UNBUNDLING TCN: THE IMPERATIVES OF LEVERAGING PPP IN ENTRENCHING GRID AVAILABILITY, RELIABILITY AND RESILIENT POWER SYSTEM

Presented By Aloaye Wilson Alli, PhD MBA FNSE REng FNIMechE FNIPE M.ASME MNIM; ZAAPTRON Consulting Limited/ZAAPTRON Energy Company Limited 22, Gnassingbe Eyadema Street, Asokoro 900231 Abuja-FCT Nigeria.  Twitter: @AloayeWilson

Content
1. History of Electric Power
2. The Nigerian Electricity Supply Industry(NESI)
3. The Structure of the Nigerian Power System
4. NESI and Industry Regulators,Grid Code and the Market Rules
5. What is PPP/PFI
6. Why PPP
7. Leveraging the PPP/PFI Concepts to solving Issues in NESI
8. Conclusion

1. History of Electric Power
❖ Electric Power happens to be the most convenient form of Energy since its introduction by Thomas Edison in 1882. He generated electricity through a DC Dynamo(Generator) driven by a steam engine. This power was distributed underground and was for lighting purposes only.
❖ Overtime, there came the need for more power in distant places and the LIMITATIONS of DC began to be noticed. DC can only be delivered OVER a SHORT Distance ONLY from the generators or Dynamos. These LIMITATIONS are Occasioned by Transmission losses and Voltage drop.

❖ We all know, for power to be transported to distant places, the the voltage at the point of generation has to be increased. In other words, the voltage levels has to be high enough for long distance power transmission, and this time, high voltage were
not acceptable either through generation or consumption.
❖ A compromise was reached with the development of the transformer and the AC power Transmission by the duo of Gaulard and Gibbs in Paris, and this birthed the AC Power TransmissioN system
❖ Further development were undertaken in Massachusetts between 1886-1889 by george Washington and William Stanley

❖ With the development of the multiphase(Polyphase) electrical system, by Nikola Tesla, the AC Power System became more attractive with his development and patency of Electric Motors, generators , transformer and the Transmission System.
❖ The adoption of AC over DC were predicated on the following:
● The AC system is more easily transformed, and this provided its flexibility to be used at different voltages for power generation, transmission and distribution to load centres.
● AC Generators are simpler in design than DC generators
● AC motors are much more simpler and cheaper than DC Motors
This era is noted as when the first Electrical Power System

2. The Nigerian Electricity Supply Industry(NESI)
❖ The Electric Power is one industry that has contributed and shaped the course of mankind and technological advancement the most.
❖ The Electric Power System is the most complex critical infrastructure ever built by man and it varies in size and structural component with basic characteristics.

❖ The Electric Power System is premised on a three value-chain, the generation, transmission and distribution. However, it is important to consider and regard the feedstock source as a value chain.
❖ The Thermal plants rely on fossil fuels, either to directly fire the SCGT power plants, CHP/Cogeneration plants, or used to steam water in the Boilers and HRSG in steam power plants, and of course for the Hydroelectric plants which rely on the energy from stored water in the Dams flowing through the penstock to the cups/impellers of the hydraulic turbine which in turn drives a 4-pole generator to generate AC Power.

❖ The Nigeria Power system was once premised on a vertically integrated management structure under the old NEPA/PHCN organizations. Vertical Integration(VI) management has its own pros and cons. Management experts would aduce more cons to pros for VI in organization management.
❖ The EPSR Act (2005) gave legal backing for the unbundling of the Nigerian Electric Supply Industry(NESI) through the creation of 18 commercialized successor corporate entities across the main value chain.

