• Monday, July 15, 2024
businessday logo


To accelerate investments, Nigeria needs to fix feed-in tariffs for renewable projects – Carbon Limits

Energy efficiency needs 4% growth to meet 2050 Net-zero emissions, says IEA

Three months ago, several countries reaffirmed their commitment to the Paris Agreement of 2015 and adopted climate change policies with a target to go carbon-neutral by 2050 or 2060, a development with dire implications on oil-dependent economies, including Nigeria.
In this exclusive interview with DIPO OLADEHINDE, Carbon Limits Team: James Ogunleye, Managing Director; Gbite Adeniji, Director and Partner; Torleif Haugland, Co-Founder and Partner explains how the firm is playing a strategic role in Nigeria’s long walk to energy transition.

There seems to be a global shift from fossil fuels (hydrocarbon) to renewable or clean energy, which will no doubt cause some disruptions in the energy sector. How concerned are you about energy transition?
(Adeniji) We are not necessarily concerned about the global transition because first it’s a reality. Global energy policy is in transition towards a net zero objective and most companies and energy sector participants have made a commitment towards the net zero objective.
That is the reality, so we don’t have any issues with that. In fact, by establishing our business in Nigeria approximately 12 years ago, we anticipated the transition – helping our “climate- aware” clients address the issues around greenhouse gas (GHG) emissions. Basically, that’s our core vision.

Climate change concern is drawing away critical investment in dollars from the energy sector. Some of the world’s biggest financiers, pension funds, and philanthropists have said they would no longer fund fossil fuel projects. Is this trend expected to continue in 2022?
(Haugland) I think we have to be clear that there will be challenges. Generally, there is a development where some finance institutions are staying away from fossil fuel projects and investment, thus making them more expensive. What is more important is whether the oil and gas industry can demonstrate that they are making progress in emission reductions.

It is for that reason that we are so engaged and trying to contribute to improve gas processing and reduce emissions in the infrastructure of the oil and gas industry in Nigeria. The oil and gas industry is a very important part of the economy and will continue to be for a considerable point in time. The best way to actually attract financing for the oil and gas industry in Nigeria is to be able to demonstrate that you are making significant progress in the efficiency and emission reductions.

There have been a lot of talks on climate change, the shift from fossil fuels to renewable or clean energy. Are there harmonised expectations for the global environment this year? What expectations do you have for the global environment for 2022?
(Ogunleye) Well, I think we all have to realise that there is a global expectation. From the Conference of Parties of the United Nations, which was held in Glasgow last year (COP26), you can see a commitment towards clean energies, particularly renewable energy. Even the oil and gas industry is now pushing more for gas. Nigeria, in its transition plan is advocating for utilisation of gas which is a cleaner fossil fuel. Currently, even the European Union is working towards classifying gas as green energy

But the approach to climate change mitigation is localised in a way because country-specific solutions are based on what is the most applicable and practical for you as a country. So, where some countries will probably be using hydro as the cleanest source of technology in their area, for Nigeria we are considering gas alongside other plausible renewable technologies.

With the decade of gas, we are now switching to gas as the predominant fuel which is a good step in the right direction. What I’m saying is that the global expectation is that all nations should reduce emissions, and we keep to our Nationally Determined Contribution (NDC) commitments by setting up an implementation plan on how our GHG mitigation actions will be implemented.

As a matter of fact, that’s where the role of Carbon Limits comes in because what we do in broad terms is to help nations, national oil companies and industries see how this can be achieved. This dates back to where we started from: the Clean Development Mechanism (CDM) under the Kyoto Protocol. CDM is mainly focused on mitigation actions in developing countries but with the NDC, each country regardless of their economic status now has an obligation for emission reduction.

The global expectation is that we cut emissions and all countries have declared GHG emissions that they are planned to cut down. As a company, this is one of the areas where we are trying to be of help – strategic implementation of mitigation actions.

