Tuesday, January 11, 2011

Correcting the power roadmap

The people of Nigeria have prioritized three action areas for our leadership to pursue. The first of these is ELECTRICITY. The current administration aims to attract foreign investment to the power sector.
The plan is laudable, but the reform should be led by an expert at deregulation, who is wholly committed to fairness. The former leader at the Nigerian Communications Communications (NCC, which successfully deregulated the telecommunication sector) would seem an ideal choice.
Besides inexperienced leadership, another obvious problem is the insistence on a transmission monopoly. To retain a monopoly in transmission would be wrongheaded; please liberalize everything.

Why say NO to transmission monopoly?
The current power roadmap will have us privatize generation and distribution and manage transmission in-house. If I was an investor, I'd rather build my own transmission infrastructure (duplicate) than throw my money away by trusting that transmission will be there for me. If we start with competing transmission links, in the long run, the network will be rationalized through trading. If we start with one transmission link, it is extremely likely to be the bottleneck in the whole national power system.

Arguing for monopoly:
1. Indian technocrat: Transmission is a natural monopoly, but he also identifies demand-supply gap considerations. China which presumably had competing transmission providers, had to restructure down to two companies.
2. BPE boss in Nigeria: Will be uneconomic to ask every operator to build its own network but NESCO has worked well in spite of having built its own network.

Arguing against monopoly:
1. Academic report: Questions the natural monopoly of transmission as well as the requirements of existence, profitability, and efficiency of a transmission market. So much grammar, but it squares with my intuition.

2. Nigerian administrator: With such an atomized approach and the insistence on a public sector transmission monopoly company whom are we trying to attract? We know how dismally public sector parastatals have performed over the past four decades. Exactly. In particular, NEPA/PHCN has received the "investment" to generate (assuming 1bn USD per 1000MW) tens of thousands of megawatts in 2000-2010, but what happened? Were existing plants maintained, even? Or what is the state of our transformers and transmission lines?

1 comment:

telcy said...

Well laid out thought Tosin...if efficiency in power generation from competitive environment meets with the usual inefficiencies in a monopolistic transmission system, we're back in the same power mess, I think!

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