Power Punch Is NESI embracing automation? Part II by omiesam November 30, 2023 written by omiesam The nation’s power grid lacks adequate automation. Nigeria’s electricity is generated from hydro and thermal sources, whose transmission lines have been continually subject to vandalism. As such, there has been a longtime failure to detect faults during distribution, adversely impacting power generation forecasting and electricity supply. This situation is why fully modernizing the Nigerian Electricity Supply Industry (NESI) for real-time monitoring and control of distribution systems is vital to achieving a reliable electricity supply. The first part of this series highlighted automation benefits. This part explores the challenges. Challenges Automation comes with several challenges. These challenges include cybersecurity risks, financial implications, and regulatory and workforce gaps. For a country like Nigeria, navigating these challenges necessitates political and economic balancing due to its complex composition. The nation’s institutions, governance structures, and social, political, and economic dimensions are heavily interdependent. Thus, seamless automation may be challenging. Cybersecurity Electricity is an integral part of all modern economies, and as electricity sectors become more digitalized, threats of cyberattacks rise. In 2021, 71% of organizations suffered cyber-attacks, with 44% paying an average cost of $3.43 million as ransom to protect sensitive data. These figures indicate the importance of an appropriate cybersecurity regulatory framework to protect against threats. There are several policies and laws for cybercrime activities in Nigeria, and the primary legislation for cybersecurity is the Cybercrime (Prohibition, Prevention, etcetera) Act 2015. Despite the efforts of the Nigerian government to combat cybercrime, there are still stumbling blocks that limit cyber-attacks, such as infrastructure and inadequate regulatory frameworks. On the former, automating the power system requires responsive incident response centres, cybersecurity training facilities and development centres. Whilst on the latter, relevant regulations must be continually reviewed and updated to address current and emerging cybersecurity threats. Financial costs The capital investment required to implement automation technologies is exorbitant. As noted in Series I, the Transmission Company of Nigeria (TCN) estimated $65 million to automate the national grid with a new SCADA system in 2018. This figure has likely increased. Nigeria’s electricity sector’s costs far exceed its revenues, and the deficit has widened. The Federal Government of Nigeria allocated ₦239 billion to the power sector in 2023, highlighting ₦232,620,744 832 as the capital costs for running the sector. According to the National Bureau of Statistics, the revenue collected by distribution companies in the last quarter of 2023 was ₦202.62 billion. Operational costs are typically 10 times the sector’s revenue or higher in most emerging countries. For instance, Iraq’s total explicit operational costs amounted to $9.3 billion, equivalent to 4.0 per cent of its GDP, with revenues totalling less than 800 million dollars. While similar power sector financial challenges exist in other emerging countries, Nigeria faces particularly substantial financial gaps, as evidenced by its market illiquidity. Regulatory and policy framework Several regulatory overhauls have been implemented to increase liquidity in Nigeria’s power sector. These changes aim to improve financial liquidity, fostering an enabling environment for significant automation in the sector. Among these changes is the approval of the Fifth Bill (No.33), the Devolution of Powers (National Grid System), which amends the 1999 Nigerian Constitution. This amendment, signed by former President Muhammadu Buhari, empowers states to generate, transmit, and distribute electricity in areas covered by the national grid. Furthermore, the Electricity Act 2023 stimulates investments for automation by promoting indigenous capacity in technology for renewable energy sources. This regulatory framework signals Nigeria’s readiness to enhance financial feasibility for full-scale automation. Nevertheless, the efficacy of these initiatives is significantly dependent on their implementation. A phased approach to automation Nigeria’s power systems rely on manual tap changers, leading to increased power outages and reduced system safety. Many transmission and generation stations lack supervisory control, data acquisition (SCADA), and telecommunication systems. Automating the electrical power distribution system, including procuring a new SCADA system and integrating the Internet of Things (IoT) into transmission operations, is crucial to swiftly address power sector issues like power outages and revenue losses. November 30, 2023 0 comment 0 FacebookTwitterPinterestEmail
