STAR INTERVIEW: We have Developed the Right Energy Mix for Nigeria, Says Fashola
Mobolaji Aluko
The Guardian
We have Developed the Right Energy Mix for Nigeria, Says Fashola
Jan 19,2017
Hosted by the Editorial Board of The Guardian at the Rutam House headquarters, Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola fielded questions on a wide range of issues − epileptic power supply, poor road infrastructure and inadequate housing for Nigerians:
Could you talk about power, infrastructure, particularly roads, and housing and shed light on government’s reforms in these area?
We started from a very difficult place. The difficulty of where we started from was embodied by a palpable desire for a change in administration. We also started at a time when not only were expectations high, there was also a global slow down economically.
For all of those dynamics, there were things we could not control because we do not control global affairs. All of those global dynamics have local consequences. The local consequences are the things we are dealing with. I can tell you that this administration has spent a lot of time planning and this is very important because planning takes time. We are in a result business as I continue to remind myself and everybody around me.
Therefore, until results become manifest, the planning really doesn’t connect with people. This year, I am optimistic that some results will manifest, but we will be climbing out of a recession instead of expanding growth. If you are climbing from the basement of a building, it takes some time to get to the ground floor. It will be better in my expectations than what it was in the preceding year. There are so many other things that the government does not control which have consequences on quality of life of the citizens but government still have a responsibility to try to manage the situation.
Lack of fund has been a problem for this administration. Coming out of the basement of recession, how fast or how well can it climb, especially in power?
Money is important but I have also argued, without seeking to sound contradictory that planning is perhaps much more important because if you have money and you don’t have a plan, money goes to waste. As far as our power sector is concerned, I lend my voice very clearly to its privatization, the reason among others being that there is public record that for over 60 years, we have managed power in the public sector and it hasn’t quite satisfied our expectation.
A couple of other things that used to be managed by government have gone into private hands and they have recorded some success. Although not all have thrived, in a commercial environment, those who couldn’t thrive have left the stage.
That said, I think there were some things that could have been done differently in the process of privatization. Even if I might have done some things differently, it doesn’t remove the fact that I might as well have made some mistakes. My attitude has been, let us manage the flaws, we can correct them instead of canceling the privatization, because that will only take us back to the beginning.
There is very strong evidence that every time we cancel contracts, first of all, we send negative investment signals that we don’t respect agreement.
Many investors don’t like that kind of behavior. In the event, we haven’t solved the problem by cancellation. I can cite one example, in 2005, Nigeria signed concession contract for its refineries to private individuals in this country. We complained, government canceled the concession and this is 10 years after, we are still importing fuel. One of those private individuals is now building his own refinery here in Lagos. Just imagine the time we lost and how much we have spent on importing fuel.
What I see in the power sector are really man-made problems, they are not engineering problems, they are not technical problems. Our engineers can get to work but there are issues from communities, like Right of Way. So, when people don’t get compensation because we didn’t plan resettlement in the project designing, what we end up with are court cases and injunctions just to stop development. We already have power plants in place but there are no gas pipes there. We are constructing gas pipelines now; but what was the planning that went into conceiving a power plant without a corresponding gas pipelines to it?
We have containers held up at the ports for years because contractors couldn’t get paid to clear their goods. Why didn’t they get paid? There was no provision in the budget and that is not an engineering problem. It is management and administration.
We understand the circumstances but how come the country is underperforming in nearly every issue?
It is not government alone that is to blame. Government is just an institution populated by people you and I know. I have a proposition in my mind that I haven’t yet fully detailed and when I do, I will perhaps share it. But I will answer your question by asking a question: How many people work eight hours a day?
“Let us go back and read Chief Obafemi Awolowo’s Voice of Wisdom and his advice on how to use 24 hours. Are we doing that? I am thinking in my head that if everybody worked for five hours a day, we would be amazed at what this nation would produce. We are supposed to work eight hours, but how many of those eight hours do we spend receiving visitors and doing other unproductive things”.
In your presentation last November, you said in your own template, government is more like a regulator, that it is only the transmission component government takes care of. With the current grid system and the ambitious plan to generate 2,000 megawatts this year, does the grid system have the capacity to achieve this?
I will call your question a rolled up play. Let me start with the opening statement: It is not about what I said; it is a statement of fact. With privatization, government is now a policy maker and a regulator. Government used to be the main operator – distribution, generation, and transmission. But government is now largely policy maker and regulator. Government still retains the transmission line.
There are a lot of literature about the power sector, there is a book I read when I was newly appointed minister by some scholars in Oxford, they analyzed five countries that have privatized, identifying their challenges. The story in those five countries – South Africa, India, China, Brazil and Mexico – is not different from what we are going through. Each country that has privatized has kept one part of the value chain, whether it is generation, distribution or transmission. They don’t privatise all three but there is no hard and fast rule which one you should keep.
The current energy mix is drawn in favour of thermal stations that are fired by gas. Is this wise in view of the challenges in the Niger Delta where the gas comes from? And what can be done to amend the power privatization laws to allow for embedded power?
Let me speak first to the energy mix, most of the industrialized countries have an energy mix. Most of Europe, especially the UK, and United States still have at least 25 per cent coal in their mix, they have 30 per cent gas and 20 per cent nuclear. The combination of their renewable energy made up of biomass, hydro, wind and solar is in the region of 20 per cent, solar accounting for quite very little because of the periods that they are out of sunlight.
Now, what have we done here? We have left our coal behind, we focused on our gas in recent times. This country used to have coal and hydro. The only coal power plant we had, we cannibalized it and broke it down. Pardon me for being lengthy but I think it will help to understand where we are. We focused on gas under the rapid national integrated power project, which was sensible in the context that we were flaring the gas anyway. We mandated all oil producing companies to start building power plants. That was how power plants like the ones by Agip, Exxon Mobil and a few others came up.
Gas is cleaner in Nigeria, so we are probably likely to do more of it. It is also quicker to develop and to deploy in terms of large volume. The landmass, the materials you will require to build a 1,000 MW of hydro power is perhaps four or five times what you will need to build gas. Like every power source, each one has its limitations, wind speed has its season, sunlight is not available 24 hours a day, coal has its ecological challenges, hydro is not available all year round, and gas is also subject to pressure issues.
So, we have developed an energy mix that responds to the point that you raised. We completed that last year around July at our National Council of Power summit. We see a lot of people trying to develop solar power here in the south but again it will be expensive because the sunlight here is not as prolific as it is up north. That is an investment guide and a policy statement that do more coal in the coal belt, more gas in the gas belt, more solar in the solar belt and more hydro in the hydro belt, so that we don’t have a repeat of power plants in obscure location that do not deliver on their expectations because of planning and conception issues.
In terms of the grid, there is a lot of talk about the grid being vulnerable. All of that talk, with respect, is not accurate. It may be yesterday’s story but we have repeated it in a dogmatic fashion without asking the question that this administration claims to have completed some grid programmes. I spoke about Alagbon, Okada in Benin and Sokoto, these are expansion programmes of the grid.
If we have completed those projects, clearly it can’t be correct for anyone to continue to argue that the grid is only 5,000 MW. I was at Ayobo here and we saw expansion programmes going on there. I have briefed members of the press at quite a few Federal Executive Council meetings announcing grid expansion projects in Kano, Kaduna, Osogbo. The grid can’t be static. We must also understand that the grid cannot leave the supply behind because it is under-utilised capacity and once you have that capacity and you are not using it, somebody is paying for it.
What is important is to synchronize the development of the grid, which is what we are doing to run slightly ahead of the expected power supply. Today, for the record, the grid capacity is also a function of simulation and simulation requires us to consult with everybody using the grid. At its best today, the grid capacity is 7,200 MW that we have build up to, at its very worst, it is 6,500 MW and we have not less than 10 projects still under development.
At the end of this month, we will switch on the transmission substation in Kaduna, that is part of the grid expansion, because it will start taking power from the Guwawa power plant.
In terms of embedded power, the real problem is that having sold the asset to Company A under certain terms and conditions. All who live in a particular area are customers of Company A. Anybody who wants to distribute power to the customers of Company A would inevitably be infringing on the commercial and proprietary interest of the owner of that asset.
What we are trying to do is to encourage the DISCOs because they hold contractual rights. Government would be sued if we show no regards to the contracts. So, we are encouraging the DISCOs to allow for extra power and use their assets to transmit to their customers. This was the point I made as governor when I was commissioning the Lekki Power Plant that if government allowed us, we could power Lekki within six months and I was quoted as saying that Nigeria could be powered in six months.
The point was that the power was there but because we couldn’t encroach on the territory of Eko Distribution, we could only use the power to power streetlights, which were public assets, our waterworks in Lekki and Victoria Island. So, there was a lot of redundant capacity and we were trying to factor an arrangement that if government agrees, we can power the residents in six months.
Is there no national planning document on ground for each of the sectors you man, for any incoming government to run with? The last administration did so much on power roadmap, why do we need to start afresh with each administration as if Nigeria is just coming out of independence? Again, with the plan you have spent time on, when categorically will you say Nigeria will have uninterrupted power; is it five years, 10 or 15 years?
