Financial Energy Review
The Managing Director/Chief Executive Officer, Nigerian Bulk Electricity Trading (NBET), Dr Nnaemeka Ewelukwa, has said that the country needs more gas power plants.
Ewelukwa, said this during a panel session featuring several energy stakeholders on Nigeria’s gas-to-power masterplan in the ongoing Nigeria Energy conference in Lagos
According to him the Edo state-based independent power producer (IPP), Azura power plant had signed a gas purchase agreement with Seplat Energy in 2014, which gave Seplat a line of revenue for over ten years. This line of revenue enabled Seplat to invest about US$300 million to expand its gas facilities. He alluded to the fact that the Seplat expansion would not have been possible without the Azura power plant.
“To build more gas-based power plants, there is a need for power purchase agreements and there is a need for full payments, otherwise, there will be a gap in the value chain,” he says.
Dr. Ewelukwa said that once the downstream works, the upstream will work. He noted that the entire value chain will be efficient as it should be when all customers are metered and are paying their bills when due, and distribution companies (Discos) are collecting payments.
“When discos are efficient in their operations and are making payments to NBET, it becomes possible for NBET to pay generating companies (Gencos). In turn, Gencos would be able to pay gas suppliers. Our goal is to get the system working to the point where NBET is no longer needed to transfer funds from Discos to Gencos, because we now have a truly competitive electricity market,” he maintained.
Dr Ewelukwa also emphasised on the need for NBET, Discos, Gencos, Transmission Company of Nigeria (TCN) and the Gas Aggregation Company of Nigeria (GACN), to work together, so as to accelerate the drive towards having an efficient electricity market.
As Nigeria currently lacks enough infrastructure to enable maximization of natural gas resources, incentives are needed in order to encourage the development of more gas to power infrastructure. Olakunle Williams, the Chief Executive Officer of Tetracore Energy Group, spoke about the need for gas-to-power projects financing.
“There is a lot of emphasis on export projects like the Nigeria-Morocco gas pipeline. However, to enable gas-to-power projects development, there is a need to create certain market conditions that will enable these projects.
“We need to strengthen the value chain very quickly by creating conditions to ensure that sanctity of contracts, full payments and offtake assurances are done,” he says.
Dafe Akpeneye, the commissioner for legal, license and compliance at the Nigeran Electricity Regulatory Commission (NERC) said that coordination and communication between policymakers and regulators is key to pushing the value chain forward.
“There is a massive mismatch in the powetor sec tor. Only until recently, the government was subsidizing our power consumption. We have had tariff review battles with labour unions because there is a perception that consumers are paying for darkness,” he said.
He called for patience on the part of Nigerians, stating that power supply tariff payments should be made, so as to play the long game and at the end of the day, the power sector will be better off for it. He also reminded stakeholders that Nigerians need to know the roadmap to power sector success, which outlines the journey and cost to get to the destination, so, they can make better choices.
Nigeria’s current electricity demand is said to be about 19,000 megawatts, but the supply is only 5,000 megawatts. For the nation’s growing population, Nigeria needs to upgrade to 40,000 megawatts and about 10 billion standard cubic feet of gas per day is needed to achieve this. So far about 70 percent of gas produced in the country is being consumed by the power sector.
