Distributed Generation in Nigeria’s Electricity Industry Deregulation – Assessment and Integration Abimbola Odubiyi Powergen UK Plc Coventry, CV4 8LG United Kingdom E-mail:
[email protected] Abstract. The unsatisfactory performance of the National Electric Power Authority (NEPA) has lead to proliferation of small-dispersed private generating facilities embedded within its distribution network. In some areas, these facilities are the sole provider of electrical energy. This paper assesses Distributed Generation operation in Nigeria, and presents a framework for integrating this type of Generation in a postderegulation era. It offers solutions to specific problems that may arise in a developing country like Nigeria that is in the process of deregulating its Electricity Supply Industry (ESI). Keywords: Distributed Generation, Deregulation and Privatisation. 1.
Introduction
Distributed (embedded) generation (DG) schemes are small modular generating machines ranging from kilowatts to few megawatts capacity. According to [1,2], DG1 refers to small (typically kilowatts up to 10 MW) power plants at or near the loads, operating in a stand-alone mode or connected to a grid at the Distribution or subtransmission level. In some cases, DGs harness unconventional energy resources, such as wind, biomass, tides and waves, solar, and geothermal. Small power sources have been developed and employed for industrial, commercial, space, underwater, and biomedical applications. In developing countries DG is ideally suited to power small remote loads located far from the grid. Here, integrated renewable energy systems (IRES), a special subset of DG, are ideally suited for these situations. DG technologies and energy resources include:
Wind-electric conversion systems
1
Distributed or Embedded Generator is more than small portable generating sets used in private homes.
Innocent E Davidson School of Electrical & Electronic Engineering University of Natal Durban, 4041, South Africa E-mail: Davidsoni@nu/ac.za
Mini and micro hydro plant Solar PV and Solar thermal-electric conversion Geothermal Biomass Small co-generation plants powered by natural gas and supplying electrical and thermal energies. Electro-chemical energy system (e.g. fuel cells and hydrogen production) Electrical storage system Thermionics and Thermoelectrics Tidal waves and ocean flows
Since DGs are located on-site or nearby the location where the energy is used, they usually operate at the low voltage (between 11kV and 132kV) supply chain of bulk electric power distribution system. Their on-site location provides the opportunity for greater local control and more efficient utilisation to boost efficiency and reliability [3]. 2.
Nigeria’s Deregulation Program
Nigeria’s low electricity consumption of 85kWh per capita [4], served mainly by NEPA’s unreliable system and infrastructure has posed a challenge to the government over the years. The under performance of NEPA has influenced recent decision of government to deregulate the industry by breaking up NEPA into generation, transmission, Distributed/supply sectors and privatise its constituent parts allowing these companies to operate under competitive market principles as far as practicable [5]. Figure 1 shows the proposed structure. Under the proposed unbundled structured, an industry regulator will be setup to have oversight over the activities of industry participants to ensure fairness in all their operations and protect consumers’ interests. To ensure, efficiency and effectiveness, the transmission and Distributed sectors will operate as monopoly businesses in their franchise areas, with strong oversight from the regulator.
CURRENT INDUSTRY STRUCTURE
ONE VERTICALY INTEGRATED ORGANISATION - NEPA
GENERATION
PROPOSED INDUSTRY STRUCTURE
TRANSMISSION
DISTRIBUTION
Specialisation encouraged by competition & regulation emphasising different key success factors
GENERATION
TRANSMISSION
Competitive
Regulated
DISTRIBUTION
Regulated
SPECIALISED ORGANISATIONS
SUPPLY
Competitive
minimising line losses and voltage sag common to Distributed networks in many developing economies. Provision of a stand-alone power supply in areas where transmission and Distributed infrastructure does not exist or grossly inadequate. In some cases, provision of backup and other ancillary services in times of stress on the Distributed networks. Alleviation of congestion on the Distributed network through peak load shaving.
Industry Regulator to ensure fair play
4. Figure 1: Proposed Structure of the Electricity Industry Post Deregulation
Distributed Nigeria
Generation
Operation
in
This plan should assist in transforming the electricity supply industry from its current state of a low efficient, non-profitable entity with extraneous bureaucratic structure to that of an efficient, innovative and profitable industry comprising of individual companies operating under the discipline of a free market economy.
