Why are Nigerians paying for wasted energy?

Globally, about 1.2 billion people lack access to electricity according to the International Energy Agency (IEA) – Nigeria has a share of about 8% yet waste more than 40% of generated electricity. The energy deficit in Nigeria is glaring, so much so that it has stifled all meaningful economic development. Still, most businesses spent scarce resources paying for wasted energy. How can our products and services ever compete globally with such waste? Many businesses have indulged in sharp practices and cutting corners just to survive the harsh economic reality.

While countries around the world have been investing in ways to boost energy efficiency, we keep deceiving ourselves in Nigeria believing that Renewable Energy Technology (RET) is now cheap with “this” ideology of very long-term benefit that is not bankable. The potentials of energy efficiency investment has been neglected so much in Nigeria because business owners and managers do not yet understand its value – how it can significantly improve profit margin and risk management through the bottom line. These potentials are ripe to be harvested because of our history of cheap energy and the legacy of stock of inefficient industrial equipments. Energy prices are now adjusting to international level because Nigeria can no longer afford to maintain costly energy subsidy leaving companies exposed to significant energy price fluctuations.

Everyone is seeking for ways to cut down their energy cost and or generate from a cheap source. Ironically, renewables does the opposite; even when the right policies are in place such as the Renewable Energy Feed-in-Tariff (RE-FiT), RETs still lead to an increase in the general price of electricity. Unless the externalities of conventional technologies are quantified and internalized – that is, taking into account its wide global and local environmental impacts; most RETs will continue to cost more. The excitements of RETs are often short-lived in Nigeria at the consideration of cost. Have one ever wondered why most sellers and even promoters of RETs are still stuck with the conventional system? We must begin to tell ourselves the truth about sustainable energy development.

Recently, the Paris Climate Change Agreement was ratified by 175 countries in New York. The aim is to keep global temperature rise below 1.5˚C. The agreement encompasses mitigation and adaptation strategies by member Nations to curb the temperature rise. Consequently, countries submitted their Nationally Determined Contributions (NDCs) that indicate how much they will reduce their emissions and what actions they will take to do so (see table below for Nigeria key mitigation measures).   

Obviously, Energy efficiency holds the greatest potential toward the reduction of Green House Gases (GHG) in Nigeria as compare with renewables. Nigeria has to get this priority right not just because of GHGs but for the interest of our overall sustainability in energy development.

If the Nigerian government is so passionate about RETs, Small Hydro Systems (SHS) is a good place to start. SHS has lower investment risk, resources are locally available, technology can easily be localized and local jobs are created. Realistically, the Government and by extension the International Finance Institutions (IFIs) must focus on innovative frame work and Financial Instrument (FIs) that can create the enabling environment to scale up the adoption of EE and RETs . Such Instruments must be able to mobilize the greatest amount of private financing for the least amount of public funds thereby achieving maximum leverage. Every instrument must be designed to overcome specific technological barrier or risk. Without neglect to other forms of FIs, a well structured Partial Risk Guarantee (PRG) has proven to be very effective for some RETs in many low income countries with similar characteristics as Nigeria.

Moving forward, priority has to be given to the recovery of financial resources lost through wasted use of energy in Nigeria. Energy Efficiency is the invisible power house for sustainable energy development, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goal. Nigeria must focus on the elimination of energy waste through an aggressive energy efficiency programs that will include demand-side-management strategies. This will not only improve supply but will also improve our grid stability and reliability which are the basis for the integration of RETs.

Chima Muoneke