❖ These entities, 11 Distribution companies, 6 Generation companies were sold in 2014, on 60:40 equity holdings to the private sector.
❖ The Transmission entity, rechristened Transmission Company of Nigeria(TCN) is retained by FGN.
❖ The TCN is licensed to perform the functions of transmission and system operations of HV network of the NESI, this renders it as the bulk energy wheeling and system operating agency in NESI and this makes it very strategic in the growth and development of the NESI

3. The Structure of the Nigerian Power System
❖ The Nigerian Power System has a total of 41 generation Plants including the Lagos Power Plant(Ijora Power Plant) built in 1896, the 10MW Katsina Wind farm. The total installed capacity is 16.7GW. However, the current installed operational capacity is 12GW, out of this value, 7.8GW is available and only 4.8GW can only be uptaken by TCN
and while the 11 Distribution companies do not take more than 4GW
❖ The NESI is regulated by two agencies, the Nigeria Electricity Regulation Commission (NERC) and the Nigerian Electricity Management Services Agency(NEMSA). Each has its own turf, with NERC supreemost. NEMSA mandate is to ensure that electrical materials/equipment/instruments used in NESI are of the right quality, standards and specifications

❖ The NESI is governed by the Standards, Manuals and Codes (Grid, Distribution Metering Codes and the Market rules, Standards and Guidelines regularly issued by NERC which has the mandate as the technical and economic regulator of NESI, through licensing, regulation of legal persons engaged in the generation ,transmission ,system operation, distribution and, trading of electricity.
❖ The Grid Code and along with other codes(Distribution, Metering and Market Rules) provides the day-to-day operating guide and procedures, and principles governing the development, maintenance and operation of an effective , well coordinated economic transmission of power for the Nigerian Electric Power Supply Industry (NESI).

4. NESI and Industry Regulators,Grid Code and the Market Rules
❖ The TCN enforces the Grid Code and the Market rules on behalf of NERC, this is because the TCN currently operates two other licenses, the System Operation and Market Operation licenses and its own Transmission System Provider(TSP) license.
❖ The System Operation(SO) license enables it to manage the grid through energy management schemes, maintain system stability and energy despatch and power flow optimisation
❖ The Market Operation Licenses(MO) enables it regulates the energy market applying the market rules

❖ Industry experts have faulted the concentration of two other licenses on an agency. It is viewed as one of the factors inhibiting the growth of the energy market and lack of interest by investors aside the low tariff structure in Nigeria.
❖ It is opined that the unbundling of TCN into separate(TSP, SO & MO) entities would further entrench industry governance, investment and operation reliability, speedy electricity market growth among other opportunities.
❖ Each with its own management structure would focus adequately in deepening its sector of NESI. The TSP would own, develop and manage the power lines transmission and the switchyards /substations infrastructure, its focus would be to solely ensure availability of these infrastructure at all times in a safe manner at all times.

❖ The System Operation would perform the de facto system operation activities, in effecting dispatching of generating units or Power Pack Modules in line with the Grid Code, handling Power System emergencies (Transient/Steady state stability issues, performing energy demand forecasting, coordination of transmission and outages. These responsibilities/tasks require the acquisition and deployment of Artificial Intelligent super communication and network monitoring and system behaviours and tracking equipment.

❖ The Market Rules would be managed and enforced by the Market Operator. The electricity market is still at its infancy and the need to developed as the other sectors are developing or even ahead.
❖ The Grid Code provides for the setting of a body that would always harmonise decision by these agencies under the guidance and supervision by the industry regulator.

❖ The onus lies critically on funding this agency, and the longer we delay, the worst the sector becomes due to paucity in funding operations, network expansions etc.
❖ The saddling of these critical roles and responsibilities under an agency of government is stifling industry growth, and is an indirect perpetuation of the archaic vertical integrated management system hitherto jettisoned with PHCN balkanization.

❖ The rule of thumb stipulates that 1GW be made available for every 1,000,000 citizens for energy sufficiency and security. This requires NESI to have installed capacity of 200GW. Conservatively, this 100GW should be an immediate projection.
❖ The proponent of decentralisation of responsibilities suggests the move would ensure full deregulation of the sector when private investors are allowed to play a critical role in the emerging entities.  The lesson learned in the earlier privatisation exercise would come handy in guiding the phase.