Shortly after I took office, one of the things I decided to do was to lay out a roadmap, which I shared with the public and the roadmap is very simple. Start first to pursue energy anywhere, so long as it is safe. The first leg and the short-term plan was incremental power. Incremental power required us to do all what we have been doing, build up the grid, finish uncompleted projects, plan expansion of more power plants, develop the energy mix, license solar companies so that everywhere you can get extra power, you get it.
Today, as we sit down, it is difficult to precisely say this is how much power Nigeria needs because we do not first know how many we are. Not knowing how many we are, how can we then really know what we need? When we were playing games with our 2006 census, we have come to reap the whirlwind today. So our population is what anybody guesses it to be. Sometimes, we are 170 million, othertimes, we are 180 million.
If you don’t know how many guests are coming to the party, how many bottles of water do you buy? A nation is not different; it is the sum total of individual homes and families. Therefore, the sensible way to progress first is just increase the power. How much do we need? I am not sure until I have a census. Otherwise, we will have unrealistic and unempirical targets.
In the same way that housing has been estimated, the census was wrong and faulty as the Census Tribunal has shown because I went to court as governor to challenge the census result and we won. Several local government results in Lagos were nullified and our own results were upheld. If that census was faulty, on what numbers is the housing deficit being projected?
So, when I speak of planning, I speak very seriously and deeply. Otherwise, we would be running an endless race, with no dimension. So, firstly, get more power, any amount of power, and plan the process. That is what takes us to stable power.
The second step to stable power is how many people need power and if we don’t do that national audit, you wont know. Stable power means everybody must have enough at peak periods. Because there is peak period power demand and off peak period power demand. And then you must have a redundancy that allows you to do maintenance, because power equipment are all man-made, they break down. The same way that you have two generators in your house and you must fall back on one when one breaks down, you must have such capacity with power. That is our medium-term destination.
Then, long-term destination to uninterrupted power, which answers the question, yes it is possible. But at that point when we have stable power, everyone of us has a duty to now imbibe conservation of energy as a lifestyle because what is wasted will never be enough. To roadmaps and plans, I am not sure maybe I am the one who used the word wrongly but I distinguish between policy statements and plan. There is a national housing policy, which is affordable housing. What is the programme to deliver it? There is none.
I am working now to build a national housing programme, which must in my view pass two tests: It must be acceptable. The type of houses that are acceptable because of our diversity are not uniform. Our climatic, cultural and religious diversities must be incorporated. Some of the studies that we did suggested that in some parts of the country, male in-laws can’t use some of the conveniences that have been used by females and we spent the last one year getting feedbacks from architects across Nigeria trying to build a national housing programme.
What is affordable? “We see houses that have been built that are empty, people can’t afford to buy it or rent. Some of the housing policies have left the off-takers behind. We are now trying to connect with those off-takers what can they afford, and we cannot speak to every off-taker. We have just awarded the first of contracts to build the design that we have evolved. After then we will subject them to the test of affordability. The ones that pass those test become our platform for industralisation and rollout. It is like if you want to test this product, you don’t make one million bottles, otherwise you will lose”. You make some samples. It is when you have validated that the market will take it that you can proceed on industrialising it. That is the housing programme I am drawing up for Nigeria. There are all sorts of things that are called plans but they don’t show you the methods and the details.
Again, I was just reading one of Chief Awolowo’s speeches because I read him from time to time. He is one of the most prolific thinkers I have ever encountered not just in Africa. His thought processes were very detailed. He spoke about planning when he was delivering his speech to launch the Elere Cassava Initiative sometime in 1973. It took almost a year to plan it from report to implementation.
We don’t take these things serious. We just want to see everything happening. If the people you are working with don’t understand what you want to do, how can you have a common purpose towards what you cannot understand? Perhaps, let me rephrase that, we see football teams assemble together and we all see that they are not playing well because they have just been put together. That is evolution and preparation process. One or two years later, we see that team winning. The government is not different, it is a team. It takes time.
The civilian administration in 1979 has the Housing for All Programme; now with the issues highlighted above, should housing be a federal project?
Perhaps, you are right there. I would love to see governors take the lead as I did with the Lagos HOMS initiative. But I have also looked at models in the UK and Singapore, they were led by the national government. One thing government can do is to create a programme that everybody can then buy into. Housing construction for the poor, middle and working class is a seasonal event here. It should be a national annual event irrespective of what party is in government. It is when that is in place that the deficit noticed in the sector can be addressed.
For me, the biggest contribution I can make in that sector is not the number of houses I build. What I hope I will be able to leave behind is a programme that will have national acceptance and would survive irrespective of what party is in government.
Are there measures in place for efficient and well-structured mortgage system with the private sector collaboration considering the setback the Obajana project which Dangote had? What are the safeguards to ensure there is transparency in public spending?
We didn’t close on it, the background to it is that there is a tax policy that anybody whether individual or corporate who builds any infrastructure that is assessible for public use can actually claw back in individual or corporate tax rebate.
It wasn’t a policy for Dangote; that was a company that only took advantage of the existing law. I will do more of it if the opportunity presents itself.
In terms of public resources, I think the public procurement act was inaugurated in 2007. Between 2007 and now, the public space in spite of that regulation has been riddled with a lot of inefficiency and we are beginning to see all of the things that went on in spite of that regulation. The answer to the question is that government housing regime must be uniform. There cannot be two pricing for the same commodity by different arms of government.
Everybody relies on the pricing from the Bureau of Public Procurement, so you can’t even make a procurement essentially without going through them. And so some of the things that were credited to have been done by some ministers, I just wonder how some people find them believable in the very first place.
For example, I was alleged to have given somebody some hundreds of millions of naira for some political venture, how can people even think that this is believable. It is one thing to tell a lie, it is another thing to tell a poor one because if you just follow the public procurement law, you will know it is impossible.
There was something that was reported recently trying to scandalize the government that the Buhari government was planning to award an 800 million dollar contract and you think that can happen in secret. I am astounded at the pedestrian level at which people even conceive lies. A bad lie is just disgraceful. Nigeria is trying to borrow a billion dollars and you are alleging that someone is spending 800 million dollars for a project, excuse me! It just doesn’t make sense. The law is there, we will do our best to work within the parameters of the law.
That is the law and that is how we play. There are some procurement that are within the ministerial limit, it is a committee of officers in the ministry, not me. I don’t sit in that committee. I am not saying it is not possible, but the most difficult place to steal money is in government because you will have to collude with so many people.
Still on housing, going back to the last question, can we really do housing without the private sector?
Certainly not. Once that model is verified and accepted and it is affordable, we are going to use private sector to drive it. To mass-produce it. Government will then become the guaranteed off-taker, using the models of mortgage, so that X company that is now building our agreed standard and quality knows that, once he finishes, somebody has a mortgage to take it off him.
These are the ways I have seen housing developed abroad. That is why if you go to Europe, most of the houses you see in counties are uniform. That is where we are going, but you can’t build uniform houses that people don’t accept or can’t afford. The proposals we get from private companies A to Z come up with too many designs and that is not implementable.
Shelter is so important to any individual. How can government assist the masses to save and buy into this home ownership scheme?
Interestingly, for the first time in six years, the Federal Mortgage Bank is reporting surplus account half year. Against the backdrop of N4 billion losses, they recorded about N400 million surplus half year. Savings all flew out of the window from the time we grabbed the notion of free housing.
I think institutions like The Guardian stands in a position of great responsibility to get involved in the political fray in terms of subjecting political promises to rigour. I have heard people say we will build two million homes in four years. It is not possible. In the UK where they have complete industrialized scheme and produce nails and every building material, it is a programme of 250,000 to 300,000 houses every five years.
Let us assume that it was possible. Can this economy produce one million homes? We have allowed those things to go out without questioning. The public have held on to them and there seem to be dashed hope when in fact there was nothing to place hope on. Are we honest enough to engage with the public and say to them while should anybody who has no job legitimately expect to win a home?
“We have a culture where people expect that you give them money to go and build a house. A nation doesn’t prosper that way when incomes aren’t tied to roofs. Everybody’s job in the UK is tied to his roof. Our income sources are not tied to our shelters. That is the mortgage system which was what we tried to resuscitate under the Lagos HOMS scheme and it is working”.
What is government doing to ensure that customers of the DISCOS have choices and don’t just get stuck with one service provider?
Let us set the context again, we didn’t solve our power problems in 62 years. We privatized it now for three years and one month. Can we say we are seeing a reasonable result within the time frame? Just set the context. If you see a three-year-old growing a moustache, you must be worried. In specific answer, we will get to that destination because that is the ultimate destination where you can chose where your power comes from.
If they told you in 2002 that you could change your telecom subscriber and still retain your number, you will have said it was impossible. When they started, it was only voice and text, now we are watching movies on our phones. So, it will evolve. You must look at it within that three years context. Three years after GSM privatization, it was still a slow start.
So, it’s a process, but we must be very careful that we don’t hurt one business in order to kill it. The Manufacturers Association of Nigeria (MAN) took this up with me and I told them that the GENCOs and DISCOs, are part of the private sector they are concerned about. Should the house fall because they are going through some teething phase? We are thinking about those things.