Power Punch Is Nigeria’s electricity supply industry (NESI) embracing automation?– Part I by omiesam November 24, 2023 written by omiesam Nigeria’s electricity supply industry has evolved to tackle various challenges over the last two decades. Schemes such as the Electric Power Sector Reform Act, the Credited Advanced Payment for Metering Implementation (CAPMI) and the Meter Asset Provider (MAP) have anchored this evolution. Despite these efforts, ineffective data capturing, poor tariff collections, and coordination challenges persist. The sector’s absence of system automation constrains the power supply and limits energy transition targets. This limitation negatively impacts grid management and data-backed decision-making processes. Existing schemes A mix of manual and automatic systems controls the Nigerian grid. The electricity supply chain utilises a manual tap changer alongside the NSONG platform, supervisory control, and data acquisition. (SCADA). The Transmission Company of Nigeria (TCN), the utility responsible for transmission and market operation services, announced that it is utilising internal tools and vendor-procured applications to improve market operations. Some of these solutions include upgrading the NSONG platform adoption of SCADA and the Central Data Management System (CDMS). These schemes are discussed respectively below. The NSONG platform promotes the skeletal exchange of information, improving its previous functionality. Before the platform’s upgrade, grid control was primarily done via manual logs and email sending. According to TCN, the platform enables transparency within the electricity grid, facilitating seamless integration among generation companies, distribution companies, and the National Control Centre through the Generator Dispatch Tool (GDT) and Distribution Dispatch Tool (DDT). For SCADA, it is internationally recognised as the best solution for coordination and market data recording. Its implementation is yet to be operationalised due to its significant financial implications. In 2018, TCN estimated the cost of a new SCADA system to be $65 million. As of September 2022, TCN announced that its procurement is still being actively pursued. TCN further promulgated its active work towards enabling SCADA implementation by constructing “two state-of-the-art control centres in Osogbo and Gwagwalada to house SCADA infrastructures“. The Central Data Management System was launched by the federal government (FG) in 2020. In conjunction with the government, Sustainable Energy for All (SE4All) initiated this project under the Nigerian Energy Support Programme (NESP). It is intended to monitor power networks across the country to empower data-driven electrification planning and provide the government, investors and project developers to deliver former President Muhammadu Buhari’s power sector vision 30:30:30 – a target to deliver 30,000 MW of electricity by 2030 with at least 30 % coming from renewable energy. The project is carried out in collaboration with the European Union (EU) and the German government. Thus far, the Ministry of Power announced in 2022 that the project successfully mapped 21 states and the Federal Capital Territory, recoding a satellite mapping of 350,000 settlement clusters with over 2.6 million buildings identified and further noted 50,000 km of 33 KV and 11 KV power distribution lines tracked nationwide. Cumulatively, these schemes led to increased metering penetration and reduced revenue losses to an extent, but they have not effectively addressed data capturing and sector illiquidity. This inefficiency contributes to monthly reconciliatory gaps between the Nigerian Bulk Electricity Trading Plc and the discos. Benefit of automation A verifiable electricity database is integral to developing socioeconomic opportunities. Aside from the numerous benefits like reliable load forecasting, reduction in technical and commercial losses, and enhanced grid monitoring and control, the data can be an engine for sustainable economic growth. Integrating the Internet of Things (IoT) enhances checks and balances, suppressing the likelihood of corruption. IoT devices are designed with critical functionalities such as digitalisation and algorithms that improve power quality and transmission reliability, reduce utilities’ operational costs and boost power distribution efficiency. Power underpins societal development. It provides cross-cutting efficiency and development across all sectors and aspects of life. Thus, automating Nigeria’s power system to ensure sustainability and energy efficiency is crucial for overall advancement November 24, 2023 0 comment 0 FacebookTwitterPinterestEmail
African Focus How Much can Mini-grids contribute to the African Energy Transition Plan? by davidomata November 20, 2023 written by davidomata In a press release from the World Bank on the 27th of September 2022, it was reported that solar mini-grids have the potential to provide uninterrupted electricity to over 500 million people in unpowered and unserved communities by 2030. Today, there are about 750 million people without access to electricity, and more than 50 per cent of them live in sub-Saharan Africa. In a recent interview, the practice manager for the World Bank’s Energy Sector Management Assistance Programme (ESMAP) spoke on how Africa can leverage private finance and mini-grid technology to bridge the power access gap. However, he emphasized the need to have more sustainable policies that would drive the mini-grids across Africa as the current policies, if not changed, would keep at least 670 million people without access to electricity by 2030. He added that the current pace of electrification on the continent is not fast enough. While Mini-grids have been applauded as crucial in accelerating access, they cost about $0.4/KWh, which is higher than the $0.16 average cost of