Nigeria: a power sector in transition
Nigeria’s power sector as it exists today comprises medium to large gas based OCGT and CCGT power plants that are optimized for steady, baseload operation supplying electricity into the national transmission grid. Multiple power plants are covered under long-term centralized contracts with a single off taker that purchases the electricity produced and pays them. This needs the fuel supply, power generation, transmission, distribution, collection and payment to power producers all functioning seamlessly and sustainably with checks and balances across the entire chain.
Such power generation assets have limited operational flexibility and perform inefficiently when operating below their design load levels. Long-standing weaknesses in the value chain have resulted in power producers experiencing severe operational constraints, made worse by late and unremunerative payments, leading to financial losses and in turn drying up of investments into strengthening the overall infrastructure. The result: a widening demand supply gap that forces businesses and citizens to rely on expensive diesel gensets for electrical power, thereby hindering economic progress.
The power sector has been adapting to these challenges through regulatory liberalization enabling the emergence of privately contracted power supply models. One of them being power plants embedded within distribution companies (DisCo’s) to generate electricity close to load centres and distribute it through their networks or dedicated connections where necessary. The power plants sell electricity to the host DisCo’s as well as to eligible commercial and industrial customers either on a merchant basis or under multiple bilateral power purchase agreements based on a service-based tariff structure.
These power plants may be embedded or merchant or a combination of the two and need to ensure dependable electricity supply at competitive tariffs that are profitable and sustainable. As a key input for financial modelling, the selection of power generation technology is a critical determinant of project feasibility, bankability, and long-term viability. Small to medium sized modular RICE power plants are inherently better suited to the dispersed nature of such embedded/merchant power plants that have evolved to address the challenges imposed by a dysfunctional power sector value chain in Nigeria.
Wärtsilä RICE at the core of flexible power generation
Embedded/merchant power plants in Nigeria need to serve their host DisCo’s if contracted, as well as commercial and industrial customers with variable demand profiles which may require them to respond quickly to such fluctuations with high levels of availability and reliability. As such, the generation assets are required to operate efficiently, flexibly, and reliably while utilizing locally available fuel. RICE power plants fulfill these criteria better than other technologies, and their modular design enables cost-effective scalability in response to customer-driven demand, while multi-fuel capability provides resilience in managing fuel supply uncertainty.
➨ Operational flexibility
An installation with multiple ~10 MWe EG Sets as an example would allow operators to precisely match generation output to real-time demand by starting up or shutting down individual units quickly without a significant drop in efficiency or increase in maintenance costs. Maintenance of one or more EG Sets can be carried out without the need to shut down the entire plant. Including spinning reserve and standby units is relatively less capital intensive and ensures even higher levels of availability and reliability.
➨ Fuel resilience
Fuel linkage uncertainty represents one of the most significant operational risks in Nigeria’s power sector. In gas-based power plants, pressure fluctuations or interruptions in the supply can reduce generation capacity or disrupt operations.
OCGT and CCGT power plants would either derate significantly in case gas quantity and/or pressure drops below optimum levels or shut down altogether in case they drop below certain minimum thresholds. Variable load operation not only results in a steep drop in efficiency but also has adverse impacts on maintenance costs while trips can cause severe impacts. Not only do power producers incur higher fuel costs while generating lower revenue but are also faced with increased maintenance costs that combine to erode their profitability.
RICE power plants with multiple EG Sets utilizing gas as a primary fuel provide superior resilience under these conditions as they require lower gas pressure to start with and in case of reduced quantities, one or more EG Sets can be shut down while the remaining EG Sets can continue operating at high levels of efficiency thus generating partial revenue by serving customers that pay for this reliability. Equally importantly, partial load operation would have a modest drop in efficiency and minimal impact on maintenance costs including when having repeated starts and stops or even the rare trips.
Feasibility and bankability
Given the current natural gas prices applicable to power projects in Nigeria, small to medium sized embedded/merchant power plants built around RICE technology represent an optimum combination of initial investments (CAPEX) and lifecycle costs (OPEX) to deliver a tariff that is more competitive when compared to OCGT’s or CCGT’s for the same installed capacity.
OCGT power plants need relatively lower CAPEX; however, they could be upto 25% less efficient, with limited operational flexibility and fuel resilience further contributing to a higher OPEX, thus resulting in an uncompetitive tariff. CCGT power plants need relatively higher CAPEX, with efficiency that could be at par or at best marginally higher, however their lack of operational flexibility and fuel resilience would end up at a comparable OPEX, thus resulting in an uncompetitive tariff.
The modularity of RICE power plants facilitates capacity additions aligned with customer demand growth cost effectively and quickly with minimal disturbance to ongoing operations. A phased investment approach reduces the risk of stranded capacity and eases financial modelling. The superior performance dynamics that are inherent features of RICE technology can be harnessed to monetise any spinning reserve or standby capacity through the offering of ancillary services.
Manageable investments across such small to medium sized power plants can attract financing from local investors and lenders that benefit from ground level knowledge to make faster decisions and select the right technology partner to ensure effective implementation. This is clearly one of the most feasible approaches to add incremental yet meaningful power generation capacity, and when deployed at scale could help in narrowing the demand-supply gap for affordable and dependable electricity.
Best value for money
Wärtsilä’s Energy Business offerings cover a wide range of solutions that can be customised to meet the electrical power requirements in an efficient and reliable manner through long-standing experience and proven track record in handling projects starting from equipment deliveries to engineering, procurement and construction (EPC) responsibilities all over the world that are fully backed up by comprehensive lifecycle services.
The flexibility and fuel resilience that are inherent features of Wärtsilä RICE technology offer clear-cut competitive advantages to embedded/merchant power plants in terms of affordable and dependable electricity supply and deliver the best value for money to commercial and industrial customers, thus allowing them to focus on their core competence.
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