Renewables to the rescue

Interestingly, fuel queues have vanished across petrol stations in Nigeria, as experts believe the reforms in the downstream sector of the petroleum industry have brought about this. As petrol dealers are allowed to sell the way they bought the product. We now see several petrol stations selling the product at different prices on the same street.

Although before now, fuel queues were blamed on the shutdown of operations by some independent petroleum marketers who say they are no longer making a profit by selling petrol at the government-fixed price.

It couldn’t have come at a worse time, as businesses and households have been grappling with the increasing prices of fuel—electricity, petrol, diesel, and gas—since May 29, 2023.

These rising energy prices have a far-reaching economic impact on the masses. Many businesses and households that depend on diesel-powered and petrol-powered generators, amid the continuing unreliability of electric fuel from the national grid, have seen their operating and living expenses go up uncontrollably.

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To cushion the effects of these soaring energy prices, various businesses have resorted to passing down the cost to their customers, leading to a rise in the prices of services and commodities and further chipping away at the income levels and purchasing power of the consumers.

A report by the International Energy Association (IEA) notes nearly half of all Africans without electricity live in Nigeria, the Democratic Republic of Congo, Ethiopia, Tanzania, and Uganda.

“To cushion the effects of these soaring energy prices, various businesses have resorted to passing down the cost to their customers, leading to a rise in the prices of services and commodities and further chipping away at the income levels and purchasing power of the consumers.”

The Energy Progress Report, published by the IEA alongside the United Nations Statistics Division, the International Renewable Energy Agency (IRENA), the World Bank, and the World Health Organisation (WHO), estimates that about 92 million Nigerians lack access to electricity from the national grid, as far back as 2022.

In recent times in Nigeria, it has not been sweet for those lucky enough to have access to the national grid, considering the fact that the national grid has collapsed countless times in the last few months, plunging the entire country severely into total darkness.

Unfortunately, Nigeria has not been able to get it right in the energy generation and supply sectors, which therefore calls for one to begin to think of renewable energy, especially off-grid renewable energy, as the cure for this apparently perverse energy problem.

Like crude oil, Nigeria has abundant renewable energy potential. Renewable energy, by definition, is energy that is derived from resources that can be replenished naturally on a human time scale. Five major sources of renewable energy exist. These are solar, hydro, wind, biomass, and geothermal.

Most parts of the country receive generous amounts of sunlight all year round, except, perhaps, for a few cloudy hours in a day during the rainy season. Large rivers crisscross the country, while windswept hills and coastlines punctuate the Nigerian landscape. There is also plentiful vegetation suitable for biofuel, as considerable progress has been made in identifying and exploring potential geothermal sites in Nigeria.

Due to the relative advancement in indigenous expertise in solar photovoltaic technology, solar energy is the most widely available source of renewable energy in the Nigerian market. The assumed potential for solar power generation in Nigeria is 427,000mw, as of 2022. In a country with an energy supply gap of at least 180,000 MW, according to the Association of Nigerian Electricity Distributors, this is huge and potentially game-changing.

Transitioning to solar energy systems can represent an effective cost-saving strategy for businesses and households. While the initial cost of purchasing a solar energy system may be high compared with diesel-powered and petrol-powered generators, many solar energy companies have flexible payment plans in place to cushion the impact of the initial outlay on their customers. Besides, solar energy systems are more durable and easier to maintain in the long run, and they do not require constant fuelling as sunlight is a free gift of nature.

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Issues around the high cost of solar energy systems (which has made them uncompetitive compared with fossil fuel generators), long wait for investment returns, and inadequate information about renewable energy products have hindered the full take-off of the renewable energy industry in Nigeria. The government and other stakeholders can step in to facilitate the diffusion of renewable energy in the country.

Commercial banks and other fund providers, for instance, can address the financing gap by developing innovative supply-side and demand-side financial products for operators and consumers in the renewable energy industry.

On the supply side, low-cost funding should be made available to manufacturers and service providers to catalyse local production. On the demand side, low-cost financing should be made available to businesses and households that desire to purchase renewable energy solutions.

Government incentives, partnerships, patronage, demand aggregation, advocacy, and capacity development are some of the other strategies that can be employed to help solar energy companies to enjoy economies of scale, bring down the cost of their products, and become more competitive. While the focus in Nigeria seems to be on solar, we must not lose sight of other renewable energy solutions like wind farms, off-grid hydroelectric power, and biofuels.

Aside from its positive impact on the environment and the disposable income of households, transitioning to renewable energy can also have a positive macroeconomic monetary impact.

We believe that adopting renewable energy solutions can curb the demand for and importation of these petroleum products and go a long way in stabilising Nigeria’s exchange rate.