According to him, the government has nothing to gain from sending investors in the power sector packing, following calls from some quarters asking for revocation of privatisation of the sector.
“If revisiting it will mean that distribution companies (DISCOs) should open up and investments should come in, I am for that. If it means that the entire power sector will become very efficient, I will support it. But, I will not support cancelling of the contracts we had with them.”
“If we revoke privatisation of the sector, investors will carry their bags and go, they will tell others that Nigeria is not reliable for investment,” Fashola says.
The minister, however, urged the EU-business delegates to invest in the power sector, saying that no economy would grow without investment in infrastructure.
Fashola was speaking at the 5th European Union (EU)-Nigeria Business Forum, themed: Harnessing Nigeria’s Potential for Economic Growth in Lagos.
Nicolas Mathon: Unlocking successful independent power projects in Nigeria
Nicolas Mathon, Director, Project Development, Africa and Europe, Wärtsilä Energy (Article & Image: Nicolas Mathon)
The successful completion of the Azura Edo 450 MW gas-fired power project in 2016 was hailed at the time as setting the blueprint for future independent power projects in Nigeria. The $900 million plant, which gathered 20 international banks and equity financing partners from more than nine countries, took over six years of project development and construction. It was intended to provide a pathway for others to enter into similar agreements and unlock financing for power sector investment. But five years on, no new independent power projects have come to fruition.
Today, grid generating potential is just over 12 GW in Nigeria. More than 40% of the population lack access to electricity, and those with access, suffer regular power cuts and outages. This is not due to a lack of projects or ambition. With its Vision 30:30:30 the government is committed to deliver 30GW of electricity with 30% renewable energy mix by 2030.
As the largest economy in Africa, with huge gas reserves and high solar energy potential, Nigeria has all the natural resources necessary to meet these targets. However, there are three major and interconnected challenges to overcome to complete successful IPP projects, namely the fragile energy transportation and distribution infrastructures, the ambitious yet incomplete energy reforms, and finally, securing access to long-term international project financing.
The fragility of the existing energy infrastructures, the relative immaturity of the power sector reforms, combined with security and currency risks, create enormous barriers to entry for IPP projects in Nigeria. While there is no simple answer to resolve this, our experience is that an holistic approach to cover all project parameters is crucial and that demonstrating flexibility and resilience over the long term is of paramount importance.
An improving, but still complex regulatory environment
Nigeria’s power sector reforms began around ten years ago when the government launched an ambitious privatization and unbundling of the vertically integrated historical utility. Power generation plants were transferred to privately held GENCOs, the distribution network went to partially privately owned DISCOs, while the transmission network was kept under government ownership, managed for some time by the private sector.
The resulting regulatory environment is complex and still evolving today, creating significant uncertainty for project developers. Despite a strong legal framework and the many government efforts to implement reforms, project developers and sponsors need to navigate multiple agencies and government organizations with sometimes conflicting or unaligned processes.
To cope with this uncertainty, information must be checked and rechecked at various levels to safeguard a project ecosystem that requires constant monitoring and validation. Keeping abreast of developments requires continuous contact and resilience, mobilizing full time resources to stay in the game.
Mitigating project development risk with a 360° approach
Major energy infrastructure projects are multi-million-dollar transactions that require long cycles to develop and even longer to payback. Having a reliable turnkey solution provider, with the experience of international project development, can make a significant difference for future IPP projects.
Independent Power Producers must also beyond the capability to mobilize technical resources, such as engineering, engine manufacturing, construction, and service teams, work with consultants and advisors to bring expertise on environmental and social topics, on connecting infrastructures, primary fuel supply legal matters and accordingly to contribute to internal and external project development costs.
From engineering, procurement and construction (EPC) through to operation and maintenance (O&M), successful project finance relies upon complex back-to-back contractual agreement structures to secure access to the gas, the grid, and the offtake of the generated power. Once a bankable model has been designed, only then can projects raise finance from international development finance institutions (DFIs), international and local commercial banks and other accessible funds.
