Energy Efficiency Accelerates Uptake of Renewable Energy-Ekeh
The Nigeria power sector has not been able to satisfy the yearnings of the masses due to the payment of outrageous bills for darkness, individuals and communities providing infrastructure for the Distribution Companies (Discos) and gross deficit in procuring pre-paid meters. Gentechnews, Editor, Tony Nwakaegho held this Exclusive interview with an energy expert, Uchechukwu Eke, PhD, who provided valuable insights into an avalanche of questions on energy efficiency, alternative energy, power sector, among others in Nigeria. Excerpts:
Some pundits opined that Nigeria is suffering from Energy poverty by paying for darkness and a call for energy justice in Nigeria. However, there is not yet an adequate and reliable approach for meeting the huge energy deficit of Nigeria. What is your take on this?
Those who hold such view know that access to energy is imperative to the well being of citizens. For this reason, they have in mind the situation where the use of estimated billing implies that consumers of public power supply, who are denied access as a result of blackouts, are forced to pay for power they have not used. Of course as alternative for public power supply, the affected consumers resort to the use of polluting private power generating alternatives. From the foregoing it would seem that such pundits are somehow on point, since energy poverty refers to lack of access to modern energy services resulting in the resort to dirty or polluting alternatives by a large population in a country.
It should be noted however that energy poverty in Nigeria is mainly as a result of low electricity generation and supply, which means that a large percentage of Nigerians lack access to electricity. The World Bank estimates that only about 55.4% of Nigerians currently have access to electricity. In other words those denied access to electricity as a result of blackout but forced to pay through estimated billing, merely contribute a fraction to energy poverty by periodically increasing the proportion.
It is most worrisome that despite the coming of DisCos and several initiatives of government to address the meter gap in Nigeria, the problem still remains intractable. As for closing the huge energy deficit, it will take a combination of massive investment in an expanded energy mix and policy review, to allow states to participate in power generation and supply.
Remarkably, countries like Angola and Nigeria have a well-developed but poorly managed petroleum industry. Excess gas products from these countries are flared, mostly, as a result of the high requirements for gas transportation and storage. Now the masses are groaning over a hike in the price of cooking gas. What is your advice to the government to mitigate these contrasts and challenges in gas production and gas price hike in Nigeria?
Nothing can justify the quantity of gas flared in the country in the face of the huge domestic demand for the product both for power generation, other industrial and house hold uses. In any case, all the arguments advanced can be solved with the right policies.
Excusing the continuous flaring of gas in the country on the ground of high cost of transportation and storage does not represent the whole fact. All oil and gas projects are high risk, high cost investments. Hence investors expect and often receive high reward for their efforts. The problem with gas therefore, is that while there are huge investments in gas export projects due to accruing high reward, investors are disinterested in domestic gas projects because they argue that such projects bring low return on investment. The government should continue to aggressively evolve fiscal incentive regimes that will catalyze investment in gas-to-power, gas-to-transport fuel and other industrial, commercial and household gas use projects.
Nigerians had experienced intermittent collapse of the national grid and this has been attributed to more generation of power that cannot be distributed. Why is the country selling electricity to neighbouring countries and has not expanded its infrastructure to be able to distribute electricity from the Gencos to the Disco and the end users?
From the unset, let it be clear that neither generation nor distribution is enough in Nigeria. It is therefore not only insufficient distribution that is a problem. The issue is that within what is available; Discos are often in the habit of rejecting load from Transmission Company of Nigeria (TCN) because of capacity constraint. This rejection, apart from political considerations, would appear to provide both economic and technical justifications for Nigeria to sell electricity to neighbouring countries that have capacity to take the rejected load.
The reason why power distribution infrastructure has not been expanded is not very difficult to see. It is the inability of the Discos to invest in distribution facilities beyond what they inherited from PHCN and the failure of the power sector regulators to wield the big stick to bring them in line. The Discos have always hinged their lack of investment on low return on investment due to low electricity tariff. Unfortunately despite the new service based tariff regime that government granted the Discos as a means to addressing their complaint, one is yet to see any positive action from the Discos.
