A vision to power NigeriaJuly 26, 2021
Nigerian Minister of Power H.E. Engr. Sale Mamman talks to The Energy Year about the major achievements and setbacks in Nigeria’s power sector liberalisation, the strategy behind the key current government electrification initiatives and steps being taken to maximise the country’s gas wealth via gas-to-power.
What have been the major achievements and setbacks in Nigeria’s power sector liberalisation?
Liberalisation has brought technical and financial competence to the sector as it has opened the industry to private participation. In the Nigerian context, this has enabled us to optimise our portfolio by leveraging private capital whilst enabling us to better utilise our funds in developing the off-grid space and certain aspects of the value chain that still mandate government participation.
Further to this, liberalisation has done away with the vertically integrated nature of the industry that has held the sector back from development and rapid progress, especially given the global energy transition we’re witnessing. Such vertical structures then are antiquated and prove ill-fitting for the long-term sustainability of the industry, which serves as the impetus for the liberalisation efforts. Indeed, we’ve recorded interest from independent power producers (IPPs) involving a variety of technologies looking to connect to the grid, from traditional gas resources to renewable sources such as solar.
Of course, liberalisation has some challenges. The introduction of more players in the sector – including a regulator, the bulk trader, market operator, system operator, GenCos and DisCos [generation companies and distribution companies] – means that the operating model is far more complex and challenging to effectively and efficiently implement as compared with the previous, vertically integrated model, where a single entity was in charge of service delivery.
This has led to co-ordination issues within the sector with some unwanted consequences, the most obvious of which are the liquidity challenges and stranded assets we have, further adding to the fiscal burden of the sector.
How would you assess the current dynamics between GenCos and DisCos?
While they have different business models, GenCos and DisCos have a similar goal, which is to ensure sufficiency of energy supply to end users to power the needs and growth of the nation. The GenCos are obviously far upstream in the value chain, only preceded by the gas supplier, whilst the DisCos are the last mile of the entire electricity supply system and directly deal with customers.
As one might imagine, both of these entities have different sets of challenges. For the GenCos having sufficient gas supply and an evacuation corridor that would enable utilisation of capacity is what matters, whilst in the case of DisCos, it is ensuring efficiency in the supply of electricity to users as well as market collections in the reverse order to supply further upstream.
Market collections on the distribution end have not been the best, which has proven to be a source of great concern for other value chain participants. However, in that same vein, the structural misalignment existing within the value chain has made it difficult for the distribution end to effectively offtake and distribute capacity. Mindful of this conundrum the FG [federal government] undertook to correct this challenge with an expansive investment in the expansion and rehabilitation of the bulk power system in hopes of addressing the longstanding issues once and for all.
What roadmap is the Presidential Power Initiative (PPI) following in order to increase access to reliable and affordable electricity?
The roadmap of the PPI is to achieve complete expansion of the bulk power system to 25 GW operational capacity via a three phased approach: phase 1 – 7,000 MW; phase 2 – 11,000 MW; and phase 3 – 25,000 MW. The government is very serious about the Siemens electrification, as of this moment. Approval has been obtained for the pre-engineering of phase 1, which entails mapping out all the preliminary work required to implement phase 1 and achieve 7 GW of operational capacity. This will significantly reduce the risk of stranded assets on the grid and save the country the loss of NGN 1 billion [USD 2.43 million] a day due to constraints.
How will the Transmission, Rehabilitation and Expansion Programme (TREP) upgrade the nation’s transmission infrastructure to stabilise the grid and enhance performance?
Similar to the PPI, the TREP is a TCN [Transmission Company of Nigeria] specific initiative designed to expand and improve the transmission system. The difference with the PPI is that it focuses on the assets of the TCN and the transmission master plan, which is originally within the framework of the Nation’s Transmission Expansion Plan.
Executing these projects hand in hand with the PPI would enable us to speed up the timeframe and leverage complementarities to deliver positive outcomes earlier than what would have been possible if we solely focused on the one initiative. A key thing here is to improve the interface with the distribution companies such that more of the power can be transferred to the distribution system and on to customers, further reducing the burden of undelivered capacity in the system. This is to be done hand in hand with the initiative to promote more of the willing buyer, willing seller drive.
What steps are being taken to maximise the country’s gas wealth via gas-to-power?
We are witnessing many efforts by the FG in pursuit of gas-based industrialisation. At the moment, the AKK pipeline and power plant projects are a clear indication of the nation’s interest in optimising its gas portfolio across the country.
Via GPIC [Gas and Power Investment Company], the NNPC is also forward integrating downstream by partnering with experienced firms to build thermal gas plants at key designated locations – Abuja, Kaduna and Kano – making a total of 3,600 MW of potential capacity that would come on stream at the end of the project. Couple that with the interest from IPPs in developing gas-fired plants, currently at various stages of development, and a clear picture emerges of the FG’s interest in exploiting the gas-to-power value chain.
How symbolic is the Mambilla Hydroelectric Power Station?
The Mambilla hydropower project is dear to this administration and to Nigeria, evidenced by the relentless effort of this administration in pursuit of early delivery of the project. From the perspective of the bulk power system, the project is very significant because it is situated in a location that is very advantageous to the grid, as the northeastern region is the most underdeveloped of any region in the country. This means the project would contribute to lessening constraints on the grid and improving flexibility and supply as well, not to mention the ancillary benefits of local content and what have you in the region and nation at large.
Furthermore, the project not only fits the ministerial KPIs and targets but is key to achieving the country’s vision 30:30:30, which is to achieve 32 GW of new capacity by 2030 with 30% renewable contribution.
How is the government supporting the deployment of mini-grid and off-grid solutions in remote locations?
There are various interventions domiciled in the Rural Electrification Agency (REA) dedicated to the development of mini-grids across the country. These can be seen in the Rural Electrification Fund, the Nigeria Electrification Project (NEP) and many more.
On the part of the ministry, we have partnered with SE4all to further de-risk the space by providing ground truth data to help prospective developers to make better decisions in terms of project development and execution – the mini-grid monitor and central data management system both speak to this.
In what ways is the ministry betting on renewable energy as a clean alternative that will expand the country’s power sector moving forward?
Renewable energy is a powerful tool in modern electricity systems as it provides a flexible means to achieve electrification both on-grid and off-grid. The ministry is guided by the vision 30:30:30 to achieve 32 GW of electricity by 2030, with a 30% contribution from renewables. This is why we are heavily focused on delivering the hydro projects: Zungeru, Mambilla, Dadin Kowa and Kashimbila, alongside the Katsina wind farm project.
Beyond this, we are looking at resuscitating the 14 frontrunner solar IPPs that would add a further 1,050 MW of clean solar power to the grid and more importantly, demonstrate market readiness to accept renewables in the bulk power system.
Renewables, specifically solar power systems, provide a veritable means to increase energy access due to the low-cost nature of the setup, as well as their flexibility as compared to grid extension. We have seen in the last decade more innovation in this space than any other in the power sector as new innovative technologies and business models are overcoming traditional obstacles such as finance and associated risks to improve electrification in the underserved and unserved regions around the world.
In recognition of this, we have embarked on the Solar Power Naija programme, with the aim to connect 5 million homes in the underserved regions of the country. This will allow for 25 million individuals to have energy access in places where grid extension might not be viable.