“The move to a decentralised system in which states can regulate clusters of the transmission and distribution systems could usher in a regime of experimentation and learning under which citizens and authorities can contrast the efficiency of markets run on cost-reflective electricity pricing with those run on inadequate and uncertain state subsidies”.
Many Nigerians in different parts of the country last week celebrated the Eid-El-fitr in darkness. This was as a result of another “national grid” collapse i.e. the shutdown of the network that transports generated electricity from remote power stations across the country. The collapse often happens because distribution companies “reject” or shed electricity load, and thus overwhelm the transmission grid’s carrying capacity.
Reacting to the national grid collapse during an interview on Arise TV’s Global Business Report, Eyo Ekpo, a former Commissioner of Market Competition & Rates at the Nigerian Electricity Regulatory Commission (NERC), has said breaking the national grid into smaller, more manageable units could be the solution to the frequent national grid collapse.
Ekpo advised the Nigerian government to decentralise the power system by giving each state the autonomy to generate and distribute electric power. He said while referring to the privitisation process that broke up Nigeria’s former electric power behemoth, the National Electric Power Authority, “The easiest thing to do at the time was to take the structure that we had, which was a national market, one single national market divided into generation sector and transmission-distribution sector which was itself further subdivided into a number of zones and that structure wasn’t changed. We just took the 11 or 12 zones that we had in the distribution sector and turned them into private companies that cover a number of states.”
Continuing, he added: “I don’t think that that one-size-fits-all national grid system still works for us. I think that what we need to begin to look at is to bring more states actively into the frame. We have to decentralise our distribution, pay more head to the actual wording of our constitution which actually empowers states to make laws for the distribution sector and for the regulation of transmission”. Eyo argued that this will lead to the development of effective electricity distribution markets across the country.
Keeping Technical and Financial Balance
Eyo explained that “the electricity grid is a transport pipeline that conveys electrons from generators to distributors. As you can imagine with all pipelines, any pipeline you can think of has to be kept in balance. And in this case, the balance we are talking about is an engineering balance between the voltage at which these electrons travel and their frequency on the other hand. I would add another kind of balance, which is commercial or financial balance for every electron that goes out into the market, some money equivalent to the value of that electron needs to go back in, so that that pipeline continues to run and continues to grow as population and demands grow. If either of these two balances is upset. The system will inevitably collapse.”
The former NERC Commissioner was making a cryptic reference to the poor finances of Nigeria’s electric power market. The Government has disrupted the smooth functioning of the market by preventing the move to a regime in which consumers pay tariffs that cover the cost of generating and distributing power. Firms across the value chain have thus been unable to finance acquisition of the equipment that would boost capacity and prevent grid collapses.
The move to a decentralised system in which states can regulate clusters of the transmission and distribution systems could usher in a regime of experimentation and learning under which citizens and authorities can contrast the efficiency of markets run on cost-reflective electricity pricing with those run on inadequate and uncertain state subsidies.