The existing Nigerian power system is highly unreliable both in content and in essence due to policy somersault. Why is it difficult for the Discos to patronize the local pre-paid meter manufacturers instead of importing and heaping the cost on customers?
To answer this question, it is appropriate to give a little background to issues relating to local manufacturers and suppliers of electricity meters to Discos. It is common knowledge that Nigeria has a very embarrassingly wide meter supply gap and meters for filling this gap are expected to come from local manufacturers and importers of finished meters.
Incidentally it is these importers of meters that government through MAP granted the right to be contracted by the Discos. Here lies the problem. First problem is that, the MAP policy grants these importers and suppliers the right to take only a minimum of 30 percent of meters produced by local manufacturers and 70 percent imported in their supply.
It would therefore appear that the issue should be the small percentage allotted to local manufacturers of meters and their inability to meet up, rather than the inability of suppliers to patronize them. It is in the public domain that, local meter manufacturers have consistently argued that they have capacity to manufacture 100 percent of meters needed in the country, but are constrained by some government policies to even meet the 30 percent. Local meter manufactures claim that, importers are granted more favorable tariff than themselves. For instance, they say that while the importers pay a one off 10 percent import tariff on finished meters, they the manufacturers pay, between 5 percent and 40 percent in addition to port charges for their raw materials. They also claim that government’s fixed meter pricing policy, difficulties in sourcing foreign exchange and custom clearing challenges constitute other constraints facing them.
Has the purpose of the Federal Government unbundling of the power sector been achieved?
I would say, not yet. It is still work in progress. A lot still needs to be done to realize the purpose of the unbundling policy. A close look at the power sector as it is now shows that the unbundling only succeeded to the extent that, it changed the operators of the sector from public to private. Most of the characteristics of the pre-unbundling era are still present. For instance, we still hear of estimated billing, consumers buying transformers and other equipments for the Discos and lack of expansion of distribution facilities. It is in realization of the failure of the unbundling of the power sector through ESPRA (2005) that, the current national assembly is tinkering with the idea of an ‘Electricity Act’. An act they hope will fix the short comings in the sector.
Sufficient amount of useful energy can be harvested from the flared gases by making proper investments on modern and highly efficient natural gas-fired electricity production technologies. Why is the government still foot dragging on this issue of gas flaring that is causing environmental degradation in the Niger Delta region?
The government has always recognized the need to end gas flaring in the country. In this regard it has been implementing a basket of gas flare reduction and domestic gas development policies that have worked in other countries but have failed to produce any significant result here. Some of these policies can be categorized into gas flare criminalization and commercialization policies. The problem therefore cannot be ascribed to foot-dragging by the government. Rather it is a problem with style of policy design and implementation.
One major reason Nigeria’s gas flare out policies failed and which needs to be addressed, is the government’s consensual approach to regulation. For instance, in 1976 when OPEC member countries reaped the first oil windfall, Saudi Arabia for instance, compelled the multinational oil companies in their country to apply a percentage of their portion of the windfall to develop the Saudi national gas grid. This was followed to the letter. Today Saudi Arabia is not just the s largest oil exporter but also ranks sixth in global supply of Urea produced from gas.
In Nigeria, rather than a strict enforcement of regulations, regulators allow International Oil Companies (IOC) too much room to influence the regulatory process. The result of this style of regulation for gas flaring is that, between 1979 and 2021, the country has severally missed targets it set to stop gas flaring and consequently lost huge amount of revenue. In 2020 alone, NOSDRA estimates that the country lost about $1.24billion to gas flaring.
Early this year, having failed to meet the last 2020 date, the government set a new 2025 date for ending gas flaring in the country. If this date must be met unlike in the past, it is hoped that there must be strict implementation of available regulations and policies.
The University of Nigeria Nsukka has championed a course through the recently installed 100 kVA refuse-derived fuel (RDF) gasification power plant on their main campus. Why is the government not encouraging mass production and commercialization of such refuse-derived fuel (RDF) gasification power plants in all tertiary institutions in Nigeria to bridge the electricity deficit?