electricity globally in terms of production cost. In a recent study undertaken by Nextier’s technical associate along with other researchers from Ghana on the profitability of renewable energy sources in the country, it showed that while the levelized cost of energy (LCOE) for a solar PV project is 2.34/KWh. At the same time, the national tariff for electricity is 1 GHC/Kwh. Considering that solar PV is currently the most affordable among renewable energy sources, this calls for concern about the ability of the communities where these mini-grids are connected to pay the associated tariffs. According to the Mini Grids for Half a Billion People Handbook, the production cost currently is high. Still, it is projected to come down to about $0.2 by 2030 if all the necessary measures are put in place to drive the mini-grids. The Nigeria’s Energy Transition Plan established a target of 7GW for mini-grid generation by 2050. However, given the existing state of the sector and the growth in the capacity of mini-grids nationwide over time, this objective is nearly impossible to reach. The sustainability has been called into doubt because, Aside from Husk Power Systems, no other African developer of mini-grids has been able to break even or turn a profit, even though some of them have been in business for roughly ten years. Several studies have demonstrated that customers’ ability and willingness to pay is high, and Husk Power Systems has distinguished itself from other mini-grids by achieving corporate profitability. Early-stage businesses find it extremely difficult to raise capital to advance beyond grant or private equity-backed pilot stages despite the fact that their services are reliable and predictable. The sustainability and scalability of mini-grids in Africa will require targeted interventions. First, large-scale, long-term loans at low-interest rates are crucial. As infrastructure initiatives, mini-grids should receive funding appropriate to their significance. De-risking instruments, patient debt, and equity capital are essential to luring semi-commercial and commercial lenders. Secondly, a concerted effort is needed to empower communities through business training and asset finance. Relying solely on energy for lighting is insufficient to ensure the economic viability of mini-grids. Elevating local incomes through productive use training and micro-finance or implementing cross-subsidization of energy costs will be pivotal in making energy accessible to the most vulnerable segments of society. In conclusion, mini-grids hold the key to unlocking Africa’s energy potential and propelling the continent towards a sustainable future. This feat can be achieved by adopting a multi-pronged approach that encompasses policy reforms, strategic investments, and community empowerment. We can bridge the power access gap and usher in an era of inclusive and reliable electricity for all. The time to act is now, for a brighter, more electrified Africa awaits. November 20, 2023 0 comment 0 FacebookTwitterPinterestEmail
Power Punch Exploring the Gas-to-Power Value Chain by omiesam October 5, 2023 written by omiesam Natural gas has been heralded as one of the cheapest sources of energy. This information is desirable given Nigeria’s abundant natural gas reserves and the federal government’s Energy Transition Plan that seeks to leverage this commodity to achieve its net-zero carbon emissions by 2060. The enhanced utilisation of natural gas in the evolution of the Nigerian Electricity Supply Industry (‘NESI’) value chain serves as an opportunity for the federal government to: Upscale electricity generation and supply to meet the country’s domestic power needs. Increase its revenue from the reinjection of flared gas into the electricity value chain. Reduce greenhouse gas emissions (GHG). According to the Nigeria Gas Flare Tracker (GFT), in the first six months of 2023, the country flared 138.7 billion standard cubic feet (SCF), losing $485 million in unrealised revenue. The Nigerian Oil Spill Detection and Response Agency (NOSDRA) estimates the country lost $22.9 billion to gas flaring from 2011 to 2021, which is uneconomical. As indicated in the preceding paragraphs, commercialising gas flares yields benefits. For instance, its monetisation can shore up approximately $10 billion annually for the federal government, which can fund the country’s Energy Transition Plan’s $10 billion annual budget. On the other end of the spectrum, the gas-to-power value chain also faces several challenges, one being political misalignment. Gas-to-power value chain: the challenge The gas-to-power is complex due to its highly politicised upstream component in the value chain. The gas-to-power chain starts with the upstream players, gas exploration and production companies, and ends with the generation companies (gencos). In contrast, the NESI value chain starts with the generation companies, then the Transmission Company of Nigeria, distribution companies and the end users. This significant political involvement is due to the federal government’s pursuit to keep domestic gas prices low to protect public interests. However, this situation results in discord between the public and the private sector as private participants aim to maximise profit. An illustrative example is when the federal government cut gas prices from $2.50/MMBtu to $2.18/MMBtu in July 2021 to prevent