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The much talked about embedded power scheme aimed at boosting power supply in the country has been jinxed because of high foreign exchange rate and failure to increase electricity tariff, which has forced some of the promoters of the projects to put them on hold, BusinessDay investigation reveals.
In the embedded generation project model, bulk electricity energy is generated outside the national grid through a bilateral agreement between a distribution company on the one hand, and the generator- that is the company that generates the power within the coverage area of the distribution company, on the other hand.
Industry sources say except urgent steps are taken to address these problems, the expected intervention from the scheme, aimed at improving power supply in the interim, may not be realisable.
This situation has led to the frustration of some of the electricity distribution companies, which have already positioned themselves to enter into supply contracts with those that have indicated interest to generate power and sell to the discos at agreed prices. The aim of the discos is to enhance power supply to their networks.
One of the promoters, who spoke with BusinessDay, said he cannot buy gas to fire his plants, even though he had completed the installations of his 12 megawatt plant, because the cost of gas is high. Gas, he said, is paid for in foreign exchange, adding that the cost of gas has doubled by 1,000 standard cubic feet.
“When we were starting the project, the exchange rate was $1 to N195. But now with the exchange rate at $1 to N305, it would be difficult for me to breakeven, thereby making it a bad business. It would change my business model completely,” he said.
He urged the government to intervene in the matter by looking at the gas chain and ensuring that the price of gas is reduced.
He said the failure of the government to allow for increase in the electricity tariff was making matters worse. He further stated that without an increase in tariff, it would be difficult for Discos to recoup their investment.
Our investigation further revealed that some of the electricity distribution companies have finalised arrangements with some promoters of the scheme and are just waiting for the said promoters to present a take-off date. Some of the companies promoting embedded power generation include, Geometrics, Ossiomo Power infrastructure Company, PIPPLVI Disco Limited, Tofu Energy and Power Company, and Island Power Limited. The case of Geometric Power is different from the others, in that it has fully installed it equipment but has matters to resolve with Enugu Disco.
Eko Electricity Distribution Company, for instance, planned to harness 1,000 megawatts of electricity over a period of six years, with most of this coming from embedded generation. The company plans to achieve this through the scheme. Initially, about attracted 100 promoters applied to participate in the scheme. This number was eventually pruned to 43.
The 43 successful companies have already been handed a list of requirements that they must meet before EKEDC can enter into any contractual agreement with them.
Of this number, only ten companies were successful in their bids but unfortunately, they have not be making progress because of the exorbitant price of gas which is paid in foreign exchange .
The company plans to grow generation by 20 percent each year to reach 1,000 megawatts (MW) for its electricity networks by 2020. A substantial part of this generation is going to be through embedded power generation. A source close to EKEDC told BusinessDay that the company wants to ensure a transparent transaction in the whole process, so that it would be seen to be fair to all parties concerned.
Informed sources say part of the requirements would be robust resources to engage in this type of business, office accommodation, the necessary equipment for power generation and technical skills, among others. The EKEDC would however give supply to only those customers willing and able to pay the set price, which is likely to be between N24 and N30 per kilowatt-hour, an informed industry source told BusinessDay.
Olusola Bello
