• Friday, July 12, 2024
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Nigeria’s volatile energy: The sustainable way forward?

Nigeria’s volatile energy: The sustainable way forward?

Despite abundant natural resources and significant energy potential, present-day Nigeria’s power sector remains marred by inefficiencies, outdated infrastructure, and inadequate generation capacity. Frequent power outages and unreliable electricity access impact both residential life and business operations, stifling industrial growth and affecting the quality of life for millions of Nigerians. The inconsistent power supply has prompted widespread reliance on expensive and environmentally unfriendly diesel generators, further burdening the economy and environment.

The frailty of the existing power conditions in Nigeria is compounded by additional volatility from man-made disruptions, such as strikes, and tiered distribution systems that can negatively impact energy flow to production plants and business hubs. On June 3rd, 2024, the Nigeria Labour Congress (NLC), the central organisation of workers, embarked on an industrial action to demand an increase in their minimum wage and to protest the increase in electricity tariffs. This development, following unsuccessful negotiations with the government, disrupted economic activities across the nation. The strike included the shutdown of the national grid for more than twenty-four hours, plunging the country into darkness and highlighting the fragile state of Nigeria’s energy infrastructure. It is reported that this action resulted in an estimated loss of N148.8 billion in a single day, with cargo agents alone reporting losses of N7 billion due to the disruption.

Beyond business losses, the tiered system of electricity pricing in Nigeria has a significant negative impact on the cost of living and doing business. In April 2024, the Nigerian Electricity Regulatory Commission (NERC) announced an over 200 percent hike (from N66/KWh to N220/KWh) in electricity tariffs for Band A customers as part of moves to eliminate subsidies and achieve a cost-reflective tariff system. Band A customers, who receive a minimum of 20 hours of electricity daily, represent about 17 percent of the total electricity customers in the country. This policy has severe repercussions, extending beyond businesses to essential sectors like education. For instance, the University of Ilorin is now among the federal universities grappling with severe financial pressure due to escalating electricity costs, with a monthly bill of N230 million. Similarly, the University of Jos faces a staggering 300 percent increase in its monthly electricity bill, now at N80 million, increasing the risk of disconnection.

Nigeria can move towards a more reliable, efficient, and environmentally friendly energy system. These systems will not only enhance energy security and reduce reliance on fossil fuels but also stimulate economic growth and improve the quality of life for Nigerians.

From a regulatory standpoint, the government has developed several policies aimed at improving energy access. The Renewable Energy Master Plan (REMP) [2013] seeks to increase renewable electricity supply to 36 percent of total electricity generation by 2030. The National Renewable Energy and Energy Efficiency Policy (NREEEP) [2015] aims to improve hydropower capacity by about 12 GW and solar capacity by 6 GW by 2030. The Energy Transition Plan (ETP) [2022] provides a roadmap to decarbonising the power sector, envisioning 197 GW of solar by 2050. These policies address various aspects of the industry, including research and development, energy pricing and financing, legislation, energy efficiency, and environmental considerations. Since 2015, the Nigerian Federal Government has embraced solar for rural electrification, with the Rural Electrification Agency supporting over 2 million new off-grid solar connections under the Nigeria Electrification Project.

The Electricity Act 2023, signed by President Bola Tinubu in June 2023, aims to accelerate the development and integration of renewable energy sources, including solar, into the grid. The law mandates the regulator to create an enabling environment to attract clean energy investments. Measures include the provision of embedded renewable energy regulations, the introduction of feed-in tariffs, the simplification of concessions for the generation and distribution of less than 10 MW, and guidelines on net metering for rooftop solar PV systems.

To prevent further chaos and address energy inefficiencies, Nigeria must adopt sustainable and clean energy measures on the back of the enabling regulations set out by the current administration. Renewable energy solutions and energy storage can help prevent future blackouts and reduce electricity costs while displacing inefficient legacy infrastructure and policies. Below is a list of sustainable solutions readily accessible to SMEs, institutions, and members of the public to help alleviate the overdependence of the country on the national grid. Most of these solutions are easily made available and affordable through financing institutions leveraging existing information and artificial intelligence.

Solar power expansion:

Rural Electrification: The Rural Electrification Agency (REA) has been instrumental in deploying solar mini-grids and solar home systems to provide electricity to off-grid rural areas. This approach reduces dependence on the unreliable national grid and diesel generators.

Rooftop Solar Systems: Encouraging urban households and businesses to install rooftop solar panels can reduce pressure on the national grid and provide a reliable power source.

Large-Scale Solar Farms: Investing in large-scale solar farms can significantly

Battery storage: Investing in large-scale battery storage systems is crucial for stabilising energy supply, subsequent usage, and consumption as a business or resident in Nigeria. These systems can store excess energy generated from renewable sources (solar) and release it during periods of high demand or when generation is low. This not only ensures a more reliable power supply for operations but also enhances energy stability and reduces the need for costly and polluting backup generators.

Incentives for renewables: To popularise, accelerate, and maintain the deployment of renewable energy projects, Nigeria can provide financial incentives such as tax breaks and subsidies for manufacturers, businesses, and operators driving renewables adoption in the country. These incentives make renewable energy projects more economically viable and attractive to founders, investors, and operators, with a ripple effect on the cost of adoption by users and businesses, overall fostering a rapid expansion of renewable energy capacity. Put simply, by reducing the initial cost burden, these incentives can encourage both large-scale projects and smaller, decentralised renewable energy installations.

Feed-in tariffs: Implementing feed-in tariffs (FiTs) can be an effective way to guarantee fixed prices for renewable energy producers. By offering long-term contracts with stable pricing, FiTs provide financial certainty and a predictable return on investment for renewable energy projects. This encourages more projects to come online, increasing the overall share of renewable energy in Nigeria’s energy mix and driving down costs through economies of scale.

Net metering: Net metering allows consumers who generate their own electricity from solar panels to feed excess power back into the grid and receive credit on their electricity bills. This promotes the adoption of rooftop solar systems by making them more financially attractive. Homeowners and businesses can offset their energy costs and contribute to the overall energy supply, reducing the load on the national grid and promoting decentralised energy generation.

Embracing distributed energy resources: Reducing the risk of blackouts and irregularities can be achieved by increasing reserve contingencies through technologies such as batteries, smart metres, and APIs for payment collection. A more sustainable and cost-effective approach would be to embrace distributed energy resources. This includes embedded generation, demand-side response (DSR), and interconnected local energy systems, also known as microgrids, to enhance resilience. Intelligent energy use, such as turning up, turning down, or shifting demand in real-time through DSR services, can significantly improve energy stability.

Incorporating these sustainable solutions can significantly improve Nigeria’s energy sector. By investing in battery storage, providing financial incentives for renewables, implementing feed-in tariffs, and allowing net metering, Nigeria can move towards a more reliable, efficient, and environmentally friendly energy system. These measures will not only enhance energy security and reduce reliance on fossil fuels but also stimulate economic growth and improve the quality of life for Nigerians.

Nigeria’s journey towards sustainable energy is critical for economic stability and improved quality of life. By adopting renewable energy solutions, enhancing regulatory frameworks, and embracing innovative technologies, Nigeria can mitigate the challenges of its volatile energy sector and pave the way for a resilient and sustainable energy future.

Chiemeka Okeke is the Co-Founder and CFO of Powerfull Technology Limited. He talks about challenges in Nigeria’s energy sector and potential ways for expansion of solar adoption and the sustainable energy future.