My last post on the Nigeria power industry was a reaction to a Vanguard article by the Minister of Power.
It was an article I read while at Murtala Mohammed Airport in the midst
of what turned out to be a brief power outage. It was a reactionary
post and its been on my mind for a few weeks to write a more structured
article about where we went wrong, why we are where we are now, and what
we need to do to ensure a future of economic development borne out of
the provision of a critical element of the fuel that drives the engine
of growth in most developed countries; electricity.
- Hindsight (“Cause and effect are not closely related in time and space”):
So what happened? How did the power sector in Nigeria get so decrepit?
Hindsight says we all lacked foresight and didn’t invest in power
industry infrastructure development and maintenance. There were no power
stations built in Nigeria throughout the 1990’s (the worst period for
the industry, in my opinion), we failed at long-term systems and needs
planning because we were too busy just trying to survive. I grew up in
Nigeria during this period and that’s when all day and week-long power
outages (without explanations) began. No surprises that it coincided
with a period of bad government, but that’s a story that has been told
time and time again so I won’t repeat that here. I will focus on the
systems failings; in my opinion, that was the period shortly after the
90’s when Electric Power Reforms started in Nigeria without recognizing
the immediate need to increase generation.
- Insight (“Today’s Problems Come from Yesterday’s Solutions”):
So where are we? Citizens and consumers require 3 things from their
power provider; electricity delivered safely, reliably and affordably.
On all three expectations, the current power system fails Nigerians.
Every citizen or business that can afford it is his/her/its own
government when it comes to utility service provision, salving their
needs by buying a generator, building a borehole in their compound and
providing their own personal security. And for every citizen who cannot
afford to be their own government? They live without electricity.
According to the government ‘Today, in March 2016, we have just about 5,000 MW of power on the National Grid for about 180 million people.’ For some context (and this is a rough but apt calculation),
- I worked at a power station which generated 1000 MW of electricity for approximately 400k homes, assuming every home in London uses the same amount of electricity as a home in Nigeria. Assuming there are 36M homes in Nigeria (with 5 people per household), it means we as a country are generating just 5X the amount of electricity from one power station in London for 90X the number of people!- Put another way, according to the World Bank, our per capita electric consumption is 142 kWh. What does that mean? It means we are in the league of countries like Nepal (128kWh per capita), Sudan (159kWh), Togo (148kWh) and the Democratic Republic of Congo (110kWh). These are countries with much smaller populations and smaller requirements than Nigeria. With all due respect to these countries, that is not a league we want or deserve to be in. Contrast this with the countries that have similar size populations (and less natural resources to draw on) to Nigeria, countries like Bangladesh (156M pop.) with per capita of 293 kWh and Pakistan (182M pop.) with per capita of 450 kWh. My point? We are falling extremely short of the expectations we have of ourselves and the possibilities...There are very few things that we all do which don’t require that electricity be delivered safely, reliably and affordably. Electricity is the engine of growth in every developed country in the world. It is also the single most impactful element in personal comfort (an oft-ignored element of the value electricity provides). The similarities between Nigeria and the low electricity consumption per capita countries I listed above extend from poor electricity provision to lower life expectancy and health expectations for citizens. Provision of electricity ranks very closely in importance to good governance because it is a big input into productivity growth, especially in the long run, which, in itself, is a strong driver of economic growth. If we increase the productivity of the average Nigerian (and heaven knows our productivity is at a low right now), we increase the growth of the economy. Increased productivity = greater money earned = greater money spent and improved credit flow within the economy. Let’s chalk up the last few years in the Nigerian power industry, two full economic cycles, as the lost decades. Current policies are structured to rebuild or improve old infrastructure and maintain less relevant business models. The good-governance experiment is currently ongoing in Nigeria; it’s time to begin the provision-of-electricity experiment with a clear view of the industry’s future.
- Foresight (“the areas of highest leverage are often the least obvious”): If we agree with the premise that all consumers, regardless of class, deserve to have stable, affordable and secure electricity, then it’s time to embrace the change currently going on in the electricity industry globally. There is a chance to start afresh in Nigeria, as the way electricity is generated, produced, stored and marketed is changing. There is a wider array of choices for generation (solar, geothermal, wind etc), there are storage options which serve the needs of average Nigerian homes at less cost than the current diesel alternatives, and smaller companies can get into the business of producing electricity for different segments of the market. The change we have to embrace in Nigeria, with an opportunity to even leapfrog countries like the USA in adoption, is inevitable and is as a result of several global trends that are currently playing out. These trends are climate change, reducing costs of renewables like solar, the convergence of internet technology and operational technology, bringing more efficient methods of electricity consumption to consumers and businesses alike. What does this look like for the average Nigerian?
It means
Kayode, a small business owner with an office in Ikeja and a family of
five living in Ogudu, Lagos, can buy solar panels (his primary source of
electricity) for his home/business from Powerseller Co. PowerSeller Co
also provides a small diesel generator (as backup) for Kayode.
Powerseller Co manages the solar panel and diesel generator and manages
the interaction between Kayode and the PHCN. It means the PHCN plays the
role most government agencies play; providing oversight, so Powerseller
Co does not cheat Kayode. It means Kayode might pay a little more money
for Power at the start of the month, but he is assured that throughout
the month, his electricity will be on and keep the food in his freezer
from rotting. It means even though Kayode is now spending more on
electricity, his productivity has increased, and so has that of his
family and employees. Since productivity growth and credit leads to
economic growth, it means Kayode’s business generates more money, and
the cost of electricity stays at the current percentage of his expenses,
but he now gets reliable and safe electricity. It also means Kayode and
his neighbors in Ogudu can band together and form a mini electricity
grid of their own.
The scenario
above clearly demarcates the value elements and who is providing it. The
generation comes from any business which can afford to generate power
from any safe source. The distribution and transmission is provided by
an asset owner who only collects rent on the usage of transmission
lines. The oversight is provided by government entities, who, based on a
clear understanding of where value lies and where things are going,
ensure that all parties play fair. The service provider, or marketer,
ensures that the average consumer receives the optimal customer service
because anything less means the customer can move to a competing
business. This new business model solves the real problems facing the
Nigeria power sector; generation and a focus on solving the problems of
the past. It’s happening fast; in 2012, Vivint,a home security services
provider in the US, decided to start selling solar panels to Americans
in a market where the price of solar was well above current customer
prices. In just two years, Vivint had put solar panels on twenty two
thousand homes, generating 274MW (5.6% of total generated in Nigeria),
the size of a power station! It takes 5-6 years to build a power plant,
but recognizing the future of power generation, Vivint built a
virtual/future power plant in 2 years. It can be done, and the time to
start is now.
And by the way,
taking the future virtual utility approach also solves the problem that
continues to plague the Nigerian economic mindset. It places the
convenience and productivity of the consumer as the priority, because
that is really the point of this whole industry; to provide electricity
to consumers safely, securely and affordably.
It isn’t rocket science, we just need to start taking our citizens seriously.
http://www.huffingtonpost.com/seyi-fabode/the-nigeria-power-situati_b_10700680.html 
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