The Niger Delta which is troubled is critical to development of infrastructure in the country
In terms of stability in the Niger Delta, it will be very helpful to the country if we had peace, if we had understanding, if those who are aggrieved find a cleaner platform for expressing their anger. Nobody wins.
First of all, more pipeline vandalisation just means more pollution. It means more damage to the ecology and to the environment. It means that even their guaranteed share of 13 per cent derivation is lower. It means that FAAC account every month will be poorer. It means that workers will find it difficult to get their salaries. We are also complaining that the exchange rate is widening. That is the major source of dollars. The oil price has gone up, we have to take advantage of the benefit, get more dollars with increased output and reduce the pressure on the economy.
Can the window on private participation in road construction be expanded to address some terribly bad Federal roads?
Of course. In Lagos for instance, Ajose Adeogun is an example. It was a partnership with Zenith Bank. Adetokunbo Ademola is an example; it was in partnership with Eko Hotel. We are planning to have an electricity consumer census because what the books show today is that only six million households use electricity.
Most federal roads are terribly bad, those were your words, I disagree sir. I disagree very seriously. This is an institution that owes the public accurate information. Most federal roads are not terribly bad. A federal road runs for hundreds of kilometres, but what we see is about 45 per cent failure. On a section of 100km, maybe sections of up to 10/15km have failed. In the East, there is a peculiar problem; it is an ecological problem of erosion coupled with some high-water table.
The unique nature of those roads does not necessarily transform to say all the roads in Nigeria are in the same condition as that of the East. Also, we must stop confusing a budget with cash; money hasn’t been voted for those roads. A budget is not cash, it is a statement of what you intend to spend and you have to earn it first before spending.
All that we have had in the last 10 years is that the capital budget has been below 20 per cent. It has been reported by this organization severally. So where was the money that was voted when we were spending more on recurrent expenditure.
The last administration budgeted N18 billion in 2015 for all Nigerian roads. As governor of Lagos State, the last budget that we did for infrastructure had over N200 billion and it wasn’t enough to solve the infrastructure needs in Lagos. Out of that N18 billion, I think all that they disbursed was about N9 billion. The budget for housing was N1.8 billion for the whole of Nigeria. And the disbursement was N700 million. And the budget for power was N5 billion. We have changed that with the budget of N286 billion for works in 2016, about N80 billion for power and N35 billion for housing.
For the last three years, contractors haven’t been paid in Nigeria. The first payment they are receiving in three years was in July 2016. How does that translate to where we are, the federal roads run for hundreds of kilometres, even if they have N2 trillion cash today, they can’t build the road in one year, it is man-hours and material deployment day by day. That is our reality.
On the Lagos-Ibadan expressway for instance, the relief you are seeing have cost us over N22 billion. That is what they have received. Imagine if that N22 billion has been released on an annual basis. We just lost time and I want to emphasise, this is this government’s first full year budget. It started late, so all the implementation you have seen is about seven months.
Clearly, there is promise on the horizon. We don’t have enough money, our choices are made by our realities, we want to revamp the economy. We can’t build every road immediately. The roads that drive our economy becomes important, what drives our economy, energy. So, you must build roads that help us to evacuate our energy resources. In this regards, Apapa-Oshodi, Lagos-Ibadan routes become major considerations, so also are the Ilorin-Jebba, Benin-Ore, Oyo-Ogbomosho, Sokoto-Minna, Enugu-Port Harcourt-Aba roads.
The former Federal Secretariat in Lagos is a wasting asset. And is your being a 3-in-one minister a challenge?
There was a policy in the past to dispose of those assets and the federal secretariat I recall was one of those assets concessioned to a private group. There is a presidential taskforce that was set up to manage the exercise. That taskforce reports directly to the president, not to me. On my portfolios, I didn’t choose myself.
For me, every time you get the opportunity to serve your country, as long as you are healthy enough to do the job and you have ideas to pass across, you must not shirk the opportunity. If you do, you lose your right to complain if things are not done well. It is also not correct that it is one minister doing everything. We have two ministers in that ministry. I have a Minister of State who work with me. I have two Permanent Secretaries, very experienced and hardworking. I then have directors and assistant directors.
I think it is important if a study was done about the role of ministers in other countries. I see my role as resetting the focus leading the team. Management, sharpening focus, renewing commitment and dedication is really the heart and soul of my work. I am not the one who will go and do the power. I am not an engineer. I deal with letters and files, responding to the public.
Finally, why is there a disconnect between the military solution and political solution in the Niger Delta?
In my ministry, I am an end user of petroleum product – gas. The point is that I do not have ministerial responsibility to deal with the problems in the Niger Delta. My experience is that people will never be angry forever. Anger dissipates after time. There have been very consequential conflicts in Yorubaland. It ended eventually and the end of that conflict ultimately signaled development for them.
The message clearly is that there wont be prosperity and development, which is one of the basis of anger. All of those who live in that region must understand this in their own enlightened best interest. It is not only about revenue for the country but even developmental programmes for the region.
We have developed the right energy mix for Nigeria, says Fashola
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My People:The following information may be also helpful:Germany's Energy MixSouth Africa Energy MixBolaji Aluko--On Mon, May 2, 2016 at 2:27 AM, Mobolaji Aluko <alu...@gmail.com> wrote:QUOTEWe just approved about 14 different solar projects to generate a combined capacity of 1,286 MW and that is the biggest aggregation of solar project that the country has ever undertaken but those projects would not be delivered for another 12 to 18 months depending on how quick they come through with the agreement on tariff and the price which has made it difficult to close the agreement. I think it is important for the information of the public, to underscore that when you get a license to generate power, the journey has just began. If you are using Gas, you have to close agreement to guarantee the supply of gas otherwise you will have some of the projects we have today in Geregu Omotosho, and Olorunsogo where the gas is not enough because it wasn’t well planned..........Perhaps this should take me to the issue of location of the Power production facility to the source of power fuel. It is a very important issue. Once the generation plant is far from source of fuel what it invariably means is that the cost of that power is bound to go up. We have an Energy Policy that we met but there is no Energy Mix. That is what I am working on now, to develop an Energy Mix because we have many sources of fuel. We have solar in the North and what we are doing now is to find the most prolific Solar area of the North and I think it is looking like Jigawa and Kano where the irradiation is at the highest and classify that area as our solar belt. We would get land there from those states and know that our solar development for the next 15, 20 to 30 years will come from that place, put more solar manufacturing plants in that area and this way we reduce the cost. It is much more efficient for us to plan a transmission programme that evacuates all the solar from one place.
We are looking at the Middle Belt, and North Central for the most prolific area for coal production. As you would also see, that area and parts of the Northeast in areas like Taraba will have a mixture of some solar and hydro because of the projects that are coming there like Mambilla, and you already know about Kainji, Jebba and Zungeru, which is under construction now, in Niger. The Energy Mix in that area will be a combination of solar, hydro and some coal. For down South, in the South South and South West, it will largely be gas. In parts of the South East it will be a combination of gas and coal because the mines in Enugu still have their historic capacity which my colleagues in the Ministry of Solid Minerals are looking at. So once that Energy Mix is completed which should happen before the end of the second quarter this year, it is easier for investors to then know that if you want to do gas stay here, if you want to do solar, stay here and so on.
So all the transmission problems that we have had in the past will go away because it is now planned. This will affect pricing because if you put a Gas Power Plant in any part of the North today and you have to pipe gas from the South over 500 to 700 or 800 kilometres, the law says that for you to arrive at the tariff, it must factor in your investment and profit. So that, will include cost of the pipes and power. That’s going to be a high tariff. It would have been better if you build a plant in the Gas location in the Niger Delta and you transport the Power through transmission. Transmission is actually cheaper than pushing gas over 700 kilometres. This are some of the errors made in the past that we don’t want to repeat. Thankfully they are not many.
- Power Minister Fashola (April 2016)UNQUOTEQUOTESUNDAY MUSINGS: The Case for an Energy Emergency in Nigeria - Again
By
Mobolaji E. Aluko, PhD
June 7, 2015
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FIGURE 15: Suggested Regionalization of Energy Sources for Power Generation in NigeriaPower infrastructure development, protection and pricing
With respect to power generation, despite the advantage of use of gas in power generation, clearly exposure to gas supply vagaries must be reduced if power is to be available, adequate and reliable. One quick way is to convert as many SCGT plants to CCGT plants, which, while capital intensive, almost doubles the power capacity of the plants for the same amount of gas. Another quick way is that favorable gas pricing for power can also lead to some LNG being re-diverted to power generation rather than being exported, a reverse path suggested in Fig. 4a. Most importantly, the mix of energy sources must be enlarged and regionalized to include coal, (crude) oil, solar, wind, biomass and even nuclear technology (see Figures 14 and 15), with both distributed/embedded generation (of 20-100 MW per plant or even less) being encouraged nation-wide. Distributing and reducing the average capacity of each power plant, and increasing grid transmission voltage from 330 V to 440-726V (to reduce transmission losses) are essential options to consider and implement. Again, power-line protection, like pipelines, must be given national priority using security personnel and technology, while competitive tariffs (eg Naira per kilowatt-hr kWh of energy supplied) must be set so that private investors can re-coup their money (capex recovery, opex and maintenance sustenance, and profit). However, while users are interested in affordable tariff (naira per Kwh) regimes - whether single- or multi-year (MYTO); see Figure 18 - one can understand that they are most interested both in power reliability and in their ability to METER their own usage rather than be subjected to the present unsavory regime of estimated billings. Consequently an aggressive METER-PROVISION (including pre-paid metering) exercise must be embarked upon.
