OPPORTUNITIES
The power system that will evolve will throw up opportunities. States can progressively electrify areas where the national grid does not exist so that, when interconnected with the existing grid, industrialization can get to the rural areas. Also, they will now have the opportunity to buy up a non-performing utility and, hopefully, end monopoly for good. This will be the case since States also own a fair percentage of the DisCos in their domain. Furthermore, States can now implement private-sector led design-build-operate-maintain (DBOM) model in an integrated procurement model that combines design and construction responsibilities with operation and maintenance. In deepening competition, States can also employ robust market designs to implement a retail choice model where competition is created at the metering and supply end of the value chain. What is more, States can attract private sector investments through a licensing regime while creating conducive environments with opportunities for reliable and sustainable revenue stream.
This can also be an incentive for clean energy technologies. One expects more renewable and non-renewable energy systems (gas, oil, coal, micro and mini grid systems, solar homes, rooftop solar, wind farms, solar farms, mini-hydro, biomass, landfill etc) featuring in the Nigerian power system with the attendant benefits and advantages.
The need for proper protection and coordination of the national, regional and State grids will be a must. Supervisory Control and Data Acquisition Systems (SCADA), digitalization, and other Data Management Systems will be key. The regional or State grid can be ring-fenced and interconnected to the existing national grid which provides back-up to it in times of disturbance and excess demand. This will lead to inter-area transfer of power with its benefits and challenges.
The discovery of gas and crude oil in various basins in other parts of Nigeria will potentially lead to increased refining capacity and gas-fired power generation systems in these areas and cause more exploratory activities which can add to the local economy. If we consider the fact that power supply is abysmally poor for now, any initiative that helps some parts of the country to have improved power supply systems is positive because we can then concentrate efforts on those other areas “in darkness”. Also, this will throw up healthy rivalry and competition in neighbouring States. Where a State does not have the resources to generate electricity, we expect collaboration with neighbours in a regional grid system that has to be carefully managed.
Since States will now have regulatory agencies of their own, this is expected to lead to an improvement in the quality of regulation in the country. The relationship between the electricity market regulator at the federal level and those of the States have to be well defined with clear responsibilities and governance arrangements. Before giving licences, the Nigerian Electricity Regulatory Commission (NERC) needs to ensure that the applicant licencee (the franchisor) has needed capacity in terms of knowledge and experience to perform creditably. Also, people with experience in power systems and power system regulation will be required nationwide. Power system professionals especially will be required to manage the day-to-day planning, operation, control, protection and maintenance of the multi-systems that this will bring about. Asset Management will be key!
In general, this presents an opportunity for Nigeria to showcase an uncommon form of privatization and to think outside the box and be innovative. Smart Grid technologies will notably assist in many ways.
THREATS
A commendable act of this nature requires careful thinking, and if not well thought through, can lead to chaos. It is not enough to travel down the path and later regret and not know how to go forward after a few years just as we have experienced in the case of the privatization which took place almost a decade ago now. Also, the transmission company of Nigeria (TCN), ahead of facing competition, will have to figure out how to operate in the different markets to be thrown up by this move. For sure, it has to respond to the creation of regional and State grids to maintain competitive advantage while improving customer service.
There is also the fact that many States have started many generation projects for up to two decades now and those projects haven’t been successfully completed. It is hoped that States will not hold back from seizing the opportunity this amendment presents to them after pushing so hard to play a bigger role in the electrification of their local economies.
From experience, the fact that this amendment took place at the twilight of this administration, it is important to have an incoming administration that will have the political will to guide the implementation of the new law until teething problems are surmounted and a more stable situation is attained. There are many questions begging for answers including what the role of NERC was in arriving at this position, the role of the Nigerian Electricity Bulk Trader (NBET) in this new arrangement, whether or not an agency was created to manage the new structure with the mandate to clearly define the way and manner existing institutions and agencies will amend their roles and functions to accommodate the change in the constitution under review.
As highlighted earlier, this policy portends a threat to many DisCos in the NESI. Independent Electricity Network (IEDN), Embedded Generation (EG), Eligible Customers (EC), power traders and more players will operate in the hitherto franchise area, previously believed to be exclusive to them. It may be that DisCos themselves will apply to become eligible customers and the power system will surely become more competitive and complex to manage.
The restructuring of the electricity supply system in Nigeria from centrally managed to a decentralized one has commenced. The revolution has started and only those who have the vision to think differently will be the early benefactors. Hopefully, this will lead to further competition, better service delivery and reduced tariffs for consumers.
While it is doubtful that all the States will get involved in the three major levels of generation, transmission, and distribution of electricity at the same time, the progressive development will benefit customers who are the ultimate beneficiaries of this amended constitution.
Welcome to the dawn of an emerging power sector in Nigeria. Interesting times ahead!
…concluded.
Idowu Oyebanjo PhD FNSE FNIPE FNIEEE CEng MIET UK
2 comments
Sir, permit me s space to comment on the above subject matter. You have really explained in details. The advantages & disadvantages of Amending the constitution to allow states to generate, transmit & distribute electricity.
SWOT analysis is a strategic planning technique used to identify and analyze the Strengths, Weaknesses, Opportunities, and Threats of a proposed action or project. In this case, we will use SWOT analysis to evaluate the proposal of amending the Constitution to allow states to generate, transmit and distribute electricity.
Strengths:
Increased Control: Allowing states to generate, transmit, and distribute electricity will give them greater control over their energy infrastructure, allowing them to tailor their energy systems to meet their specific needs and priorities.
Energy Security: States will be able to rely on their own energy sources, reducing their dependence on imported energy and increasing their energy security.
Economic Benefits: The proposal will create jobs in the energy sector, potentially boosting the economy of the states that choose to take advantage of it.
Weaknesses:
Lack of Coordination: The proposal could lead to a lack of coordination among states, potentially leading to inefficient energy systems and energy waste.
Increased Costs: Developing and maintaining energy infrastructure can be costly, and states may not have the financial resources to invest in their own energy systems.
Regulatory Issues: The proposal may require significant changes to existing regulatory frameworks, leading to uncertainty and potential legal challenges
Opportunities:
Innovation: States may have the opportunity to develop and experiment with new energy technologies, leading to potential breakthroughs in energy generation, storage, and distribution.
Increased Renewable Energy Use: States may be more likely to invest in renewable energy sources, such as solar, wind, and geothermal, leading to a reduction in greenhouse gas emissions and other environmental benefits.
Energy Independence: States will have the opportunity to become more energy independent, potentially reducing their reliance on non-renewable sources of energy.
Threats:
Inequality: Smaller or poorer states may not have the resources or expertise to generate and distribute electricity, leading to an unequal distribution of energy infrastructure and potential power imbalances.
Fragmentation: If too many states opt to create their own energy systems, it could lead to fragmentation of the national grid, making it more difficult to manage energy distribution across the country.
Political Polarization: The proposal may become politicized, with different political groups advocating for or against it, potentially leading to a divisive political issue.
Overall, the proposal to amend the Constitution to allow states to generate, transmit, and distribute electricity has the potential to provide states with greater control over their energy infrastructure, improve energy security, and potentially create economic benefits. However, it also presents challenges such as lack of coordination, increased costs, and regulatory issues.
Brilliant. Well done sir.