In addition to coordinating project finance, and to mobilizing internal and external resources, the ability of the IPP to share the development risk by taking minority equity stakes in projects is also paramount.
Selecting the right technologies in a challenging environment
Gas fuels more than 80% of the nation’s power generation capacity in Nigeria. But in order to generate reliable power from gas in a challenging environment, not all technologies are equal.
For instance, the challenging conditions of gas transportation and distribution, combined with the fluctuating electricity loads, makes it difficult for traditional large gas-turbine based power plant projects to operate efficiently.
Gas turbines operate on a continuous combustion process, requiring a constant supply of gas and a stable dispatched load to generate consistent power output. Supply from the Escravos-Lagos Pipeline System (ELPS), which forms the backbone of Nigeria’s gas transportation system, is subject to disruptions due to a number of upstream constraints and its own operational challenges. This makes it challenging to respond to the daily variations in customer demand. The result is stranded generation assets and transmission bottlenecks causing shutdowns at some of the country’s largest power plants.
Power plants with reciprocating gas engines, however, can run with lower gas pressures and provide high efficiency at Nigerian site conditions with high temperatures and humidity. Medium-sized projects of 250 MW can make a significant contribution to meeting the country’s energy demand as they are able to operate with a large spectrum of gas qualities and other liquid fuels provided through other supply infrastructures. More importantly, they can provide the flexibility and resilience required to accommodate varying loads either due to consumption patterns or to challenged transmission and distribution infrastructures. As renewable projects are progressively integrated into the mix of Nigerian grid connected power plants, the need for flexibility and agility to adapt to intermittent sources of electricity such as solar and wind will increase.
Enabling the “Decade of Gas” vision
Whilst there is no single solution or quick fix to solve the challenges of Nigeria’s power sector, the ability to deploy the appropriate power production technologies combined with proven project management know-how will go a long way to overcome these barriers and take advantage of the government’s “Decade of Gas” vision. High-quality IPP projects based on gas engine technology will contribute to meeting the country’s unserved energy demand, whilst reducing dependence on expensive diesel generators and drastically reducing CO2 emissions.
OPINION: Nicolas Mathon, Director, Project Development, Africa and Europe, Wärtsilä Energy
Wärtsilä renews O&M contract for the 100MW Lafarge Ewekoro power plant in Nigeria
Wärtsilä to operate and maintain Lafarge Ewekoro captive power plant (Image: Lafarge Africa Plc)
Wärtsilä, a technology group has signed a 5-year long-term Operation & Maintenance (O&M) agreement with Lafarge Africa Plc, one of Nigeria’s leading building material producers. The agreement covers the 100 MW Lafarge Ewekoro power plant, which provides a dedicated supply of electricity to the company’s concrete and cement manufacturing processes. Signing of the O&M agreement took place in July 2021, and is an extension of a previous 10-year agreement.
The captive Ewekoro plant was supplied and commissioned by Wärtsilä in 2011. It consists of six Wärtsilä 50DF dual-fuel engines, operating primarily on gas, but with the flexibility to automatically switch to liquid fuel in case of a disruption to the gas supply. Similarly, should the quality of the gas supply be disrupted, the Wärtsilä engines will continue to operate efficiently, delivering an assured and reliable power supply to the facility. Unlike gas turbine plants, the engines will also function efficiently with a low-pressure gas supply, thus providing a huge advantage given the region’s vulnerability to such interruptions.
The captive power plant provides the cement production facilities steady supply of electricity and an efficient use of available natural gas as primary fuel. By having Wärtsilä operate and maintain the power plant, the customer can focus on its core business to deliver construction materials to Nigeria.
“We have benefited significantly from the efficient way by which Wärtsilä has operated and maintained this plant for the past ten years, and we had no hesitation in extending the agreement for a further five years. An uninterrupted reliable supply of electricity is essential to our production, and having our own power plant, built, operated and maintained by Wärtsilä, gives us this assurance,” said Lanre Opakunle, Strategic Sourcing Director, Power & Gas, Middle East & Africa, Lafarge – a member of Holcim Group.
