Electricity tops energy sector investments in 2016
The International Energy Association (IEA), a Paris-based energy think tank, has said that for the first time ever, the electricity sector edged ahead of the oil and gas sector in 2016 to become the largest recipient of energy investment.
Oil and gas still represent two-fifths of global energy supply investment, despite a fall of 38% in capital spending in that sector between 2014 and 2016. As a result, the share of low-carbon supply-side energy investments, including electricity networks, grew by six percentage points to 43% over the same period.
The IEA’s 2017 World Energy investments publication recently released stated that total energy investment worldwide in 2016 was just over $1.7 trillion, accounting for 2.2% of global GDP. Investment was down by 12% compared to the organisation’s revised 2015 energy investment estimate of $1.9 trillion.
But investors in Nigeria’s privatised electricity assets in 2016 struggled to stay afloat. The Transmission Company of Nigeria (TCN) last year said the electricity distribution companies (DisCos) were remitting a paltry 25 percent of their market bill.
Much has not changed in 2017. Nigeria’s eleven electricity distribution companies settled on average only 31 percent of the N111billion worth of electricity invoice from generation companies failing to collect over N75.5billion from January to March 2017, BusinessDay analysis shown.
This further worsened shortfall in the electricity market currently valued at over N1trillion. The market shortfall for 2015 and 2016 is estimated at N473 billion while the tariff shortfall is approximately N458 billion. 5.
Nigeria’s electricity sector will require approximately $1.5 billion annually for the next five years (2017 to 2021) to achieve sector viability according toe Power Sector Recovery investment Programme which the government began phased implementation earlier this year. Meanwhile, the economy is losing $29.3 billion annually, due to the lack of adequate power.
Experts say lack of enforcement of market rules contributes significantly to the liquidity crises in the sector.
“The major problem in the electricity market in Nigeria is that Nigerian Bulk Electricity Trader (NBET) has not played its role as a market operator as it should. It has failed to call the DisCos to order and enforce market rules hence contributing to the liquidity problem in the market,” said Chuks Nwani, energy lawyer and Vice president of PowerHouse International, an energy advisory firm in an earlier comment.
According to the IEA report, a way out of the jam is ramping up investments in renewable energy. The world’s highest crude oil importer China was the largest destination of energy investment, taking 21% of the global total, yet the makeup of investments in China has been changing.
“2016 saw a 25% decline in commissioning of new coal-fired power plants. Today, energy investment in China is increasingly driven by low-carbon electricity supply and networks, and energy efficiency,” says the report.
Global electricity investment edged down by just under 1% to $718 billion, with an increase in spending on networks partially offsetting a drop in power generation.
Investment in new renewables-based power capacity, at $297 billion, remained the largest area of electricity spending, despite falling back by 3%. Renewables investment was 3% lower than five years ago, but capacity additions were 50% higher and expected output from this capacity about 35% higher, due to declines in unit costs and technology improvements in solar PV and wind.
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