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Low Power Generation, Despite More Rains in Hydro Dams

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Electricity - Investors King
  • Low Power Generation, Despite More Rains in Hydro Dams

As power generation in Nigeria falls below a seemingly traditional 4, 000 megawatts, despite the rains that should normally fill up the hydro dams for optimum generation, Chineme Okafor writes on the issues behind the drop.

For many months now, Nigeria’s power generation profile has failed to take a sustainable upward trajectory, frequently fluctuating at an average of 3, 444 megawatts. The latest reports from the Transmission Company of Nigeria indicate that between July 17 and July 23, a period of about seven days, a total of 22,978MW of electricity was generated and wheeled into the national grid by the TCN. The report equally indicate that the situation is far from what it was the previous week, when 25,819MW was generated and also wheeled by the TCN into the grid for distribution to the 11 distribution zones of the country.

Capacity Loss

Similarly, between July 17 and 25, daily statistics of obtained from TCN System Operator department indicate that constrained generation was about 5364MW, while about 11,738.5MW could not be distributed by the 11 electricity distribution companies because of poor distribution facilities.

In addition to this capacity loss, about N8.192 billion worth of revenue was deferred by the power sector on account of the inefficiencies. This was despite repeated claims by the Minister of Power, Works and Housing, Mr. Babatunde Fashola, that the government was resetting the operations of the country’s power sector.

Since 2011 when a one-time Minister of Power, Professor Barth Nnaji, embarked on a generation capacity recovery exercise prior to the electricity sector privatisation exercise, Nigerians usually enjoyed longer hours of electricity supply during the rainy seasons when water collection in the reservoirs of the three hydro power stations – Kainji, Jebba, and Shiroro – are high and able to drive most of their turbines to give out more power. This continued until about October when the rainy season peaked and water levels in the reservoirs began to recede with some turbines getting idle again.

Inconsistency

At these times, power generated from the hydros is often combined with what is given out by the gas generation plants to grow generation to an average of 35000MW. Although, Fashola, stated recently that the current government inherited an average generation profile of 2600MW when it took over on May 29, 2015, records from the TCN for this period do not tally with his claims.

As at May 29, 2015, when former President Goodluck Jonathan handed over to President Muhammadu Buhari, TCN’s records indicate that Nigeria’s grid had 3,205MW of peak power generation, 515MW higher that the 2,690MW Fashola quoted in a recent statement from his senior special adviser on communication, Mr. Hakeem Bello.

Moreover, peak generation on the previous day (May 28) was 3,155MW while the lowest generation mark the country’s grid recorded that period was 2,741MW, with over 60 per cent of the power generated from gas power plants.

Current Situation

According to TCN statistics, the daily power generation during the two-week period in July under consideration were 3227MW; 3504MW; 3285MW; 3656MW; 3579MW; 2898MW; and 2829MW, respectively, while the daily distribution reports of the Discos between July 10 and July 16 were 3511MW; 3973MW; 3915MW; 3947MW; 33511MW; 3487MW; and 3475MW, respectively.

The TCN indicated that the national peak demand forecast stood at 19,100.00MW, out of which 11,165.40MW was the installed available capacity, 7,139.60MW was the available capacity. It added that 7,000MW was the current transmission capacity, and network operational capacity of 5,500.00MW. The peak generation capacity ever attained in Nigeria was in February 2016, when 5,074.7MW was generated, while the maximum energy ever attained stood at 109,372.01MWh.

Challenge

President of Nigerian Gas Association, Mr. Dada Thomas, recently decried the reliance on seasonal rains for improvement of generation and supply. Thomas stated that the nationwide shortage of natural gas supply was the most critical issue facing the Nigerian power sector.

According to Thomas, the NGA, gas producers and investors in the country would be at ease if the natural gas shortage was checked at least in the short term. He added that the shortfall in natural gas supply had been further worsened by pipeline vandalism.

Thomas said the problem was affecting cost-reflective electricity tariffs, Power Purchase Agreements, and regulation of gas price. He urged the federal government to take action to resolve the problem and other challenges that had made further investments unattractive for gas producers, processors, pipelines and transportation companies.

He also said the shortages could cause massive economic and social disruptions in future if Nigeria failed to act now and address the challenges of the sector.

Similarly, Nnaji, who to a large extent nurtured the sector into privatisation, reportedly expressed deep concern about the future of Nigeria’s power sector, saying the environment is not attractive for investment that can address the various challenges of the sector. He explained that foreign investors were not willing to invest in the sector because the government had not addressed major issues that would guarantee good return on investment. He noted that many projects had been stalled due to financial constraints and tariff issues.

Nnaji’s 180MW capacity Geometric Aba power plant has remained encumbered by legal tussles with the Enugu Electricity Distribution Company over ownership of the Aba and Ariaria distribution networks, which the government in 2005 ceded to Geometric in a formal business agreement, but failed to respect in 2013 when it privatised and sold the Enugu distribution network to EEDC. Actions like this one by the government have worked to discourage investment in the power sector.

Despite expectations that the government would through a stable environment, open up the sector for private investment to reposition the power sector, it has failed to consistently invest to upgrade the country’s transmission network. Although Fashola said at a recent power forum in Lagos that the TCN would undertake 200 projects to improve power transmission and supply in the country.

