Bilateral electricity purchase agreements are necessary in Nigeria to aid the direct sale of power from Generation Companies (GenCos) to Distribution Companies (DisCos).
The implementation of these contracts between GenCos and DisCos is expected to address the non-buoyancy of DisCos and pose a serious challenge in the implementation of bilateral power contracts.
The bilateral power contract will allow the DisCos to engage directly with willing GenCos for energy supply on mutually agreed terms, which is expected to improve on the Power Purchase Agreement (PPA), boost power generation, and electricity supply in the country.
Electricity sector operators are negotiating bilateral contracts to enable power purchase agreements in the contract market phase set to begin in July.
Three DisCos – Eko Electricity Distribution Company, Ikeja Electric, and Abuja Electricity Distribution Company – were earlier this year instructed by the Nigerian Electricity Regulatory Commission (NERC), the regulator, regarding the implementation of bilateral contracts with GenCos. The existing contracts in the Nigerian energy supply industry see the Nigerian Bulk Electricity Trading Plc (NBET), the manager and administrator of the electricity pool in the industry, buy energy and capacity from 26 generation plants owned by the respective GenCos that have contracts with NBET.
For a bilateral power contract to be fully effective, coupled with the appropriate market structure, there are factors that need to be considered and/or be put in place for a seamless transaction, including but not limited to the following: The willingness of the parties to enter into the contract; the availability of the necessary infrastructure to support the transaction; the availability of the necessary regulatory framework to support the transaction; the availability of the necessary financing to support the transaction; as well as the availability of the necessary technical expertise to support the transaction
Outside these factors being considered and addressed, no meaningful progress will be achieved, despite the laudable initiative of a bilateral power model.
The institutionalisation of contracts such as Power Purchase Agreements (PPAs) and the creation of the Nigerian Electricity Management Services Agency (NEMSA) are some of the measures taken to transform the Nigerian power landscape
With the evolving regulatory framework of the Nigerian Electricity Supply Industry (NESI) and the declaration of eligible customers, the Niger Delta Power Holding Company Limited (NDPHC) led by Vice President Kashim Shettima, who is also the Chairman of the Board of Directors of company, has identified opportunities to revolutionise the industry through end-to-end solutions that increase electricity access for Nigerian homes and businesses and reduce the financial burden on the federal government’s balance sheet.
The primary objective of the initiative is to ensure a consistent, reliable, and cost-effective supply of electricity from NDPHC’s power plants to the extensive industrial and business clusters in Agbara and throughout Nigeria
NDPHC has successfully constructed eight power plants with a combined capacity of approximately 4000 MW, as well as various transmission and distribution infrastructure.
A significant portion of the capacity remained stranded due to constraints within the transmission and distribution system, distribution losses, gas limitations, and the financial burden on the federal government’s balance sheet through NBET, the FGN-owned primary bulk purchaser of electricity that on-sells to electricity distribution companies in Nigeria.
NIgeria has struggled with poor power supply for decades, with generation hovering around 4,000 MW on the national grid. An estimated 2,000 MW of electricity is stranded daily due to several challenges especially transmission and distribution infrastructure.
Data from the Association of Power Generation Companies (APGC) indicates that GenCos lost at least N1.632 trillion between 2015 and 2021 over the lack of full evacuation of generated electricity on the national grid causing stranded power of 27,204 megawatts (MW).
The data showed that about 25 active GenCos had over 15,000 megawatts (MW) of stranded generation capacity at the end of 2021.
The vice president, Senator Kashim Shetima, in his capacity as chairman of the Board of Directors of NDPHC, led the management team of NDPHC to a business roundtable at OPIC Industrial Estate, Agbara in Ogun State, where he assured industry owners of the federal government’s determination to bypass infrastructure obstacles and supply electricity to them through NDPHC in a cheaper and sustainable manner.
The bilateral power purchase agreement will ensure that those businesses get power at 60 per cent cheaper than what they currently pay for energy. None of the businesses currently operating within the Agbara industrial cluster is currently using energy from the national grid.
Shetima promised that NDPHC will give them needed power within the next six months.
NDPHC has successfully constructed eight power plants with a combined capacity of approximately 4000 MW, as well as various transmission and distribution infrastructure.
He expressed dissatisfaction that a significant portion of the capacity remained stranded due to constraints within the transmission and distribution system, distribution losses, gas limitations, and thereby put financial burden on the federal government’s balance sheet through NBET, the FGN-owned primary bulk purchaser of electricity that on-sells to electricity distribution companies in Nigeria.
He said the primary objective of the initiative is to ensure a consistent, reliable, and cost-effective supply of electricity from NDPHC’s power plants to the extensive industrial and business clusters in Agbara and throughout Nigeria. NDPHC remains at the forefront of the industry in pursuing bilateral power sales and other projects that ensure efficient and targeted power delivery to end-users.
Shettima said the NDPHC is ready to supply electricity to other industrial clusters in Nnewi, Port Harcourt, Kano, and others. They recently signed an agreement with Ibadan distribution company and are ready to work with partners in supplying electricity to residential areas directly on a bilateral basis. All it takes is to minimise technical losses, which has to do with poles and wires; commercial losses, which has to do with technology to ensure that there is no power theft or that power theft is reduced, and of course, eliminate collection losses, which has to do with metering.
The initiative to light up industrial clusters across the country is an indication that the President Bola Ahmed Tinubu administration is on a journey of rekindling the flames of enterprise. The federal government’s commitment to revamping Nigeria’s infrastructure framework was the much-needed drive in empowering Nigerians and strengthening the nation’s economic policies. The Vice President vowed to closely monitor the progress of work in the ongoing power projects to light up industrial clusters across the country, with a view to holding every relevant official accountable. He reiterated the commitment of the Tinubu administration “to providing the necessary institutional and policy support to ensure the successful delivery” of the project.
In his remarks, managing director/CEO NDPHC, Chiedu Ugbo saId the business roundtable signified the unwavering commitment and preparedness of NDPHC in strategic collaboration with esteemed partners to undertake bilateral electricity sales to end-users.
“As many of you are aware, NDPHC is a wholly-owned government company responsible for implementing the National Integrated Power Project (NIPP), which aims to enhance electricity generation with associated electricity transmission and distribution infrastructure, for the benefit of Nigerians,” he said.
Governor of Ogun State, Dapo Abiodun, said the location of the pilot phase of the initiative is due to the viability of the Agbara Industrial area as the most successful industrial estate in the country. He said the initiative aligns with his administration’s drive to provide critical infrastructure in Industrial clusters across the State and thanked President Bola Tinubu and VP Shettima for prioritising the power sector, noting that it will unlock potentials in different sectors of the economy. The Minister of Power, Mr. Adebayo Adelabu, expressed optimism that the initiative to ensure effective power supply to the Agbara Industrial Estate would be achieved and can be a model to be replicated across the country.
The NDPHC’s initiative to rev up industries in Nigeria is a significant step towards providing a consistent, reliable, and cost-effective supply of electricity to end-users. The initiative will not only increase electricity access for Nigerian homes and businesses but also reduce the financial burden on the federal government’s balance sheet. The commitment of the federal government and the NDPHC to the successful execution of the project is commendable, and it is hoped that the initiative will be replicated across the country to enhance the productivity of businesses and institutions in Nigeria.
