The demand for electricity has continued to increase among Nigerians even as operators tackle the challenges hindering the growth of the nation’s power sector over the years, DARE OLAWIN reports
With Nigeria’s rising population, electricity demand continues to be on the rise, mounting pressure on the government and private operators whose duty it is to ramp up power generation and create adequate energy access for the millions of Nigerians living without electricity or limited power supply.
‘Band A’ became a buzzword in Nigeria last month when electricity customers receiving at least 20 hours of supply daily saw a jump in tariff – a development that highlighted the huge and growing unmet demand as well as investment opportunities in the power sector.
Less than 15 per cent of the total customers in the country are under this category, according to the regulator, while the rest – those without reliable supply – still have their tariffs being subsidised by the government.
The demand for electricity from the grid has continued to grow on the back of rising urbanisation and a surge in the cost of petrol and diesel used by many households and businesses to power generators.
Last year, the Enugu Electricity Distribution Company signed a Memorandum of Understanding with the Anambra State government to ensure 24-hour power supply daily in the state.
Several distribution companies such as the Eko Electricity Distribution Company have seen their revenue collection efficiency rise to over 90 percent.
Cost-reflective tariffs are crucial to encourage new investments across the value chain that will enable more customers to enjoy a constant power supply.
With the rising demand for electricity and recent measures by the government to boost private investments, the sector looks set to witness substantial growth in the coming years.
The country has seen a rapid increase in its population over the years, growing from less than 50 million in 1960 to an estimated 216 million in 2022, and is projected by the United Nations to reach 400 million by 2050.
Its share of the urban population jumped from 15.4 per cent in 1960 to 55.6 per cent in 2022 and is expected to hit 264 million in 2050.
However, a large chunk of the population lacks access to electricity from the national grid, with total generation usually hovering around 4,000 megawatts and 4,500MW.
The Nigeria Electricity System Operator put the country’s grid generation installed capacity and national peak demand forecast at 13,014.14MW and 19,798MW as of Wednesday.
The average available generation capacity of the 27 grid-connected power plants increased to 4,922.26MW in the fourth quarter of last year from 4,211.44MW in Q3, according to the Nigerian Electricity Regulatory Commission.
It has over the years developed industry codes and standards, market rules and regulations in a bid to create an attractive and stable electricity market in the country.
An energy expert and partner at Bloomfield LP, Mr Ayodele Oni, said the sector had witnessed significant achievements such as the unbundling of the power value chain, the creation of the electricity market, the involvement of private sector investors, the establishment of NERC and other agencies as well as the creation of opportunities including off-grid generation and eligible customers regime.
He said the Electricity Act of 2023 had built upon the innovations introduced under the old regime, adding that it would lead to increased participation of the private sector; promotion, development, and utilisation of renewable energy sources to promote energy access; and less bureaucratic process for licensing; promotion of a cost-reflective tariff system; and utilisation of a meter-based electricity supply.
“Notwithstanding the challenges experienced in the Nigerian power sector, it is envisaged that the implementation of the Electricity Act and other commendable policies including a commitment from both government (at both federal and state levels) and private sector players will not only yield benefits for the sector but will further enhance the growth of the Nigerian economy,” Oni said.
Private sector players
The power sector was privatised in 2013, with the government handing over the generation and distribution assets to the core investors who bought them and retaining ownership of the transmission company.
In the last 10 years, private investors have made significant investments in their power plants and distribution infrastructure but the sector is still grappling with many challenges including gas supply shortages, limited distribution networks, limited transmission line capacity and a huge metering gap.
The entry of the private investors has led to a reduction in the average aggregate technical commercial and collection losses; an increase in metering, distribution substations and transformers; as well as the establishment of customer centres across the country.
