…As Power, Works and Housing Minister stresses need for public enlightenment on the economics of power supply
…Says the PPA is one of the ultimate fruits of the President’s visits, seeking partnerships abroad within Africa and beyond Africa.
…“We expect that these pioneers have opened the door for other players to come in. And as it is in other jurisdictions, we expect that the prices will further drop down as the technology gets better and cheaper,” he says
In a major milestone in the pursuit of the Federal Government’s commitment to the achievement of incremental power supply, the Nigerian Bulk Electricity Trading Plc (NBET)Thursday in Abuja signed Solar Power Purchase Agreements with 14 Solar Power Project developers and investors even as Power, Works and Housing Minister, Mr. Babatunde Fashola SAN, stressed the need for public enlightenment on the economics of power supply.
In his remarks at the signing ceremony, also witnessed by top officials of the Power, Works and Housing Ministry, Fashola said the need has become expedient as the country invests in renewable energy whose technological inputs were currently being imported adding that the public needed to understand the dynamics involved in the cost of energy.
The Minister, who recalled the recent judgment that set aside the electricity tariff earlier introduced by the Nigerian Electricity Regulatory Commission (NERC), said there was need for Nigerians to see electricity as a product that has to be produced from raw materials that have to be bought, a product that has to be transported and the transporter has to be paid and the transport cost indexed into the cost of the final product just as it is done with other products.
Urging the investors to see their investment as an opportunity to join in this public education, Fashola told them, “Let us explain to our people that you come in as business men not as social interventionists and you come into an environment of profit and loss and while our duty is to protect consumers, we also owe an obligation to enable you run your business. We can do that if we work together. You must be as interested to educate as we are”.
The Minister, who recalled that the first question he was asked when he assumed office as Minister was why the country was not using solar energy since the sun was free, said the people should be made to know that the facilities needed to convert the sun’s energy into electric current for use have to be imported adding, “Let us see it as an opportunity to educate ourselves about the economics of power”.
According to the Minister, it is also important to understand what constitutes adequate consultation and to understand, for example whether in setting tariff, the NERC must speak to every Nigerian before it has complied with the law adding, “So these are the responsibilities that today’s partnership imposes on us to find solutions where none may readily appear”.
“Let us also use the opportunity to enlighten the public that tariff can never be permanently fixed because it will always be subject to the dynamics of economics; and therefore, if cost of raw materials go up tariff must follow some time in a way that if they come down tariff should also come down”, he said adding, “I think in this way we will build more understanding, we will see less excitement to approach the courts and more willingness to work with the regulator.
Exonerating the Judiciary from blame in its Judgment on the Tariff issue, Fashola argued that the Judiciary has the constitutional responsibility to hear matters brought before it and to determine such matters in the way that the arguments have been canvassed and the way the judgment may appear to represent.
Describing the judicial intervention as one of the unusual things happening in the power sector, the Minister declared, “Let me say the judiciary is blameless, it has the constitutional responsibility to hear matters brought before it and to determine them in the way that the arguments have been canvassed and the way that the judgment may appear to represent”.
Fashola, however, commended the investors for their resolution to go ahead and invest even after the court judgment on Tariff describing it as a demonstration of their commitment to the development of the nation’s power sector and their confidence in the future of the sector.
“Clearly your position on tariff now seems somewhat in doubt, but in spite of that, you remain committed, you remain resolute to proceed. This is the role of pioneers to see where the path has never been charted and I am sure, working with you we will find a way”, he said adding, “For me, I think that we must also see the opportunities that are inherent in what appears to be a setback”.
Fashola said there was need also to make comparisons where they exist about how other sectors have reacted to the realities of the economy adding that sectors like the Petroleum and media and communications have reacted accordingly “because the parameters and the indices of the Money Market have changed”.
“And therefore all of the things cannot remain the same even though economics will always expect them to remain the same. I think this is an opportunity for us to ensure that our people get the best power the sector has to offer by taking the electricity sector to the real and the responsive economy; because I think it is the basis of privatization in the first place, to take it away from government and put in the real economy”, he said.
Fashola also stressed the need for the people to understand that investments in the sector such as Solar and other renewable energy, take time to mature, saying that such impressions laid in the past had caused agitations and loss of confidence among the citizenry as public expectations appeared largely unfulfilled.
