Truly the business of providing electricity in such a country as Liberia comes with its unique complexities and the solutions must come from within and it cannot be one that is adopted from other countries. Below are some thought provoking insights that will start the conversation and encourage Liberians to get involved with the process and attempt to resolve these challenges in the right context.
• With the introduction of the WAPP, Liberian Independent Power Producers (IPP) will be competing against Cote D’Ivoire, Sierra Leone, and Guinea IPP for power delivery within Liberia and into the high power WAPP grid. Inefficiencies and bureaucracies will only provide leverage to a competitor from another efficient neighboring country who is willing to provide electricity at competitive pricing. If there are any opportunities for operating in excellence and finding the right balance between the consumers’ interest and national security we should act on them with a sense of urgency. The WAPP power lines could be completed before our grid due to source of funding and scheduling.
• Currently LEC is in all facets of the electricity business with the exception of management which was outsourced to Manitoba Hydro International. This contract will end at the end of 2016. The new management has not yet been determined. LEC will be at its best when it can only focus on the business of electricity delivery. Nigeria went a step further and privatize the T&D arm but with strict guidelines that a majority of shareholders be Nigerian because of National Security. Liberia may go this way; however any private entity looking to purchase the Generation and/or T&D business element will want to see steady and sufficient profit from within these power areas; the high capital maintenance and build cost coupled with the insufficient power traveling on the lines may make investors “wait small” on the sidelines. Although debatable, LEC is currently operating at a very efficient and effective level given their restraints. The organization understands the business of electricity and they are moving along as fast as they can.
• Private investors will invest in the business of generation if they see the value to their shareholder. For this to happen the electricity regulatory commission will have to establish marketable and bankable tariffs.
• The success of the regulatory commission for electricity will depend on its ability to keep the consumer engaged as it operates and set tariff rates based on objective facts, truths, and transparency. Investors like certainty and knowing the rules of engagement, politicians want a stable environment for investors, and consumers want transparency. The regulator must be neutral, have a high competency in knowledge of the electricity business and be able to engage the consumer with a high level of transparency, truth, and frequency. All the methodologies applied to determine the tariff must be made available in a format that can be understood by the consumer. Politicians like to know that the electricity solution being provided is the best given the circumstances, while investors like to know that it will not change overnight and what the variables are. A regulator that strikes the right balance is a force to be reckoned with.
• Due to national security, the transmission and distribution grid will probably be managed and owned by LEC.
• Although it is tempting to focus on the short term solution, the consumer will have to be disciplined, understanding, and appreciative of the herculean effort it takes to provide safe, reliable and affordable electricity. When the complexities are fully internalized, the consumer will then fully appreciate LEC.
• Understand that to an investor Liberia is just one out of many countries they can invest for a return. When we are compared to other West African countries by an investor, other countries present not only a better rate of return, but a larger consumer market with a ready infrastructure, and more ability to spread their risk. This may not be a popular topic but we have to realize that we have a very small population of premium consumers and investors will discover that the numbers are tough to pencil out.
• All questions or concerns about the electricity tariff should be addressed to the appropriate office. We should avoid demonstration and destruction to the infrastructure. Electricity infrastructure carries a huge cost and is time heavy to build, and we will only be doing a disservice to ourselves.
• Insist on and expect excellence in customer service from LEC, and expect the same from your regulator.
• The majority of our current electricity infrastructure from the generation, T&D lines, Management, etc.… is being funded by international donors in the form of grants and discounted capital. This is the primary reason why the cost of electricity is expected to come down and not based on supply and demand as a traditional business model.
• The business model for electricity is a bit different than other commodities or products. An investor will require a guaranteed fixed price per KWh and a minimum take (amount of KWh of purchase) before they even put the first shovel in the ground. This means that once a power purchase agreement (PPA) is set up with an IPP you have to honor that PPA and said terms before you can take from another IPP, even if they have a better price. In the food market the buyer just goes to the next stall. With electricity the consumer has to purchase the agreed upon amount at the agreed price and then if they still need more they then may go to the next IPP.
• In Texas (USA), the electricity market is unique, it allows consumers to choose their electricity provider and the form of electricity (renewable, coal, hydro), as available by the utility company chosen. To be sure this model works for Texas at the moment due to the population, the consumer market, the stiff competition, many years of investing hard capital, and other policies put in place at the state level. This model may present some challenges in the Liberian electricity context because our market is not mature or sizable to obtain such consumer leverage, not to mention that our electricity consumer market pales in size compared to Texas. Texas has a population of over 27 million of which 88% 24 million (88%) are connected to the grid, with electricity consumption around 70,000MW out of their 78,000MW produced capacity. Compare to Liberia where maybe and estimated 300 thousand (10%) of our population may have access, consuming 10-12MW. Not to mention Liberia is still considered to be unstable, and one of the poorest nations in the world.
• Most IPP and their financiers want a traditional 20 year PPA. If the price and terms are competitive in the Liberia electricity context, this is great especially if it is without some form of subsidy.
• Insist that 20% to 40% of the IPP be offered up for ownership to the Liberia public via issuance of shares.
• An IPP that has the ability to scale up generation in a short time frame as the economy grows and more consumers are connected to the grid could potentially be of great value to the electricity sector.
• Micro-grids seem to work when it is completely funded by a non-profit organization. There’s been a lot of challenge for investors to come up with a working business model without a huge support via some form of a public-private partnership. These are mostly use for rural areas. In addition, how much value is electricity to a rural inhabitant and at what price?
When I think about electricity in the Liberia context I cannot help but think about the Pied Piper who was invited to the town by its townspeople to save it from the rat infestation because of his extraordinary gift of playing the flute. He kept his word and utilized his flute and rescued the town, but in a blink of an eye they forgot how painful it was to live with the rats. When he demanded his pay, they reneged on their promise to him. It did not end too well for them as the Pied Piper returned in that same year and led away all of the town’s children by playing the flute again on July 26. Liberians should remember that over US$500 million will have been spent from approximately 2010 to 2030 on electricity, about 80% coming from the International Donor Organization to power Liberia by 2030. A centralized approachto electricity at the moment appears to be most cost efficient. If there is a space for independent private producers, insist that they are completely vetted by the regulatory commission and that the methodology for the vetting process is transparent, especially on the safety, reliable and affordable metrics.Whenever there are articles in the press about an independent power producer wanting to provide a certain amount of electricity into the Liberia grid remember the Pied Piper and ask this question:
Will Johnny’s rates be competitive (cheap/affordable) and is the Pied Piper okay with it?
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]