higher electricity tariffs. This action forced generation companies to cut prices, which led gas producers to lower gas volumes supplied to the local market, thereby resulting in electricity supply shortfalls. Thus, misalignment inadvertently leads gas actors to default on their market obligations, exacerbating the nation’s energy insecurity. Industry experts explain that a compulsory obligation on gas producers by the government to sell a certain percentage of produced gas to legacy power plants at a controlled price, regardless of production and pass-through costs, disincentivises gas producers from complying. Looking Ahead The political, regulatory and commercial stakeholders must synergise to make the gas-to-power value chain work. A unified approach to regulating domestic gas supply in Nigeria is critical to advancing the gas-to-power value chain. Repeatedly, the gas and electricity regulatory regime has disintegrated because of stakeholder’s unwillingness to take cognisance of the affairs outside the formal politics in the National Assembly. Gas unions, such as the Nigerian Gas Association and Nigeria Union of Petroleum and Natural Gas workers, drive the trajectory of the crystallisation of the gas-to-power value chain. Thus, the extensive commercialisation of the gas-to-power value chain hinges on coordination across the value chain. Conclusion Commercialising gas flares can significantly close energy access gaps. However, establishing an electricity market out of the gas-to-power value chain requires political balancing. The gas-and-power industry regulatory regime is dimensional. It requires uniformity between the political, regulatory and commercial players to open up the gas market for competition and improve the overall sector performance of the gas-to-power value chain. October 5, 2023 0 comment 0 FacebookTwitterPinterestEmail
African Focus Reinvesting Fuel Subsidy Funds for Nigeria’s Energy Transition Plan by davidomata October 2, 2023 written by davidomata The discontinuation of fuel subsidies in Nigeria presents an opportunity to redirect significant financial resources towards the nation’s pressing energy transition goals. This policy paper outlines a comprehensive strategy for reinvesting the erstwhile subsidy funds into the Nigerian Energy Transition Plan. By examining successful case studies from other nations, this proposal offers concrete recommendations for maximizing the socio-economic benefits of this transition. Before the subsidy removal, Nigeria allocated an average of 400 billion naira monthly to fuel subsidies. Some funds can now be channelled towards the Nigerian Energy Transition Plan, which requires $17.7 billion annually to facilitate the transition to a more sustainable and diversified energy sector. Utilizing Subsidy Funds to Achieve Universal Energy Access, Net-zero Emissions, and Economic Growth Nigeria stands at a crucial juncture in its energy trajectory. The recent removal of fuel subsidies has unlocked a reservoir of financial resources that can be strategically deployed to shape a more sustainable and prosperous future. Reinvesting fuel subsidy funds for Nigeria’s energy transition plan promises to achieve three pivotal goals: universal energy access by 2030, net-zero emissions by 2060, and concurrently, driving industrialization, job creation, and economic growth. Universal Energy Access: Millions of Nigerians now lack reliable access to power, obstructing advancements in healthcare, education, and economic growth. Nigeria may increase access to energy by emphasizing investments in off-grid and mini-grid alternatives and enhancing the national grid’s infrastructure. This will change people’s lives and help companies and communities become self-sufficient and productive. Net-Zero Emissions: The urgency to combat climate change cannot be overstated. Committing to net-zero emissions by 2060 places Nigeria at the forefront of global efforts to curb environmental degradation. In this regard, reinvesting fuel subsidy funds for Nigeria’s energy transition plan can accelerate the transition to renewable energy sources, which produce negligible greenhouse gas emissions. Nigeria can substantially reduce its carbon footprint by incentivizing clean energy projects and establishing robust regulatory frameworks, safeguarding the environment for future generations. Industrialization, Job Creation, and Economic Growth: Industrialization is the bedrock of economic development in any country. Nigeria can unlock unprecedented economic potential by channelling subsidy resources towards fostering a conducive industry environment. Investments in renewable sectors and reliable and affordable power supply will stimulate manufacturing and production. This, in turn, translates into substantial job creation, particularly in local communities, providing livelihoods and driving economic prosperity. Key Recommendations Establish a Dedicated Energy Transition Fund: Establishing a dedicated Energy Transition Fund is a critical step in ensuring the effective allocation and management of resources for Nigeria’s ambitious energy transition goals. This fund would serve as a centralized financial vehicle designated for projects and initiatives related to renewable energy, energy efficiency, and sustainable technologies. By creating a dedicated fund, Nigeria can streamline investments, enhance transparency, and attract