Eagerly awaiting the physical handover of the privatised Power Holding Company of Nigeria’s (PHCN) successor companies by the Federal Government, buyers of the distribution companies (Discos) are considering tapping into off-grid electricity after takeover to provide better services to their customers.
This is an indication of their realisation of the enormity of the challenges ahead in bringing about steady power supply in the near term, which, according to analysts, should not be expected until 2017.
“We have the availability of additional power from industrial producers. So, we can look to off-grid power to inject directly into certain neighbourhoods and then better serve customers in those neighbourhoods,” Daniel Mueller, transaction advisor of West Power and Gas Limited, the buyer of Eko Electricity Distribution Company, told BusinessDay on the sidelines of the Power Investors Summit Nigeria held recently.
“And this will be part of what we will do because we have to show customers that there is a real difference being made. We will just ask that customers bear with us as any sort of new generation project will take some months to implement, but we will strive to communicate with our customers the programme that we have in place,” he added.
Off-grid power is electricity available for supply to specific consumers through a dedicated distribution network but not connected to the national grid.
Last week, BusinessDay reported that investors in the power sector may have up to four years to sort out challenges in the Nigerian electricity market before consumers start benefiting from the transfer of ownership of the PHCN assets to private sector management, according to industry analysts.
Nigerian companies’ efforts to meet their respective power demand in the face of worsening supply have resulted in a whopping generation of about 1,457 megawatts (MW) off-grid electricity, with some of them having spare capacity. Discos are eyeing this as a stopgap measure to improve power supply.
“Technically, it is doable. If the intention is to only distribute the electricity, I believe NERC would be willing to give them some concession (note that buying and reselling would require a trading licence).”
Some of the companies who have captive power plants are not using all the capacity they have and are, indeed, willing to sell the spare capacity they have,” said Ayodele Oni, an energy law and policy expert and senior associate in top law firm, Banwo & Ighodalo.
Oni is also of the view that for those companies to sell the spare capacity beyond the captive generation permits they may have, they would also be required to obtain generation licences.
Diran Fawibe, chairman and chief executive of International Energy Services Limited, said that “if this is an interim measure pending the time that they will be able to sort out the masterplan they have for the power sector, then it should be encouraged. There is nothing fundamentally wrong with off-grid power. For over 20 years, I have been advocating distributed power system.”
Sam Amadi, chairman of the Nigerian Electricity Regulatory Commission (NERC) said the new investors can buy off-grid power as long as they follow the process, adding that they are not bound to the one from the national grid.
“Discos are always free to contract power from embedded generators if they so choose as long as they follow the process and regulations,” he said. “They can buy new powers, but they have to follow the rules. They have to follow the licence terms. They have to procure it based on competitive process. They have to buy it at the price we have set. It doesn’t matter where they buy. They can buy from anybody. The person just has to get a licence to supply to them.”
Some of the companies that have invested in captive power plants include Lafarge WAPCO (90MW); Dangote Cement (258MW) at Obajana and Ibeshe; Western Metal Product Company Limited (WEMPCO) 52MW; Nigerian Breweries plc (16.8MW); Guinness Nigeria’s Ogba brewery (9.3MW); and Nestle Nigeria plc (3MW).
Others are United Cement Company (47mw); BUA Sugar Refinery (20MW); BUA Cement (45MW); Notore Fertiliser (50MW); Flour Mills (60MW); Unilever (6MW); Academy Press (1.2MW); Cadbury (7.3MW); IMIL (14MW); Dangote Sugar (15MW); Golden Sugar (12MW); Island Power (114MW); Oando Akute (12.1MW); NLNG (400MW); and Indorama Eleme Petrochemical/Indorama Fertiliser plant, about (225MW).
Last year, NERC issued regulations on embedded generation and independent electricity distribution, as part of efforts to improve power generation in the country.
Embedded generation is the generation of electricity that is directly connected to and evacuated through a distribution system which is connected to a transmission network operated by a System Operations Licensee.
Nigeria is targeting 40,000 MW generating capacity by 2020, but power generation capacity currently hovers between 2,500MW and 3,500MW for a population of over 170 million people.
Information from Business Day was used in this report.