My People:So Fashola gets it....he just gets it....there is so much hope....never mind the caterwaulers....And there you have it.Bolaji AlukoVANGUARD
Electricity: The price Nigerians must pay, by Fashola
•Explains why he has no control over tariff
•Envisions a brighter future for power sector performanceBabatunde RAJI Fashola, SAN, responds to these Frequently Asked Questions about the Nigerian Power Sector. Fashola, the Minister of Power, Works and Housing, explains that there is a price to pay to have improved electricity supply.
What are the components required for generating electricity?
Perhaps the place to start is to say that the whole purpose of this discussion is to simplify what appears to have become a very complex issue. And first to say that, Electricity is not different from what you and l learnt in our Physics in schools; Energy resulting in alternating current and all of the technical processes. But to say that if you remember the Principle of the Dynamo and the magnetic fields and all of that, that is really what it is all about.
Simply put, the power plants that we have are nothing but very big generators. Power plants are just multiples of the small generators we use at home and just as the generators use fuel, petrol or diesel, the big power plants also use fuel. The fuel sometimes is gas, sometimes it is water where you have hydro-plant, sometimes it is coal. So we just need to understand that we are dealing with big generators, there is no mystery about it.
Let me also say that our energy supply is also behind the growth of our population. Today, in March 2016, we have just about 5,000 MW of power on the National Grid for about 180 million people. Now, we have been producing power since 1960 or thereabout, the old Electricity Corporation of Nigeria (ECN), the predecessor of the National Electric Power Authority (NEPA) and the Power Holding of Nigeria (PHCN), was created by a 1950 Ordinance and it started operations in 1951, probably over 60 years and from that time the cumulative power we have generated is 5,000 MW and we got to that a few weeks ago this year. So if you do a breakdown of about 66 years you look at averagely about 75 MW of power per year. And when you look at how our population has exploded between 1950, when it was about 37 million, even then corporate Nigeria as known today had not evolved, the Northern and Southern Protectorate, by 1962, l think we were about 47 million and now we are 180 million.
So part of the problem we have to deal with is how to equitably and sufficiently distribute what is not enough; clearly not enough. But again possibly, and I believe, can increase in geometric proportions if we all do the right things. One year ago, the holy grail for Power was 4000MW. That was what they were chasing, but less than a year later, we are at 5,000MW. So, if we now do the right things, we won’t have the outages that we have and instead of fixing and trying to stay at 5,000MW, we should be moving on to 6,000, 7,000. And probably be moving in leaps of 2,000MW and I think that is where we should start really, to just understand that background that there is nothing esoteric about it. It is more about how much we want it and how much price it is going to take from us in terms of our behaviour, in terms of our restraints, in terms of our sacrifice that determines how much more of it we can get.
What are the features of reforms in the Power Sector?
Well, l think before we go into reforms, let us also understand why reforms? Until about 2013, which is over 60 years ago, Government was the provider of electricity. Nobody else but Government except for a few gas-to-power initiatives by our Joint Venture partners like Chevron, Exxon Mobil and some other Independent Power initiatives, in order to convert the gas that they were producing. It was government in generation, in transmission and in distribution. And then the people of Nigeria said that government was not efficient, that government must change the system and that government must hand it over to the Private Sector. That was what the people of Nigeria said and in 2005, our elected representatives came together and passed one law called, the Electricity Sector Reform Act of 2005 and that was the beginning of reform. That reform was concluded in November 2013.
That was the privatization that the last administration did and it ended in the sale of 17 companies comprising six generation companies called the GenCos and 11 distribution companies called the DisCos sold to private organizations with government retaining certain levels of equity and ownership. But majority interest has been sold to private owners. The only one government kept was the transmission line. The Transmission System is the one we colloquially call the “high tension.” That is the transporter in the whole value chain.
I will now go to that value chain. In that value chain, it is important to talk about the fuel source because it defines the cost of electricity. Today we have power produced from two principal sources – Gas and Water which is hydro. Now before you get gas, you will either get it directly from production, which is called associated gas or from natural gas fields that has no association with oil. So you need to set up a gas production and processing facility to set up. That is a very big machine that you must raise money in order to construct. People must understand this. After you have produced the gas, you must now pipe it out and pump it into the generator. It is like building your fuel tank at home and now using pipe to connect it to your generator.
From the time the gas is going out, there is a meter saying how much gas I am sending to you the generator owner. At the point of intake, when you are receiving the fuel, which is the gas, you also have a meter measuring how much you are receiving. So just as your generator at home is measuring how much fuel it can take, it is measured because you have to pay for that fuel. And when you use it and turn the machine on to produce energy, when you are sending it to a transmission company, the transporter, there is also a meter at the generation end saying, “Ï am sending you so much power”.
So, he too knows what he is carrying. And when the transmission system is receiving it, it is also measuring and saying, “0 l got 10 “, and then it is delivering it to the DisCos. At the point the DisCos take the Power in, they too have meters which measures how much was received. The DisCos may say, you said you sent me 10MW of Power, l received 9.8 and that’s what l am going to pay for. It is now the Disco at the last end that does the hard business of distributing to hundreds of thousands and millions of homes.
At the point when the DisCos are pushing out Power from the substations, if you go to those substations, you will see meters of what is going out from each substation as bulk power and then it is metered at the transformer end into our individual homes so that it can be measured, the money collected and paid back to everybody.
Now, the impression has been created, perhaps, that the DisCos collect all the money. It is not true. The maximum that the DisCos collect is about 25 or maximum 30 percent of what they collect from consumers because they must now pay the transmission company, they must pay the generation company and they must pay the gas company. Once there is a default on that value chain, the power system is in trouble. Because there must be continuous supply of gas and continuous wheeling of energy. So if you are an operator or a transporter in that system and you don’t get paid will you continue to render service?
This is the reform that had taken place. Will it work? I believe it will work. Does it have challenges? It does have challenges and this is not the best that could have been done. But I don’t want to bemoan yesterday. I want to deal with today. I want to plan tomorrow from today. That is why I am going around from one power plant to another. I have been to Kainji and Jebba hydro Power Station, I have been to Egbin Gas Power Stations, I have been to the old Oji River Power Station which used to run on coal. It has been dismantled now. There are still many more to see, l have been to the major transmission Stations across all the six states in the North Central area of Nigeria. I have been to them and my learning still continues because I need to see what I am employed to manage, I have heard about it in the briefings now I am going out to see and what I am telling you now come from what I have seen, what I understand and what I am still learning more of. Some of the people who come to speak without visiting some of these Stations, without knowing how they work, I wonder how our people find them credible and believable and I will address some of those comments as we go on.
Power is a capital intensive venture that requires foreign investors. Why is government not looking in this direction?
Power is too strategic, just like fuel, to leave entirely in the hands of foreigners. And as a matter of National Security, we can’t leave all of our power to foreign investors. They can play in the environment as they already are, there are investors from different parts of the world now. But listen, Power is a strategic security asset. That is one side of it, the other side of it is that, we complained that most Nigerians don’t invest in their country, they keep their assets abroad; they have invested here now and we must give them some support. We must give them some token acknowledgement. They could have refused to invest at all or they could have even taken their money abroad.
When you look at economies like the United States today, you can’t talk about the prosperity of their economy without talking about people like Rockefeller, J.P. Morgan, the Carnegies and so on that built that economy. They built the first oil wells, the first rail lines, the steel plants and other big projects. J. P Morgan financed the production of electricity although he is much more known for Banking and Finance. And l think that, in my own little way I am beginning to see that generation of Nigerians beginning to emerge, funding infrastructure, strategic national assets and venturing into entrepreneurship. That is my sense of it. Now the interesting thing is that in the last few weeks there has been enormous appetite for investment in the power sector. International brands that I worked with when I was Governor have come and they are seeking to invest in buying equity in some of the existing distribution companies and generation companies. That means Capital is coming into the Sector.
Also some people are wrongly directing proposals to government to supply electricity accessories. Such proposals should be properly directed to the GenCos and DisCos and not to government what government does now through TCN is building transmission lines. For those who want to generate power, their proposal and license applications should be directed to NERC. We are now just supervising the architecture of power. But indeed there is a lot of appetite for investment in the power sector.
We just approved about 14 different solar projects to generate a combined capacity of 1,286 MW and that is the biggest aggregation of solar project that the country has ever undertaken but those projects would not be delivered for another 12 to 18 months depending on how quick they come through with the agreement on tariff and the price which has made it difficult to close the agreement. I think it is important for the information of the public, to underscore that when you get a license to generate power, the journey has just began. If you are using Gas, you have to close agreement to guarantee the supply of gas otherwise you will have some of the projects we have today in Geregu Omotosho, and Olorunsogo where the gas is not enough because it wasn’t well planned.
