Short-termism: Nigeria Power Sector’s Real Achilles Heel, By Yusuf O. Ali
The debate about the true causes of the problems that have historically hindered the NPS is likely to rage on as everyone tries to downplay their culpability in the problem. What is abundantly clear is that short-termism has failed us. It is high time we realise that while we might wish/hope/pray otherwise, there is no quick fix to the problems facing the NPS.
“… It is the same story for the power industry. When I tell my friends, that forget any improvement for the next five years, they are scared, but that is the truth. We need minimum of five years to invest before we see results…” – Olufunke Osibodu; the Managing Director of the Benin distribution company.
Like all truths, the above disclosure by one of the insiders of the Nigeria Power Sector (NPS) must have been a bitter pill to swallow for most Nigerians.
As bitter as the pill might have been, it was refreshing to hear the truth. The knowledge of this particular truth is important because it helps all of us accept the reality and allows us to be better prepared to make plans regarding how Nigeria, businesses and the people will cope in the absence of improved grid electricity supply. However, I will go a step further than Mrs. Osibodu by declaring that over the next five years and beyond, if the investments in the NPS are conducted using the same fire brigade, short-termist approach that has been employed historically, our pain will last considerably longer.
The current Situation
Although there was little to no investment in generation capacity increases between 1990 (the time Shiroro hydropower plant was built) and the turn of the millennium, a number of power plants were added in the first decade of the millennium, giving Nigeria its current net grid-installed capacity of about 12GW. About 10GW of this capacity is natural gas-fired with the remaining 2GW being hydropower.
Interestingly, Nigeria’s peak generation has never exceeded 5.5GW, less than 50 percent of the theoretical peak. This is as a result of numerous operational and maintenance challenges facing the plants. For the gas-fired plants, gas shortage has, undoubtedly, been the biggest cause of the operational outage. The gas shortage was initially due to the inability of Nigerian gas companies to produce the quantity needed by the plants but this has been exacerbated in recent times by ever-increasing militant attacks on Nigeria’s fragile gas pipeline infrastructure. Nigeria’s hydropower capacity is limited because of a combination of the water levels of River Niger and the fact that Nigeria is downstream.
According to President Muhammadu Buhari, transmission and not generation is the biggest Achilles Heel of the NPS. This proclamation is defensible considering that the transmission capacity is estimated to be about 5GW and it has a radial design (i.e. no redundancies in the network) which is riddled with numerous bottlenecks; locations where the transmission capacity is not high enough to carry the connected generation capacity. The distribution network capacity is estimated at 7.2GW; 60 percent of installed generation capacity.
Why We Need a Change In Approach
There is no getting away from the fact that in terms of developing the NPS, Nigeria is tasked with a challenge like no other country had in the past. In this era of ever-increasing dependence on electrical appliances, the demand for electricity for the maintenance of a reasonable quality of life means that the NPS must be rapidly developed. However, with climate change becoming a more pressing threat, this rapid capacity development must be done with consideration for long term environmental sustainability. These must also be managed against the need for diversification of the electricity generation technologies in order to guarantee improved energy security.
Over the last 30 years of the NPS, the only constant has been a lack of consistent policies that encourage a wholesome development of the sector. Numerous governmental changes (military and democratic) combined with a lack of foundational principles/plans have meant that the various powers that be have resulted to short-termist approaches to resolving the numerous issues (most especially with respect to capacity shortages) in the NPS. The recent 1GW solar deal and to a smaller extent the 2005 National Integrated Power Project (NIPP) are examples of the quick-fix solutions that different governments have embarked upon.
…a look through the supply mixes of the countries with more gas reserves than Nigeria shows that Nigeria is treading a virtually lonely path. With the exception of Qatar which uses gas for all of its electricity generation, the countries with the next highest dependence on gas generation are Iran and Saudi Arabia; in both countries, gas accounts for about 50 percent of generation.
Note: Taken in isolation, I think the NIPP was a good idea as it attempted to address two of the most pressing challenges of the time. However, from a strategically planned policy viewpoint, it still feels like a bolt out of the blue which neither depended on any preceding policy nor set out to direct future policies that would follow it.