“Lafarge has been a customer with whom we have built a strong relationship over a number of years. Their readiness to renew this O&M agreement is a clear indication of satisfaction with our performance, and of how it supports the achievement of their business goals,” commented Marc Thiriet, Energy Business Director, Africa West, Wärtsilä Energy.
The scope of the agreement includes the operating crew, performance guarantees, plant availability, and spare parts.
Wärtsilä has also supplied Lafarge with another 100 MW power plant located in Mfamosing, Nigeria. With a total of 200 MW of generating capacity to the same customer, Wärtsilä has established a high level of trust that validates the efficiency of the company’s flexible and reliable technology.
Since 2010, Wärtsilä has had a strong presence in Nigeria with a total installed capacity of 667 MW. The company locally employs approximately 90 people. In Africa, Wärtsilä has an installed footprint of more than 7000 MW.
NNPC, EGBIN To Boost Gas-To-Power, Energy Transition
NNPC, The Nigerian National Petroleum Corporation and Egbin Power Plc have pledged to collaborate towards ensuring sustainable power supply and boosting Nigeria’s energy transition through optimisation of gas-to-power initiatives.
The Chief Operating Officer, Gas, NNPC, Yusuf Usman and Chairman, Board of Directors, Egbin Power Plc, Temitope Shonubi, announced both organisation’s commitment to transforming the power sector during a facility visit by the NNPC team to the power plant on Monday in Lagos.
Usman said the NNPC was committed to deepening gas utilisation in Nigeria, adding that the turn-around of Egbin Power post privatization was very impressive and indicative of the expertise and huge investment injected by the Sahara Group into transforming the thermal power plant.
“This visit has been an eye opener for me. We have seen turbines that have been running for over 40 years and still performing optimally through the efforts of Egbin management and employees to achieve a turnaround at the plant through overhaul of the entire system. This is a huge plus for the privatization exercise and positions Egbin to play a leading role as we work towards energy transition using gas which is a clean fuel that we have in abundance in Nigeria.”
Usman assured the power plant of the support of the NNPC, adding, “I have listened to the concerns you raised, particularly, regarding transmission restrictions. I am aware that works are ongoing in this regard to ensure that all the power we generate is safely evacuated.”
Shonubi said Egbin Power Plc had developed a robust strategy for its Phase Two investment expansion plan that is projected to add between 1,750 megawatts (MW) and 1,900MW to Nigeria’s power generation pool. He explained that Egbin’s operations were guided by an unwavering commitment to environmental sustainability. “We are mindful of our carbon footprint and continue to operate in compliance with global standards to ensure our energy is clean and our environment preserved for future generations.”
He noted that huge investments and consistent overhauls of the system had played a critical role in increasing its generation capacity “consistently and sustainably” since the plant was acquired in 2013.
He said: “Egbin has 1,320MW capacity. As of the time we took over, the plant was generating 300MW which is abysmal 22 percent. As of today, our generation capacity has surged, and we are doing 89 percent. We hit generation peak of 970MW this year despite challenges many thanks to expertise and dedication of our employees and support of our stakeholders. We are delighted at the tireless commitment of our employees to our vision of lighting up Nigeria and ultimately, Africa.”
Shonubi also acknowledged the support of stakeholders including the NNPC, Central Bank of Nigeria, the Power Ministry, Banks, Transmission Company of Nigeria, regulatory authorities, and the entire power sector, noting that multi-stakeholder collaboration remained critical to delivering uninterrupted power supply in Nigeria.
Health24 hours ago
Gricd partners with Nigeria’s NPHCDA to deliver 4.2 million doses of Moderna COVID-19 vaccines
Press Release2 days ago
Softline expands in MENA by increasing its investments in the Egyptian market
Press Release2 days ago
TradeDepot Raises $110 Million To Extend ‘Buy-Now-Pay-Later’ to Retailers Across Africa