NERC and NBET now insist that they must see the agreement for the purchase of gas before they sign the Power Purchase Agreement (PPA). Once this is signed it is almost a certainty that the plant must be built. Once you take the PPA to the bank you get money because it means there is a guaranteed purchaser who is ready to take the power. It was PPAs that we used when I was Governor to build all those plants for our Water works; for Lagos Island, for Lekki, for the Free Zone, for Mainland in Ikeja and for the hospital and all of that. Once you signed a PPA, take it as done that project will happen. In an environment where there is not enough gas, where there is inadequate price, you won’t sign a PPA, and once you don’t sign a PPA, there is no power project. It is important for people to understand this as well. But what we are trying to do is to reduce the time frame in which this is done.
Perhaps this should take me to the issue of location of the Power production facility to the source of power fuel. It is a very important issue. Once the generation plant is far from source of fuel what it invariably means is that the cost of that power is bound to go up. We have an Energy Policy that we met but there is no Energy Mix. That is what I am working on now, to develop an Energy Mix because we have many sources of fuel. We have solar in the North and what we are doing now is to find the most prolific Solar area of the North and I think it is looking like Jigawaand Kano where the irradiation is at the highest and classify that area as our solar belt. We would get land there from those states and know that our solar development for the next 15, 20 to 30 years will come from that place, put more solar manufacturing plants in that area and this way we reduce the cost. It is much more efficient for us to plan a transmission programme that evacuates all the solar from one place.
We are looking at the Middle Belt, and North Central for the most prolific area for coal production. As you would also see, that area and parts of the Northeast in areas like Taraba will have a mixture of some solar and hydro because of the projects that are coming there like Mambilla, and you already know about Kainji, Jebba and Zungeru, which is under construction now, in Niger. The Energy Mix in that area will be a combination of solar, hydro and some coal. For down South, in the South South and South West, it will largely be gas. In parts of the South East it will be a combination of gas and coal because the mines in Enugu still have their historic capacity which my colleagues in the Ministry of Solid Minerals are looking at. So once that Energy Mix is completed which should happen before the end of the second quarter this year, it is easier for investors to then know that if you want to do gas stay here, if you want to do solar, stay here and so on.
So all the transmission problems that we have had in the past will go away because it is now planned. This will affect pricing because if you put a Gas Power Plant in any part of the North today and you have to pipe gas from the South over 500 to 700 or 800 kilometres, the law says that for you to arrive at the tariff, it must factor in your investment and profit. So that, will include cost of the pipes and power. That’s going to be a high tariff. It would have been better if you build a plant in the Gas location in the Niger Delta and you transport the Power through transmission. Transmission is actually cheaper than pushing gas over 700 kilometres. This are some of the errors made in the past that we don’t want to repeat. Thankfully they are not many.
If the Government has sold the DisCos and GenCos, why is it still in charge of increasing tariffs?
Let me say first that as Minister, I have no power over tariff. Any interference that I make on tariff would be an unlawful one. I have no powers over tariffs, but an opinion and I think it is important to make that point. The authority vested with deciding tariff matter is the Nigerian Electricity Regulatory Commission (NERC). It was created by the 2005 law which the people of Nigeria, through their representatives passed and I think it is a good law. The power to review tariff is vested in provisions of that law. Of course, they will not set tariff without notifying the Ministry.
The important thing to say about this last tariff is that when privatization took place, the last administration knew that they were not doing market tariff. It is important to say this and I think they should have been honest and open with Nigerians to say this is the price. But they sought to inch the price along, especially because of the advent of elections. And so people had already began to get an impression that tariffs were just going up every time. So instead of taking us to that tariff once, they were inching us towards it. So the impression was created that the thing was going up every day. So I understand the frustrations and the reactions that trailed the last tariff.
But there are two broad lines between the two tariffs. The old tariff was going to continue to go up. How did I know? I was the first person to oppose the review of the tariff when I was briefed. Why are you reviewing upward? Why can’t we have Power? These were my initial reactions when l first became Minister. Then, I was taken through all that had happened before, in my opinion and I saw in fact that the tariff was reviewed upwards but was reversed by the last administration because of the elections and during that reversal liabilities had accumulated; about N200 billion liabilities had accumulated.
In order to validate what they were telling me I called a meeting of all the DisCos and the DisCos took me through all the challenges that they were facing. It wasn’t that they were without blame, but these were the realities and if we kept the tariff going like that, every two years, Nigeria would be indebted to them to over a trillion Naira for an asset we had sold. So we were going back to an era of subsidy for people who are supposed to be operating commercially. I couldn’t recommend that. If we had a trillion Naira to spend on Power why didn’t we give it to PHCN. If we had done that we won’t be where we are today. So this was what changed my thinking, because without a doubt as I have always told people there is problem with gas. Gas production for local use was low because the price was not right. Local gas use was selling at $1.30 and for export it was $4. If you were producing gas where would you sell it? So we needed to raise that price to get more gas to our idle power plants. So by the time I became Minster that decision had been made to add two dollars to the price of Gas to take the price of Gas to $2.50 and to allow for 80 Cents transportation which came to $3.30 from $1.30. If gas was the major material for producing power, how sensible is it to expect that the major component, the palm oil that you would use for cooking your soup, the price would go up and the price of your stew would not go up. So that was the basis when l surrendered my objection to tariff review.
As l said, l have no authority but l have an opinion and l saw that this tariff, as challenging as it might be, was really the driver for gas. It has become the incentive to supply gas; if we get more gas, we will get more power. How did we reach 5,000 MW? We haven’t built any new plants, we just got more gas into the existing power plants and the more gas that comes, the more power we’ll get. We still have power plants in Geregu that has six turbines, only two are working; four are idle. Each one of them has 115 MW of power to produce, so that’s 460 MW of power idle. Omotosho is running at half speed, Olorunsogo is running at half speed, the old Lagos IPP built by Governor Tinubu now managed by AES is lying fallow in Lagos, 240 MW, no gas. So if the price of gas is not right, you won’t fire those plants. It’s that simple. That was why, it made sense to me to support it but the decider was NERC, not me.
With the increase in tariff will Nigerians now have stable Power?
There is still a lot of work to do. What I can tell you is that if we can get the cases out of court against the tariff, we get the cases out of Parliament against the tariff, because I believe that business men like to deal with their regulator not with politicians, they understand business rules they don’t understand political rules, then you create stability in the market. Business men are confident; they know that the game won’t change. They will take position and in that way, you will see first incremental power. If you don’t have incremental power, moving from 5,000 to 8,000 and upwards like that you can’t equitably distribute what is not enough. The logic behind it is like ten people are thirsty and there is one bottle of Ragolis water and they ask the seller to buy more Ragolis water when the cost of production has increased and they are not ready to pay for the difference, they won’t get enough Ragolis water to quench their thirst.
Electricity is compounded by the fact that you cannot store it. Once it is produced, it must be used. But the more power we produce the more stability we will see. I can guarantee that but I cannot guarantee that people will not go and cut gas lines. I can’t guarantee that people will not go on strike and go and shut down distribution companies or transmission facilities or the Control Centre in Oshogbo because they want some of their colleagues to be kept at work. Is it profitable to discomfort a whole nation in order to protect 200 people? Because that is what happened in Ikeja DisCo.
If there is a dispute about policy in the NNPC about restructuring, is the answer to a welfare issue that can be negotiated, resolved or even litigated upon in a court or before an arbitration panel a shut down? Instead of choosing those options, the chosen option was to shut down the gas pipelines. As a result, 13 generation plants were shut down. Was that the best answer? I can’t guarantee people’s behaviour. So it is actually the people who are supposed to be producing the energy that are shutting down production in both the gas companies and DisCos. It is not the President or the Minister. So we need to have a rethink about the productivity of that workforce. What are they doing? What are they contributing to our national productivity? Because, as I said, I am a lawyer and I do not know about the technical side of electricity except what I am learning. But you know what; very highly educated engineers like Engineer Makoju and Prof. Barth Nnaji have operated in this Ministry. It wasn’t that they were not good enough; it was because of some of these attitudes.
So, as far as technical capacity lies, we have it. In terms of technical capacity, Engineer Makoju can fix things but he cannot run a power plant on his own, people were employed to do that. I know that Prof. Barth Nnaji knows much more about gas than me but he won’t operate a gas pipeline on his own. The job of a Minister is to coordinate all these activities together in order to engender productivity. If there was a war today, President Buhari, with all his military might would not be the one to carry the gun. His role would be to coordinate. So that is the productive force. What are we getting out of it? That is a question we need to ask. It is, therefore when we all sign up for qualitative and uninterrupted power supply that we can then guarantee what you are talking about.
Will the Power sector not be better off with the spread of metering and bringing more consumers into the meter net than increasing tariffs?