It is quite a good idea, but may not be easily realizable. Of course I cannot speak for government. However it may not make a good business case for an investor, if it is only to be mass produced for all tertiary institutions in Nigeria. What could be possible is for government to challenge other tertiary institutions to acquire the manpower to do the same thing as UNN. In the same vein, I am suggesting, encouraging tertiary institutions and in fact other government establishments in the country to try and generate a portion of their electricity needs from suitable renewable energy sources including RDF.
There is an immediate call for all-green energy globally. Is the continent of Africa ready going by their financial and technical constraints, as well as, market incentives for renewable energy investment?
In my 2014 book, Green Energy Revolution: Forces, Facts and Figures, I contended that the green energy revolution was raging across the globe, with clear “leaders” and “laggers”. In particular, I lamented that despite being blessed with abundance of the green energy resources particularly solar energy, developing African countries were lagging behind the developed countries in Europe and America. The reasons for this poor performance as you have rightly identified include, financial and technical constraints as well as absence of attractive market incentive for renewable energy investment.
The five cardinal targets from sustainable energy production point of view are identified to be: reduced carbon dioxide emissions, ecologically friendly process, energy transition security, reduced energy production cost and massive integration of green energy technologies and these are directly promoting a better environment while improving economic security. Do you see any of these happening currently in Nigeria?
Energy production in Nigeria is still far from sustainable and the reasons are not farfetched. In fact none of the five pillars is yet being achieved. For instance, low supply of public electricity compels citizens to resort to the use of high cost, high environment polluting private electricity generators, candles and kerosene lanterns. In the same vein, low supply and high cost of cooking gas force citizens to use firewood, coal, kerosene and other alternatives that have adverse impact on the environment. With regards to green energy technology uptake, one can conclude that, effort is being made but progress has been slow.
Two major pillars of the present energy transition are energy-efficiency and renewable energy. Has Nigeria effectively keyed into these pillars which are a radical shift in the energy system from an existing model to a new paradigm?
Certainly, the country has keyed into the two pillars of energy transition. However like I said earlier, progress is slow. A major reason progress in renewable energy transition in Nigeria is slow, can be traced to the implementation of energy efficiency and renewable energy policies. So much emphasis is placed on renewable energy policies but not much is done about energy efficiency. Yet energy efficiency is as important and usually precedes renewable energy implementation for effective renewable energy mainstreaming. Energy efficiency accelerates uptake of renewable energy and the lack of it discourages renewable uptake. It is for this reason that energy efficiency has been described as ‘a bridge to clean- energy future’. Energy efficiency for instance, results in energy saving and energy saved is energy generated. It also reduces carbon dioxide emission, while curbing climate change and saving costs.
The reason Nigerians are not keen on renewable energy technologies is because they use energy inefficient, mostly second hand, end of life appliances and equipment that are not suitable for renewable energy technologies. Renewable energy technologies compared to conventional non-renewable energy technologies, have very low energy densities and are therefore only suitable for use by energy efficient, low energy consuming appliances and equipments.
To accelerate renewable energy transition in the country, enough visibility must be given to energy efficiency. After all, energy efficiency solves energy problems on the demand side while renewable energy plays a part on the supply side. First step will be to initiate a national energy efficiency programme, for the purpose of educating the citizens on the relationship between renewable energy technologies, energy efficiency and energy demand of appliances and equipment. Second step will be to phase-out energy inefficient appliances and equipment from circulation in the country, through implementation of Standards and Labels (S&L) and Minimum Energy Performance Standard (MEPS).
In 2015, the Federal Executive Council approved the National Renewable Energy and Energy Efficiency Policy (NREEEP) which is broadly geared at removing barriers that put renewable energy and energy efficiency at economic, regulatory, or institutional disadvantages. Has NREEEP been able to provide a conductive political environment that will attract investments in the renewable energy and energy efficiency arena?
