Editor’s note: The following is the first installment of a 4-part article on the business of providing electricity in Liberia. The author, William Thomas Bernard King, is writing from a unique vantage point having worked at one of the leading electricity utility providers in the United States, as well as from his own research of relevant literature and first-hand experiences with the electricity issue in Liberia.
The intent of this correspondence is to provide a common context in which we will be able to comprehend all of the facets or variables in play relating to bringing a safe, reliable, affordable (cheap) electricity to every home, industry or business in Liberia. At the conclusion of this article my hope is that we will be able to not only comprehend all of the key players in the electricity utility industry but also be able to hold an informed conversation with those in charge of the herculean task of bringing electricity to Liberia. There is an opportunity for a paradigm shift on how we see the electricity business which will no doubt impact our views and insights into conversations or policies concerning electricity in Liberia. Our views and inputs do matter as it will determine whether or not we “Liberians” truly achieve a grid of the future where we can all benefit. To those who understand the electricity business, this information will be nothing new. This article simply attempts to increase and broaden the awareness of the business of electricity for all citizens of Liberia, in the hope that this will in turn make the conversation flow much better and remove the proverbial sense of distrust and paranoia that we can at times harbor due to unmet expectations of past promises.
Liberians are eagerly anticipating an additional supply of safe, reliable, and affordable electricity when Mt. Coffee Hydro comes on line at the end of 2016, this much needed electricity supply will complement what is already being provided by the Heavy Fuel Oil Generating facilities, and the diesel generators. These combined generating facilities will provide an estimated 32MW in dry season or 76MW in the wet season. In addition, the Electricity Law that recently passed, providing a mandate for the formation of a regulatory entity that will set the rules, processes, and guidelines that encompasses tariffs, generations, transmissions and distributions, customer services, independent power producers and licensing, will begin to make the pot boil in the electricity sector. In the past, electricity – as a product — was left to governments or large industries to provide for the customer and electricity companies was oligopolies, working as the sole license provider within a defined territory without the threat of outside competition. In today’s environment small scale commercial power generation, environmental regulations, and improvement in technologies have changed the playing field. It appears that all pieces of the electricity supply chain have the ability to run independently of each other. While this may be true, the question is “Is this model applicable and beneficial for Liberia?”
The above question can be best answered by identifying the stakeholders in the electricity business arena and what drives them to deliver safe, reliable and affordable electricity. Each stakeholder uses a different rationale within the same electricity business context in looking to deliver safe, reliable, and affordable electricity. Their unique rationale will impact the journey to electrifying Liberia. Whether or not Liberia truly achieves a grid of the future that we can all benefit from will be left up to how quickly we can identify and contextualize our current position with regard to electricity in the West African region and globally.
Liberia Electricity Corporation (LEC): Currently LEC is authorized to perform: generation, transmission and distribution, customer service, and management of electricity, they are the producers and sellers. The regulation and governance is under the Ministry of Lands, Mines & Energy, within the office of the Deputy Minister for Energy. LEC has a clear mission, “To increase reliable access to affordable electricity throughout LEC’s service areas, in the quickest, most prudent and sustainable manner possible.’’ A private generation company that wants to produce and sell electricity at a commercial level in Liberia will have to coordinate and communicate their intent to LEC if they are looking to provide power through the national grid and to recoup their cost with some profit. To be sure, before LEC looks to purchase privately generated electricity, there must be a need for more electricity consumption than LEC can provide at a reasonable rate. At the moment LEC generates more than it can transmit and a portion of their cost is subsidized by donors.
West African Power Pool (WAPP):The West African Power Pool (WAPP) is a specialized institution of ECOWAS, covering 14 of the 15 countries of the regional economic community (Benin, Côte d’Ivoire, Burkina Faso, Ghana, Gambia, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo). International organization of public interest, the WAPP is to ensure Regional Power System integration and realization of a Regional Electricity Market. WAPP is made up of Public and Private Generation, Transmission and Distribution companies involved in the operation of electricity in West Africa.
It has, to date, 26 member companies, including LEC. Liberia is part of the Cote D’Ivoire, Liberia, Sierra Leone and Guinea line, which will span approximately 1,200 kilometers throughout these four countries. The construction has already begun and there are designated connection points in Liberia with one being Mt. Coffee Hydro. This will allow for Liberia to potentially sell power not being consumed to the other countries and vice versa. This will be helpful for Liberia because the lines will run through areas that LEC cannot service at the moment. Another benefit with having the WAPP is that private generation companies may sell directly into this market via a Power Purchase Agreement.
