Abstract
The Multi Year Tariff Order (MYTO) is the Nigerian Electricity Regulatory Commission (NERC) pricing framework for determining the Nigerian Electricity Supply Industry (NESI) pricing model. One of the objectives of the NERC’s MYTO pricing model is to ensure regulated electricity end user tariff without compromising return on investment. Achieving this objective is imperative to attract investors in the growing Nigerian electricity market. However, NESI has hitherto been faced with challenges ranging from its inability to provide sufficient power to its customers to not being viable enough to provide return on capital invested. In this paper, sensitivity analysis of power plant operation and performance parameters on the cost of electricity (CoE) generation using MYTO (power generation) pricing model were evaluated. Thermodynamic modeling and simulation of an open cycle gas turbine (OCGT) was carried out to augment scarce data on power plant performance and operation in Nigeria. Sensitivity analysis was carried out using probabilistic method based on Monte Carlo simulation (MCS) implemented in commercial software (@ Risk®). The result highlighted sensitivity of the model input parameters to cost of electricity generation based on technical and financial assumptions of MYTO model. Seven most influential parameters affecting generation cost were identified. These parameters and their correlation coefficients are given as: 1) foreign exchange rate, 0.76; 2) cost of fuel, 0.51; 3) thermal efficiency, -0.23; 4) variable operation and maintenance cost, 0.22; 5) fixed operating and maintenance cost, -0.03; 6) capacity factor, -0.02; and 7) average capacity degradation, 0.01. Based on the gas turbine engine and input parameter distributions statistics for this study, the generation cost lies between 9.84 to 15.45 N/kWh and the probabilities of CoE within these values were established.
Highlights
Proper energy mix with adequate production is a target of every nation in achieving her energy demands and meeting stringent emission requirement
The Nigerian Electricity Supply Industry (NESI) is majorly characterized by centralized power plants, which feed into the national grid and the power is apportioned to different distribution companies through the Nigerian bulk electricity trading (NBET) company
The most ranked input parameter is the foreign exchange rate (Forex). This statistical value of Forex in Multi Year Tariff Order (MYTO) has the ability of changing the mean cost of electricity (CoE) at ₦12.06 ₦/kWh to a value between 10.68 and 13.27 ₦/kWh
Summary
Proper energy mix with adequate production is a target of every nation in achieving her energy demands and meeting stringent emission requirement. Nigeria with low energy generation capacity and inadequate energy generation mix alike is facing multi-dimensional challenges in meeting her energy requirement of at least 10,000 MW. The Nigeria government in a bid to reposition the electric sector in 2005 came up with Electric Power Sector Reform Act (EPSRA, 2005) to boost energy generation and distribution capacities in the country. This leads to privatization of two segments of its electricity industry; generation and distribution sectors, anticipating that investors can take over and produce sufficient power to meet growing electricity needs of Nigerians. A visible and consistent polices to guarantee capital recovery, returns on investment for investors while maintaining affordability and quality of service to consumers must be in place [5]
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