About $262 billion investment is required in the power sector if the 30, 000 megawatts (Mw) electricity generation target set by the government is to be actualised by 2030.
This is as the set target may be hampered by the state of power sector infrastructure, which experts said, could not effectively generate the much-needed electricity for the country.
Of this project target, renewable energy is expected to contribute 30 per cent to the energy mix by 2030.
The Minister of Power, Adebayo Adelabu, dropped this hint at an oil and gas conference in Lagos.
Represented by Director of Transmission Services Department, Ministry of Power, Emmanuel Nosike, the minister said the country has a low power generation, transmission and distribution capacity of about 5,625Mw; 8,500Mw, and 8,425MVA, which he noted, are inadequate to even reach the targeted power generation of 20,00OMw in the short-term.
“Nigeria needs about $262 billion in investment to meet the expansion needs of the power sector by 2030,” the Minister said.
Expressing concern over the situation, Adelabu said the power sector was faced with multiple challenges, which comprised insufficient generation capacity, tripping of transmission lines, vandalism of power infrastructure, high frequency due to low demand for power, and aging infrastructure.
The Minister said the insufficient power generation was due to outdated power plants, underinvestment in new generation infrastructure, and over-reliance on fossil fuels such as gas/steam and diesel.
“The interruption in electricity supply is a result of sudden outage in the transmission line which may be as a result of overloading, overheating of insulation, and faulty substation equipment. Vandalism of power infrastructure is a significant challenge in Nigeria’s Power Network. Criminal elements, sometimes intentionally damage power lines, transformers, and other equipment associated with low levels of surveillance and security on all electrical infrastructures.
“High frequency due to low demand for power is often referred to as “over-frequency” or “over generation” and it occurs when the power supply exceeds the demand on the grid. Its effect can be felt in the Overloading of Generators and Transformers, Loss of Synchronization, and Frequency Instability. When the frequency goes up, the machine output reduces, and vice versa.
When power systems infrastructure has exceeded its expected lifespan, it needs repair, rehabilitation, or replacement. Aging power network infrastructure can lead to increased failure rates and reduced reliability without adequate maintenance and system upgrades.
“These issues have had far-reaching consequences on the nation’s development, and as such, may risk losing potential investors,” he explained.
To address these challenges, the minister said there was need for the government and private sector to collaborate on developing a strategic approach to upgrade and modernize the electricity transmission infrastructure to fully realise the anticipated benefits of privatising the power sector.
Adelabu further revealed that the signing of the Electricity Act 2023 is a deliberate effort of government to attract the required private sector investment in the power sector to bridge the huge deficits of electricity demand and supply. The Electricity Act 2023, assented to by President Bola Ahmed Tinubu, enables states, companies, and individuals to generate, transmit, and distribute electricity.
Going forward, Adelabu warned that the Federal Government would no longer provide sovereign guarantee between investors and organisations. This procedure, it is said, would enhance accountability and responsibility between both parties. Besides, it will also eliminate the existing arrangement where the Federal Government provides a sovereign guarantee, assuring the investor that the money will not be lost.
“This is believed to be a reason why the investor and the organisation relax because they know that the government will pay. For now, the Ministry has proposed a situation where the investor and the firm will be committed to ensuring that the project works and payments will be from the proceeds of such project.
“Contract financing should be encouraged. The contract financing should be between the investor and the organisation. For instance, if somebody wants to invest in the transmission of electricity today with the Transmission Company of Nigeria (TCN), it should be between the investor and the TCN,” he said.