❖ They equally opined that it will allow massive injection of capital required for infrastructure renewal, expansion of the energy wheeling network and mitigation of the AT&C losses across the transmission and distribution value chain
❖ It will enable operational risks mitigation by decentralising risks to agencies that would be suitable to manage such risks

5. What is PPP/PFI
❖ The Public Private Partnership/Public Finance Initiative is a contemporary procurement process that provides the best way to secure improvements in public utilities, and acquisition of new critical infrastructure without adversely increasing the country’s
debt portfolio or impact on the nation’s OR organisation’s balance sheet.
❖ The PPP involves the private sector supply of infrastructure assets and services that have been traditionally been provided by the government or as partnership between the public sector and the private sector for the purpose of designing, planning, financing, constructing and/or operating projects which would be regarded
traditionally as falling within the remit of the public sector

6. Why PPP?
❖ A shared ownership between the public and private-sectors for a designated period of time is adjudged as most suitable in the current dispensation and there are different PPP frameworks that one can choose from to execute projects.
❖ It will allow government to focus on some other social development projects

❖ A PPP financed critical infrastructure would be reverted to the public sector after the private sector must have recouped its investment , unless renewed for another term. A term normally range between 25-35 years.
❖ PPP provides a risk sharing framework between the parties
❖ It allows various agreement to be reached that may preserve some public interests and allow the practical and ethical reorientation of inherited workforce.

7. Leveraging the PPP/PFI Concepts to solving Issues in NESI
❖ It is assumed that private sector investment in TSP would attract heavy capital investment in upgrading and modernising the grid, rapid construction of transmission lines and substations with ultimate impact in grid expansion, strengthening against frequent frequent transient and steady state instability
❖ Investment in System Operation would encourage similar investment in the acquisition of artificial intelligence driven system-wide communication, real-time monitoring, control of the power system
❖ Opening and development of the market rules with innovative energy products , competitiveness between Discos would be guaranteed

❖ It will ensure accountability across the entire operational spectrum
❖ Ensures rapid industrial revolution of the Nigerian economy
❖ Added investment in the power sector through the PPP procurement process, will further liberalise the sector with more jobs creation, capacity building and enhancement for the Nigerian employees who will inline to take over the sector on expiration of the PPP concession period.

8.Conclusion
❖ The common expectation of Nigerians is to have a regular, steady and high quality power supply, for now it looks like a mirage, no thanks to the weak power system, flip flop policies on power and poor sectoral investment. It is the wish of every Engineer,
especially Power System Engineer to ply his her trade in a reliable power system, as a reliable system enables a lot of social and economic activities mostly centred around production and manufacturing concerns. The manifestation is glaringly displayed in GDP growth and per capita index.

❖ Nigerians have been starved of stable power supply and it is the opinion of this presenter that full deregulation through the unbundling of the TCN entities into separate corporate outfits and enable participation of investors through PPP with concessionaires managing the TSP, SO and MO for 25-35 years will encourage rapid
system expansion, modernisation, reduction of AT&C losses will usher NESI into prosperous times, with stable, reliable power system that would be transiting to resilience.

Bibliography
Nwangwu, G (2016) ‘Public private partnership: managing risks and identifying opportunities’. McGraw-Hill, London
Grimsey, D; Lewis, M.K(2004)’Public private partnership: The worldwide revolution in infrastructure provision and project finance’ MPG Books, Great Britain.
Amana, E(2020) ‘The Nigerian infrastructure conundrum-The missing links. 2020 Presidential lecture of the Nigerian Academy of Engineering. NAE. Lagos
Alli, W.(2019) ‘Reconfiguring the nigerian power system for improved system delivery’ NSEApapa Monthly Lecture delivered via Telegraph Platform

Kiameh, P(2003) ‘Power generation handbook: selection, applications, and  maintenance’. McGraw-Hill, New York
Kundur, P.(n.a) Power system stability and control. Mcgraw-Hill New york
NERC (n.a) ‘he Nigerian grid code for the Nigeria electricity transmission system.
Available online .NERC. Abuja

 

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