Sunday 29 September 2013

Revised Tariff for TCN forecasts 5,000MW for 2014, half of the 10,000MW promised by Minister Nebo

Nigerian Electric Regulatory Commission (NERC) released their Multi-year Tariff Order (MYTO 2) for the transmission sector dated on June 1, 2012. The MYTO determines the actual tariffs that Transmission Company Nigeria (TCN) will use to calculate and earn its revenues for 2012 to 2017.

In the revised MYTO created by NERC, the revised tariff rate for 2013 is N1422 per MWhr which is a decrease from N1521 per MWhr for 2012.  From the rates structure above, It is clear that TCN’s revenue generated is directly proportional to the amount of power it transmits through it transmission network based on the Naira per MWhr tariff rate.

To further illustrate, Nigeria has generated and transmitted a record peak of 4.5GW. This record peak supply was achieved in December 2012 and till date has not been reached again in the country. Now assuming 4.5GW of power is transmitted all year round through TCN’s transmission network, this would correspond to 39,420GWhr being transmitted for the full year. At a tariff rate of N1500 per GWhr, TCN would earn approximately N56 billion ($350 million) for the year. As you can notice, this calculation is based on TCN transmitting 39,420 GWhr for the year and this value is currently not sustainable in the sector so actual revenues earned by TCN would be less that N56 billion ($350 million).

For the above calculation and for NERC’s approval of the tariff rates, there is a requirement for TCN to provide a reasonable forecast for how much GWHr would be generated and transmitted through its transmission network that would be used as an input into the calculation.

This GW or GWhr value would provide an insight to what TCN and NERC are forecasting for GW supply in Nigeria for the upcoming years. It would also provide a GW value to compare with the promised 10GW of power by next year (2014) made by the minister of power. It was shocking to discover that there was no value for a forecast of GWhr or GW generated and transmitted presented by NERC in the MYTO document. The document jumped from presenting the total revenue requirement for TCN for 2014 to stating the calculated tariff of N1400 per GWhr. The MYTO document does not show the forecasted GW or GWhrs that the 2014 Naira/MWhr rate is based on. It leaves it to the reader to reverse the calculation to determine the GW or GWhr used in the calculation for 2014 to 2017.

No Wahala NERC, I have recalculated the GW requirement that supports your approved 2014 forecast. Based on a 2014 Revenue requirement of N65 billion and forecasted 2014 tariff of N1400/MWhr, TCN and NERC are forecasting an average of 5.3GW of power to be generated and transmitted through its network in 2014. A 5.3GW supply is not even close to the 10GW (10,000MW) supply promised by Minister Chinedu Nebo in 2014.

If NERC and TCN are forecasting 5.3GW for 2014 to determine TCN’s revenue requirements, why then are Nigerian Politicians forecasting the unachievable 10GW of power for 2014. Does this mean that TCN and NERC do not agree with the aggressive 10GW supply promised by the Minister? Is the 10GW forecast promised by the minister not realistic enough to be used for calculations of revenue for TCN? Does this mean Nigeria will have 10GW of installed capacity from the completion of NIPP generation projects but not enough transmission capacity evacuate the increased generation supply? These are questions that the power sector should address.

A 10GW forecast for generation supply by 2014 does not seem realistic given where we are right now supplying an average of under 4GW of power. If our generation and transmission supply has a record peak of 4.5GW, targeting a supply of 10GW by 2014 is forecasting an annual growth rate of over 100%. It is not practical to forecast such an annual growth rate in the power sector anywhere in the world. The 5.3GW Forecast for 2014 used in the MYTO seems more realistic. This would correspond to an annual growth rate of approximately 18%. Comparing to China’s remarkable growth rate of 11.8% during the expansion period of 2000-2009, this is still a very optimistic target for next year given we have not even been able to maintain close to the 4.5GW peak we achieved in December 2012.

[See more on Nigeria’s optimistic growth rates in my article, “Nigeria to make International History if Generation Supply grows to 10GW (100% growth) by 2014”, http://laselle-engineering.blogspot.ca/2013/08/nigerian-to-make-international-history.html ]

Nigerian Politicians should look to actual experts in the sector to forecast realistic power supply targets for the upcoming years before promising Nigerians targets that even the Transmission Company and the regulators (NERC) do not support. Re-building a power sector that has been neglected for decades by previous leaders will not happen overnight and this message should be communicated to Nigerians. Setting and promising targets that are not practical or that cannot be achieved only makes the Nigerian people lose confidence and trust in their leaders when these targets are not met.

If readers are wondering about future GW forecast, based on the revised MYTO 2, the 2017 forecast (4year forecast) specifies a Tariff of N1,709 per MWhr which corresponds to a forecast of 6.2GW for 2017.




Saturday 14 September 2013

Why does Nigeria export Power when it continuously struggles to meet its Power Demands at Home?