For instance, Eko Electricity Distribution Company, one of the 11 distribution companies, inaugurated in March a 2 X 20 MVA injection substation to boost power supply to customers within the Surulere Lagos axis of its franchise area. Its ongoing projects include the construction of a new Festac III 33kV feeder, 33/11kV power transformer at the Lekki Injection Substation, 33kV aluminium underground cable with Outdoor Bay, and the upgrade of Agungi Injection Substation to 2 X 15MVA.
Two generation companies, Geregu Power and Transcorp Power, are listed on the Nigerian Exchange Limited with significant investments made to ramp up their generation capacity.
The number of registered customers in the sector stood at 13.16 million as of December last year, up from 7.48 million in the third quarter of 2017, according to data from NERC. More than 5.8 million customers had meters compared to 3.45 million in Q3 2017.
Only EKEDC, Ikeja Electric and Abuja Electricity Distribution Company had provided meters for more than half of their customers as of the end of 2023.
“The most proven method for reducing collection losses and improving revenue recovery is the installation of meters (especially prepaid meters for non-maximum demand customers),” the regulator said in its latest quarterly report.
“Therefore, DisCos are expected to utilise one or more metering frameworks provided for in the NERC MAP and NMMP metering regulation (2021) to improve end-use customer metering in their franchise area,” it added.
It said this would reduce commercial and collection losses and ensure the flow of funds to upstream market participants in the sector.
At a recent customer engagement forum, EKEDC committed to bridging the metering gap entirely by 2028 with a plan of metering 120,000 customers yearly within the next five years.
Operators deploy solutions
Since the privatisation of the sector, industry players have leveraged technological advancements, such as smart metering and grid modernisation, to improve operational efficiency and reduce losses.
In 2020, EKEDC launched the Supervisory Control and Data Acquisition-Distribution Management System to control its injection substations and monitor its distribution transformers. It gives the company access in real time to information regarding the current state of its technological assets and the areas that require attention.
The DisCo, which receives between 12 and 15 per cent of the available power from the grid, has partnerships with independent power producers that enable it to augment the allocation from the transmission company. It partnered with Elektron Energy in 2023 to deliver a 30MW gas-fired embedded power generation project in Victoria Island, Lagos. It said in March that the bilateral agreement with Niger Delta Power Holding Company for the supply of 100MW that was put on hold due to liquidity constraints would be resuscitated.
EKEDC has instituted various customer-oriented initiatives designed to streamline processes and enhance user experience.
These include the implementation of digital platforms for bill payment and query resolution, the establishment of dedicated customer service centres, and the deployment of rapid response teams to address service disruptions promptly.
Oni said the privatisation of the sector was necessary to further promote private sector involvement, efficiency and promotion of foreign and indigenous investment.
Although the privatisation has resulted in both its high and low areas, the power sector is one area which from regulatory and industry perspectives has continued to evolve, even though at a pace slower than expected, according to him.
“The Nigerian power sector reflects a systematic building of an institution, the development of which has been fraught with many challenges accumulating from several factors such as the poor implementation of quality policies, corruption, and political involvement among others,” he said.
Oni said the sector had proved to be resilient over the years., noting, “The historical background (pre- and post-Nigerian independence) reflects efforts that have been introduced to develop the industry. While some of these efforts have yielded significant success, others have further deteriorated the sector. The privatisation of the Nigerian power sector was one of the efforts introduced to dissolve the bureaucratic monopoly of the industry.”
The Chairman, Board of Directors of EKEDC, Dr Dere Otubu, recently highlighted the progress made in reforming the electricity industry and the need for increased investment to meet the growing energy demand in the country.
“Nigeria has enormous potential in the power sector that can be unlocked with sufficient capital injection from investors seeking long-term returns,” Otubu, who is the vice president of the Nigeria-India Business Council, said at the council’s event in January.
“The power sector is the backbone of any thriving economy, and as we witness the dynamic growth in Nigeria, it is imperative to inject more resources into power to bring about the desired growth. This will not only address the current energy deficit but also lay the foundation for sustainable economic development,” he added.
SOURCE: PUNCH
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