additional sources of financing. We may draw some lessons from Germany and France’s Energy transition initiatives. Germany’s Energiewende program, one of the most renowned energy transition initiatives globally, established a dedicated fund known as the “EEG Account” (Erneuerbare-Energien-Gesetz). This fund collects fees from electricity consumers and redistributes them to support renewable energy projects. It ensures a stable funding source for expanding renewable energy capacities and has played a pivotal role in Germany’s transition to a low-carbon energy system. France has set up the “Energy Transition for Green Growth Fund” (Fonds de transition énergétique pour la croissance verte) to support renewable energy, energy efficiency, and sustainable transportation projects. This fund provides grants, loans, and guarantees to projects that align with France’s energy transition objectives. Leverage Public-Private Partnerships (PPPs): Foster collaborations with private sector entities to co-finance and implement projects within the energy transition plan. Provide incentives such as tax breaks, concessions, and guarantees to attract private investment. Invest in Research and Development (R&D): Allocate a certain amount of funding to promoting R&D in renewable energy technology at Nigeria’s post-secondary institutions. This strategic investment will promote a localized culture of sustainable energy solutions by enabling academic and research groups to lead ground-breaking discoveries. Nigeria can develop a cadre of professionals capable of leading the country’s transition to renewable energy sources by investing resources in higher education institutions, placing Nigeria at the forefront of the world’s green energy revolution. This strategy creates a solid basis for long-term energy innovation and independence and improving technological capability. Prioritise Capacity Building and Workforce Development: Select bright young people from each Nigerian state and the Federal Capital Territory (FCT) to get specialized training in renewable energy technologies as part of a focused strategy to prioritize capacity building and workforce development. Resources will be devoted to on-the-job skill development, organized academic programmes, and vocational training under this programme. Nigeria will create a skilled workforce that embraces the idea of a sustainable energy future by investing in the development of this diverse cohort, guaranteeing fair representation and knowledge across regions. This strategy encourages national cohesion and regional empowerment to advance the energy transformation agenda and address the urgent demand for specialized skills. Monitor Progress and Adapt Strategies: Implement a robust monitoring and evaluation framework to track the impact of investments. Adjust strategies based on performance indicators, ensuring that resources are allocated efficiently. Conclusion Reinvesting fuel subsidy funds for Nigeria’s Energy Transition Plan is crucial to resilient and sustainable energy growth. By adopting lessons from successful overseas case studies, Nigeria may hasten the transition to a greener, more financially viable energy future. The policy paper’s suggestions offer a tactical road map for achieving these objectives. October 2, 2023 0 comment 0 FacebookTwitterPinterestEmail
Connecting The Dots Grid Decentralization: A Pathway to Maximize RE Potential in Nigeria. by thenextiergroup September 26, 2023 written by thenextiergroup In this episode of Connecting the Dots, our guest is Dr. Damola Omole, Director of Utility Innovation, GEAPP. He joins Emeka Okpukpara to discuss grid decentralization as a pathway to unlock renewable energy potential in Nigeria. This episode explains how a decentralized grid can promote efficiency in the Nigerian power sector and how this approach can pave the way to explore alternative energy sources. This conversation also highlights how GEAPP is using battery technology to address the power supply challenges across Africa and Nigeria. September 26, 2023 0 comment 0 FacebookTwitterPinterestEmail
Power Punch The Role of States in Electricity Generation and Energy Transition by davidomata September 21, 2023 written by davidomata The most recent constitutional amendment, specifically the 1999 Constitution of the Federal Republic of Nigeria (Fifth Alteration) Bill No. 33, 2022 (on the National Grid System – Part I & II, Second Schedule), received unanimous approval from both Chambers of the National Assembly on March 1, 2022. This amendment grants individual states the authority to generate, transmit, and distribute electricity within areas already integrated into the national grid. President Buhari formalized this amendment by affixing his signature on March 17, 2023. This constitutional amendment presents a significant opportunity to enhance the implementation of the national energy transition plan. It provides a means to enhance energy accessibility and leverage the diverse resources available across the states to optimize Nigeria’s energy mix composition. Domestication of the National Energy Transition PlanWhile Nigeria has an established national energy transition plan, it is imperative for individual states to seamlessly integrate and domesticate this plan within their medium and long-term policy frameworks. Each state boasts a distinctive energy landscape with varying renewable