FG’s grid sanctions expose gaps in power privatisation – Experts

The Federal Government’s latest threat to sanction and disconnect power generating companies (GenCos) that fail to comply with the Free Governor Mode of Operation (FGM) requirement has exposed structural weaknesses in Nigeria’s power sector, experts have said.

Stakeholders who spoke with Daily Trust said the enforcement action, 13 years after the privatisation of the successor companies of the defunct Power Holding Company of Nigeria (PHCN), highlighted shortcomings in the privatisation process and the failure to address critical infrastructure gaps.

They argued that while enforcing FGM compliance was necessary to improve grid stability, sanctions alone would not solve the recurring problem of grid collapses. They called for comprehensive grid modernisation, including digitalisation and the deployment of Supervisory Control and Data Acquisition (SCADA) systems across the electricity value chain.

Kunle Kola Olubiyo, President of the Nigeria Consumer Protection Network, said FGM compliance was critical but could not function effectively on an ageing electricity network.

“The digitalisation and automation of the national grid across the entire value chain is inevitable,” Olubiyo said. “But we are enforcing 21st-century rules on 19th and 20th-century infrastructure. Much of what we have cannot integrate with modern smart-grid technology.”

Olubiyo said the Federal Government-Siemens Power Project should have incorporated end-to-end SCADA systems but regretted that this was not achieved.

He noted that the expectation that generation, transmission and distribution companies would independently finance digital systems had not materialised because many operators lacked the capital required for such investments.

According to him, the Federal Government would need to provide guarantees to enable the companies to access financing from development institutions such as the World Bank, International Finance Corporation, African Development Bank and Japan International Cooperation Agency.

“Without real-time monitoring and control, we cannot manage load or prevent collapses,” he said. “Sanctions will not fix an analogue grid.”

Olubiyo called for an urgent review of the power sector privatisation, arguing that the inability of privatised companies to fund basic technological upgrades without sovereign guarantees raised fundamental questions about the reform.

Another sector analyst, Banji Cole, also faulted aspects of the privatisation process, saying many of the problems currently confronting the industry should have been addressed before the assets were transferred to private investors.

He said investors could not continue to face challenges more than a decade after acquiring the assets without a lasting solution to the sector’s structural problems.

Cole advocated a standardised, value-chain-wide grid modernisation programme rather than fragmented investments by individual companies.

Dr Joy Ogaji, another sector analyst, said GenCos recognised the importance of SCADA in improving real-time monitoring, operational visibility and grid reliability. However, she warned that implementation involved significant technical and financial challenges.

“SCADA integration is not a plug-and-play exercise,” Ogaji said, explaining that generation plants operate highly customised, original equipment manufacturer (OEM)-specific control systems.

She said integrating SCADA with those systems required detailed technical assessments by OEMs, many of which were international companies with specific design protocols and lead times.

Ogaji said several GenCos had already begun consultations with OEMs, but completing the process would require time and technical flexibility.

She also highlighted the financial burden. According to her, many GenCos are struggling to meet basic operational costs, including salaries, making it difficult to finance capital-intensive SCADA projects.

“Beyond hardware acquisition, there are costs linked to OEM engagement, system upgrades, installation logistics and vendor management,” she said.

She added that key SCADA components, including remote terminal units, cyber-secure data gateways and protocol converters, were largely sourced from overseas. Shipping, installation and site configuration could therefore take several months.

Ogaji said similar SCADA integrations in South Africa, India and parts of Southeast Asia had taken up to 24 months from commencement to completion.

She called on the Nigerian Electricity Regulatory Commission (NERC) to introduce additional support mechanisms for GenCos, including allowing them to recover SCADA investments through clearly ring-fenced capital expenditure allowances in MYTO tariff adjustments.

She also proposed concessional financing through development banks, repayable over five to seven years, to support SCADA compliance.

“While we appreciate GenCos who have complied, it should be noted that not all hands are equal and relevant stakeholders should do everything to make the liquidity situation of the GenCos better,” she said.

Daily Trust reports that NERC is expected to fine or disconnect some generating plants from the national grid following recommendations by the Nigerian Independent System Operator (NISO).

The move followed efforts to enforce compliance with the FGM requirement as part of measures to prevent grid collapses. NISO Managing Director, Abdu Mohammed, disclosed this at a grid stability workshop hosted by Mainstream Energy Services Limited at the Jebba Hydropower Plant in Niger State.

Mohammed said NISO had assessed generating companies and submitted its findings to NERC for enforcement. While some GenCos had complied, others had requested extensions, while some remained non-compliant.

“We are now at the stage where defaulting generating companies will be sanctioned,” he said.

He explained that the immediate sanctions would be financial penalties but warned that persistent non-compliance could lead to disconnection, suspension from market participation and other measures.

The FGM requirement is important to grid stability because governor controls enable generating units to automatically respond to changes in system frequency, helping to contain sudden deviations caused by changes in generation or demand.

However, GenCos have argued that the sector must compensate them for keeping turbines spinning when they are not generating electricity.

Mohammed stressed that the power sector required long-term planning and substantial investment rather than ad hoc interventions.

“The power system is highly capital-intensive, and it requires extremely careful planning. You cannot plan for it on an ad hoc basis,” he said.

He said the system had recorded significant improvements in stability, noting that there had been no recent system-wide collapse despite isolated disturbances.

NISO also disclosed that it was working on a SCADA/Energy Management System project to improve grid operations and investment planning.

Mohammed said the system would be commissioned as soon as possible, adding that the resilience of Nigeria’s future grid would depend on effective operations, long-term planning and preparation for emerging energy sources and rising electricity demand.