Wednesday, 20 May 2015

Article: Where Nigeria’s Power Roadmap Missed Road

 By SKC Ogbonnia

Despite investing over $30 billion in the sector in the past 15 years,  Nigeria ’s epileptic power supply has taken a turn for the worse in recent months. Today, the total electricity supply is less than 2,100 megawatts (MW) for a country of over 170 million people. As a result, the citizens and businesses have resorted to use of electric generators to the point where some industry experts are now placing the frontal cost including imported fuel as high as the size of annual national budget. This mire has provoked a wide range of debates with a host of powerful voices overtly urging the President-elect Muhammadu Buhari to scrap current power sector reform altogether. But any temptation to toe that line readily translates to a right cause on the wrong course. The problem is definitely not the policy by itself. The gospel truth that the highly celebrated Road Map for Power Sector Reform under President Goodluck Jonathan has simply missed road, but can and should be redirected.

The roadmap was conceived on a charming premise that deregulation and privatization are twin catalysts for energy eldorado. Although the Jonathan people pursued the power agenda with admirable zeal; little did they know that a reliable service delivery in the power sector required more than mere theory. Yet they marginalized a central theory on privatization which clearly states the effectiveness as well as efficiency is contingent upon the environment. The industry naïveté is further exposed when considered that the committee on power would fail to recognize that any concept which advocates corporate profits at the crude expense of public interest cannot be ideal in this stage of Nigerian national development where an average citizen lives on less than one dollar per day.

The  United States of America  offers a salutary experience. Due to the importance of electricity in human welfare and obvious complexities with privatization, deregulation of the power sector in the  US  did not begin until less than 25 years ago. And despite what some analysts may view as its merits, only 16 out of  America ’s 50 states have seen sufficient benefits to exercise full deregulation of electricity. 

Simply put,  Nigeria  is not quite ripe for deregulation and may seem to be in a paradox of sort. Yet, reversing the policy is a recipe for a colossal disaster and thus no longer an option. Even as it is necessary to review where and how the roadmap missed its bearing, this piece is a blueprint to redirect the existing program towards efficient power delivery.
By all indications,  Nigeria ’s power sector reform is fraught with difficult road blocks but none is more daunting than the fact that the policy implementation veered off by failing to steer the original direction of the roadmap. The first main detour was at the juncture where political cronyism crossed the entire process. Major public electricity assets under the privatization exercise were sold off at ridiculously below-the-market prices to a retinue of government cronies who not only lacked the technical capacities and expertise but also the genuine interest to drive home the power vehicle. The most perilous mishap to the roadmap yet is that the implementation team placed all its eggs in one shaky basket. 

Contrary to the dictates of the roadmap, instead of prudent diversification to alternative sources of energy, implementation has been concentrated on gas-to-power. Worst still, a vital link of the roadmap anchored through the Ministry of Petroleum Resources punctured an important component of the very initiative on gas-to-power by abandoning the nationwide gas pipeline master plan initiated under President Olusegun Obasanjo, including the strategic East-North gas pipeline (CAP) from Calabar through Enugu and Ajaokuta to Kano. Today, not only is over 80% of  Nigeria ’s power to the National Grid generated through thermal plants, most gas infrastructure is localized to a volatile axis of the country. The result is that any illegal tampering of the gas pipelines in the area, which is sadly very often, is a nation in darkness.     

The quickest way to remedy the situation is to defy the odds and provide adequate gas supply to the multitude of existing power plants in the country—and with immediate effect.  Nigeria ’s power problem no longer hinges on lack of power stations but failure to provide the plants with abundant natural gas in the land. For instance, even though the country currently boasts of over 2 billion cubic feet of gas daily with a power generation capacity at about 6,000 MW, the total output is less than 2,100 MW. The huge drop is attributed to inadequate gas supply due to vandalism. According to  Nigeria ’s Ministry of Power, the sector has been losing close to 120 to 150 million cubic feet of gas per day (MMScf/d) in the last eight weeks along the Trans Forcardos (TFP) and Escravos-Lagos (ELP) pipelines.  A mere 300 MMScf/d of gas loss at any point in time translates to a reduction of about 1,000 MW of power supply.