energy resources, infrastructural capabilities, and energy consumption patterns. Through a judicious alignment of the national plan with their specific circumstances, states can strategically optimize their transition endeavours and leverage their available resources through several avenues, such as: • Harnessing Abundant Renewable ResourcesNigeria has many renewable energy resources, including solar, wind, hydro, and biomass. States must conduct thorough assessments to identify and capitalize on their indigenous resources. For instance, states in the northern region can tap into the abundant solar potential. Those in the coastal areas can also explore offshore wind and marine energy options. By strategically deploying renewable energy technologies, states can drastically reduce their reliance on fossil fuels and decrease greenhouse gas emissions while electrifying their communities and improving access. • Strengthening Grid InfrastructureA robust and reliable grid infrastructure is the backbone of any successful energy transition. States must invest in upgrading and expanding their transmission and distribution networks to accommodate the increased integration of renewable energy sources. Smart grid technologies, energy storage solutions, and microgrid systems can enhance grid resilience, ensuring a stable and consistent energy supply. • Promoting Energy Efficiency MeasuresImproving energy efficiency is a cornerstone of any sustainable energy strategy. States can implement policies and initiatives to reduce energy wastage in various sectors, including industrial, residential, and commercial. These actions may involve incentivizing energy-efficient technologies, implementing building codes, and encouraging adoption of energy-saving practices. • Encouraging Private Sector ParticipationStates should actively engage with the private sector to attract investments and expertise in renewable energy projects. Public-private partnerships can accelerate the deployment of renewable energy technologies, creating a conducive environment for businesses to thrive while contributing to the state’s energy transition goals. • Fostering Research and InnovationInvesting in research and developing clean energy technologies is paramount to advancing the energy transition. States can establish research centres, collaborate with academic institutions, and incentivize innovation hubs to drive technological advancements in energy generation and renewable energy technologies. • Prioritising Education and AwarenessEducating the public about the benefits of renewable energy and energy efficiency is crucial for garnering support and participation. States can implement awareness campaigns, workshops, and educational programs to empower communities with the knowledge and skills to embrace sustainable energy practices. ConclusionBy capitalizing on this unique opportunity, states have the potential to steer the nation towards a sustainable and prosperous energy future. States can enhance energy generation and efficiency through thorough strategic planning, harnessing local resources, and cultivating innovation. This collaborative effort promises to construct a cleaner and more resilient energy landscape, ensuring a brighter future for future generations. September 21, 2023 0 comment 0 FacebookTwitterPinterestEmail
Power Punch The Electricity Act and Private Sector Participation by omiesam September 15, 2023 written by omiesam The Electricity Act (“the Act”) enshrines the liberalisation of the electricity market to allow private sector participation. Section 1 of the Act provides a framework to guide the market’s transition to a purely contract-based competitive electricity market from the previous non-contract-based structure. This liberalisation was done to revolutionise the market’s monopolistic characteristic and disentangle the roadblocks that hinder the influx of private capital into the Nigerian Electricity Supply Chain (NESI). Private sector participation? the benefits Deregulating the market has been heralded by industry experts as the key to revamping the NESI. Private participation in the power industry has recorded numerous benefits in the Global South, including competition, innovation in electricity services and overall sector growth. An illustrative example is China. In China, its state-owned energy producer, the State Power Corporation (SPC) – before it was unbundled into several companies, controlled over seventy (70) per cent of the total generation capacity. However, after deregulating the country’s electricity sector and allowing private sector participation, SPC’s control was reduced to forty (40) per cent. This change led to increased independent power producers (IPPs), which enhanced affordable connectivity and power generation. De-monopolising electricity markets increases competition, which may drive down electricity prices. On the other hand, this begs the question of the challenges that may accompany liberalising the market and how prepared the NESI is to handle them. These potential challenges are discussed below. Private sector participation? “the unknown” Electricity generation cost is volatile in liberalised markets. This volatility is because the market forces of demand and supply determine the cost of electricity and not regulators, which is alarming for a few reasons. One, unlike the consensus that a competitive market reduces