Clean Energy in the Policy Mix

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Power shortages continue to stifle growth and are regarded as the primary drawback for operations across all company sizes. The cost of self-generation of energy is often cited as a heavy strain on the cost of doing business. Additionally, it gulps a considerable amount from household pockets. Nigeria depends heavily on gas for its energy requirements. Given the frequent gas shortages, power supply across the country is usually epileptic, reports The Guardian.

The FGN estimates national energy demand at 17,720MW. However, generation capacity from the national grid is only about 7,099MW. In an attempt to improve this capacity, the Transmission Company of Nigeria (TCN) has secured US$1.5bn from donor agencies to finance power transmission projects across the country. The TCN aims to achieve transmission capacity of 20,000MW over the next three years.

Based on the most recent data from the federal ministry of power, works and housing, peak generation was 4,215MW on Monday of the final week of August. Its lowest generation on the same day was 3,088MW.

 Official thinking on power is tilting towards developing alternative sources. The FGN has produced a national renewable energy action plan. It targets an energy contribution from renewables to total energy generated at 16% by 2030; with hydropower accounting for 7.1% and solar energy 5.9%.

Access to reliable, cost-effective and sustainable energy could have a multiplier effect on development. Based on industry sources, China is the largest renewable energy employer providing at least 3.4 million jobs as at last year. Its photovoltaic (PV) industry (i.e. solar electric) alone employs 1.6 million individuals. Meanwhile, Brazil is regarded as the second largest employer with almost 1 million employed, mostly in liquid biofuels.

In Africa, it seems Rwanda is at the forefront in terms of utilising renewable energy techniques. Rwanda is making advances with off-grid renewable energy solutions for its rural economy which is estimated to be 83% of the total population. A project to get clinics in remote areas of Rwanda onto reliable sources of renewable energy recently kicked off. Ensuring that healthcare centres are connected to sustained energy is vital for socio-economic growth.

For this healthcare project, decentralised power sources such as PV systems are primarily utilised because of their cost effectiveness. PV systems basically convert solar energy to direct current electricity using semi-conducting materials. However, other renewable energy sources are currently being explored as energy demand still surpasses supply.

Apart from its potential to increase flow of capital as well as improve cross-border trade, renewables have a key role to play in pushing the global village towards its optimal functioning level. Its direct impact in Nigeria, however, will be to solve the growing energy demand as well as become a competitive source of capital attraction.

There has been some traction in ramping up solar energy across the country as a few partnerships have sprung up. One such is the Abiba 50MW solar project in Kaduna State. Access Quaint (an asset development & consultancy firm) has secured a US$1.25m convertible loan agreement for this project. This proposed plant is expected to generate electricity for about 600,000 households annually.

Furthermore, Total Nigeria recently signed a Solar Home Solution distribution agreement with Blackbit Limited. This partnership is expected to result in increased distribution of solar inverter kits in Lagos and Abuja. It is very likely the solar panels within this kit will be imported rather than manufactured domestically. However, if the latter could be explored, this would have a significant effect on job creation and economic growth as a whole.

There is also some forward movement in hydro-power. Last month, the construction of the 3,050MW Mambilla hydroelectric plant was approved. The construction of this plant is expected to cost US$5.8bn. Apparently, the China Export-Import Bank will provide 85% of the funding while the FGN will provide the remaining 15%.

The construction of this hydroelectric plant is estimated to take about six years. Additionally, four dams will be constructed during the process. Another hydroelectric power project, Zungeru, which has a 700MW capacity is also underway. The first phase of the project is projected to be completed over the next two years. Once these projects are completed, this should result in improved productivity from SMEs.

 In contrast, the biodiesel and wind segments are still hugely untapped. For biodiesel, the conversion of oil waste (such as recycled restaurant greases) would drive down cost of self-generation via fuel dependent generators. Additionally, Nigeria’s aviation sector also stands to benefit from a booming biodiesel industry as it can also be an alternative for aviation fuel. At the peak of the fx sourcing issues, airline operators struggled to secure aviation fuel which is mostly imported, thereby affecting their operations. Energy generated from biodiesel could also accelerate rural electrification as well as stimulate farming activity.

On a bright note, the FGN’s proposed green bond worth N50bn should be a positive for these untapped segments within the renewable energy industry. It is to be project tied in collaboration with the federal ministry of environment; renewable energy projects are to be included.

Although still in its infancy stage in Nigeria, improved energy supply through renewables would stimulate business activities, particularly among SMEs which contribute as high as 50% to the country’s national output. Given that energy supply through renewables are capital-intensive at the initial stages, increased investment is required. However, in the long-run, the benefits associated with these investments on a macro level would be immeasurable.

Source: IWIN

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