Fresh Vision

1.0: INTRODUCTION: Energy utilization is a core attribute of humanity. With increasing population also comes an increase in the demand for energy. The IEA in its World Energy Outlook, projects about 83% increase in global energy demand in the next 20 years (IEA 2014a). Although countries naturally turn fossil fuels as part of their energy mix due to its plentiful and reliable nature the same report reveals that there would be significant increase in renewables.

Aside the fact that fossil fuels are exhaustible, their combustion also has immense adverse effect on the climate with (GHG) emissions, capable of bringing the world to an abrupt end.  Already, the cost of renewable energy is dropping across several countries, as at 2014, new wind power was cheaper than new coal and gas power in Australia, China and the United States (Sussams, et al 2015). Electricity from roof-top photovoltaic systems is also cheaper than grid supply in many countries and places across the world. (Chen 2014).

Being naturally replenishing resources, the place of renewable energy in the global energy mix is sacrosanct, and tireless effort is required in a bid to perhaps completely transition from fossil fuels to renewable sources of energy.

As the most populous country in Africa – a mineral rich continent – it is poignant to reflect of on the issues affecting the energy industry and the role of renewable energy technology for Nigeria. With renewable electricity as focus, the challenges of its deployment, as well as a review of existing commercial risks and policy instruments that could enhance the growth of industry are discussed in this article, with strategic recommendations proffered by comparing tested risk mitigation approaches and solutions that have been successful in other Countries across the globe.

See list of abbreviations at the end of article

 

2.0       COUNTRY BACKGROUND AND ENERGY CONCERNS

Nigeria is situated in western Africa, with a Population of 182 million people mostly rural, and an annual growth rate of 3.5 % (NPC 2016) .

Nigeria’s economy is fossil fuel dominated. With the largest proven Gas reserves in the continent (OPEC 2016), about 40% of its national GDP, over 80% of government’s revenue and over 90% of Nigeria’s foreign earnings come from crude oil related activities. It is highly vulnerable to negative impacts of climate change along its large coastal territories, such as, degradation of agricultural lands, desert encroachment, depleting water resources and low agricultural output among others (Nigeria and Climate Change: Road to COP15).  If the current trend is unabated, the long-term impact will be catastrophic for the future of the country. (Akuru U.B., et al 2015)

2.1       Nigeria’s Energy Mix

Nigeria has wide range of energy sources. Amidst inefficient energy conversion processes, leading to significant losses, and the fact that most primary fuels are exported for government revenues, creates a huge shortfall for local consumption, Nigeria paradoxically imports the fossil-fuel products it currently uses, despite being a leading oil and liquid natural gas producer.

2.1.2    Energy Production

Nigeria’s energy production in 2014 was 260.02 Mtoe (IEA 2014b). Around 80.7% of that was from biofuels and waste, while natural gas was 8.3%, oil  8.3%, and hydropower and other renewables had a significantly smaller share of about 0.3%. Most of the Oil and Gas produced are exported, as well as with a portion of the Hydro generation under long term agreements schemes, while the Biofuels/Waste energy generation are  mostly from local wood harvested in rural areas.

2.1.2    Energy Consumption

Nigeria’s Energy Consumption was 116.5 Mtoe for same period, (IEA 2014b), with about 85.3 % of this coming from Biofuels and Waste and shown in Figure 2.1 below.

The  predominant proportion of biofuels and waste in Figure 1.2 can only be explained as use for cooking purposes, given that about 69.8% of much of Nigerian’s population depends on fuel wood for domestic and cottage industry purposes. This use of biofuels also accounts for the single largest factor for the change in the country’s vegetation and the increased desertification (ANFP 2006), the situation is compounded by the predominant use of inefficient cooking methods, based largely on open fire with obviously low thermal efficiency and associated smoke related ailments, especially among women and children. This further prompts the need for other forms of renewable energy.

2.2       Issues affecting Nigeria’s Energy Sector

 Nigeria’s capacity for energy production is largely defined by the government’s strategic vision of the economy. Whereas, a comprehensive review of the entire energy sector, consisting of abundant proven primary energy sources such as Coal, Petroleum, Natural Gas, Biofuels, Nuclear, Hydro and other renewable sources would be required a longer treatise than anticipated for this blog  article, attention will be paid here to electrical energy, being a secondary form of energy that is plays a direct key role in daily human activities. With electrical energy consumption per capita of 142kWh Nigeria ranks least amongst Lower Middle-Income Classification of countries by the World Bank. Some significant factors responsible for this energy “crises” are  highlighted in Figure 3.1  below

2.2.1    Policy Deficiencies:  The NEP was first approved in 2003 without timelines or enforcement strategy. The NEM was developed in 2014 and remains a draft for public comments on the ECN website. A review of the NEP has also been carried out but is still a draft as at 2016. Such situation does not encourage investment in the energy industry. Also there has been weak implementation of the MYTO by the NERC creating significant liquidity crises for power generation companies.