electricity prices, the United States electric industry evidenced otherwise. In 2007, the Ameren utility in the U.S. increased its electricity bills by fifty-five per cent for customers, compared to the twenty-six per cent increase noted by Commonwealth Edison customers. Thus, although studies show a link between implementing deregulation policies and electricity price reduction, most studies have shown that such reduction is short-term, noting a reversal to increased prices in the long term. Therefore, deregulation may increase utility prices for you and me, which is worrisome as production costs and other economic factors in Nigeria already diminish the average consumers’ purchasing power. Secondly, the NESI has been subject to a legacy of compounded issues, making the willingness of private participants to invest obscure. The private sector is profit-driven, and the readiness of state actors to tackle NESI’s challenges, such as inadequate infrastructure and regulatory uncertainties, is crucial to ensuring full-scale privatisation for improved reliable electricity. Thus, state governments should consider existing NERC regulations on franchising and third-party investments to guide their market designs in establishing their regulatory markets for easier integration of new market entrants. Leveraging existing regulations would prevent legal hitches and provide a clear pathway for accessing existing infrastructure, thereby enhancing market coordination and preventing abuse of market power by previous monopolistic forces. Way forward The primary purpose of deregulating the power sector is to improve market liquidity. To achieve this improvement, state regulators must resolve institutional issues that may hinder the transition to a competitive electricity market. A foreseeable challenge is a dip in profits of the companies with monopolistic powers as a result of de-monopolising the NESI, which was the case in Argentina during the global economic crisis. This profit dip may lead to friction between existing and prospective private sector entrants. Hence, deregulating the market necessitates structural transformation and synchronisation between private and state actors, with the government playing a more significant role in promoting coordination. The government must develop strategies to compensate current industry players for profitable losses while levelling the playing field for new entrants. Agreeably, liberalising the NESI promotes holistic sector growth. However, state actors must eliminate entry barriers for better implementation of their respective objectives. September 15, 2023 0 comment 0 FacebookTwitterPinterestEmail
Power Punch Is Nigeria Returning to Coal Mining? by omiesam July 20, 2023 written by omiesam Nigeria symbolized its commitment to limiting global warming by launching its thirty-seven-year Energy Transition Plan (ETP). The World Bank estimates that about ninety-one million Nigerians still don’t have access to electricity, indicating Nigeria’s energy poverty. As a result, the President announced a return to coal mining to close energy access gaps; however, this response is insufficient for climate change mitigation. The Bureau of Public Enterprises (BPE) announced the investor call for public bids on the following five blocks in Enugu State: Amasiodo Coal Block; Onyeama Coal Block; Okpara Coal Block; Inyi Coal Block; and AgwasiAzagba Coal Block. Why is Nigeria Returning to Coal Mining? One may interpret Nigeria’s return to coal mining as a sign of a liquidity crisis. The World Bank Poverty Outlook for Nigeria revealed that only 3.7% of the nation’s revenue was unused to service debts. As of June 2023, Nigeria’s inflation records at 22.2%, outpacing wage growth. With these economic indicators, the government does not have the money to fund renewable energy projects to improve electricity access. However, operationalizing coal mining activities is counterproductive to attracting prospective investments to support the ETP’s $410 billion objectives. In the World Energy Transitions Outlook 2023 June editorial, the International Renewable Energy Agency (IRENA) analysis indicated a continuous plummet in investments in Nigeria and other African countries. The IRENA further predicts access to financing to become more constrained due to the unfavourable risk-return profiles of African countries. Nigeria should dredge people-centred approaches such as Just Energy Transition Partnerships (JETPs) to achieve near-zero emissions and bridge the energy access gap. People-Centred Approaches: why JETPs? Just Energy Transition Partnerships is a financing mechanism that combines climate mitigation with energy access. It incorporates blended financing that addresses socioeconomic consequences, enabling Nigeria to achieve low-cost energy access, economic empowerment and industry competitiveness. The objective of a JETP is to allow wealthier nations to fund coal-dependent countries’ transition towards clean energy according to the receiving country’s transition plan. Focusing on increasing house income reduces the dependence on fossil fuels such as charcoal and firewood is preferable to mainstreaming charcoal use to increase energy access. The elasticity between household income and fossil fuels used is apparent. International organizations such as Sustainable Energy For All (SE4All) have endorsed the adoption of JETPs as a