Deregulated, privatized, regulated; they are terms of art. The real purpose is to allow business operate on a commercial basis, in order to create competition, in order to engender productivity. Now meters in electricity production are not as freely sold as the readily available telephones, because there are codes, there are standards, and because of safety as well. Improperly installed meters may become a potential source of danger- fire; using cheap meters can cause accidents. There is a regulatory agency which regulates the types of meters you can use. Installation of meters is a very technical things because the Operators are saying that some people even by-pass their meters.
But what is the meter when stripped of its technicalities? An electricity meter is basically just a measuring device to measure how many units of power you use. Meters on a basic level are comparable to measuring devices such as fuel pumps, plastic water bottles and mudu cups for measuring garri. But we can’t leave meters without going back to tariff.
We have about 180 million people. But all the DisCos combined have just about six million consumers in their database combined for Nigeria. Are you telling me in reality that it is only six million people that use electricity in Nigeria? So you can imagine the number of people that are using electricity that is not measured, that is not metered, that is free. Out of that six million that they have, they have metered about three million, inherited and added on. So there is still a gap of close to 50 percent of that six million that need to be metered. Now, in deciding that tariff what did we seek to achieve? It was to say, “stop giving people fixed charges, it’s unfair… Take it out,” because there is no fair basis for doing so.
In deciding tariff again what people must understand is that consumers are classed in different categories. R1, for example, is the most vulnerable class of consumers, their tariff is about N4 per kwh or something like that. It remains unchanged. It wasn’t changed; there is a protective policy for the poorest of the poor that if we get power to them they must not pay more than this. These are people who use not more than a light bulb and radio. They don’t have fridge or any big appliances. Then there is R2 one phase; these are people who have the basic one fridge, television and radio. Then there R2, 2 phase and R3, these are those with big appliances, DSTV, air conditioners and all of that. Those are the people whose tariff really went up because they form the real bulk of those who pay for electricity. When you flip it around, it is almost like a type of cross subsidy, let those who can afford pay more and let the poorest of the poor stay where they are, don’t change their tariff.
Then we removed, through NERC, the fixed charge, don’t pay the fixed charged any more. We now told the DisCos “If you get this new tariff, if anybody complains that his bill has gone up, and he disputes that bill, that person is only liable to pay his undisputed last bill”. You cannot say because your bill has gone up so you won’t pay; pay your last undisputed bill so we know you are complaining in good faith; you are not trying to game the system. From that point on, the DisCo cannot disconnect you. If he insists you used the power, let him come and prove it. The only way to prove it is to measure it. That was the first incentive to force the DisCos to meter. But we also had to give them the incentive because people should not forget that meters cost money.
On the average, some of the DisCos that I know used to have about three to four hundred thousand consumers that they have to meter and given some of the numbers that I have seen, those run into no less than seven, eight to ten or 18 billion Naira to cover. You don’t keep that kind of money in your pocket, you must go to a bank. Now if a bank wants to lend you that kind of money it wants to see that you can pay and if you are doing it with the old tariff clearly no bank will lend you money because it is an unsustainable business.
One of the examples I use is the person selling iced water and the price of ice block has gone up and you say he can’t increase his price but must go and buy more bottles, to sell to who? He won’t recover. That is one thing people must understand about the philosophy behind the tariff.
And the other point I want to make is that many of us have generators and we also have inverters. The combined cycle of our inverters and our generators does it produce 24-hourelectricity? It does not. Your inverter can only run for about eight hours and so can your generator unless you want to kill it, and that is 16 hours out of 24; you still have eight hours gap. If you combine the cost of the generator, the cost of the inverter and the diesel to power it as well as maintenance cost, how much does it add to, to generate 16 hours of electricity? And then we expect somebody to generate 24 hours of electricity at a cheaper price. That is one way to look at it. And if you cannot do it yourself at a cheaper price, is it fair to ask someone else to do it at a price cheaper and a longer period. That is one side of the coin. The other point and about increasing power is that the old tariff did not allow people to buy power at premium except you were a government agency which was what we did in Lagos. So if for example my diesel costs about N50 a week and I have someone who could give me power at N30 a week and public tariff is about N24 a week, there is no way I can’t take that power at a premium because it is still cheaper. But the old tariff did not allow that. It fixed everybody at the cap. But in the new tariff, we recommended that they should have willing buyer and willing seller. What that would have done if it hadn’t been challenged in court was that it would have allowed the embedded power that people were asking for to take root in various communities across the country in such a way that those who wanted premium power would take premium power, free off the Grid for those who did not want premium power.
But again people have said no; perhaps they did not understand. This was a tariff order that was more friendly ultimately to the consumer. And as I said, the old tariff was going to be going up but this new tariff would be coming down in 24 months on a progressive basis.
Now I also wish to make this point and I shouldn’t lose the opportunity. I have said that the R1 consumers were protected and so on; but we have heard allegations that the Tariff was increased by 45 percent. That is not correct because the price of power is not exactly the same in e very DisCo just as the price of garri is not the same in every state. So if the amount is not the same can you increase them with the same amount uniformly?
How is tariff derived? Tariff derivation starts from the Discos and not from NERC. Each DisCo must hold consultations in its operational area with stakeholders. The law did not say who are the stakeholders but the law did not mention Labour. But each DisCo must now file a return to NERC because NERC is now the referee to say, “Oh you said you consulted people, we want to know who attended. They look at their records, they ask for video recordings and make sure that it happened. And I saw their reports. The interesting thing was that representatives of Labour were present at those disco meetings. May be not in enough numbers but what is enough numbers is a matter for debate. Did they consult? Yes. They issued advertorials as required, in radio, some used radio and television, some used radio, TV and newspapers and some used only newspapers. Once the publication has been made, did we respond? Were we sufficiently educated? I think these were the issues that went on and we saw the classification of people that went there. I saw in their report representatives of organized labour who attended the meetings and signed with their names and email addresses and telephone numbers.
So some of the things that have been put in the public are false because there is documentary evidence to show that there was consultation. Was there enough consultation? We can continue to debate that, nobody is ever guilty of over-consultation. If you want to get opinion of everybody in a community you do poll sampling.
You don’t speak to everybody in order to get opinion about a poll and that is the whole idea about that. There is also a provision in the law that anybody who is not satisfied with the tariff pronounced by NERC can file an application to NERC asking for a review. The law didn’t say you should go and protest or go to Court or Parliament.
The law says you should go back to NERC which is obliged to review it. So all of us must become familiar with the consequence of this reform. But in order to close this part, and it is the most important part of the discussion, is that it is the tariff that gives stability to distribution, to transmission, to generation and to gas production. If you don’t have that stability, if you have all the generation capacity, the distribution companies won’t take power, just as you have heard, some are rejecting power because they can’t sell it. And once it has been sent to them, it cannot be stored and they can’t wheel it on. That was why I expressed my opinion and appealed to Nigerians, let’s support this. I think it can work.
Today, NERC has issued over 100 licenses for power generation but if the tariff is not right, they won’t translate to power plants. If we allow this stability to stay, I am convinced from what I have seen so far, there can only be incremental power because power is the real business now that everybody is interested and once Nigerians are interested in doing something they don’t lose, they don’t give up. They have this energy. You will see the penetration we have achieved with GSM. Even those we met ahead of us we overtook them. So that is why I am optimistic. But we must set the ground rules.
With widespread complaints relating to issues of load shedding, ageing or non-existent transformers in some areas and estimated billings: Why is there poor customer service instead of improved service in the power sector ?
We have talked about how long privatization has taken, nearly two years. I’ve talked about the transition in knowledge and capacity. Most of the power plants are very old. Most of the transformers are very old, 30 to 40 years and they are being refitted slowly.
I was in Jebba Hydro Power Plant which was built and commissioned by President Buhari when he was Military Head of State. Part of the maintenance schedule for Jebba was a full turn around service scheduled every six years after commissioning. It was not done until 2013, almost 30 years later, so how do you expect that to deliver efficient power?
The same thing happened in Egbin, turbines were down; parts were being cannibalized and so on and so forth. At Oji River Power Station, after cannibalizing the old coal plant one turbine at a time, in order to save the other turbines, the whole system finally collapsed and somebody suggested that it should be scrapped.
So that is what the businessmen have bought. In the same vein, similar to the same backbone that the GSM operators had of 250,000 lines prior to expansion to the current 100 million lines.
So that’s another analogy. So you will have epileptic power supply from time to time until all the equipment is refurbished, changed, upgraded and more power is built in. But as I said, the focus is incremental power. Now why is that important? It is important because all over the world, machines and turbines break down. The reason you do not notice them in those parts of the world is that they have enough and they have redundancy.
When one is down they switch to another because they have enough and they have time to carry out routine maintenance on the broken down machines. If you have only one generator in your house, it will not generate power for you while it is being maintained if it breaks down. If you have two, you have a backup. This is just a context for you to see all of this.
But customer service must improve. At our meeting in Enugu I said to the DisCos “you have to lead this reform now by taking ownership. You have to have complaints officers that people can reach to explain why they could not have service and how long they have to wait to get it”. That is customer service. They can wait out a problem if they know what the problem is and how long it will take to solve it. But it becomes frustrating if they do not know what’s going on.
