• Nigeria must maintain national power grid for economy of scale – Wonodi
‘Seun Ibukun-Oni, Abuja
Power sector experts, at the 74th Power Dialogue have tasked the federal government on the imperative of state electricity market and the prospects of achieving universal electricity access in Nigeria.
A panelist at the event, CEO of ZKJ Energy, Rumundaka Wonodi highlighted the difference between a state electricity market and a state owned electricity market, saying that the Electricity Bill 2022is aimed at the former.
While corroborating Wonodi’s position, another panelist who is the CEO of Excredite Consulting Limited, Eyo Ekpo, stated that Nigeria is ripe to have a state electricity market after five decades year of evolution.
Problems of Sub-optimality should be tackle before transitioning
Ekpo rued the protracted challenge of sub-optimality in the power industry after the privatization of the retail and posits that efforts should be geared towards unraveling the causes of the sub-optimality to guarantee efficiency going forward.
Using Lagos state as a case study, Ekpo said: “Lagos has the capacity for about 3600 feeders with two electricity distribution companies: Eko Electricity Distribution Company, EEDC with 87 feeders, while Ikeja Electricity Distribution Company, IEDC has 93 feeders despite the viability of Lagos state. Hence, Nigeria must deal with how to segment the market to meet the peculiar needs of each state to make it viable for would be investors.”
Wonodi on the operational model suitable for Nigeria maintained that state should regulate the wholesale but not the retail market because Nigeria is not ripe to handle the complexities involved.
Rather, he advocated targeted policies based on well articulated contract favouring subsidy to encourage industralization. He called for incentivising performance and investment tariffs within jurisdiction. “I will advice against breaking the national grid. The wholesale should remain under the control of the federal government . But it must be de-risked for a more stable and reliable power generation in the country.
• Transitioning should be in phases – Egeruoh, AFDB chief engineer
On the viability of state electricity markets, the chief engineer, African Development Bank, AFDB, Chigoziri Egeruoh submitted that it is neither here nor there. He stated that the outcome will be dependent on a number of factors.
“The transition to state electricity markets may drive investment or otherwise. This will be determined by the policy direction of the government, financial players such as the banks support and overall viability of the state. While there is cross subsidy at the moment, that stops immediately after the transition hence the need to play supportive roles such as developing infrastructures, sovereign guarantee to investors, merging of states in a collaborative manner that will birth integration, tax incentive among others.”
Egeruoh added that the energy industry is complex. “Electricity is first about technical issues before the financial issues because economy of scale.” He urged the government to adopt a phase by phase transition and do the appropriate engineering analysis and financial analysis to ascertain efficiency.
Ekpo rue the less than acceptable approach to the previous energy policies where a lot of the things involved to make the market viable are not captured. Hence, he maintained that their needs to be a more robust dialogue to inculcate policy discussion among the various stakeholders in the energy industry. These discussions would include: interconnectivity and how it affects others, grandfathering or transferring ownership of current discos to the states.
Wonodi insists that a bill should come from a policy document. He maintained that states have a responsibility in the distribution systems but there should be a single power grid to tie to the African energy market.
He mentioned a need to plug the gaps in the industry to guarantee efficiency in the market. A larger market is better, where their is economy of scale. He recommended a central policy framework to ensure that all the states are working to achieve a common goal.
The Power Dialogue is hosted by The Electricity Hub to highlight the implications, challenges and possibilities of the Electricity Bill 2022 on the Nigeria energy industry.