 In 2007, Nigeria commissioned and energized a 70km, 330kV transmission line from Ikeja to Republic of Benin (CEB-NEPA project). 330kV is currently the highest voltage in the Nigerian transmission network. This line was part of a strategy driven by West African Power Pool (WAAP) to export power generated from Nigeria to Republic of Benin.  At the time of commissioning, Nigeria was exporting 80MW of power and today, Nigeria is exporting an average of 200MW to republic of Benin [African Development Bank Group, May 20, 2013].

Nigeria does not have the capacity to generate and transmit the required power it needs to meet the demand of Nigerian consumers. The country generated an all-time record peak of 4.5GW and this was in December 2012. Ever since December last year, Nigeria has not been able to reach this record generation peak due to lack of adequate generation supply and limited capacity on the transmission network. The “Road Map for Power Sector Reform” in Nigeria specifies a rule of thumb of at least 1GW (1,000 megawatts) of electricity generation and consumption for every 1 million head of population for any developed industrial nation. Based on Nigeria’s population of 150 million people, we should be targeting to generate and transmit a minimum of 150 GW.

It is very clear that we are realistically decades away from generating and transmitting power to match the demand of the true loads of Nigerian consumers. In fact, based on above, we are only generating and transmitting 3% of the total GW we should be targeting to generate and transmit based on our population.

Why did we invest in transmission facilities to export power to neighbouring countries? One would think that if we did invest in transmission facilities to cross international borders, this strategy would have been executed to enable Nigerians to import power for a short to midterm to meet the excessive generation supply shortfall in the country. When stable and reliable Power is available in Nigeria, plans to invest in the exportation of excess generated power can be examined. However, this is not the strategy that was adopted. Based on the installed facilities, Nigeria is a net exporter of Power to Republic of Benin and Niger.

Rather than investing in the engineering and constructing of transmission lines from Nigeria to Republic of Benin for power exports, we should have been investing in transmission lines and facilities to transmit and distribute any excess power generated by our power plants to major load centers in our country. According to the African Development Bank Group, the Ikeja transmission site from where power is exported has a capacity of 450MW and is the largest transmission site in Africa with a 330kV transmission network. Any excess power that could be transmitted from this site should have been to support the requirements of Nigerian consumers.

There is no logical reason why we invested in facilities to export power to neighbouring countries when we are not able to meet our own power demands. This was a bad decision made by our leaders. Nigerians need to pay closer attention to details to prevent decisions like this being made in the future.

 Given the major generation supply and transmission capacity shortfall in the Nigeria, any investment made to the Nigerian power sector should be used to reinforce and expand our system in the short and long term and not to support loads of neighbouring countries. Ambitious plans to export power should be a thing of the future and efforts to further export additional power should be ceased until relatively stable and reliable power supply is available to Nigerians.

Granted, 200MW is not a huge figure in the large scheme of the power requirements in the country. However there is a significant cost to construct a 70km transmission line of the highest voltage in the country. This expense could have been better justified to expand and reinforce transmission facilities in Transmission Company of Nigeria (TCN).

Below is a chart published by West African Power Pool (WAAP). The chart shows energy exchanges per country in GWhr for West African countries. From the chart, it is clear that Nigeria exports the most power to date when compared to other ECOWAS countries in WAAP.



Wednesday 4 September 2013

When would Nigerian Leaders Set Performance Targets to Measure and Track Actual Power System Reliability?

It is a common statement made in Nigeria by our leaders saying Nigerians are benefiting for more stable and reliable power supply. They go as far as saying people are celebrating about the more stable power supply [Minister Nebo, Vanguard August 11, 2013].

How are we able to validate these claims about a more stable system? How is this reliability actually measured and reported to the Nigerian People? Is the Power system really getting reliable or are we mastering the art of scheduling power supply to loads across the country to provide the illusion of actual increased stability and reliability?

System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) are two of many reliability indices used internationally by Power companies to measure and track their reliability performances. SAIDI measures the average duration of power outages per customer/resident in one year and SAIFI measures the average number of times a customer/resident experiences an outage or power loss in one year.

The median SAIDI value for North American utilities is approximately 1.50 hours [IEEE Standard 1366-1998]. This can be interpreted as a customer or resident had experienced an average of 1.5hours without power in one year.

The median SAIFI value for North American utilities is approximately 1.1 [IEEE Standard 1366-1998]. This can be interpreted as a customer or resident had experienced an average of one outage or power loss in one year.

In Nigeria, can we even state that we have an average of 24 hours without power in one year compared to 1.5 hours median outage experienced in North America? Can we state that we have an average of only 10 power outages/losses in one year compared to the median single outage experienced by North American utilities? It is clear that we are very far from the above North American SAIDI & SAIFI benchmarks. It will not be an easy or short road to reach actual international reliability benchmarks. However, we should start by setting achievable reliability goals, targets and timeframes to track and report to the Nigerian people about the real reliability performances on our power system as we make the required expansions in our Power Sector. Statements like we are experiencing more reliable power provide no value. Reliability performance should be reported with appropriate metrics and benchmarks so the Nigerian people can be made aware if there is actual increased reliability on the system. It is impossible to manage what you cannot measure.