Total cost of risk for privatized electric power generation under pipeline vandalism

Gas pipeline vandalism is a huge threat factor to steady electricity generation and energy materials flow in the power sector of Nigeria. It imposes huge cost of risk to that sector. Due to incessant pipeline vandalism, power availability is subject to elements of chance and with undesired out comes that adversely impact on power generation value chain. To this end, this study seeks to develop a model for estimating the cost of risk to a power generation company (Genco) and calculating plant unavailability indices by applying the dispersion technique. Applying the dispersion technique is innovative and differentiates the current methodology from other works on the subject area concerned. The probability and impact of failure alongside the variances and standard deviations of the parameters were derived. Cost to the Genco was obtained by multiplying fuel utilization ratio by unsupplied power and associated differential between price of electricity (output) and price of its primary fuel. Results showed that the lost megawatt hours (MWh) standard deviation, δ, of the case study plant is 48,176.776 MWh. During the 2010 to 2012 periods, the resultant risk to the Genco was estimated to be ₦ 45,399 per MWh, ₦ 42,022 per MWh and ₦ 42,832 per MWh with the exchange rate as ₦150/$, ₦155/$ and ₦159/$ respectively. To bridge a research gap based on literature, total cost index and model have been developed for measurement of impact or loss suffered as a result of vandalism. Inclusion of reliability index in the algorithm is a novelty as it allows measurement of level of system performance and its vulnerability to vandalization. The information will be of immense benefit to private investors in the power sector who have to make decisions over management of electricity generation in Nigeria based on imperfect information, following the privatization exercise.