The Nigeria Electricity Supply Industry (NESI) Market Participants and Stakeholders Roundtable( NMPRS 2023) has made far-reaching recommendations that it believes would make the country achieve a functional and efficient electricity market.
The recommendations are contained in a communiqué released by the organizers of the recently held NMPR 2023.
Top on the list of recommendations is the need for Nigeria to address the identified challenges of the sector and promote growth in the Nigerian Electricity Supply Industry (NESI).
It therefore put forth the following recommendations:
1. Power Generation: Privatization, Challenges, and the Way Forward
• Power generation benefits from economies of scale, hence, Nigeria should be converting all its simple cycles to combined cycles as done in Egypt. This is more environmentally friendly and is the quickest way to increase generation capacity.
• Reopen the MYTO and provide a tariff that incentivizes capacity sustenance and additions, including the move to a combined cycle.
• A full contractual market with capacity payment should be encouraged. This will enable the replacement of aging capacities as well as support the retention of existing capacities.
• Full payment as and when due for services rendered.
2. Gas-to-Power: Challenges and the Way Forward
• Pay for gas utilized as and when due.
• Increase and improve pipeline connectivity as this provides a cheaper gas supply option for the thermal plants.
• To attract more upstream gas players in the industry Nigeria must begin to award gas blocks with some incentives.
• Domestic escrow for gas-to-power generators can provide assurances to suppliers that can lead to reduced prices if backed by security and longer-term firm contracts.
• Gas is a transition fuel to decarbonization, and only policy/regulation can be used to drive its development.
3. Power Distribution: Privatization, Challenges, and the Way Forward
• Current MYTO is outdated after over 10 years and needs a decoupling since enough sector data should have been gathered to improve the assumptions initially made.
• NERC should implement a fair and cost-reflective tariff structure that encourages investment, ensures revenue sufficiency, and incentivizes efficient energy consumption.
• Cost reflective tariff should be treated as an output, not an input.
• DISCOs should introduce energy efficiency programs and initiatives to encourage customers to adopt energy-saving practices and technologies.
• DISCOs should expand the deployment of smart meters to improve billing accuracy, and revenue collection, and reduce electricity theft.
4. Metering and Customer Centricity
• One of the key responsibilities of every electricity utility company is the issue of revenue circle management which is metering billing and collection this is a model worldwide.
• The importance of accurate metering and customer-centric approaches was highlighted to improve billing accuracy, reduce losses, and enhance customer satisfaction.
• The best metering strategy is that which focuses on 100% METERING, starting city to city, like the strategy adopted by mobile phone companies. Saturate city by city with meters and in no time, the country will have meters everywhere.
• Concentrating the initial rollout of meters and providing power to cities and industrial centers will require a review of the ATC&C losses since the recovery is expected to be over 100% at the high cost of paying customers.
• For equilibrium to occur, the velocity of energy input must be equal to the velocity of revenue output.
• There must be a funding mechanism that allocates meters to every home, one city at a time, using a patient capital mechanism.
5. Power Transmission and Grid Stability
• Operators/investors should upgrade and expand the transmission and distribution
Networks to reduce losses, improve reliability, and ensure efficient power delivery.
• Immediate rollout of ISO as the market competition stage has been attained. ISO
should be corporatized and commercialized to make it perform
• TSP should have a cost-reflective tariff that allows for investment in new systems.
• TSP should be corporatized and commercialized to make it perform and break TSP into ZONES.
• To bring rapid changes in the transmission space, we need interconnection and capacity increase to reduce susceptibility to perturbations.
• Urgent need to reduce system losses that currently are at about 7.25% and equivalent to power delivered to a “loss disco”. This level of loss is huge and unacceptable
6. Electric Power Sector Financing, Liquidity, and Recapitalization
• Federal and State Governments should invest in training and capacity-building programs to enhance the skills and knowledge of professionals in the power sector, including engineers, technicians, and operators.
• Federal and State Governments should encourage strategic partnerships between the public and private sectors to leverage resources, expertise, and innovation for the development and operation of power projects.
• Federal and State Governments, together with power sector operators, should promote consumer awareness, engagement, and education to foster a culture of responsible energy consumption and empower consumers to make informed decisions regarding their electricity usage.
• The power sector requires longer-term and lower-interest capital in domestic currency. Pension funds of about N17trn should not just be for government bonds but should be made available for infrastructure development with risk mitigation measures in place.
• The Federal Government should provide incentives to encourage local and foreign investment in power infrastructure to improve generation, transmission, and distribution capabilities.
7. Renewable Energy and Energy Transition
• The Federal Government and NERC should promote the development and utilization of renewable energy sources such as solar, wind, and hydroelectric power to diversify the energy mix and reduce reliance on fossil fuels.
8. NESI Regulatory Ecosystem/Electricity (Amendment) Act, 2023: A Review and Implications for Consumers, States, and Market Players
• The EA 2023 will not improve access to electricity except states look at regional collaborations to drive investments and power growth.
• EA 2023 will not change the NESI without full and closely guided implementation with strict timelines and deliverables.
• The Federal Government should enhance the electricity regulatory framework to ensure effective oversight, enforcement, and accountability within the power sector.
• There is an urgent need to institute a code of corporate governance to guide the value chain and this will no doubt increase confidence in the NESI.