Distributed or embedded generation in Nigeria is generally a point-to-point radial connection from the generating machine straight on to the load center. NEPA’s electricity distribution operation to consumers cover a wider geographical area involving both radial and mesh networks used to supply electricity to several customers on the low voltage end of a bulk electricity delivery industry value chain.
To attain this goal, the country’s national Assembly recently passed the Electricity Reform Bill that will provide legal backing to this radical restructuring of the Electricity Supply Industry. Subsequently, the Bureau for Public Enterprise (BPE) the agency charged with deregulating the Electricity Supply Industry has embarked on preparatory work for the unbundling of the NEPA.
Over the years small-scale on-site Distributed or embedded generators have been established along side NEPA’s 11 to 33 kV distribution networks. These small generators (mostly using diesel or furnace oil) supply power to industries and in some cases communities/estates attached to them, through their own self-built small private Distribution networks.
3. Benefits of Distributed Generation
It is unfortunate that NEPA has not utlised the opportunities provided by DGs to alleviate the problem of power shortage especially in rural electrification program in the country. Over emphasis on costly conventional large centralised electricity supply facilities is depriving some customers the benefits that DGs located in their area can provide.
One of the factors in favour of Distributed generation especially in developing economies like Nigeria is the unreliability of NEPA to meet the electricity demand by large industrial customers [6]. Hence Distributed or small industrial (i.e. embedded) generation should be encouraged, because of their benefits to industrial customers, whilst complementing the activities of NEPA’s electricity Distributed service. In Nigeria and other developing economies, the benefits brought about by Distributed Generation especially to large industrial customers are:
Reliability of electricity supply, which is critical for the conduct of economic activities. Provision of necessary power quality needed in industrial applications that are dependent upon sensitive electronic instruments and controls Obtaining high efficiency power transportation gains for on-site applications by
Early in the deregulation process, the following issues regarding DGs and their impact on operations of local Distributed Network Operators (DNOs) need to be addressed. Will DNOs created from NEPA have the monopoly status as the sole provider of electricity in their franchise region, especially in rural areas? Are they required to oversee the operations of DGs connected to their networks, as they affect their wider network system integrity? The main concern here will be how to curtail DNOs from abusing their monopoly power in operating and maintaining electricity distribution service in their franchise area.
Concern of DG-owners about reliability of DNOs networks post deregulation and privatisation, judging from current performance of NEPA’s Distribution sector [7]. High reliability is extremely vital to the textile, chemical, petrol chemical, paper, cement and other process industries. Industrial consumers would not compromise under any circumstance, and would seek to ensure adequate supply of power to meet their needs. Further more, there will be financial, geographical and environmental constraints on quick capacity expansion of generation, transmission and distribution facilities which NEPA’s successor companies will face post deregulation and privatisation.
It is unclear if the policy of deregulation of the electricity industry addresses the impact DGs connected to the local distribution network have on network reliability. In addition remuneration for services DGs may provide to support local DNOs need to be addressed. 5.
Distributed Generation Technology for Nigeria
In the short to medium term demand for electrical energy will continue to out strip supply, because of constraints of time lag of building conventional large generating, transmission and distributed infrastructure. The huge demand for electricity calls for investments in more DGs across the country. Private investors and DNOs should be encouraged to set up DGs closer to the consumers. DGs should be considered as an option to other co-operative solutions as: network upgrades, uprating and integration of protection, metering, control, and voltage support. DGs should be used as an additional measure to bring electricity to the masses, and industrial concerns especially in rural areas. In the context of Nigeria with abundant fossil resources (e.g. natural gas) and sunlight, DGs of choice are: Combine Heating and Power (CHP) – this type of plant also known as co-generator, involves capturing waste heat from power production and putting it to some useful purpose at the customer site. They are mostly gas-fired plants with potential for over 70 percent fuel utilisation efficiency in industrial and commercial establishments like pulp and paper, chemical/petrol chemical and refining industries.
