Power firms lose N1.6tr in 7 years over unutilised electricity

Power Generation Companies (GenCos) lost at least N1.632 trillion between 2015 and 2021 over the lack of full evacuation of generated electricity on the national grid causing stranded power of 27,204 megawatts (MW).

According to data obtained from the Association of Power Generation Companies (APGC), the about 25 active GenCos had over 15,000 megawatts (MW) of stranded generation capacity at the end of 2021.

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Breakdown of the loss figure shows that the GenCos had 63,339.02MW of available power generation within the seven years, just 32,778.98MW of power was generated and evacuated through the Transmission Company of Nigeria (TCN) network to the Distribution Companies (DisCos) network for supply to consumers.

A balance of 27,204.5MW which is about 30 percent of its available capacity was stranded during the seven years. This stranded power translated to a N1.632 trillion market loss during the period, the data showed.

On a year-by-year analysis of the revenue loss from 2015 to 2021, the highest loss of N273.32 billion was recorded in 2016 when the GenCos could not deliver 3,828MW to the grid even when it had 7,040MW capacity.

The second highest stranded power was recorded in 2020 when the GenCos recorded N266.1bn loss over 3,742MW stranded power from an overall 7,793MW generation capacity.

In 2018, N264bn was lost due to 3,699MW stranded power; the power generation companies then lost N256.9bn in 2019 when they could not get 3,599MW of electricity to the consumers due to transmission and distribution network challenges.

Another N236.4bn was lost in 2017 as the GenCos recorded 3,312MW stranded power while 3,010MW stranded electricity caused a loss of N214.9bn in 2015.

The least of the stranded power and its losses was recorded just in 2021 when 2,248.5MW could not be delivered to the grid due to the grid hiccups causing a loss of N120.2bn, which is about half of the revenue lost in each of the previous six years.

Commenting on the weak transmission and distribution network, a power sector expert, Dr Joy Ogaji, in an outlook report for this year, held that: “Reliability has been discovered to be a function of infrastructure, and proper metering guarantees accurate billing. While some stakeholders have opined that the illiquid state of the NESI is the core challenge, we believe the liquidity crisis is not the problem, but a key symptom of the problem and can be solved.

“Hence, we expect an increased focus on the provision of required infrastructure as well as ensuring infrastructural handshake between the TransCo (TCN) and the DisCos,” she noted.

Power grid sustains 4,000MW since Dec

In December 2021, Nigeria attained a new trend of sustaining an average 4,000MW of electricity supply daily without disruption or system collapse. This has excited power experts, believing that the woes of the power sector can be solved.

In an explanatory note on his social media handle, a former commissioner at the Nigerian Electricity Regulatory Commission (NERC), Eyo Ekpo, said for the first time in the Nigerian history (December 2021), Gencos delivered to the DisCos via TCN over 4,000MW each day, precisely average of 4,261.25MW and 102,270 megawatts hour (MWh) daily.

He continued, “No collapse, no drop below 4,000MW. Trend has continued into January. Consistent production and delivery to DisCos over 4GW/100GWh (4,000MW/100,000MW) for a full month without a system collapse has never happened before. So, this is a “big” milestone, one with real value, albeit it has taken far longer than expected to achieve.”

Mr Ekpo who represented the South South on the NERC board from 2010 to December 2015, said it was a great sign of what could be, if the various moving parts of Nigeria’s electricity value chain were allowed to work as designed. He said: “Certainly, this has more value than the usual talk of 13,000MW installed capacity (but no fuel or transmission capacity to move it around).

“Next is to move the sector to a point where no less than 95% of revenues are returned to the GenCos that deliver this consistency. However, the snail’s pace at which this milestone has been reached also indicates a need to consider a restructuring of Nigeria’s single electricity sector,” he explained.

“This level of consistency can only be delivered when they all work together. Indeed, it is doable.”

Concerns over NBET role, DisCos’ remittances

Beside the issue of stranded capacity which caused N1.6tr loss already in the Nigerian Electricity Market (NEM), the GenCos are also worried about the strength of the Nigerian Bulk Electricity Trading (NBET) to play its revenue bridging role between the GenCos (the producers) and the DisCos (the electricity marketers). In what is described as a monopsony, NBET was established to increase investors’ confidence in the Nigerian Electricity Supply Industry (NESI) by shielding the GenCos – and by extension, protecting the natural gas producers from market risks.

However, NBET has been unable to shield GenCos and gas producers from the liquidity crisis that has plagued the industry due to its monopsonic nature. “Over the years, this market structure has continued to weaken the motivations for DisCos to collect and remit payments from the customers, as NBET cannot take action against any delinquent DisCo,” said Ogaji.

This year, Dr Ogaji, said the GenCos will continue to face huge debts as long as there exists an inability to sell stranded capacity or get paid for energy sold as at when due.

She called for liberalisation of the power sector such that the GenCos can sell power directly to willing DisCos without having to pass through NBET. She said “In the year 2022, it is our belief that allowing GenCos to sell electricity to DisCos and eligible customers eliminates most of the drawbacks of the monopsonic structure.”

Daily Trust reports that what this implies is that, the principle of willing buyer, willing seller will now apply. For any DisCo who has no capacity to pay for electricity, the GenCos may refuse to supply bulk power to them, rather than supply to them and the DisCos remit just 30 percent of the energy invoice to the GenCos. At the upstream level, the GenCos have been used to this principle with the gas suppliers where they are bound by a take or pay obligation for gas.

The GenCos also decried the challenge of insufficient gas supply to the GenCos which they said has led to consistent underutilization of the GenCos’ capacity. This may be worsened with the implementation of the Petroleum Industry Act (PIA) that stipulates where inactivated contracts and GenCos’ inability to meet their gas obligations could lead to insufficient gas supply to gas-based GenCos. Nigeria currently has about 28 GenCos, 25 of which run gas-fired plants.