Read also: Developing economies need a fair energy transition strategy- Chairman, Stanbic IBTC

Nigeria, Africa’s largest oil producer, has committed to achieving net-zero carbon emissions by 2060 while underlining the importance of gas as a transition fuel. Are we really ready for this transition or is this just another lip service?
(Adeniji) You know, 2060 is literally 40 years away and that’s a long journey. It starts with baby steps. In the case of Nigeria, I can confidently say Nigeria has commenced its baby steps. What the President said in Glasgow was please don’t rush us to 2050. We are clear we can’t make 2050, but we believe we can make 2060.

To make it, what the government has done is the following: For the first time in Nigeria’s history of petroleum production, the new legislation, the Petroleum Industry Act, robustly addresses the utilisation of gas which is the preferred fuel during the transition.
The entire global energy system has agreed that gas is a fuel of choice. So, Nigeria has legislated around gas. To support that, Nigeria has enacted a climate change legislation. This was sometime late last year. There are institutions in place including the Ministry of Environment, Ministry of Petroleum Resources, and the regulators under these ministries who are charged with implementing those legislations.
Let’s say that foundations for the journey to 2060 are actually in place. So, what we will do as Carbon Limits in Nigeria is to help client partners and the general public walk this talk over the coming years.

To what extent has Carbon Limit’s presence in the country impacted the level of carbon footprints in Nigeria’s environment and the fragile economy?
(Ogunleye) The company was set up in 2010. Prior to that, two projects were registered by Carbon Limits AS, Oslo. One of the two projects registered is the biggest project that was registered at that time in Africa. The project was set up to reduce about 2.2 million tonnes of emissions on an annual basis by eliminating about 60-70 mmscfpd of gas that was being flared. When you look at that type of project, you can imagine the magnitude of emissions that can be reduced within the oil and gas industry by eliminating gas flaring and reducing methane emissions.

To your earlier question about performance and the extent that this gas plant has operated since 2010, you can imagine the magnitude of emissions that has been avoided by taking out gas flares and utilising the gas for domestic utilisation. This means a lot for the country in terms of emissions reduction achieved in the oil and gas sector. And for us as a company, it is a testimony of our achievement in the country.

Beyond that, we’ve also had projects that have been registered within the power sector, the manufacturing industry, and even in the transport sector. I should mention that so far, we have registered above 50 percent of the 12 projects in the country. That should give you a clearer view of our footprint and how much we are involved in efforts to reduce GHG emissions within the country.

Nigeria has aims to achieve net zero carbon emissions by 2060. How do you think Nigeria can drive increased international funding for renewable energy projects?
(Adeniji) If the regulatory framework, particularly on the power sector side, is addressed, then Nigeria is likely to have more investment than we have currently in renewable energy projects. You must bear in mind that there is huge solar intensity and opportunities in northern Nigeria.
Once we are able to resolve issues around feed-in tariffs for renewable projects, we should see some acceleration in investments. It will also help if we resolve issues around payments (revenue collection) in the power sector, as that will make the development of more utility-scale projects possible.

What are some of the biggest challenges that you faced in interacting with Nigerian regulators?
(Ogunleye) I think the key issue here is trying to get people to understand the language of climate change. Trying to get as many as possible to have that understanding of how climate change issues work internationally. While your question is on regulatory issues, the point I’m making here is that we need to get into the place where, first of all, awareness is broadened, and the capacity of people within the regulatory space is also deepened.
It is important we attract and get some available funding opportunities for renewable energy projects and other projects that reduce GHG emissions in the country.

The World Bank is able to support private sector projects that reduce emissions through the Transformative Carbon Asset Facility (TCAF), a trust fund that supports countries’ efforts to implement market-based carbon pricing and to create conditions for private sector investments in low-carbon technologies.

This is the same for some other countries, particularly in Europe, that provide carbon financing opportunities for projects that are renewable energy based, particularly solar projects that reduce GHG emissions by displacing the use of diesel.
The point is, you have to be aware that such opportunities are available for you to be able to attract them. And when you are aware, you need to have the right understanding of the type of information or data that is needed to be assembled and what can be shared with the international community to attract these funding opportunities. So, these are areas that we would like the regulatory space to be informed about – getting the right capacity to understand and attract international opportunities that are out there.