Advanced Industrial Turbines and Microturbines – these are a class of modular gas fired generators that produce high-temperature, high-pressure gas to induce shaft rotation by impingement of the gas on a series of specially designed blades. Typical efficiencies (without use of external exhaust heat) range from 21 to 40%. Their high quality exhaust heat can be used in a combined mode cycle to fire a small steam turbine thereby improving efficiency. Their maintenance costs per unit of power output are among the lowest of all generating technologies. They are most suitable for light industrial and commercial establishments, plus rural domestic use. Solar Power – solar power systems use sun tracking mirrors to reflect and concentrate sunlight unto a receiver where it is converted to high temperature thermal energy. The heat is then used to drive an engine or electric generator. At a cost of US$650 for a 55W solar power system [8], such power source is unaffordable to most rural households in Nigeria. However, this type of DG is suitable for remote rural energy supply applications for powering telecommunication base stations and outpost rural emergency services locations like police, health centres etc. 6.
Economic and Technical Evaluation of Distributed Generation
In assessing a customer’s energy needs, and to determine the suitability of DG investment in stand-alone or grid connected systems, specific issues under – Regulatory, Economic and Technical categories must be considered. An approach for assessing Distributed Generation investment is shown below in Figure 2. Given the need for economic viability of DG investment, this flow chart considers the customer’s need for adequate electrical energy and the supply (i.e. DNO and DG) options available. The result of these inputs will determine whether the investment in DG goes ahead. Since DG development will not cease post deregulation of the electricity industry, owners of DGs will need the professional services of engineers, economists and others to negotiate with DNOs, design and implement solutions, answer critical questions, provide adaptive models/solutions about energy information, such as:
Measure and quantify the costs/values that energy produced by DG contributes to the cost of good/services or the quality of life in the
Regulatory Legal / Operational framework Environmental Planning permit
Economic Start Up & Running Costs Avoidable cost Payback period
Distributed Generation embedded within the wider geographical boundary of a franchised local Distribution Network Operator (DNO) [9].
Technical Manufacture Data Security / Safety of Equipment Reliability / Power Quality Qualify Operator
In the process of deregulation of the electricity industry, the probable challenges confronting government officials and their advisers fall into these broad categories:
Investor Assessment Non Viable Connect to DNO Network
Viable
Purchase Power from DNO
Invest in DG
Operate DG to meet Load Shape
Sell Power to DNO
Yes
Any Excess Power ?
Yes
DG meets total Power requirement
No
No Yes
Buy Short Fall from DNO ?
Figure 2: Assessing viability of DG investment (adapted from [3])
DNO area. Cost/values would include such items as ecology, opportunity, risk and depletion as well as the traditional direct cost/value set. Identify a method for quantifying cost/value that is more appropriate than the current Distribution tariff methodology. Identify method(s) for system "resource planning/ modelling" that is responsive to real time cost, new technology/methods and is compatible with Distributed, disparate resources. The method should be able to evolve, adapt, and learn as part of its architecture. Define an operational methodology that supports and encourages participation (e.g. easy entry and exist) in a deregulated energy market. The method must be cost effective (i.e. the cure should not cost more than the disease) Show the information necessary to enable the method. Define the characteristics of the information such as resolution, latency, size, speed and volume.
7.
Challenges for DG under Electricity Deregulation in Nigeria
As countries all over the world deregulate and restructure their electricity industry; they are confronted with the challenges of setting up appropriate regulatory and contractual arrangement that accommodate and promote the interest of
Legal and Regulatory Framework: The structure of the legal and regulatory framework that offers incentives for current and future Distributed Generation wishing to participate in electricity trading post deregulation, whilst accommodating the wider responsibility and interest of local DNO entrusted to supply power in their respective geographical area. In this regard the issue and modality of Open Access regime and connection agreement to DNOs network by Distributed Generation should be well defined to ensure easy assess to the Distribution/supply networks. Network Access Regulation: Mode of operation for DGs wishing to connect to the network of local DNO, plus the identification of the appropriate engineering and commercial boundaries. This will require the application of necessary supporting infrastructure/equipment like protecting relays (e.g. voltage/frequency relays), metering, and data collection. Also, payment for services provided by DGs to DNOs to support their system. ESI Operation and Management: Having the appropriate enabling environment with the proper financial incentives where by Distributed Generation and local DNOs can offer mutual assistance to each other. In this regard consideration should be given to establishment of an appropriate commercial forum in which DGowners and DNOs can meet to discuss industry matters affecting their operations.
8.