In the same way that you cannot pick different unrelated Lego pieces and reasonably expect to build a masterpiece, it is virtually impossible for us to continue to combine these policies that have no foundational convergence and hope to come up with a robust supply system that is capable of withstanding the rigorous sustainability demands, costs, emissions and environmental security in the long term. As a result, there is a need for the quick alternation of our planning approach; short-termism must give way to a long-term, holistic and coordinated strategy.
In the quest to move away from the haphazard approach of developing the NPS, generation must be the first point of call, because the type and location of the plants that we plan to develop directly impacts the technological and design choices that will be made regarding both the transmission and distribution grids.
Note: In this vein, it is noteworthy that there are reports that the World Bank and Japan International Cooperation Agency (JICA) are currently in the process of undertaking a power system expansion plan for Nigeria.
The Supply Mix
Over 80 percent of Nigeria’s current grid-installed capacity is gas-based. From an energy security viewpoint, the lack of diversity in Nigeria’s supply mix is far from ideal. Like the gas supply problems, capacity and pipeline sabotage have shown us that such dependence on a single technology can be costly. Admittedly, Nigeria is blessed with enormous natural gas reserves – ninth in the world – which makes some level of dependence on gas-fired generation logical from a Primary Energy Resource (PER) control viewpoint.
However, a look through the supply mixes of the countries with more gas reserves than Nigeria shows that Nigeria is treading a virtually lonely path. With the exception of Qatar which uses gas for all of its electricity generation, the countries with the next highest dependence on gas generation are Iran and Saudi Arabia; in both countries, gas accounts for about 50 percent of generation. Iran’s situation can be explained by the challenges the country has faced from the international community with regards to the development of its nuclear programme. A proposed 20GW nuclear programme has received parliamentary approval in Iran. In Saudi Arabia, plans to further diversify away from gas are in full gear. By 2040, the government plans to have 17GW and 40GW of nuclear and solar power generation respectively.
Gas-fired generation provides safe base-load generation (when used in the Combined Cycle configuration) and has the lowest emissions of the fossil fuel technologies; this has made it a darling of many power system planners. However, in comparison with nuclear power, a better base-load generation technology, gas is an environmentally dirty technology. In light of the need to give significant consideration to Green House Gases (GHG) emissions, continuing to develop the grid with the current heavy dependence on gas could pose a challenge to the environmental sustainability of the NPS.
As mentioned earlier, the foundation of any holistic change in the NPS is the supply mix. In this light, a supply mix which I have developed and tested both analytically and through extensive interviews with stakeholders in the NPS is as follows: 40 percent gas, 25 percent coal, 25 percent nuclear, five percent hydro, one percent wind, and four percent solar.
Note: Around the world, it is universally agreed that the power sector is the easiest to decarbonise, in terms of the reduction of the greenhouse gas (GHG) emissions produced as a result of its activities.
Coal has been mooted as the next technology to be added to the Nigerian supply mix. This is a logical choice because coal is another sound base-load generation technology and Nigeria is reported to have significant reserves of high quality coal. Coal is significantly more environmentally unfriendly than gas, so adding it to the mix as proposed can only further jeopardise the environmental sustainability of the NPS on the long term.
What Does the Change To a Long Term Holistic Approach Entail?
As mentioned earlier, the foundation of any holistic change in the NPS is the supply mix. In this light, a supply mix which I have developed and tested both analytically and through extensive interviews with stakeholders in the NPS is as follows: 40 percent gas, 25 percent coal, 25 percent nuclear, five percent hydro, one percent wind, and four percent solar. Compared to the current Business As Usual (BAU) mix, the mix above calls for significantly reduced contribution from gas which is compensated by increases in the contribution from coal and nuclear.
Note: The BAU mix is postulated to be: 80 percent gas, six percent coal, 10 percent hydro, four percent non-hydro renewables, based on this report from the Presidential Task force on Power.