 2.2.2   Availability: For a country of 182 million people, a power generation installed capacity of 12,522MW and 6,050MW available capacity (NPBR 2014).Given that 81 % of power generation are from gas fired power plants frequent cases of sabotage and vandalism of gas pipeline in the Niger-Delta region where gas is produced, greatly affect availability (KPMG 2013).

The culture of energy efficient conduct, such as turning off light bulbs in the day, or use of energy saving devices which could make such power available for other uses, is still lacking despite the potential, several other sources of energy such as Wind, Tidal, Geothermal, etc., these avenues remain unexplored.

2.2.3    Low Energy Access: At present, only 10% of rural households and 45% of the country’s total population have access to electricity, and with its landmass, being the third largest country without access to electricity (IEA 2014b). This is much lower than that of Ghana (72%) and South Africa (85%). This is due to the old and falling transmission infrastructure, there is frequent system collapse and forced outages. The remoteness of some Nigerian communities either far into desert regions in the North or deep sea islands of the coast of the Delta also makes extension of the transmission grid challenging. The absence of a smart-grid contributes to very significant transmission technical losses.

2.3.4 Affordability: The challenge of affordability is best address by classifying the energy supply in Nigeria can be classified into two main categories, (a) urban and (b) rural.

In urban areas, unreliable power supply forces both households and industry to rely on privately owned generators for much of their power. These generators are more than twice as expensive (NGN 62 – 94/kWh) than grid-based power (end user tariff of NGN 26 – 38/kWh), NERC (2015). However even at the grid tariff rate, a comparison with the national average graduate wage of NGN 60,000 shows that a continuous electricity consumption of 1kW would cost 31.2 % of income. The result is that many people illegally connect to power distribution line or by-pass their meters (energy theft)

In rural areas, the MYTO 2.0 fixes a tariff of NGN 4/kWh (highly subsidized), yet when compared with the National Minimum Wage of NGN18,000 shows that 19.2% of such income will be expended on electricity consumption alone. This is well above the 10% threshold of affordability. The result here is that rural homes continue to use fuelwood to generate energy in-spite of the dire environmental consequences.

Other issues include energy project financing, energy conservation and efficiency, manpower development for increased local content participation, research and development, “missing money” syndrome etc.

 3.0   SOLAR POWER POTENTIAL AND DEPLOYMENT

Only about 45% of Nigeria’s population has access to electricity supply. The national grid is limited in reach, and would take decades to reach most remote areas in Nigeria. Also, the transmission grid has a capacity to transmit only about 5,300MW leaving up to 30 % of power generation capacity idle, NPBR (2015). This situation calls for urgent attention in the development and application of renewable energy resources to eliminate high costs associated with grid extensions, maintenance in remote and rural areas.. Also, the EPSRA 2005 makes provision by law for individuals to generate electricity not exceeding 1000kW in aggregate without a license, and undertake distribution of electricity with a capacity not exceeding 100kW without a license. This exemptions to holding a license favours energy generation from renewable resources, empowering group of individuals to invest in stand-alone or off-grid power generating systems. However, apart from hydro, Nigeria has not significantly developed other renewable electricity resource (NREEEP 2012).

3.1       Contribution of Various Renewable Technologies to Electricity Generation

The deployment of large-scale renewable power generation could prove transformational, but small consumer- and household-level systems could offer energy independence for the majority with presently limited or zero access to reliable electricity.

Although information about the renewable contribution to Nigeria’s electricity generation is scare the 2012 estimates by ECN places Hydro (LHP) as highest (96%) with 1.938MW, Hydro (SHP) 60.1MW, Solar 15MW, Wind 10MW while no meaningful  contribution was noted for Biomass electricity, or Geothermal (NREEEP 2012).  However as at August 2016, the government has initiated Power Purchase Agreements with 14 new Solar Power developers which are reported to have the potential of adding about 1,125MW to the grid.  (Financial Nigeria 2016)

3.2       Choice of Solar Power Technology

1. Nigeria’s geographical location around the equator (REAP 2006) exposes it to enormous radiation from the sun as show in Figure 3.2 below
2. It can be easily adapted to remote locations.(dessert regions in northern Nigeria and islands in the south)
3. Rapid reduction in cost of Solar PV Panels (Newsom 2012).
4. Variety of applications and easy scalability (from small to medium and large solar panels are available for divers operations.)