Proposals for DG Integration
To overcome the above challenges and provide the appropriate enabling environment that allows for smooth technical and commercial operation of Distributed generation post deregulation, the following need to be considered.
a) Proper definition of what constitutes a Distributed Generation. In this respect what constitutes a Distributed Generation, with clear explanation of their technical and commercial boundaries within the geographical area of a DNO must be included in the overall Electricity Reform Bill that will give legal backing to the restructuring and unbundling of electricity industry.
For example a DG owner may be restricted to a point-to-point radial connection to serve demand requirement of a properly recognized load (e.g. an industrial plant). In consented cases, allowing for any excess energy produced and not required by the demand to be split or passed on to the DNO network at a mutually agreed quality and time. Standardization may be considered in this regard. b) Setting up of appropriate legal and regulatory codes: These codes will be the basis for legal contractual arrangements that governs the operations and interactions between a DG and a local DNO. Codes that govern activities dealing with: Design codes (technical and commercial)– connection standard, metering, payment etc. Ancillary services provisions (e.g. voltage support, backup reserve, load management -DSM). Island operation. Dispute resolution between DGs and DNOs. The regulatory body must be empowered to monitor the implementation and operation of these codes and serve as Arbitrator in times of dispute. For smooth operation, complex or deliberate loopholes in the codes should be avoided. c) Connection and Charging Principles: When a DG connects to DNO assets (e.g. network substation), the charging principles and mechanism should be clearly defined. This should be reviewed annually to make it relevant to changes taking place in the industry and wider society. d) Provision of information, network designs and expansion, etc. that facilitate true open competition in the supply of power to industrial customers. This will ensure a level playing field between DGs and DNOs. 9.
Conclusion
As the country proceed with the deregulation of the electricity industry and privatisation of NEPA, it is essential to learn from the experiences of other developing and developed countries, and adapt these to the local environment. Local experience acquired in the process must be well managed and proposed. There outcomes implemented with a delicate balance of competing factors, for maximum benefit. A careful evaluation of local issues, concern of DG owners and peculiarities of the development of Nigeria electricity industry should not be ruled out. Moreover, development of a viable legal framework to take on board the benefits of DG needs foremost attention to make the overall process of deregulation a success.
References [1].Institute of Electrical and Electronic Engineers Reference Book, IEEE Press, 1999. [2].Strategic Plan for Distributed Energy Resources, US Department of Energy -Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy, September 2000. [3].Integrated Assessment of Dispersed Energy Resources Deployment, Consortium for Electric Reliability Technology Solutions, Lawrence Berkeley National Laboratory, CA, USA, June 2000. [4].International Energy Agency (IEA), Energy Prices and Taxes – Quarterly Statistics, First Quarter 2001. [5].Agagu, O. NEPA’s Privatisation to Give Rise to 28 Firms, The Guardian Online, http://www.ngrguardiannews.com, March 29, 2001. [6].Innocent E. Davidson and Abimbola Odubiyi, “Power System Operation in Developing Economies – The Nigeria Experience (Part 1)”, `Energy supply and Management feature’, SA Electricity + Control, pp. 6-9, July 2001. [7].Makoju, J.O. “Challenges and Constraints of Electricity Distributed in Nigeria”, Reform and Privatisation of the Nigeria Electricity Sector Conference, London, 16th & 17th July, 2002. [8].World Bank Group, “Energy and Development Report 2000 - Energy Services for the World’s Poor”, World Bank ESMAP publication. [9].Abimbola Odubiyi and Innocent E. Davidson, "Distributed Generation Under Deregulation - ESI Restructuring in Pakistan”. Energize, Power Journal of the SA Institute of Electrical Engineers, September/October 2001, pp 44- 47. Authors Abimbola Odubiyi holds a HND in Electrical Engineering from Ogun State Polytechnic. He received the B.Sc and M.Sc degrees in Electrical Power System Engineering from the University of Wisconsin-Milwaukee, USA; MBA from Aston University, Birmingham, UK. He is presently a Senior Commercial Analyst with PowerGen Plc, the 3rd largest integrated electricity company in the UK. Innocent E. Davidson holds a B.Eng. (Hons) and M.Eng degrees in Electrical Engineering from the University of Ilorin, Nigeria, and Ph.D. in Electrical Engineering from the University of Cape Town. He is presently a Senior Lecturer with the School of Electrical and Electronic Engineering, University of Natal. His research interests are in electric machinery design, power network planning and operation, and the effects of power sector deregulation on power systems.