They need to open more customer service outlets just like the TELCOS have done. Some of them are already opening up portals on the internet which we must also use because they are trying to cut cost. The more customer care centres they open the more rental they pay and you see when they are going to pay rent nobody wants to accept one year rent they all want 3years rent in advance.
So these are part of the cultural issues that you and I must also change because they can’t build all of those facilities, they will need to rent. Well, I am sure that their business will be assisted if they see someone who will accept 6 months rent rather than 3years rent in advance. But as the equipment get upgraded they will get better. As I pointed out, all of the lines that come to our homes now don’t belong to NEPA again but belong to the DisCoS. As they age they must change them. They must change within that bandwidth of money they get. Bulk power today for gas is about N13.50kobo per kilowatts, N2.50 kobo for transmission to carry it, you are at N16.
The average tariff now is about N24 so N16 to N24 is about N8 and that is the margin of the DisCo to operate its station, get the power to you, to fix broken transformers, to fix your line, to get people to come and repair and so on and so forth. That is the reality. It can be a very profitable business in numbers but it can also be challenging.
Why not use solar and wind for cheap power if the cost of gas is too expensive?
There is a lot of misinformation being thrown out there by people who claim to know, who either have not verified what they learnt yesterday or deliberately seek to mislead the public.
Today, the cheapest source of energy is hydro because the turbine is driven by the force of water to create electricity. Hydro is about 4 cents per kilowatt hour followed by gas which is about 11 cents per kilowatt hour. If you multiply that by N200 per dollar hydro comes to about N8 per kilowatt hour while gas come to about N22/kwh.
Now the minimum tariff for solar is 17 cents which works out to about N34/kwh. How do you index a tariff of N34 for solar energy on people who are resisting tariff of N24? It cannot be cheap after accounting for imported costs of shipping, transport and demurrage. However, it can get cheaper with locally made photovoltaic panels and cells.
As for wind power, upon assumption of office as Minister, even I questioned why we don’t make use of wind energy. The simple answer is that we lack the required wind speed because of our location as a country. To achieve the necessary wind speed of 8 mph as compared to the 4 mph typically available in Nigeria, taller and more expensive wind towers will be required to achieve the same result. If you need a storey building to achieve something and I need to build a 6 storey building to achieve the same result, then I am definitely at a disadvantage compared to you. These are some of the factual realities our experts have not told Nigerians. And so, the answer is again in the energy mix. Take the power closest to the energy and fuel source which will help reduce both tariffs and production costs while making evacuation easier because of an increased ease of planning.
What is the future of Power generation in Nigeria given the current state of the Power assets?
I think that as long as we can excite the investors’ confidence, the future of power generation is bright.
Today, incidentally, I just saw the head of the international nuclear agency who visited to assess the progress of Nigeria’s nuclear power because we are already pursuing, from the previous administrations dating back about 15 years, a nuclear programme.
The plan ultimately is to start to produce nuclear energy, 1,200 mw at start, expanding up to about 4,800 mw as we go forward because that would be, again, the new power for developing an emerging economy because most of the big, global economies have signed up to Cop .21 and the Climate Change obligations to reduce carbon fuel use and therefore nuclear energy will be the alternative energy they will be looking at.
Therefore, we will benefit from the technology as time goes on. So the future really, for me, is a very hopeful future. We can ramp up on solar, reduce the cost, we can ramp up on gas, produce more, and we can ramp up on hydro because Zungeru Power Project is now back on stream. Construction stopped for about two years due to court cases and other hindrances. Thanks to the initiative and dedication of the Governor of Niger State, all the cases got out of the way in order for the construction workers, about 800 workers to get back on site.
So, there is so much opportunity for inclusion and jobs if people just allow this thing to play. But we can’t force people to do the right thing and that is why I have decided that this discussion is important to educate people and to let Nigerians know that it is one thing to elect a government and another thing to stand by your government, through the distance. And I think ,this is the time the government needs the people to stand by it, and to tell all of those who seek to obstruct the plans that this government has.
There must be a continuing ownership of the policy of government. That is the way you give support, and every time your government looks back, the government sees that you are still there, the way you were during the campaigns and during the voting. That is a fuel that government needs to carry on without looking back.
Pipeline vandalism contributes largely to the poor generation and transmission output currently being experienced. What steps are you taking to put a stop to this?
I think the biggest contribution will come from the communities through whose territories these pipelines pass, to take ownership, to stand as security vanguards for the protection of pipeline assets because if the pipelines work it benefits them more. With the best of intentions, how many kilometres of pipeline could any government really police? And they are as diverse as they are lengthy.
So it is a cultural and behavioral remake that we must have, that no matter how aggrieved or upset we are about anything, government assets that deliver power, that support the power system and the economy of the country are not things that we can take our anger out against.
There is no society in the world that I know, as vexed as they may be in Europe, as vexed as they were in the Arab Spring, they didn’t damage their power assets and they didn’t damage their gas lines. And I think that is the message really to us. Those assets must remain inviolate. All of us must protect them as if they were our personal assets. And that is when we can then begin to say we will have uninterrupted power.
No matter what anybody does, once you take out a gas asset, no matter how much power you have, you shut down the system. From the last outage we had now, it takes days to restore the system back because you have to get the pressure back; before you can begin to hook up all the power plants. So it’s like when you have a dirty fuel filter in your car, it just begins to jerk. And when you drain the tank and switch on the engine, clearly you won’t have enough fuel. You need to wait for the fuel line to be suffused with enough fuel for the pump to activate before driving the car again, so it is the same, it’s not different.
What are some of the things you have been able to do since you assumed office?
For me it is premature to talk about achievements; this is a journey that hopefully will take us to 2019 when the government’s scorecard will be assessed. So, I don’t think perhaps it is the best time to measure events. Rather we should measure trends. One of the trends is increased power production and that is important. But there is still a problem as I have said. I don’t want to talk about energy in terms of megawatts but in terms of access; how many more people have access to more reliable electricity? That is what is important to me. The amount of electricity produced is meaningless if people can’t tell me that they are getting it.
But there are problems along the line. One of the things we have succeeded in doing is building the team to begin to interrelate, that’s why we hold those monthly meetings now because as a ministry we can’t deliver power on our own.
We can regulate the GenCos, DisCos and the transmission company (TCN) however we don’t have power over the gas companies as they are regulated by another ministry, the Ministry of Petroleum Resources as well as NNPC. So we need to work with them. So these are the partnerships that we have forged together. At those monthly meetings now there are very senior representatives of those gas companies sitting down with us and taking instructions.
So, some of the things we have sorted out, for example, at the last meeting, NEMSA (the safety agency) had a complaint from a DisCo that their meters were not approved for use. In that meeting we resolved it and within 2 weeks, their meters were approved for use. We have issues with gas supply to one of the major power plants, the 240 MW Power Plant at Egbin in Lagos. The groups are talking now; they have reached an agreement so they are going to the gas company to get gas. That, for me, is progress.
We had the issue of the unfortunate incident of the young lady who was electrocuted in the University of Lagos. When I became Minister, we stepped in because she had a sibling that also had issues and compensation. We have closed on that and for me again that is progress. We have this court case that has been in court for about 13(thirteen) years. Let me put it differently and accurately, there is a contract that was awarded in 2003 for the supply of meters that was awarded by the old PHCN and it has ended up in court. So that is for 13 years we could not supply those meters and people were bickering and fighting. We have taken that case, really, out of court and we are trying to close it and hopefully take delivery of the meters that have been locked up in a warehouse, I think about 300,000 meters or so. Hopefully they will be useful for some purpose, I do not know.
There is a problem with Aba DisCo, by Geometric Power Plant, there is 190 MW there and they are having issues which they were not talking about. We got them to start talking, because if they close an agreement then there is potential to get 190 MW onto the Grid. There is a construction project for a transmission line to feed Alaoji Power Plant and all the way to the South East and the South South.
Now, part of the problem, in fact one problem out of the many on that project, is that there is a telecommunications mast belonging to one of the TELCOs. And let me say this publicly, it belongs to Globacom (Glo). And I say this publicly because the Chairman of Glo must be commended for his sense of patriotism. Because of this, they could not energize that line, and that is one of the problems. There are other problems. And I said “Glo, I know him and I will call him”.
And I called him and said: “Look Sir, we have this problem and I do not know who got there first but it is easier to remove your transmission mast than for us to remove a transmission line that runs over several hundred kilometers. Can you please move Sir?” And he said to me, “Look, it will be done in a week,” and it has been done. So we have cleared one problem and we are moving to the next one. There are still other problems such as procurement and so on.
So these are some of the things that have been going on backstage. We are also getting the DisCos to take on their responsibilities. We have published the names of all of the heads of the DisCos in the newspapers so that people can know who to call if you have a problem in your distribution area. People call me from as far as Borno State. Now, there was a line that was damaged during the conflict in the Borno which we have restored back to operational status. So these are some of the problems we are solving. People call me from Calabar, Warri, Sapele etc. that they do not have power, but people are also not reporting to their DisCos. So instead of coming to me in Abuja, deal with your DisCos in your area.