Nigeria  lies within a high sunshine belt and as a result solar radiation is fairly well distributed within the country as reflected in Figure 3.It has a total solar radiation that varies from about 12.6 MJ/m per day in the coastal latitude to about 25.2 MJ/m² per day in the far North. An average of 19.8 MJm^–2 day^-1 and average sunshine hours of 6hrs per day. With this, Nigeria can obtain 100 % of its electricity demand via solar power. Onifade, T.T. (2015).

3.3       Key Issues affecting the deployment of Solar Power Technology in Nigeria

Solar energy can be used to generate power in two ways concentrated solar-thermal conversion and solar electric (photo-voltaic) conversion.  In Nigeria, there is presently no report of concentrated solar thermal power development.  Small scale Solar PV technology however has found applications in agriculture and residential use.  (Yohanna & Umogbai 2010).

Issues affecting the deployment of Solar Power Technology in Nigeria include

• High Installation Cost
• Public Awareness
• Level of Technology / Component Failure
• Government Commitment and Policy Gaps
• Cultural restriction on land use
• Canalization and theft of system components, etc.

Key issues are discussed below

 3.3.1. Installation Cost: 

Financing solar projects is huge issue because the majority of costs for years of use are incurred immediately at installation. The high cost of loans in Nigeria, with interest rates over 20 per cent, is an immediate disincentive for large scale commercial investments whose payback period could take up to 4 years. Also, being that the higher percentage of the Nigeria’s population are low income earners, makes the ability to acquire solar energy devices, which are still considered expensive, difficult for residential use. Indeed the installation cost is more expensive in the short run than the use of alternative energy sources like petrol/diesel generators apart from the grid.  This is because solar energy components are mostly imported except the cables and few accessories. Although it is cheaper in the long run, the absence of a vibrant mortgage system impacts of the ability to raise the huge capital investment.

3.3.2. Government Commitment and Policy Gaps

Solar energy is quite popular in urban areas of Nigeria, and lower levels  of governments in the country has attempted to harvest it, but this has always been for welfare schemes and to score political points without real demonstration to prove to the private sector that it is a profitable investment.  Unlike for other thermal power plants, the government has not at any time embarked on giant step by installing or acquiring large solar power plants. Since the unbundling and partial privatization of the power sector in 2013, it was only in April 2015 that the Federal government approved the NREEEP, yet no specific mandate was given to the emergent generation companies on renewable energy obligations. Ensuring that laws are stable and enforced is very vital as potential investors will need reasonable certainty that key legislative provisions put in place for solar activities will remain stable, unambiguous and enforced, thus allowing the continuity of investment into the future. In addition, the current electricity tariffs low; the tariff is not market reflective for profitable investment in power generation even with the existing fossil fuel energy sources (Ohunakin et al 2014) and hence will not encourage any transactions into solar applications by any potential investor.

3.3.3 Level of Technology / Component Failure

A major constraint to the development of the Solar Power in Nigeria is the poorly established standard and quality control of locally manufactured and imported technologies. Given the low level of technical expertise and the inability of the SON to effectively regulate the technical quality of equipment imported into Nigeria, the deluge of underperforming China-made solar panels contributes to a very high rate of component failure. Users get turned-off if it does perform up to the years of guarantee which the equipment is rated. Much of the failure of solar energy equipment and associated appliances are also attributable to poor sizings and designs, resulting from lack of quality solar and other meteorological data.

The fear of failure prevents the adoption of solar technology as an energy supply option for the remote and rural poor areas in the country, due largely to lack of technically skilled personnel. Often times there are little or no training given to the end users for minor repairs or maintenance.

Also, the fragile and confused state of the existing grid makes it nearly impracticable to implement certain incentives such as the feed-in-tariff.

3.3.4. Public Awareness

The potential of solar power is hugely under estimated on the streets and even by government. At the moment many people assume that solar energy is uneconomical and unreliable, best for residential use to power only small bulbs or at most television sets. The print media also has not produced enough publicity on the subject matter. The general perception is that these forms of energy technologies are not mature and only suited for niche markets. (Sesan T. 2008) Thus there is lack of awareness of the immense socio-economic and environmental benefits derivable from solar energy, and inadequate education of consumer/solar applications users.

The government also appears to be ignorant or unprepared for meaningful commitment to developing the Solar Power potentials of the Nation, despite of the fact that solar power can provide all of Nigeria’s demand. A proof of this is the adopted recommendation of the 2006 Presidential Advisory Committee on 25-year Power Development Pan, which suggested an energy source mix of Nuclear (2%); Hydro(7%), Renewables (10%), Coal (11%) and Natural Gas (70%). This is still the basis for the 2014 NEMP draft.

