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However, for the country to wean itself off oil – and build a diversified economy – local industry and business still need access to reliable power in the meantime, says Seun Suleiman, CEO of Siemens, Nigeria. “Renewable energy is an important component of the energy transition.”
“But first we must ensure stable, reliable and affordable access to electricity for society. The primary purpose of the Presidential Power Initiative (PPI) is to strategically and systematically solve Nigeria’s perennial problems of unreliable and inadequate electricity supply,” Suleiman tells The Africa Report.
The PPI – a deal between the Nigerian and German governments that appointed Siemens Energy to double Nigeria’s installed power generation and operational distribution capacity – has the potential to fuel economic growth while cutting the share of harmful carbon emissions.
The PPI aims to improve the end-to-end infrastructure and operational capacity of the power sector, from generation to distribution.
According to the ministry of finance, the first phase of the PPI hopes to provide over 40 million people with more reliable electricity supply and create 11,000 direct and indirect jobs for Nigerians.
The mere fact that over 200 million people are dependent on an average of 4000MW per day isn’t just an embarrassment, but an impossibility
A similar project in Egypt, where Siemens Energy partnered with local power infrastructure companies to build a 14.4GW power project in 30 months, which was completed in 2018, included the largest combined cycle megaprojects in Beni Suef.
Early last year, President Buhari directed the ministry to collaborate with the Egyptian government to maximise Nigeria’s deal with Siemens Energy and ensure an effective rollout of the PPI.
According to the PPI timetable, the first phase (of three) is due for completion in June 2023 and aims to improve the end-to-end operational capacity of Nigeria’s power system by 2,000 megawatts (MW) to 7,000MW.
The necessary equipment for this phase, including transformers and mobile power substations, will begin to arrive from Germany in September this year. The second phase will boost capacity to 11,000MW and the third to 25,000MW in total, with completion due in 2025. This will be a substantial addition to Nigeria’s operational capacity, currently at 4000MW.
Deficit difficult to estimate
To build a 21st century, world class economy, Nigeria needs multiples of the proposed 25,000MW that the PPI will help bring online.
As Eyo Ekpo, CEO at Excredite Consulting Limited and a former commissioner at Nigerian Electricity Regulatory Commission (NERC), tells The Africa Report, the single biggest constraint in the power sector is that the country simply does not have enough capacity to provide electricity to citizens and businesses.
“From an engineering or infrastructure point of view, the mere fact that over 200 million people are dependent on an average of 4000MW per day isn’t just an embarrassment, but an impossibility,” he says.
“We should be commissioning new power capacity in thousands of megawatts every quarter or year if we really want to transform the country,” Eyo says.
“What if the back-up capacity that Nigerians provide for themselves through their generators, inverters etc. are north of 30,000MW? It is difficult to estimate the power deficit in the country.
There’s less than 5GW of operational capacity, thereby putting the majority population at the mercy of more expensive and polluting sources
“The government should first try to replace this capacity with a cheaper, cleaner, grid-connected and distributed publicly available power supply and then adopt [something similar to] China’s incremental power strategy that has delivered an average of 100MW every week since the 1970s,” he says.
According to PwC, Nigeria’s installed transmission and distribution capacities are over 5.3 gigawatts (GW) and 7.2GW respectively, but over 26% of the former and 56% of the latter are not utilised.
“Even with an installed power generation capacity of about 14GW, there’s […] less than 5GW of operational capacity in the nation’s grid, thereby putting the majority of the 200 million population at the mercy of more expensive and polluting alternative generation sources,” says Suleiman.
“The work that Siemens Energy is undertaking in Nigeria as part of the PPI will strengthen the grid and provide resilience, which will facilitate renewable energy expansion,” he says.
The new PPI may even address Nigeria’s power deficit and reduce some of the more nefarious consequences of fossil fuel use, says Suleiman – even though its contribution to global greenhouse gas emissions isn’t huge.
Africa accounts for just 2% to 3% of the world’s carbon dioxide emissions from energy and industrial sources, according to the UN Fact Sheet on Climate Change. In Nigeria, the biggest energy sources are gas and water. 77% of Nigeria’s electricity generation is sourced from gas while hydroelectric sources account for 20%.
Siemens is a major player in Africa’s renewable energy market. Siemens Gamesa, its renewable energy subsidiary, has installed a total of 3.4GW of wind energy capacity across Africa, saving the continent 8m tonnes of CO2 emissions annually.
Businesses in Nigeria lose $29bn annually due poor electricity, according to the World Bank. This is because they essentially provide the bulk of the electricity they use through generators, bearing extra costs. According to Nigeria’s statistics office, the percentage of power provided by generators was 48.6% in 2021.
“It is really terrible,” Abayomi Ashiru, power deployment manager at Vertiv Nigeria, a digital infrastructure provider. “Every mast site must have two generators – one to regularly run operations and the other as a reserve in case the first one fails – and they are changed every two years. This is because power has to be supplied to the equipment at all times and we can’t afford to have any major disruptions.”
A lot of things will be better in the country if we can just fix [the] power supply.
He estimates that diesel prices and generator maintenance account for 80% to 85% of operational costs. Indeed, recent fuel price hikes have aggravated the problem. A litre of diesel went from a January average of N288 ($0.69) to over N700 in March.
Ashiru believes that if the government can pull the PPI off this time, it will have a massive impact on businesses across the country and facilitate significant economic growth. “A lot of things will be better in the country if we can just fix [the] power supply,” he says.
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