29th June, 2016
In his words: “There is a chance to start afresh in Nigeria, as the way electricity is generated, produced, stored and marketed is changing. There is a wider array of choices for generation (solar, geothermal, wind etc), there are storage options which serve the needs of average Nigerian homes at less cost than the current diesel alternatives, and smaller companies can get into the business of producing electricity for different segments of the market.
“The change we have to embrace in Nigeria, with an opportunity to even leapfrog countries like the USA in adoption, is inevitable and is as a result of several global trends that are currently playing out. These trends are climate change, reducing costs of renewables like solar, the convergence of internet technology and operational technology, bringing more efficient methods of electricity consumption to consumers and businesses alike. What does this look like for the average Nigerian?”
Seyi Fabode who hails from Ekiti, has worked in every segment of the power industry from power plant operations and distribution (Barking Power Station a 1000MW Gas plant that supplied 400k homes in London), trading (Energyquote, a wholesale power brokerage firm acquired by Accenture), investments and consumer services (Power2Switch in the US, serving ~40k customers with energy purchasing and management, and on the board of two energy technology companies) for more than 14 years.
He obtained an MBA, University of Chicago Booth School of Business; MSc Manufacturing Systems Engineering, Warwick University and BEng Metallurgical and Materials Engineering, Federal University of Technology Akure.
Read his first article published in TheNEWS here: http://thenewsnigeria.com.ng/2016/05/the-way-forward-for-nigeria-on-power-expert/
And below is his latest article:
The Nigeria Power Situation: Hindsight, Insight and Foresight
By Seyi Fabode
My last post on the Nigeria power industry was a reaction to a Vanguard article by the Minister of Power. It was an article I read while at Murtala Mohammed Airport in the midst of what turned out to be a brief power outage. It was a reactionary post and its been on my mind for a few weeks to write a more structured article about where we went wrong, why we are where we are now, and what we need to do to ensure a future of economic development borne out of the provision of a critical element of the fuel that drives the engine of growth in most developed countries; electricity.
Hindsight (“Cause and effect are not closely related in time and space”):So what happened? How did the power sector in Nigeria get so decrepit? Hindsight says we all lacked foresight and didn’t invest in power industry infrastructure development and maintenance. There were no power stations built in Nigeria throughout the 1990’s (the worst period for the industry, in my opinion), we failed at long term systems and needs planning because we were too busy just trying to survive. I grew up in Nigeria during this period and that’s when all day and week-long power outages (without explanations) began. No surprises that it coincided with a period of bad government, but that’s a story that has been told time and time again so I won’t repeat that here. I will focus on the systems failings; in my opinion, that was the period shortly after the 90’s when Electric Power Reforms started in Nigeria without recognizing the immediate need to increase generation.
There’s a systems saying, ‘the easy way out usually leads back in.’ It fully captures the mistake made in trying to solve the lack of generation issue by focusing the 2005 National Power Sector Reform Act (EPRSA) on privatizing the sector i.e. transferring the burden of making up the generation shortfall without fully transferring the benefits/money to be made from the privatization to the private sector. The Niger Delta Power Holding Company Limited (NDPHC) was formed to take best practices from the private sector without fully privatizing the sector. Here’s an analogy; imagine having a run-down home and, while holding on to the keys, you ask your new neighbor who is building his own home to help you fix your home, after which you will finally hand over the keys. Very few neighbors would actually fall for such a trick, so it was no surprise that this NDPCH arrangement did not work. The government tried to take the easy way out but we still did not have enough power to meet the needs of the people from current generation capacity or new build. That situation has continued till today…
Insight(“Today’s Problems Come from Yesterday’s Solutions”): So where are we? Citizens and consumers require three things from their power provider; electricity delivered safely, reliably and affordably. On all three expectations, the current power system fails Nigerians. Every citizen or business that can afford it is his/her/its own government when it comes to utility service provision, salving their needs by buying a generator, building a borehole in their compound and providing their own personal security. And for every citizen who cannot afford to be their own government? They live without electricity. According to the government ‘Today, in March 2016, we have just about 5,000 MW of power on the National Grid for about 180 million people.’For some context (and this is a rough but apt calculation),
I worked at a power station which generated 1000 MW of electricity for approximately 400k homes, assuming every home in London uses the same amount of electricity as a home in Nigeria. Assuming there are 36 m homes in Nigeria (with 5 people per household), it means we as a country are generating just 5X the amount of electricity from one power station in London for 90X the number of people!
Fashola
Fashola
Put another way, according to the World Bank, our per capita electric consumption is 142 kWh. What does that mean? It means we are in the league of countries like Nepal (128kWh per capita), Sudan (159kWh), Togo (148kWh) and the Democratic Republic of Congo (110kWh). These are countries with much smaller populations and smaller requirements than Nigeria. With all due respect to these countries, that is not a league we want or deserve to be in. Contrast this with the countries that have similar size populations (and less natural resources to draw on) to Nigeria, countries like Bangladesh (156M pop.) with per capita of 293 kWh and Pakistan (182M pop.) with per capita of 450 kWh. My point? We are falling extremely short of the expectations we have of ourselves and the possibilities…
There are very few things that we all do which don’t require that electricity be delivered safely, reliably and affordably. Electricity is the engine of growth in every developed country in the world. It is also the single most impactful element in personal comfort (an oft ignored element of the value electricity provides).The similarities between Nigeria and the low electricity consumption per capita countries I listed above extend from poor electricity provision to lower life expectancy and health expectations for citizens. Provision of electricity ranks very closely in importance to good governance because it is a big input into productivity growth, especially in the long run, which, in itself, is a strong driver of economic growth. If we increase the productivity of the average Nigerian (and heaven knows our productivity is at a low right now), we increase the growth of the economy. Increased productivity = greater money earned = greater money spent and improved credit flow within the economy.
Let’s chalk up the last few years in the Nigerian power industry, two full economic cycles, as the lost decades. Current policies are structured to rebuild or improve old infrastructure and maintain less relevant business models. The good-governance experiment is currently ongoing in Nigeria; it’s time to begin the provision-of-electricity experiment with a clear view of the industry’s future.
· Foresight (“the areas of highest leverage are often the least obvious”): If we agree with the premise that all consumers, regardless of class, deserve to have stable, affordable and secure electricity, then it’s time to embrace the change currently going on in the electricity industry globally. There is a chance to start afresh in Nigeria, as the way electricity is generated, produced, stored and marketed is changing. There is a wider array of choices for generation (solar, geothermal, wind etc), there are storage options which serve the needs of average Nigerian homes at less cost than the current diesel alternatives, and smaller companies can get into the business of producing electricity for different segments of the market.
Read more in TheNews magazine at: http://thenewsnigeria.com.ng/2016/06/global-best-solutions-to-nigerias-power-problem/