Across the continent, electricity markets currently deal with rising debt, inadequate generation, poor network infrastructure, and other challenges. While the cost of supplying electricity to the end-user is on the rise, generation capacity is facing a steady decline.
South Africa and Nigeria are two electricity markets dealing with challenges that affect the supply of stable and reliable electricity. South Africa has at least 58,095MW of installed generation capacity, with only 65 per cent of this amount available for consumption. State-owned utility Eskom currently suffers from severe shortages resulting from a lack of maintenance of its network infrastructure. The country has, in recent times, seen an increase in the implementation of load shedding schedules to cushion the effect of consumption on an already weak infrastructure. In addition to weak network infrastructure, the company faces a huge debt crisis occasioned by poor revenues and low tariffs.
In a bid to ease the challenges faced by Eskom, South Africa’s President Cyril Ramaphosa announced the unbundling of Eskom to make way for a more efficient power utility structure where generation, transmission, and distribution operate independently. Furthermore, the Economic Construction and Recovery Plan seeks to open the generation sub-sector for investments by fast-tracking licensing for IPPs. In addition to this, an emergency plan to add 2,000MW to the grid by June 2021 and diversify energy sources are in the works.
Unlike South Africa, Nigeria’s electricity sector was unbundled in 2013 with the privatisation of generation and distribution utilities. The transmission company, on the other hand, remained under the ownership of the Federal Government. The sector currently has an installed generation capacity of 12,500MW with available capacity at an average of 4,000MW.
The Nigerian electricity sector suffers from several challenges like its South African counterpart, including the lack of a Cost-Reflective Tariff (CRT), inadequate infrastructure, high technical, collection and commercial losses. The Nigerian Electricity Regulatory Authority (NERC) has failed to implement a Cost-Reflective Tariff (CRT) since the privatisation of the sector’s utilities.
In a bid to address the sector’s challenges, the Federal Government of Nigeria is implementing the Power Sector Recovery Programme (PSRP) with the support of the World Bank. The PSRP focuses on improving the infrastructure and revenues in the sector. To address critical infrastructure challenges, the World Bank has provided funding for transmission and distribution infrastructure projects.
To secure the revenue stream of the sector, the Federal Government is implementing the National Mass Metering Program (NMMP). The NMMP will improve metering penetration in the sector through the provision of free meters to consumers. In addition, the NERC also began implementing service-based tariffs (SRT) to improve supply to consumers and align the cost of electricity supply for the DisCos. Under the SRT, Consumers are charged tariffs based on the average minimum hours of supply received.
While both countries have taken steps at implementing economic recovery plans, the impact so far has been negligible. South Africa still faces a weak network infrastructure forcing it to plead with consumers to cut down consumption. In addition, the country’s emergency 2,000MW project has suffered a setback with a court case seeking the cancellation of the winning bid and accusing the Minister of corruption in the bidding process. For Nigeria, the NMMP has recorded a less than 10 per cent progress rate in the program’s initial phase. An increase in consumer complaints has also marred the Service-Reflective Tariff (SRT) implementation. Consumers have complained of receiving less supply than approved for their SRT bands. In addition, inadequate generation capacity has forced the DisCos to implement load shedding on their networks in recent times. Nigeria has also recorded at least 2 partial and total system collapses since the beginning of the year.
With several intervention programmes in both countries, there is hope for a solution to the persistent challenges. Moreover, the success of both electricity markets will impact the economic development of the respective regions; therefore, the South African and Nigerian electricity sectors must perform optimally for impactful economic development.