technological solution to clean energy transition. On the other hand, JETPs have not been wholly welcomed. Industry experts have objected to its full-scale adoption, concluding JETPs to be narrow. Critics opine that transition designs must be heterogenetic to reflect the diversity of countries’ energy demands, oil and gas dependence and its contribution to GDP, energy level and type of energy needs. Also, the minimal footprint of Africa’s emissions has been emphasized as justification for new fossil fuel energy investments. However, regard must be given to Africa’s minimal past emissions because of its lack of industrialization. The global North has been the most significant emitter because of its heavy fossil-fueled industrial activities. For example, China and the U.S. China is rated the largest emitter of coal-generated carbon, with 10,668 million metric tons emitted in 2020; whilst the U.S. is the primary producer of crude oil. So, if African industries rely on coal and gas for energy generation, Africa’s footprint will inadvertently increase, which is ecologically harmful. Foreign investors have signalled intentions to withdraw support for fossil-reliant projects. While seeking $10 billion annually to fund its ETP, mainstreaming coal use is an investor deterrent and an impediment. Thus, it may leave Nigeria with stranded assets. July 20, 2023 0 comment 0 FacebookTwitterPinterestEmail
Power Punch Impacts of the New Amendment on the NESI. by doose April 17, 2023 written by doose In 2023, achieving stable electricity still seems farfetched for Nigeria. According to the World Bank, Nigeria has the world’s most significant energy access deficit. In a bid to improve energy access in the country, the power sector has seen many frameworks, policies, investments, an influx of projects and recently, a new amendment. This article will explore the recent amendment and its impact on the Nigerian Electricity Supply Industry (NESI). On the 17th of March 2023, President Muhammadu Buhari, GCFR, signed a new bill into law that allows “A House of Assembly may make laws for the State with respect to the generation, transmission and distribution of electricity to areas covered by a national grid system within that State.” This new law empowers states to make laws and create frameworks specific to their capabilities and needs in relation to served and underserved areas, unlike in the past, when they were restricted to off-grid or unserved areas. Given the restriction of the state governments in this regard, this amendment is a step in the right direction. One of the significant impacts of this amendment on the NESI is the uprising of state-sponsored financing structures. States can now form their state electricity markets, including laws, policies, and financing mechanisms, which opens up an opportunity for the private sector to get involved and contribute their investments. This development can enhance energy access and increase competition in the industry, resulting in job creation opportunities as states begin to source experienced and capable individuals to manage state power investments. Decentralizing electricity markets allows for much-needed accountability, and this amendment can bring about improved efficiency and transparency. Also, state governments can now be held responsible for supply lapses, which could engender much-needed improvements in the NESI. Another potential impact of this amendment is a tariff hike. States can now effectively engender market-driven tariffs, which permit periodic reviews that sufficiently accommodate and adjust for inflation and exchange rate fluctuation. This development is necessary to address the bane of businesses in Nigeria. Furthermore, this amendment could decrease pressure on the national grid, as states can enact laws on generating, transmitting, and distributing electricity within their territory. Authorization to establish regional or isolated grids that run through their states is imminent, which would reduce pressure and overreliance on the national grid, resulting in a decline in system collapse. This development promotes grid flexibility and a reduction in grid expansion costs. Despite this amendment’s opportunities, there is a risk of overregulation, intrusive compliance requirements, and increased costs due to numerous toll points within the sector. To hedge against these risks, stakeholders like the Nigeria Electricity Regulatory Commission (NERC), National Assembly, Federal Ministry of Power, and all states must chart a path as to how both the state and federal electricity markets will co-exist. Some states have taken the lead in implementing this amendment, with Lagos State and Akwa Ibom State at the forefront. Lagos State had earlier enacted the Lagos State Electric Power Sector Reform Law 2018 and issued the Lagos State Electricity Policy 2021, recording some successes. Considering the array of positive impacts this amendment will have on the NESI, it is evident that this is a much-needed leap and has what it takes to move the electricity market in Nigeria forward. However, critical actors in the power sector must create clear-cut frameworks and networks to facilitate this process and improve energy access. The NESI must take advantage of this amendment and work towards providing reliable and affordable energy to Nigerians. April 17, 2023 0 comment 0 FacebookTwitterPinterestEmail
