How Weak Transmission Stifles Power Sector Growth

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Managing Director of Nigeria’s biggest electricity generating firm, Egbin Power Plc, Mr. Dallas Peavey, last week, expressed frustration that 70 per cent of electricity generated by Egbin cannot be evacuated to the grid system on account of weak transmission lines.

Peavey, said the company had attained 1,100 megawatts (MW) out of the installed capacity is 1,320MW, adding that the grid system constantly rejects power. “We are constrained and limited to generate about 350MW daily due to Transmission Company of  Nigeria (TCN) system operations’ constraints and inadequate gas supply issues.

“Sometimes, when you get good news from TCN that you can increase your generation, we will be confronted with gas shortage and when there is gas, you have TCN issues. The situation is that bad,” he said.

The courage exhibited by Peavey further confirms the claim by Generation Companies (Gencos) and other stakeholders alike that the transmission arm of the power sector value chain remains the weakest line.

Little wonder the country has been struggling to attain 4,000MW when in reality it has a total installed capacity of over 7,000MW as ageing and weak transmission infrastructure makes the evacuation of 7,000MW impossible.

Beyond the challenge of weak grid system is rising debt profile of the Discos. According to the  Nigerian Bulk Electricity Trading Plc (NBET), invoices from the 22 power generation plants for September 2016, totalled N36.49 billion while payment to them based on receipt from the Discos was N8.99 billion, representing 24.64 per cent. But as at today, Egbin, being one of the 22 Gencos, is owed over N100 billion for electricity generated, a development that may have forced the company to threaten to shut down its operations.

State of transmission infrastructure

The TCN has transmission capability of about 6GW. Nigeria’s transmission infrastructure is made of approximately 6,680km of 330KV lines, 7,780km of 132KV lines, 330/132KV substations with installed transformation capacity of 10,166MVA and 132/32/11KV substations with installed transformation capacity of 11,660MVA.

A total of 2,650km of 330KV and 7,101km of 132KV transmission lines and 2,850MVA of 330/132KV and also 2,900MVA of 132/33KV transformation capacity will be added to the network in the next two years going by project schedules of TCN.

In addition, there are ongoing reinforcements of existing 330KV and 132KV lines and substations to enable the efficient wheeling of more electricity across Nigeria. Nevertheless, TCN is still plagued with high non-technical loss and low infrastructure coverage of the country. Less than 40 per cent of the country is covered by the existing transmission infrastructure.

Challenges

Mr. Odion Omonfoman, an energy consultant and the CEO of New Hampshire Capital Limited, was quoted as often saying that the existing transmission infrastructure and its operation is the weakest link in the electricity value chain. He explained that transmission is responsible for many instances of stranded generation, thus the improvement of its operational performance and efficiency remains fundamental to the attainment of stable and reliable power to all Nigerians.

Omonfoman listed some of the broad challenges facing TCN to include radial lines with no redundancies, obsolete substation equipment, overloaded transmission lines and substations, inadequate coverage of transmission infrastructure, as well as weak infrastructure to evacuate existing generation and serve Discos’ load demand as and where required.

Others include poor funding for planned and ongoing transmission projects and for TCN’s operations, lack of cost-reflective transmission tariff, high incidences of vandalism, community and right of way issues during project execution, lack of effectiveness in managing system reliability and inability to perform real time operations.

“We must also mention that despite the management contract with MHI, frequent government interference in the management of TCN is also a challenge and has impeded the objective for the restructuring of TCN to engender international best practices in its operations,” he said.

Poor investment

Partner, Bloomfield Law Practice, Mr. Ayodele Oni, had last year said that research has shown that over N203 billion is required to improve the grid to achieve modest improvements in the next 12 months.

However, he said, “I understand that only N50 billion has been apportioned for grid improvements. Hence, as long as power (and insufficient volumes) cannot be wheeled along the transmission grid, the power sector is unlikely to achieve substantial improvement, as embedded and off-grid power potential are currently low because of inability to pay the much higher prices.

Erstwhile Managing Director of Niger Delta Power Holding Company (NDPHC), Mr. James Abiodun Olotu, had at the 2015 PricewaterhouseCoopers (PwC) Annual Power and Utilities Roundtable with the theme, ‘‘The Challenges with Transforming the Nigerian Power Landscape’’, said TCN required about $7.5 billion to improve on its ageing transmission infrastructure across the country.

Olotu, in his presentation entitled, “Improving Power Delivery Across the Generation: Transmission-Distribution Value Chain,” lamented that obsolete and weak transmission lines were militating against the delivery of generated power, thus worsening the country’s power situation.

Represented by the Executive Director, Generation, NDPHC, Mr. Sanusi Garba, Olotu said the $7.5 billion investment in transmission upgrade is expected to be deployed over a five-year period at $1.5 billion annually.

He lamented that lack of fund to execute the $1.5 billion annual investment has made the dream of transmission infrastructure upgrade impossible.

Omonfoman said the Federal Government’s budgetary appropriation, which is inconsistent and inadequate, remains a major source of funding for TCN, adding that due to a non-cost-reflective tariff, TCN is unable to generate enough revenues to meet its operational requirements.

“Even more pathetic is the fact that despite a non-cost-reflective transmission tariff, TCN is owed significant sums for transmission services provided to date. Debts to TCN by the electricity market are well above N15 billion. Without addressing the funding and revenue profile of TCN, it is arguable if TCN would ever be able achieve its mandate,” he disclosed.

Defending TCN

Oni said it is perhaps unfair to describe the TCN as the weak link in the Nigerian power market, stressing that the generation companies (Gencos) themselves have only notionally been able to rely on guaranteed funds from NBET, as there have been major issues relating to the manner in which the distribution companies (Discos) are discharging their own roles which, if performed poorly, potentially affects the entire industry adversely.

He argued that the scale of the transmission problem has always been considered to be much greater than the problems in other arms of the sector because the Discos are known to reject energy from TCN and thus, there have been issues around imbalance energy. “Thus, while I admit there have been failings of the grid system and same requires overhaul (which is currently being undertaken), we must accept the scale of the problem as one being across the value chain and with the Discos almost more culpable than the TCN,’’ he explained.

 

Way forward

Omonfoman advised that for the power sector to make progress, investments in transmission infrastructure must outpace investments in other segments of the value chain.

With an annual investment requirement of $1 billion for the next 10 years, there is an urgent need to seek creative, private sector ownership and funding of transmission projects and infrastructure using the PPP model.

On his part, Oni said a middle ground would be the award of the management company to a third party contractor, while the government retains ownership. This way, he said the government can take advantage of the private sector while maintaining overall ownership of the grid.

‘‘However, this exact model has failed in Nigeria due to TCN’s continual intervention, so there is a question as to the extent to which ownership, control and management can be separated.

Another suggestion he canvassed may be to separate the “system operator” function of TCN from the “transmission service provider” function, with the system operator function which include systems planning, scheduling and balancing, remaining with government, while the transmission service provider function is privatised through a few models that have been tried and tested internationally and even in Nigeria for other former government-owned entities.

Source: NigeriaToday

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