International Donor Organization (IDO): International Monetary Fund, USAID, World Bank, African Development Bank, United Nations, etc… Although not impossible, it would have been an even more difficult task for Liberia to begin to establish the hydro facility such as Mt. Coffee, the Transmission & Distribution, the Liberian Electricity Law, a regulatory body, and any elements of electricity as listed without the financial and human capital resources of the IDO’s. By the end of either 2016 or mid 2017 depending on when Mt. Coffee Hydro comes on line, and LEC reaches its 2016 or 2017 T&D connection goals, at least $400 million would have been spent on the Liberia electricity sector of which over 70% to 80% is from the international community, and 30% to 20% from the Government of Liberia. These IDO’s play a vital and decisive role in the firm establishments of all of the elements for the safe, reliable, and affordable delivery of electricity. The magnitude of investments by the IDO’s may potentially dictate the terms at which privatization occurs in the generation and T&D electricity element. In the early years of deployment the electricity sector could very well be an oligopoly by design until a substantial amount of cost is recuperated to satisfy debt obligations. It will be a bit naïve on our part to think that the privatization of the electricity sector will happen quickly. At the present moment the private sector has yet to at least come up with an affordable pricing generation model that can complement or compete with Liberia’s current electricity schedule long term. By providing grant funding and low cost capital, the IDO’s have made sure that generation (Mt. Coffee), T&D and the other components of the electricity sector are competitively priced, creating an incentive for major power consumers to temporarily endure the high cost of self-generation knowing that down the line the competitive price from LEC will beat out a long term commitment from a direct purchase from an independent power producer (IPP). One can drive down the cost to consumer in two ways: 1) Enormous capital (cash) infusion in electricity infrastructure or 2) government subsidizes the cost to consumer on a monthly basis. With our limited capital resource option 1 or 2 presents many challenges. Nigeria has experience how expensive it is to subsidize the cost of electricity and it does not promote economic growth as some were led to believe. A recent report from Global Subsidies Initiative, “A Citizen’s Guide to Energy Subsidies In Nigeria;” produced by the Center for Public Policy Alternative (CPPA) and the international Institute for Sustainable Development’s Global Subsidies Initiative states:
“The cost of underpricing electricity has been in the range of NGN 232.5─356.5 billion (US$1.5–2.3 billion) between 2005–2009. This has caused insufficient maintenance and reinvestment in Nigeria’s electricity supply, causing serious problems with access and reliability, at high cost to businesses and the broader economy. Plans are now underway to gradually increase tariffs to cover costs in full, while maintaining a cheaper tariff for low-income consumers.”
Nigeria is moving away from such a taxing model on its economy; we should be weary of any IPP that makes this recommendation — this should raise the red flag for our regulators. Option 1 may be feasible depending on Government of Liberia’s (GoL) cash availability.
Government of Liberia (GoL – Executive, Legislature, and Judiciary): Establishes the Electricity Law, the master plan for electricity, the formulation and development of national energy policies, and appoints the electricity commission that will be responsible for implementing the policies and procedures as mandated by the electricity laws and governing policies. The Minister of Lands, Mines & Energy, or the Deputy Minister for Energy are not able to set the price of electricity. They may have an opinion but cannot dictate or influence what the tariff will be.
Commission / Regulator: Implements the mandate of the Electricity Law, regulates the industry, and sets the tariff for electricity. Ensures electricity companies are in line with country’s objectives. Responsible for making sure that all government mandates are carried out and that all players in the electricity sector are in compliance, establishes and updates construction and material standards to ensure the safety of all personnel and consumers, ensure national security is not compromised, issue licenses, provide a space for consumer advocate group voice to be heard. The issuance of licenses is not an automatic commitment from the GoL, nor the regulator or LEC to purchase power.
Investors: Private entities who engage in the electricity sector for profit. They see that there is a need and look to provide a solution that is sustainable for the going concern of the entity and its shareholders. Private investors will look to provide a solution in any area of the electricity sector that they are licensed for and that is profitable per their business model. When the regulatory framework is established independent power producers (IPP) may be licensed to generate power and provide it into the grid, whether or not they can do so at a competitive price will be key.
Consumer: Those who purchase electricity. Normally electricity is charged at a different tariff rate depending on the intended use. The regulatory arm sets the tariff price for each tier. Based on multiple constraints and their complexities and financial implications, tier pricing may not be available at early stages of deployment in Liberia. Below are a few examples of some categories of tier pricing:
1. Residential – Customers who use their premises exclusively for residential purposes.
2. Commercial – Customers who use their premises for any other purposes other than residential or as factories.
3. Manufacturing – Customers who use their premises for manufacturing goods.
4. Street Lights – Lights managed by national or municipal government.
With so many pivotal stakeholders involved, adapting a decentralized modern micro grid business model in Liberia could possibly work but a lot of work and resources would be required. In the next few parts that will be published, we will explore our current electricity situation and the way forward.
Work Cited and Research Articles
1. West African Power Pool: Environmental and Social Impact Assessment (ESIA)
2. Ministry of Lands, Mines & Energy: Energy Briefing for Partners (Power Point Presentation for Partners)
3. Energypedia: https://energypedia.info/wiki/Main_Page
4. Electric Reliability Council of Texas: http://www.ercot.com/mktinfo/
5. Electricity Local: http://www.electricitylocal.com/states/california/los-angeles/
6. Global Subsidies Initiative:“A Citizen’s Guide to Energy Subsidies In Nigeria;” produced by Center for Public Policy Alternative (CPPA) and the international Institute for Sustainable Development’s Global Subsidies Initiative. https://www.iisd.org/gsi/resources/introductions-non-experts/citizens-guide-energy-subsidies-nigeria
About the Author: William Thomas Bernard King works for Southern California Edison (SCE), one of the largest private electricity utility companies in the United States and the company with the biggest renewable energy portfolio. In 2014 SCE delivered 17.7 billion kWh of renewable, roughly 24% of all the electricity delivered. William’s 10 years at SCE has afforded him the opportunity to comprehend the business of electricity and the constraints of providing safe, reliable, and affordable electricity. He frequently visits Liberia to see his family and in 2012 spent 3 months visiting and exploring the country. If you would like to share a comment with William, his email is: [email protected]