Fashola said at the Nigeria Energy Forum that TCN would concentrate on completing the projects to ensure smooth transmission of energy to the national grid. He also said at a public lecture at the University of Lagos that the transmission network had expanded to 6200MW because the government had completed transmission stations in Ikot Ekepene; Okada; Alagbon; Ajah; Katampe; and Sokoto, as well as awarded many more in places like Damboa; Pankshin; Osogbo; Kumbotso; and Odogunyan.

He stated, “The logic therefore is that if projects to expand the grid are being completed and new ones started, it is either ignorance or mischief to continue to argue that the grid cannot wheel more than 5000MW. The correct, informed and sensible view is that the grid is dynamic and must grow as power production grows.”

The minister added that the power sector would receive some impetus from the implementation of the recently approved Power Sector Recovery Programme initiated in partnership with the World Bank.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Energy

Egbin Decries N388B NBET Debt, Idle Capacity

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Egbin-Power-Plant - Investors King

Egbin Power Plc, the biggest power station in Nigeria, has said it is owed N388bn by the Nigerian Bulk Electricity Trading Plc for electricity generated and fed into the national grid.

The company disclosed this on Tuesday during an oversight visit by the Senate Committee on Privatisation, led by its Chairman, Senator Theodore Orji, to the power station, located in Ikorodu, Lagos.

The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells it to the distribution companies, which then supply it to the consumers.

The Group Managing Director, Sahara Power Group, Mr. Kola Adesina, told the lawmakers that the total amount owed to Egbin by NBET included money for actual energy wheeled out, interest for late payments and available capacity payments.

Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group. The plant has an installed capacity of 1,320MW consisting of six turbines of 220 megawatts each.

The company said from 2020 till date, the plant had been unable to utilize 175MW of its available capacity due to gas and transmission constraints.

Adesina said, “At the time when we took over this asset, we were generating averagely 400MW of electricity; today, we are averaging about 800MW. At a point in time, we went as high as 1,100MW. Invariably, this is an asset of strategic importance to Nigeria.

“The plant needs to be nurtured and maintained. If you don’t give this plant gas, there won’t be electricity. Gas is not within our control.

“Our availability is limited to the regularity of gas that we receive. The more irregular the gas supply, the less likely there will be electricity.”

He noted that if the power generated at the station was not evacuated by the Transmission Company of Nigeria, it would be useless.

Adesina said, “Unfortunately, as of today, technology has not allowed the power of this size to be stored; so, we can’t keep it anywhere.

“So, invariably, we will have to switch off the plant, and when we switch off the plant, we have to pay our workers irrespective of whether there is gas or transmission.

“Sadly, the plant is aging. So, this plant requires more nurturing and maintenance for it to remain readily available for Nigerians.

“Now, where you have exchange rate move from N157/$1 during acquisition in 2013 to N502-N505/$1 in 2021, and the revenue profile is not in any way commensurate to that significant change, then we have a very serious problem.”

He said at the meeting of the Association of Power Generation Companies on Monday, members raised concern about the debts owed to them.

He added, “All the owners were there, and the concern that was expressed was that this money that is being owed, when are we going to get paid?

“The longer it takes us to be paid, the more detrimental to the health and wellbeing our machines and more importantly, to our staff.”

Adesina lamented that the country’s power generation had been hovering around 4,000MW in recent years.

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Crude Oil

Oil Rises on U.S. Fuel Drawdowns Despite Surging Coronavirus Cases

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U.S. Crude Oil - Investors King

Oil prices climbed on Wednesday after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases.

U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.7%, to $72.13 a barrel, reversing Tuesday’s 0.4% decline.

Brent crude futures rose 34 cents, or 0.5%, to $74.82 a barrel, after shedding 2 cents on Tuesday in the first decline in six days.

Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

“Most energy traders were unfazed by last week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a research note.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said.

Fuel demand expectations are undented by soaring cases of the highly infectious delta variant of the coronavirus in the United States, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

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Crude Oil

Oil Price Rises To $74.70 Despite Delta Variant

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Oil prices - Investors King

Oil price inched higher on Tuesday despite the fast spreading COVID-19 Delta variant. Brent crude oil, against which Nigerian oil is priced gained, $0.20 or 0.27 percent to $74.70 per barrel on Tuesday at 12:05 am Nigerian time.

Delta variant is spreading in China, the world’s largest importer of crude oil, forcing crude oil investors to start cutting down on their oil demand projections.

The Delta variant is still spreading and China has started to clamp down on teapots, so their import growth would not be that much,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures, referring to independent refiners.

Strong U.S. demand and expectations of tight supplies have helped crude oil to recover from a 7 percent slump recorded last Monday to mark their first gains in two to three weeks last week.

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise production through the rest of the year.

There is seemingly a battle within the energy complex between the prevailing supply deficit engineered by OPEC+ and the threat of the COVID-19 Delta variant in regions with low vaccination rates,” said StoneX analyst Kevin Solomon.

The slow take-up of vaccinations will continue to limit some upside in oil demand in those regions, and there will be intermittent spells in the recovery in the coming months.

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