According to the Minister, “Power Purchase Agreements are the heart and souls of financing Power Projects. They do not automatically on their own mean that you will have electricity tomorrow; but they indicate that in the next few months, six, nine, 12, 14, 18 months, depending on the speed of each promoter and developer, you will begin to see incremental delivery of electricity into the Grid and into your communities and I think this is important to manage expectation.
“And I also think our partners must understand this as well; and that on their office and home pages, on their sites, they must contribute to educate the public about what they should reasonably and rationally expect so that when delivery is made it is against a measured expectation”, he said.
Recalling that such perception was allowed to linger that immediately the privatization process was completed, everything was solved, the Minister, who explained that it was just a first step in the process, pointing out that although the sun is free the processes required to harness the energy and convert it to electric current are not free.
He added, “Photovoltaic cells are not made in Nigeria yet. If we are lucky, the panels, some of the aluminum fittings are being put together here. But we don’t manufacture the cells, they have to be imported, they are subject to exchange rate vagaries and so on and so forth”.
The Minister described the Power Purchase Agreement as “a document that clearly shows that the Consumer is being put first”, in that it determines how much of the energy ultimately gets to the consumer adding, “And this is the good job that government, through its agency –NBET- has done”.
According to the Minister, who recalled that on assumption of office what he met was a tariff of about 17 cents, which at N200.00 to a dollar translated to a N34.00 per unit of solar energy that would be transferred to consumers, added, “We didn’t feel comfortable to pass this onto consumers”.
“Today, as we come to 11.5 cents at N200.00 to a dollar, I think we are probably at about N23.00 which is in the region of even the disputed tariff”, he said, adding, “But we feel this is a good place to begin. We expect that these pioneers have opened the door for other players to come in. And as it is in other jurisdictions, we expect that the prices will further drop down as the technology gets better and cheaper”, he said.
Thanking the pioneer investors, most of whom were youths, for their commitment and confidence in the nation’s Power Sector, Fashola, who praised their obvious energy and enterprise, declared, “This is understandable because solar is emerging and evolving technology and no generation of people has shown a greater commitment to it than young people; and I am sure with their energy, with their enterprise and with their fearlessness, we will deliver this commitment”.
The Minister, however, urged them, “I want to say very quickly that as we go towards the process of building, please remember when you start to build, never to compromise the quality of construction. Focus on the aesthetics and the durability. It is the minimum that Nigerians must expect”.
“We must stop managing and we must ask and insist on the best”, the Minister said adding that it had become expedient to make such statement because some of the investments that have been made in the past in building Power lines and distribution facilities “could have been better delivered”. He expressed regrets that some of the facilities may have to be replaced, reconstructed or rebuilt as they were either built with poor quality materials such as poles, with poor wood or metals that have corroded.
He urged, “And so as you put this investment in place, what we must say to ourselves, especially this generation, is that we must stop managing and we will seek only to get the best”, adding, “The other point I wish to make at this event is again to salute your faith and your courage and your belief in spite of the challenges and misunderstandings in the sector”.
Fashola, who described the nation’s electricity sector as transitioning from being government-led and government-run, for many decades, to now being government regulated and private sector-run, pointed out that it was creating some misunderstandings and novelties.
Such misunderstandings and novelties, he explained, come from people who have not had to pay for power now finding it difficult to migrate to the culture of paid power and people who had never bothered about conserving electricity now being conscious because their pockets are responding to a private sector led electricity.
Others, the Minister said, include people who have never had a voice in the electricity sector now able to approach the courts to ventilate their grievance as well as people who had never had recourse when lives had been lost now also getting compensated by electricity operators.
Describing the occasion as a very important milestone, Fashola
said it signaled the nation’s “commitment to walk through the door into the global comity of nations that commit to renewable energy” adding, “I think that is a memorable milestone for our country”.
“It is one of the ultimate fruits of our President’s visits, seeking partnerships abroad within Africa and beyond Africa. It is bearing fruit today. I like to start by first focusing on the importance of what we are doing here because I think, perhaps, if we had done this three years ago, the understanding between us regulators and services providers would have been a little more clearer”, he said.
The Minister thanked members of his team, Permanent Secretaries, Directors and others in the Ministry for their unalloyed support likening it to the final blow that breaks a stone, which, according to him, “wasn’t the defining blow but simply completed the chain of activities that started with the very first strike on the stone”.
He particularly commended the Acting Managing Director of NBET, for being so gracious to recognize the work that the organization has done under his predecessor, Mr. Rumundaka Wonodi, describing it as “a sign of greatness to acknowledge others especially when you stand on pedestals that they have sacrificed to build”.