But the whole excuse of incessant vandalism of gas pipelines is roundly lame. The root cause of the problem is squarely a failure in leadership. The different conspiracy theories notwithstanding, any notion that a nation like Nigeria—a country of over 170 million people with an estimated 50% of youth unemployment—cannot guard the pipeline to the mainstay of national economy in this stage of technological advancement is nothing but the continual tendency to give the dog a bad name.

There is a plethora of data to support the foregoing opinion but the mere fact that the country takes pride in awarding huge contracts to a barefaced militant cabal for the security of gas and petroleum pipelines is a compelling testimony of the failure in leadership. With a common sense leadership in place, besides a galore of technological advances in the surveillance industry, a common task force of army, navy, and a pool from the unemployed university graduates should be adequate to address the problem of vandalism pronto—even if it requires stationing armed guards at every pole throughout the breadth and depth of the pipeline network.

The second major recommendation is a two-pronged approach on gas-to-power. With best intentions, the Roadmap has already raised power generation through natural gas to a commendable nameplate capacity of over 11, 500 MW. Although some of the plants are still under construction, a good number is completed but yet to be connected to the pipelines or the national grid. Thus, the incoming Buhari government should begin by beaming its searchlight on why development on some gas powered plants is stalled. A case in point is Geometrix, the first indigenous private generating plant located at  Aba . It is mystifying that this plant has been completed for years but hindered from coming on stream by a toxic mix of politics and private sector monopoly.

The next approach is to de-emphasize gas-to-power for the meantime and stake earnest resources to other sources of energy. De-emphasizing gas-to-power is strategic. A careful implementation of such policy not only boosts power generation in different parts of the country, it will also help to overcome overdependence on natural gas and the unending chicanery with pipeline vandalism. Best of all,  Nigeria  will finally put into use other huge natural resources long abandoned because of indolent preference for oil and gas.

Thus far, though hydro power accounts less than 20 % of the generation to the National Grid, there is an appreciable number of hydro plants in the country.  Currently, the hydro nameplate capacity stands at over 5,300 MW which, of course, includes the $7 billion 3050 MW Mambila Power Station and others under construction. Similar to the agenda on gas-to-power, rather than building more hydro plants, efforts should be made to ensure that existing hydro projects are executed in a timely manner.

Perhaps renewable energy, such as solar, wind, biofuels, and traditional biomass should not be ignored, but the most logical alternative for serious public sector investment in the power generation today is coal-to-power.  Nigeria  is globally ranked as the 7th largest in coal deposit.  Like her counterparts in other countries, particularly South Africa, the United States of

America, China, Indonesia, and Australia, Nigeria is overdue to join the comity of nations that generate power from coal. Unlike the typical hydroelectric power station that takes anywhere from 6 to 8 years before coming on stream, coal-fire powered plants normally takes 3 to 4 years to build. This proposal is in line with the original Power Roadmap of 2010, which specifically calls for continued public investment in renewable energy and coal. It is also in agreement with Buhari’s election manifesto which promised immediate revitalization of coal-to-power.

At least 7 states are known with huge coal reserves in  Nigeria  with the potential to generate more that 5,000MW of electricity. Given the recent breakthrough in the discovery of clean coal technologies, now is the time to finally kick-start the much anticipated construction of the three coal-fired power stations capable of generating a combined nameplate capacity of 1,000 MW at different locations in  Enugu , Kogi, and Gombe states.  Seed money for the coal alternative can flow by blocking—for the time being—the proposed 1135 KM $5 billion Calabar-Ajaokuta-Kano gas pipeline (CAP) and craft ways to realign the $450 million in Eurobonds already raised for the project in favor of coal development. In addition, the Nigerian National Petroleum Corporation (NNPC) can also refocus current discussions to pump more money to the CAP through the International Finance Corporation (IFC) towards immediate investment in coal-to-power. 

Finally, the incoming government should revisit the files on the below-the-market sales of national power assets, the role of banks in the process, the N193 billion owed to the banks by energy firms, and several billions extended to the private energy firms by the central government. Such approach will ultimately help to expose irregularities in the privatization scheme, determine sincerity of purpose, and identify critical omissions towards efficient power delivery.

(Dr. Ogbonnia is the Chairman of First Texas Energy Corporation)

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