So we are populating information out about who to call and how to solve complaints. But as they come also, I must commend the Director of Distribution in my Ministry too. As I send those complaints to her, she notes them and is calling the heads of the DisCos. So all of these things are going on but, these are things that should not be escalating to us in Abuja. They should be dealt with at the customer service level in the states.
Consumers too must be up and doing. If there is a fault, go and report it. Sometimes the DisCos do not know that you don’t have power but they are transmitting and distributing power. But again, as they bring on meters, the smart meters they say they are installing then hopefully things will get better. And one of the things to say about meters, some of the complaints we’ve had, and people must just before they get angry, think.
Sometimes when they want to come and install meters, people are genuinely not at home. These are some of the problems. And when you look at some of these mass exercises we have done, such as SIM card registration, we always leave it until the last minute. BVN, we left it until the last minute. So, if the whole of Nigeria has not been metered for 66 years, and suddenly we want everything to be donein one year, how really rational is that? Did everybody get a cellphone in the first 2 years? And yet, the phone is something you can freely go and buy for yourself. Some people still do not own a cellphone as we speak. So, for me it is a progress on a journey, and I am optimistic it will be done.
Three solutions offered by a critic
- Trucking of Liquefied Natural Gas (LNG)
- Localization of generation, transmission and distribution through micro power plants
- Enhanced stakeholder inclusion to incorporate investors
What was refreshing about this was that at least someone was offering a genuine alternative and it was different from the cacophony of complaints that had characterized the industry. And I say this with respect, many of the commentators just didn’t see anything that was right but they didn’t offer a solution.
Now, the problem with these alternatives, as I know it, is that first of all trucking gas, and I think I read trucking about 500 trucks of gas a day, overlooks the fact that pricing location of the power plant to the gas source is the key to sustainable power.
So, when you start trucking 500 trucks of gas every day, who will bear the cost of that trucking? Because transportation becomes incidented to the price of gas. And where do you put it in the tariff? A tariff we are saying people are still finding hard to accept, and then you want to incident cost of transportation into it.
You see, and when you look at it, that is why in the past, and even till lately, we had the Petroleum Equalization Fund (PEF) which ensures that the price of petroleum products is the same nationwide. It is another subsidy; can we afford to subsidize power again at this time? I am not sure we are ready for it. I think when the market plateaus, and we actually know where the problems are, government can then come and say: “Look, I will carry transmission free as my subsidy”. We can, and I think we will get there. It is premature, the market must play. So that is one limitation with that solution.
The other suggestion I think was the embedded generation. Again, it overlooks the gap between the tariff that I have talked about. So, the only way people can have embedded generation is if willing sellers can sell to willing buyers. Yesterday at our meeting, one of the complaints we received was simply that the people in GRA in Ikeja, Lagos had written to NERC and they had not yet gotten a response. They were asking that NERC approve for them to buy power from the Lagos Mainland IPP that we built during my tenure as Governor, because they felt they needed only about 2MW of power to meet all their needs in the community. So, we will see more of that coming to play once the new tariff settles down because it allows willing sellers to sell to willing buyers.
We also have applications like that from people on Banana Island that we are looking at, and there are a couple of them like that popping up. There are private companies whom are generating their own power and want to offer more power onto the Grid, but again it is a question of pricing. So, that contribution overlooks the fact that one will not happen without the price. It is more expensive to sell small power than it is to sell big power, and I mean that in the sense of coverage. So, if you are selling to a thousand people, your prices are more competitive than if I am selling to 100 people because I am going to sell at a premium. But once those who buy at a premium take their power that is when what they were using from the public power will be freed up for the 1000 people.
As I said, nobody could ever be guilty of over consultation with stakeholders. What we are often guilty of is under consultation and the point is that this is a representative form of governance. So, how many people will be enough consultation? That part of it is welcome, continuous consultation never hurts anybody but if you spend all your time consulting, you will spend no time doing anything at all. And there are times when you think you have sampled enough; you’re right because sometimes to be honest what you hear is more of the reason why it will not work. I am always looking for one reason why it will work so that I will go and try it.
This job can be done, we can have power but it will come at a price, and not just the price of the tariff but also the price of our own restraints. Our sense of understanding that even though electricity works like magic and you just flick a switch, there is a long process that many of us do not see which results to that magical act. And anybody who disrupts that system, really, is not a friend of our country, is not a friend of the ordinary people, is not a friend of the champions of change who elected this Government.
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Mobolaji Aluko
“We see a lot of people trying to develop solar power here in the south but again it will be expensive because the sunlight here is not as prolific as it is up north.“ - Fashiola
Absolutely shocking statement to make, either he has obviously been ill advised by officials with mediocre knowledge of solar energy generally, and in particular, recent developments in solar energy or, he has mastered his brief. In the South, we receive more solar radiation at any time than most developed countries that are investing heavily in solar energy. The equator is at zero degree latitude, Southern Nigeria is at 4 degree latitude (very close to the sun), Northern Nigeria is at 6 degree latitude (a little bit farther from the sun) whereas the developed countries are 50 degrees latitude and above farther from the equator, yet no such frivolous claims underpin their energy policies (See the attached taken from my office window). It is ‘visible light’ which is responsible for the photovoltaic effects (conversion of light to electricity), not the infra-red component of solar radiation. In fact, when it is excessively hot, the infra-red radiation adversely affects the conversion efficiency of solar panels. During raining season when cloud prevail, solar panels of nowadays are so optimised that there is still sufficient solar gain to effect electricity generation. Indeed, in addition to conventional functions of converting light to electricity, additional functions are now possible where solar panels produce electricity from rain water harnessing the ions from rain water. In France, innovative solar cells (available for purchase) have been incorporated into a 1 kilometre stretch of road producing enough power to light a village. If Fashiola wants to carve a history for himself, I urge him to seek an urgent meeting with Prof. Olurinde Lafe of the Federal University of Technology Akure to rub mind.
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Mobolaji Aluko
Bolaji Aluko:
Thanks for your response, particularly the analysis on solar thermal energy. Solar thermal, as an energy source is well known to anyone in the energy research arena, which you know very well it is not what Fashiola was alluding to in his interview to which I responded. Why you chose to totally change the context of discussion beats me hollow, particularly as you yourself alluded to that the technology and innovation in solar thermal is in its infancy with demonstrable prototypes in existence here and there. The issue I addressed has nothing to do with North versus South in terms of where best to harness this energy source, it was directly to do with the statement by Fashiola: “We see a lot of people trying to develop solar power here in the south but again it will be expensive because the sunlight here is not as prolific as it is up north.“ Here Fashiola did not say lot of governments, the emphasis was on people – in other words, it is individual efforts, be it persons or corporate body that was emphasised. Can you, in all honesty say that Fashiola was referring to solar thermal in this context - that lot of people are trying to develop solar thermal in Nigeria? If this is not the case, what was the basis of your response? Perhaps, you do not appreciate the statement of Fashiola from the viewpoints of environmental and energy policies respectively, particularly in areas of decentralised off-grid electricity supply. How can solar power be more expensive than thermal power from generators, particularly given the scarcity and price of fuels leading to drastic capacity underutilisation of generators. I expected you to be alarmed by advisers pointing Fashiola to solar thermal whose technology is just unfolding, and upon which the economies of solar energy may have been calculated and judged expensive.
Please note that I was no criticising Fashiola’s energy policy direction. That Nigeria should utilise its endowed energy resources is one I fully support and have advocated for a long time – please if you have the time, recall my doctoral degree thesis from Leicester University in the UK – “Energy and Economic Development: the case of oil producing Nigeria and non-oil producing Tanzania”, you will find I called for a decentralised energy source along the line advocated by Fashiola . Nigeria is the only country in West Africa that has all sources of energy – geothermal, coal, wind, solar, gas, hydro, and oil not just in quantity but commercial quantity, and above all dispersed all over the country. We were generating electricity from coal in Enugu, and the decision to run down the coal infrastructure was political and in line with the very sentiment at the time that if oil companies were allowed to continue with their corporate social responsibility widely practiced at the time, one part of the country would be relatively more developed than the rest, forcing the decision to ask oil companies to pay into the coffers of the Federal government who in turn would undertake the exercise. Otherwise, I see no reasons for not refurbishing and revitalising the Enugu coal power plant along with the development of the Igbin Thermal plant in Lagos. Now that Fashiola is bold enough to put the development of the country ahead of politics, it is something that should be welcome.
However, the statement he made is damaging on many fronts. Nigeria cannot fully meet the energy demands of the country, in this regards, private initiative both at the individual and corporate levels are required to complement the efforts of the government. The rate of solar energy penetration in Nigeria is increasing exponentially, and I can just image the statement by Fashiola bringing to a gradual halt. Also, anything that stops people taking electricity from, rather, put excess electricity into the central grid, should be welcome. Analogously, the environmental costs of current sources of energy, particularly in the use of electric generators, cannot be underestimated. Finally, no one talks much about land coverage these days when solar energy is concerned because of the huge and rapid innovation taking place. Land size, dusts, and cloud were the early sources of constraints to wide adopt of solar energy, forcing innovations in sector panels; this coupled with concerted efforts by manufacturers to drastic reduce energy consumption intensity of electrical products, have combined to make solar energy use a possibility in many different contexts.
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