If you have ever stumbled upon any Nigerian electricity news or article, you might be baffled by some of the terms often used in those publications. Our research shows that a large chunk of the electricity consumers still don’t understand what the privatisation of the power sector entails. Hence, words like GenCo, DisCo and TCN might just be confusing for a casual reader. The above thought process is the core premise behind this series themed “Understanding The Nigerian Power Sector” Here we explain each of the separate divisions of the power sector and give answers to common questions you may have about them.
Today we will be discussing the first Stakeholders in the power sector value chain; the Power Generating Companies (GenCo).
What are Generation companies (GenCos)?
The GenCos are one part of the three divisions of the Nigerian Power sector value chain. Since the privatisation of the power sector in November 2013, there has been a clear separation between the bodies that generate, transmit and distribute electricity.
What do the Generation Companies do?
The GenCos as their name implies are the ones in charge of the actual generation of the electricity while transmission and distribution are left to the TCN (Transmission Company of Nigeria) and the DisCos (Distribution Companies) respectively. The GenCos are tasked with transforming hydro and gas power into electrical power. Any hydro or gas generating plant is potentially a GenCo. Putting it more accurately, the company that runs and manages the plant, is a GenCo.
When was the first Generating company established?
The generating plants were NOT called GenCos until after the privatisation in 2013. Nigeria’s first electricity generating plant was built in Lagos in 1896 but it was not until 1929 that electricity supply actually started in the country. However, operational challenges have plagued the country’s electricity supply level, hence resulting in inconsistent power supply. This resulted in a situation where only government offices and influential people had electricity. Today, just about 50% of the country has at least some power supply.
What happened to NEPA?
In 1972, NEPA was formed with the responsibility of generating, transmitting and distributing electricity. However, power supply in Nigeria had been on a steady decline since 1990 leaving the nation in dire need of some serious reforms in the power sector. It also didn’t make for good reading that during this period, our nation was consistently topping the list of nations who imported generators. This was (and still is) an economic nightmare.
Initially, NEPA was rebranded to PHCN under the administration of President Olusegun Obasanjo as part of the preparatory process for the power sector’s privatisation.
As a part of a bid to improve the power sector, former president Goodluck Jonathan initiated the ”Power Sector Reform Roadmap” which allowed private investors to take control of infrastructure previously belonging to NEPA/PHCN. This capitalism approach was believed to be the way forward in the power sector as private investors were expected to be motivated by profit as opposed an implied sense of patriotism which seemed to be severely lacking by NEPA/PHCN.
Therefore, this process gave birth to successor companies of the defunct PHCN. These companies include the generating companies (GenCos), TCN (which is still controlled in a large capacity by the federal government) and the distribution companies (DisCos).
How many Generating companies do we have in Nigeria?
There are over 20 electricity generating companies in Nigeria today but the top six GenCos providing the country with electricity are Egbin Power Limited, Transcorp Power, Shiroro, Kainji/Jebba, Sapele, and Geregu.
How much power do these GenCos produce?
According to Nigerian Integrated Power Project, Nigeria’s installed generating capacity is at 10,396 MW and installed available capacity is 6,056 MW, with thermal based generation at 4,996 MW and hydro generation at 1,938.4 MW.
However, average actual generation ranges around 3,000 MW.
What are the challenges the GenCos face?
The GenCos have been faced with a host of challenges since their inception. One of these challenges is lack of gas. Even though there are about five (5) means of generating electric power today, Nigeria only generates electricity through gas and hydro power and the inconsistent gas supply across the nation is a real problem these Generating companies have to battle with.
This problem as only worsened with the constant vandalisation of gas pipelines in Niger delta region.
Another serious challenge facing the GenCos is the liquidity crunch currently plaguing the power sector. The cost of gas has continued to skyrocket due to the unfavourable exchange rate and this poses a major threat to power generation of all Generating companies across Nigeria.
‘Should gas generation a problem since gas is a natural resource in Nigeria?’
This is a common question frequently asked by keen observers and concerned citizens. Another similar question is “Why flare gas as waste when there is an obvious need for it in such an important sector in the country?”
Well, basically because it is cheaper for the Stakeholders to flare natural gas and pay the small fine that come with it than to harvest and transport these gas for use. That aside, the situation of the country has not been very favourable for production of gas considering the problem of pipeline vandalism in the Niger-Delta region.
In addition to the problems of insecurity and vandalism the GenCos are faced with, the lack of funds to improve their infrastructure doesn’t exactly help matters. Oftentimes the GenCos are forced to work below their capacity which in turns leads to minimal power generation.