How FG can tackle power generation challenges – Ogunleye
In this interview, Managing Director of PowerCap Plc, Engineer Abiodun Ogunleye, speaks on some issues in the power sector and how the government can tackle them.
Three years after privatization of power, total market shortfall of electricity in Nigeria is over N400 billion. What is the problem here?
The challenge that resulted in the shortfall is multifaceted but all avoidable. The initial concept and design of the market provided safeguards to ensure this does not happened. It's happening because of the unsecured nature of engagement between market participants. In the course of implementation of the market reforms, the regulators could not enforce a basic requirement of a market driven price which is full recovery.
Also, the initial MYTO template was distorted for political reasons as government could not justify allowing further increases in electricity price. The implemented model had also given too much leverage to the DisCos in the management of sector liquidity without any window for recourse, as would have been expected.
Do you think it is proper for government to fund the shortfall by raising N309 billion as envisaged?
On the face of it we can argue on the justification and exact figure of the liabilities. But government owns and controls the institutions that needed to make the decisions required for the gaps not to happen as such she has to address the liabilities. But the real challenge is what do we do for that not to repeat itself.
What alternative steps should the government take to erase the shortfall?
Going forward, a new cost reflective MYTO template and security pledges from all market operators must be in place to ensure all behave in conformity with market rules and as such we are able to secure better quality supply and market discipline thereafter.
The nation's power generation has again dropped significantly in the last few days causing black out in most part of the country. How best should the power generation gap be addressed by the government?
First its dry season and we may not get the best from our hydro resources and secondly we are challenged in gas situations here and there and a few plants are also been maintained. Some of these challenges are because we still have a low generation base.
The gap can be addressed by ensuring we implement a simple strategic plan to add 5,000 megawatts in cycles of two years at national and regional levels. At the national level, we need to take merchant plants to places where gas is been flared and strengthen the grid for evacuation to load centres. At the regional level, we should make a strategic decision to locate 1000 megawatts per region or zone using localised resources in each region and or state, working with state institutions.
The base load requirement of the cosmopolitan city of Lagos can be addressed both in the short run with a merchant power supply vessel and in the long term probably from a dedicated nuclear facility. The city must match its competitors by been able to run an efficient energy base infrastructures that make life better and more appropriate for dwellers. An immediate step might however be to ensure properly licensed embedded assets complement the grid in prime commercial and residential locations on a sustainable basis.
Lastly, given the high cost of grid extension, sustainable alternative solutions must be deployed to locations outside the reach of the grid.
What's your take on the recent directive by the Minister of Power that power distribution companies should raise the bar of their services or quit the country.
It was very appropriate and he may have to direct NERC to publish a service level template.
Would you subscribe to the opinion that the federal government cancels the privatization of DisCos and generation companies based on poor performance in the last few years?
There is a contract in place guiding the transactions. Let's look at the terms and diligently work through same, but we should be careful not to lose value to them.
Why are DisCos facing liquidity challenges and how can it be tackled?
It is simply because of their inability to collect enough money to cover their expenses. Aggressive collection and retailing activities along with a cost reflective tariff and better level of supply from the network would help greatly in tackling the liquidity squeeze.
What are your expectations of the power sector this year?
I expect delivery of more capacity and stability around 10000 megawatts. I also expect resolution of the short term challenges and longer duration of supply across the nation. In all it should be a better year for the sector.