Nigeria.”

Adeuyi explained that the forum would also involve practical sessions on top-class hands-on capacity building workshops on energy management systems by the United Nations Industrial Development Organisation (UNIDO); flexible integrated energy systems, co-organised by the European Regional Development Funded-FLEXIS Project and Cardiff University, UK; as well as a live off-grid demonstration by Green Light Planet.