Towards reducing energy deficit in Oyo State

The World Bank has stated that 85 million Nigerians do not have access to grid electricity. This represents 43 percent of the country’s population and makes Nigeria the country with the largest energy access deficit in the world.

The lack of stable power supply has been recognised as a major hindrance to Nigerian citizens and their businesses, as they suffer annual economic losses estimated at $26.2 billion (₦40.7 trillion).

According to the 2020 World Bank Doing Business report, Nigeria ranks 171 out of 190 countries in getting electricity and electricity access is seen as one of the major constraints for the private sector.

Before the Federal Government gave permission to state governments to generate, transmit and distribute their own power in 2023, the Oyo State Government took advantage of a provision under the Electric Power Sector Reform Act (EPSR), 2005, now defunct that allowed independent power distribution. Regarding “Distribution Licenses,” Section 67(1) states that “Subject to such terms and conditions as the Commission may fix in the licence, a distribution license will authorize the licensee to construct, operate and maintain a distribution system and facilities…”

On December 11, 2021, Seyi Makinde, the Governor of Oyo State, performed the ground breaking ceremony for the Independent Power Project (Ibadan Hybrid Power).

He explained that the Oyo State Government was entering into a contract with Elektron Energy to finance and develop an 11MW hybrid power solution for the Oyo State Government and some of its facilities within the Oyo State Secretariat and environs.

The Special Purpose Vehicle that Elektron Energy will use to execute this contract is Ibadan Hybrid Power Limited (IH Power). IH Power will also be responsible for managing the distribution infrastructure through Ibadan Hybrid Distribution Limited, which will hold an Independent Electricity Distribution Network (IEDN) license.

This 11MW solution is called a hybrid power solution because it comprises 10MW gas-fired power generation and a 1MW PV solar solution.

It is meant to produce electricity for 12 healthcare facilities, including Adeoyo Maternity Teaching Hospital and State Hospital Ring Road; the Lekan Salami Sports Complex, Adamasingba, not less 10km radius of public lighting under the ‘Light-Up Oyo’ project; the judicial complexes at Iyaganku and Ring Road; the Oyo State House of Assembly and a selection of schools within a defined catchment from the generation plant at the Oyo State Secretariat.

On December 6, the first phase of the 11MW hybrid power plant was inaugurated. Governor Makinde said that having invested in road construction, agribusiness, security and taken strategic steps to reduce the infrastructure deficit, the result has been the growth GDP grew by about 90 per cent — from N2.75 trillion in 2019 to N4.05 trillion as of 2022.

However, the question for investors in the state still remained having reliable and uninterrupted power supply.

“I know where we ought to be as a nation in terms of capacity to generate and distribute electricity, but we are nowhere near that place. That’s why all over the place, we have generators. So, when we had the groundbreaking ceremony here, it became clear to us to go from growth to a game changer for our economy to go to scale, a point where you are just using what you have to stretch the envelope.

“The groundbreaking was done on Saturday, 11th of December, 2021. This was two years before the Federal Government gave the go ahead for states to have powers to generate, transmit and distribute their own power.

“Now, as a state, we can look at our own power requirements and bridge the gap without looking towards anyone else. And this is exactly the trajectory we are on in Oyo State.

“We took advantage of the changing times and worked with the House of Assembly. In February this year, we signed the Oyo State Electricity Rega

“We wasted almost a year trying to get approval from the Nigeria Electricity Regulatory Commission for this power plant. But for the next power plant, it is now under our own control. It won’t take one month. I am saying to investors now that the coast is clear.

“So, today, we are here to commission the first phase of the IPP. I thank our partners for believing in us, because what you have done is to put in your money with the hope that you will recover it from our monthly payment. I give you the assurance that we will not default.

“With the completion of this phase, Oyo State has gone from producing electricity at the mini-grid stage to 5MW electricity with 4MW gas and 1MW of solar. You may be thinking that the 5MW is low but let us put this in perspective. Oyo State receives an average of 80MWatts from the national grid. The 5MW is roughly 7 per cent. We may be going to 500MW but, today, we have taken a step.”

The governor described the IPP as a game changer, noting that there are, indeed, better days ahead for Oyo State economically.

He said, “This is an absolute game changer. We signed an agreement with Shell and they have welded the first pipe and the $100m investment is well on its way. This is a direct investment that is not going through anybody.

“Truly, there are better days ahead for the Oyo State economy and all of us here are playing a part in making history.

“As I said, we are not stopping here. Even if they want to stop us, we won’t stop because we are well on our way. So, we are seeking more investors in the energy sector from the state and there is a market for that.”

Within the terms of its agreement, the Oyo State Government will repay the capital expenditure investment of Elektron Energy over a 10-year period within which the energy company will operate and manage the infrastructure.

The total cost of the project is pegged at N8,027,430,214 and is being executed on a Build-Operate-Transfer basis.

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To put the importance of this project into perspective, Oyo State receives an average of 80 MW from the national grid. So, when the project is completed, it would mean an increase of 14 percent in total of the electricity being supplied in Oyo State, further reducing the energy deficit in the state.

The first phase which has gone live is 5MW out of the 11 MW, and covers the state secretariat and immediate environs, the Oyo State Government has stated.