Power Generation in Nigeria Stagnates at 4,000 Megawatts Despite 15,500 MW Capacity – GenCos Explain
The sustained stagnation of power generation in Nigeria at approximately 4,000 megawatts, despite an installed capacity of 15,500 megawatts, has been attributed to several operational and regulatory challenges faced by power generation companies (GenCos).
Dr. Joy Ogaji, the Chief Executive Officer of the Association of Power Generation Companies (APGC), provided insights into these issues during her recent statement made available to reporters in Abuja.
Dr. Ogaji highlighted that both legacy GenCos and the National Integrated Power Project (NIPP) plants have been operating without adequate protection against sector risks, exposing them to various operational and regulatory challenges.
This lack of risk protection, she noted, has been a critical factor in maintaining grid generation levels at a mere 4,000 megawatts over the years.
“This situation underscores a significant anomaly in the market. For the record, GenCos have meticulously documented these losses as a result of regulatory risks,” she stated.
The APGC CEO emphasized that GenCos have consistently adhered to all terms outlined in the industry and privatization agreements, including the Power Purchase Agreements (PPAs), since the sector’s transition on November 1, 2013.
However, they have faced severe repercussions in return, including ongoing liquidity challenges, defaults on contractual obligations, and increased market volatility. These issues have led to a diminishing respect for contract sanctity among industry participants.
For example, Dr. Ogaji pointed out that GenCos are currently owed over ₦6.2 trillion, an amount that does not fully represent their outstanding contractual entitlements.
The ongoing accumulation of these debts can be linked to the GenCos not receiving full compensation for their generated output, despite incurring substantial costs associated with gas supplies, plant maintenance, foreign exchange exposure, and financial obligations.
The situation has rendered many GenCos technically insolvent, significantly hampering their ability to invest in capacity maintenance and expansion projects. Dr. Ogaji also noted that contrary to public perception, GenCos are not recipients of the current subsidy regime; in fact, they are among its greatest victims.
The GenCos are appealing for the full payment of their long-overdue receivables, as confirmed by the Multi-Year Tariff Order (MYTO) and Nigerian Bulk Electricity Trading Plc (NBET) documents. Since 2015, they have only received about 35% of their due payments, resulting in a substantial outstanding balance that remains unbacked by cash.
“How would power growth in Nigeria be encouraged if GenCos are not incentivised to make capacity available for dispatch to the NESI?
“What incentives does the market present for GenCos to invest towards recovery of unavailable capacity when they are denied capacity payment for what is already provided and maintained amid constrained and unutilised capacity?
“Unfortunately, GenCos’ increased capacity has not translated to a corresponding increase in power supply to consumers. This has become a big challenge and an inhibitor to the NESI, defeating the effort of the GenCos in recovering unavailable capacities, considering the massive, fixed charges incurred to keep the GenCos machines and units running to make power available.
“It is international industry best practice in critically underserved countries that available generation capability should be equal to average generation (energy utilised). In Nigeria, available generation has met increased stranded capacity.
“The process of verifying the GenCos invoices is akin to undergoing a doctoral degree (PhD) viva. We dare to state here that, contrary to the allegation disparaging the GenCos, no sector participant has any powers to negotiate inflated invoice payments.
“Metered data is obtained by NISO from the tariff meters, for which GenCos and DisCos have a corresponding check meter, with respect to energy sent out and energy delivered. (MR: 27.6.4).
“Market Operator (NISO) validates the metered data submitted by the participants with System Operator (NISO) figures. The capacity figures are obtained from the System Operator (see Second Interim Rules s. 8a). Capacity reading is taken every hour for each GenCo. The total is then used for preparing the monthly settlement statement and the invoices processed.
“To authenticate the process, the MO (NISO) prepares two settlement statements in a month: The Preliminary Settlement Statement (PSS) – participants are expected to check and raise complaints if they disagree with the content of the preliminary statement,
“The Final Settlement Statement (FSS) – Prepared after considering objections raised, if any. Then the final payable/receivable is made,” she noted
In summary, the APGC underscores the urgent need for systemic reform within the Nigerian Electricity Supply Industry to address the ongoing challenges and secure a more stable and reliable power generation landscape for the country.