The most striking benefits of the proposed mix are its energy security benefits. It provides diversity which does not come at the expense of Nigeria’s control of the PER. Nigeria has significant coal and gas reserves and the security of supply is not an issue for nuclear. In addition to this, the proposed mix has a marginal cost benefit. On a levelised cost of energy (LCOE) basis, compared to the BAU mix, the proposed mix is about two percent cheaper. In terms of emissions, the proposed mix reduces emissions by 25 percent. While this reduction might appear counterintuitive because of the increased coal share, the presence of nuclear; a technology with significantly lower emissions than both gas and coal, counterbalances the increased emissions associated with coal.
Note: LCOE can be seen as the cost (covering all cost components from construction to decommissioning) per unit of electricity generated. LCOE is the discounted total generation costs (construction to decommissioning) divided by the discounted total electricity generated.
Another hidden benefit of this mix is the geographical diversification of generation asset which it brings about. With the exception of the South-West geopolitical zones, other areas are blessed with at least one of the PER included in the proposed mix. Supply in the South-West can be met with nuclear power. Therefore, a lot of generation can be embedded, and connected directly to the distribution networks within the respective regions. As a result of this, the capacity requirement of the transmission network will be reduced and this will translate to overall power system investment savings.
It is time for our generation to make a national sacrifice (of sort) by playing the long game of demanding and encouraging the authorities to develop a power system that guarantees us good electricity supply in the medium/long term, while at the same allowing us to hand a “national treasure” to future generations, for a change!
Implementation of the proposed mix is not as straight forward as it might seem. Successful implementation needs a time-staggered process. Nigeria’s coal and nuclear subsectors are not developed enough for immediate deployment of either technology. Therefore, in the short term, we have to continue to develop our gas capacity. The gas plants should be developed using a mine-mouth approach; as close as possible to the gas field. This will prevent the need for extensive pipeline networks; the protection of which has proven to be a thorn in the side of our national electricity supply.
Concurrently, the coal mining subsector should be developed. One key obstacle that this development must look to attend to is the ease of access to finance for prospective investors in the coal mining subsector. Historically, as a result of the lack of a clear coal-to-power policy, potential investors in coal mining have struggled to provide credible pieces of evidence to lenders that there is indeed a market for the coal they are looking to mine. A very clear coal-to-power policy should solve this problem.
With regards to the nuclear subsector, work would largely need to focus on regulatory and technical capacity building programmes. It is expected that like other countries that are just developing their civil nuclear programmes, Nigeria will import the technology (reactor) and a big share of the early operational manpower and radioactive waste management will be left in the hand of the vendor countries. If all goes to plan, the coal plants can be expected to begin to come online in the medium term (10 to 15 years), while the nuclear plants will come online in the long term (20 to 25 years).
At every juncture, the capacity being added must be commensurate to the long term mix ratio. This process can be facilitated if Nigeria adopts the Brazilian capacity auction approach. This is a system in which the government auctions out capacities of different technologies annually. The auctions are broken down into A-1, A-3 and A-5 auctions, with the number representing the number of years after which the capacity is expected to come online. This system allows the government to control the type and when various capacity types come online, thereby making government controlled but privately developed capacity additions possible.
Although the rationale and structural changes needed in the NPS have been extensively discussed in another of my write-ups, the proposed mix and capacity auctioning mechanism can only be successfully implemented if there is strong collaboration between the key players; the designated strategic energy policy planner; the Energy Commission of Nigeria and the federal ministries of power, water resources, petroleum resources and solid minerals, which all act as ministries of state under the coordinating Federal Ministry of Energy.
The debate about the true causes of the problems that have historically hindered the NPS is likely to rage on as everyone tries to downplay their culpability in the problem. What is abundantly clear is that short-termism has failed us. It is high time we realise that while we might wish/hope/pray otherwise, there is no quick fix to the problems facing the NPS. It is time for our generation to make a national sacrifice (of sort) by playing the long game of demanding and encouraging the authorities to develop a power system that guarantees us good electricity supply in the medium/long term, while at the same allowing us to hand a “national treasure” to future generations, for a change!
Yusuf O. Ali, a doctoral candidate in the Department of Engineering, University of Cambridge, completed an MPhil in Nuclear Energy from Cambridge in 2013. He can be reached on e-mail at: email@example.com, and Twitter: @YalyAli