Promoting sustainable hydropower in Sub-Saharan Africa: the Mainstream example

Power sector reforms in Nigeria to enable more private sector involvement have spurred growth, but there is still work to be done. Building a competitive electricity market can unlock reliable and safe power for people across Sub-Saharan Africa with hydropower playing a vital role, writes Eng. Lamu Audu, CEO of Mainstream Energy Solutions Limited.

Sub-Saharan Africa has huge potential for hydropower, with about 37 GW in installed capacity, ranging from small to large hydropower. However, only 10% of this potential has been developed or exploited, contributing about 17% of electricity generated within Africa.

Nigeria is the largest economy in Sub-Saharan Africa with endowments of oil, gas, hydro and solar resources and bestowed with large rivers and natural waterfalls. The main water resources that provide rich hydropower potential are the Niger and Benue rivers and their tributaries.

Nigeria has an installed generation capacity of over 13 GW. However, the current average daily generation capacity of approximately 4 GW is highly insufficient when compared to the projected national daily peak demand of circa 29 GW. The generation and consumption gap are met by the alternative sources, especially heavy oil and diesel-powered generators, with an estimated market size valued at US$14 billion.

The Nigerian Electricity Supply Industry is still at a nascent stage due to multiple factors, including but not limited to inefficient billing and tariff systems that have put a strain on the supply of power, operational efficiency, and investment in the sector’s infrastructure.  

Efforts to resolve power deficit                                        

Over the past decades, successive governments have endeavoured to tackle Nigeria's energy deficit problem. In August 2010, the Federal Government of Nigeria launched the Power Sector Reform Roadmap, aimed at shifting the running of power utilities to the private sector. This gave rise to the partial privatisation of the Nigerian Electricity Supply Industry in 2013, with the distribution and generation segments of the value chain handed over to private investors. However, the transmission segment remains under government control.

The Federal Government of Nigeria has commenced the partial activation of power purchase agreements between generation companies and the Nigerian Bulk Electricity Trading PLC, the bulk buyer in the power sector. This partial activation seeks to release more contracted capacity to the GenCos for bilateral sales to eligible customers (i.e., industries consuming a minimum monthly average of 2 MW).

While the privatisation exercise has gained some notable milestones, the sector still faces multiple challenges, including illiquidity due to the high level of technical, commercial and collection losses; tariff shortfalls; inadequate infrastructure for metering and collections, and limited grid capacity. There is an urgent need to unlock the inherent potential of a sector which is critical to the promotion of Nigeria’s industrialisation agenda.

"The Federal Government of Nigeria has launched the Power Sector Reform Roadmap, aimed at shifting the running of power utilities to the private sector."

The Federal Government of Nigeria has launched the Power Sector Reform Roadmap, aimed at shifting the running of power utilities to the private sector. Some of the programmes initiated to improve power deficit in Nigeria include:

  • Between 2013 and 2019, the Central Bank of Nigeria supported the liquidity of the sector through the provision of ₦1.5 trillion (US$4.17 billion) in intervention funding for capital expenditure and tariff shortfalls.
  • Nigerian Distribution Sector Recovery Program: In 2020, the World Bank approved US$500 million to support the government of Nigeria in improving its electricity distribution sector. This is intended to boost electricity access by improving the performance of the electricity distribution companies through a large-scale metering program long desired by Nigerians. In addition, financial support would be provided to companies only on achievement of results in terms of access connections, improved financial management and network expansion.
  • Power Sector Recovery Operation: This will ensure that distribution companies make necessary investments to rehabilitate networks, install electric meters for more accurate customer billing and to improve quality of service for those already connected to the grid. It will further strengthen the financial and technical management of companies to improve the transparency and accountability of the distribution sector.

Mainstream’s role in fostering the growth of Sub-Saharan Africa’s power sector

Mainstream Energy Solutions Limited, the concessionaires of Kainji and Jebba hydropower plants with a combined installed capacity of 1,338.4 MW, remains at the forefront of the drive to improve the availability of safe, reliable and sustainable hydropower supply through the following:  

  • Executing its Capacity Recovery and Expansion Programme
  • Continuous participation in the concession of brownfield hydropower; and
  • Development of greenfield hydropower.    

Since the commencement of operations, Mainstream has recovered a total of 542 MW from both Kainji and Jebba hydropower plants. Following the recent completion of the recovery of Kainji Unit 1G7, 80 MW of capacity was added to the Nigerian grid, bringing our total available capacity to 1,002 MW and counting. Mainstream is working assiduously to complete the rehabilitation of the existing units and expand our capacity through the installation of Kainji Units 1G3 and 1G4, which will add 220 MW to the Nigerian grid, bringing our total installed capacity to 1,558.4 MW.

"Mainstream remains resilient in its determination to achieve its vision of providing reliable and safe power to domestic and international customers and supporting the industrialisation of Sub-Saharan Africa."

To date, the company has committed total combined investments of approximately US$240 million since we took over the operations at Kainji and Jebba hydropower plants in 2013. Mainstream remains resilient in its determination to achieve its vision of providing reliable and safe power to domestic and international customers and supporting the industrialisation of Sub-Saharan Africa.

In this regard, the company is actively participating in the Federal Government of Nigeria’s ongoing privatisation of hydropower assets, as the government seeks to improve the percentage contribution of renewable energy sources to the grid. Mainstream was also recently confirmed as the preferred bidder for the concession of the 40 MW Kashimbila Hydropower Plant, located in Taraba State, North-East Nigeria.

Furthermore, in line with its expansion initiative and strategic objectives, Mainstream has identified potential investment opportunities in Nigeria and other countries in Africa, with particular focus on the development of greenfield hydropower projects, the concession of viable brownfield hydropower projects and the development of solar PV projects that could run in hybrid with hydropower.

The relative success of Mainstream since the privatisation exercise in 2013 has shown that, with diligence and dedication, the viability of hydropower business is a possibility. However, sustainability will not be achievable without the government and other stakeholders addressing the critical challenges posed to the power sector.

The way forward

The following are some suggested success factors for promoting an enabling environment for sustainable hydropower development:

  1. Introduce more structured policy and regulation for private sector-led hydropower greenfield development to harness the huge potential. This would include a review of existing policy, which is cumbersome and disincentivises private sector-led investment in hydropower.
  2. Create a competitive electricity market. Full liberalisation of the sector would include the complete phasing out of the single buyer market model, to allow consumers to buy directly from the generators; and deregulation of the tariff regime to make it market driven. These would unlock real liquidity to the sector, give more room for investment to improve electric power supply, create more industries, and have a holistic positive domino effect on the economy.
  3. Complete the privatisation process by privatising the transmission segment, giving room for private sector investment to improve the ailing grid infrastructure.
  4. Encourage alternative renewable energy sources. The availability of more renewable energy is vital to the provision of competitively priced and steady electricity for industrial development, employment generation and poverty alleviation in Sub-Saharan Africa.

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