“I would like to acknowledge the work that has been done backstage, some of which have been acknowledged here by the Permanent Secretary, the Honourable Minister of State who has been a bastion of support, a very gentle giant and father in the industry, our directors, especially Engineer Adebisi, whose passion for renewable energy is seemingly boundless. Of course, through him to other directors; let me acknowledge Farouk who has worked backstage with his team. And, perhaps, if I do not acknowledge you personally, you are perhaps the most important person”, the Minister said.
Earlier, in his welcome remarks, the Acting Managing Director/Chief Executive Officer of NBET, Mr. Waziri Bintube, had said the 14 PPAs that NBET initialed would potentially add 1125MegaWatts to the National Grid adding that the PPAs, after initialing, were sent to the regulatory agencies for approval.
The NBET boss expressed the hope that now that the necessary approvals have been obtained and leading to formally signing of the PPAs, the developers would “quickly push their projects to financial close and commence construction in a few months’ time”.
Praising Fashola’s commitment to the task of revamping the Power sector, the Managing Director declared, “The appointment of His Excellency, Babatunde Fashola SAN, as Minister of Power, Works and Housing, with a track record of outstanding performance in public service, was the impetus needed by the sector as the new Minister made it very clear that the government was prepared to do whatever it takes to ensure that new generation projects were successfully initiated”.
On the path to the signing of the PPAs, the NBET boss, who noted that the event was “the culmination of almost three years of hard work on the part of all the stakeholders”, stressed that the stakeholders were motivated to work harder by their consciousness of the urgent need for an alternative energy source due to the recent destructions to oil and gas installations in the country with its attendant negative consequences on power generation.
According to him, “The occurrence has created enormous pressure on stakeholders to proffer credible alternatives to diversifying the country’s energy mix as a means to increasing the overall generation capacity while engagement at the political level continues”.
“Working in concert with our advisers, NBET developed a form Solar PPA to be used in negotiations with these solar power developers”, the NBET boss said adding, however, that in the course of negotiations, NBET made it quite clear from the on- set that it was not ready to offer any developer the MYTO II tariff as published by NERC.
He said by early 2015, after protracted negotiations and aggressive price discovery on the part of NBET, consensus was reached around a wholesale solar tariff of 23 cents per KWH adding, however, that the general elections of 2015 and the attendant anxieties led to a lull in the industry.
He praised the Federal Government under the leadership of President Muhammadu Buhari, for the decisive manner it quickly resolved the issues militating against the successful conclusion of some pending transactions especially the Azura Power Plant saying the project restored hope and confidence among the investors and positively portrayed the administration as possessing the political will to see through the reforms of the power sector.
“In furtherance of this, NBET was given the marching orders to resume, Fast Track and conclude negotiations with potential developers willing to invest in the sector”, he said adding, “Following negotiations and positive support from the Ministry of Power, Works and Housing NBET finally agreed with fourteen frontline developers to an internationally accepted rate of 11.5 cents per MWH, which is less than half of the MYTO II tariff. The PPAs with the fourteen developers who have agreed to this tariff were initialed on 4th July, 2016”.
Solar companies initialed at the ceremony included PAN Africa Solar Limited (PAS) which plans to build a 75MW Solar Power Plant; Nigerian Solar Capital Partners 100MW Solar Power Plant; Nova Solar 5 Farm Power Limited which plans to build a 100MW Solar Power Plant; LR Aaron Power Limited which plans to build a 100MW Solar Power Plant ; and Motir Dusable Power Investment Limited which plans to build a 100MW Solar Power Plant.
Also initialled were Afrinergia Power Limited which plans to build a 50MW Solar Power Plant; Middle Band Solar One Limited which plans to build a 100MW Solar Power Plant; Nova Scotia Development Power Limited which plans to build an 80MW Solar Power Plant; CT Cosmos ,75MW Solar Power Plant; KVk Power (Pvt) Nigeria Limited 100MW Solar Power Plant; and Anjeed Kafanchan Solar Limited 100MW Solar Power Plant.
Others are Quaint Solar, which plans to build 50MW Solar Power Plant; Oriental Renewable Solutions Limited (“ORSL”) and EN Consulting and Projects Limited (“ENCPL”). The two companies have 50MW solar project each while all the companies have accepted the terms of the agreement.