The NREEP somehow appears to be creating the right environment for investment in renewable energy. But the same cannot be said of energy efficiency. The reason for this is that energy investment is mainly driven by the profit seeking private sector. Since renewable energy guarantees investors more return on investment than energy efficiency, investors are reluctant investing in energy efficiency. Consequently energy efficiency is usually almost exclusively driven by the public sector, while the private sector drives renewable energy investment. I am therefore saying that while one can point to increasing activities in renewable energy by the private sector, not much is happening as I earlier pointed out with regards to energy efficiency where the government was supposed to hold sway.
In response to the Covid-19 pandemic, the FGN launched the Solar Power Naija Project in December 2020 to provide five million households with solar home systems for off-grid communities, under the Nigeria Economic Sustainability Plan (NESP). The implementation of the project was facilitated by the Central Bank of Nigeria, which will make available NGN140bn (approximately US$340m) in direct and indirect loans to qualifying projects. What is the impact of this project so far?
It is yet too early in the day to quantify the impact of this project, because it is still an ongoing project. Being a project that is yet at the implementation stage, what one can only say at this time, is that it is a laudable project with potential to impact positively not only on energy access but also on employment creation when completed.
The World Bank and the AfDB are currently partnering with the REA with respect to the Nigeria Electrification Programme with a US$350m commitment from the World Bank, and about US$148m from the AfDB .The International Finance Corporation has launched a sustainable energy financing and advisory programme, ‘the Climate Change Investment Programme for Africa’, which will provide funds and advisory services to banks to help them increase financing for private sector energy efficiency, renewable energy, and cleaner production projects. Similarly, the EU has committed about US$47m in funding for renewable energy projects in emerging markets, including Nigeria. What is making these funding not able to create the needed renewable energy in Nigeria and Africa?
I will say that the problem lies somewhere around the theory of supply and demand. While on the supply side investors may have access to these facilities, there is yet to be such facilities on the demand side. The result is that the high upfront cost of renewable energy products discourages their demand. There should be consumer focused financial packages that assist consumers to overcome the high initial cost of renewable energy products. When this is done, high demand for renewable energy will encourage investors to access the facilities available to them and increase production.
Another factor linked to low demand of renewable energy revolves around energy efficiency. As I have said somewhere earlier, high energy consuming otherwise called energy inefficient appliances and equipment are not suitable for use with renewable energy. The reason this is so, is because energy densities of renewable energy sources are very low compared to conventional energy sources. Unfortunately the country does not regulate energy efficiency of appliances and equipment imported into the country, with the result that we have all sorts of energy inefficient products which use with renewable energy discourage consumers.
The growing global energy transition will affect oil-exporting countries like Nigeria in three major ways: Capital losses, as hydrocarbon reserves are abandoned beneath the ground; secondary economic losses, as treasury may no longer be able to fund the public sector from oil revenues; and loss of competitive geopolitical advantage, as hydrocarbons are replaced by global or regional energy access to VRE sources—solar, wind, hydro, etc. What will be the country’s survival strategies from these challenges?
The energy transition will no doubt cause structural disruptions in global energy markets and economy. On the negative side will be countries like Nigeria that export oil, as you rightly pointed out, whose main source of income will be severally constrained, with dire consequences for their abilities to meet the social and economic needs of their people.
Despite the enormity of the inherent consequences of the energy transition, all hope is not lost however as there are available strategies affected countries can adopted to mitigate the challenges. In the case of Nigeria that runs a mono-product, oil based economy; the first thing to do is to seek ways of urgently diversifying her economy away from oil to agriculture and manufacturing; from import based to export based economy, with increased production replacing increased consumption. Such diversification will include shifting emphasis from oil to gas based revenue generating products. Since the decline in oil use will not mean the decline in gas and petrochemical products, increasing investment in gas and petrochemical products manufacturing will be critical. For instance, despite Saudi Arabia being the swing oil producer, it also ranks about number six in global urea production because the country long ago developed her gas infrastructure.
Another strategy will require the country to invest some of her oil revenue in renewable energy technology (RET) stocks in RET rich industrialized countries. With this done, when the transition is in full gear, the country will join in reaping the return on investment from her renewable energy investment.
- Uchechukwu Eke, PhD