4.0  RISK MITIGATION, RECOMMENDATIONS AND ACTION PLAN

In order to reduce the investment risks associated with large scale commercial solar power development, the following actions are recommended which will also benefit small residential projects.

4.1       Fiscal and Financing Strategy

There is need to enact an executive order to strengthen the renewable energy policy. This should mandate Banks and other financial institutions to provide SPV’s and micro-credit facilities for entrepreneurs embark on Solar Power generation projects. This will involve mortgages, and low interest loans (or concessional rates for off-grid applications) where the equipment itself can constitute the required collateral. This should also include funding for investors capable of manufacturing solar PV panels, batteries, and energy saving devices.

There is need for government to commit more funding to its already established research organizations such as the SERC and the NCERD to develop cheaper solar technologies that the private sector can consider viable for investments. There should also be Special grants for Solar Power research in Universities and Polytechnics.

There should be real commitment to set and implement renewable energy Feed-in tariffs by the regulator NERC, mandating distribution companies to deploy enabling meters/switch gear for the purpose within set timelines.

4.2       Policy Incentives, Monitoring and Evaluation

• First is the need for policy consistency to prove to private investors that the terms of contract will not be changed upon investment. A case in point is the recent court judgement preventing the NERC from increasing Tariffs, in line with the MYTO earlier agreed with investors.

• The NERC must commence immediate enforcement of the NREEEP 2015, which first objective for solar power is “To increase the percentage contribution of solar energy to the total energy mix and to ensure a minimum electricity contribution of 3% by 2020 and 6% by 2030.” Although policy also contains, Tax incentives such as (i) five year tax holiday for manufacturers from date of commencement of manufacturing; (ii) five year tax holiday on dividend incomes from investments on domestic renewable energy sources, as with several policies of the Nigerian Government, there is hardly any evidence of policy evaluation or implementation. There also has to be Power Production Tax Credits for individuals who deploy solar power.

• A Renewables Obligation Order should be issued annually to all power generation companies as is applicable in the United Kingdom to encourage electricity generation from renewable sources, with significantly higher ROCs allocated to Solar power.

• Review of the National Building Code, mandating that every new house design in Nigeria must incorporate energy saving measures, as well as the deployment of roof top solar power technologies.

• There is need for government to set up an aggressive Solar National Mission, outlining specific approaches to new annual targets way beyond the ridiculous 1,343 MW generation target by the year 2020 for Solar (All PV and Solar Thermal Systems inclusive) contained in the NREEP 2015, given its potential. This will be part of a National Programme for transitioning from fossil fuels to renewable energy which at the moment is non-existent in Nigeria

4.2       Stakeholder Concerns

 There is need for organizing systematic public enlightenment campaigns on the benefits of using solar home systems and solar water heating. This would afford an opportunity for building consumer confidence in available technology.

Additional extension programmes to facilitate the use of solar home systems, it will improve public understanding of the challenge of intermittency of solar power and how to surmount it, changing the market distortion which results in higher risk perception for potential renewable electricity projects. It is also necessary to educate the populace on energy use, efficiency and conservation best practices. NGO’s can be encouraged to take interest in public enlightenment campaigns about the dangers of fossil fuels and the environ-economic benefits of solar power.

Also, as a proof of profitability, the government has to invest in at least one major commercial solar thermal power generation in northern Nigeria. This will inspire investors to overcome existing prejudices against the industry.  The SON and ECN should also establish and strictly enforce suitable manufacturing quality standards and specifications for solar energy equipment.

5.0       CONCLUSION

It has been established that Nigeria has enormous solar energy potentials.  If solar collectors or modules were used to cover 1% of Nigeria’s land area, then the averages of  19.8 MJm –2 day-1 irradiation and sunshine hours of 6hrs per day would generate more than 100 times the country’s its need per year.  As at 2015, Italy with less solar radiation (Spinoni J. et al 2012) generates 18.91 GW of grid-connected PV power alone, much higher than Nigeria’s overall installed power generation capacity of 12.5GW.

Since the energy production level of any community dictates the pace of development, (IEA 2014b) it is possible to alleviate poverty in rural communities in Nigeria by providing solar power technology for them by implementing the appropriate policy instruments and incentives discussed in chapter 4 of this report.

 

REFERENCES

Adebayo C. (2014) How is 100% renewable energy possible for Nigeria? Global Energy Network Institute (GENI) Green Energy Research, San Diego, USA

Akuru U.B., Okoro O. I., Chikuni E. (2015) Impact of renewable energy deployment on climate change in Nigeria  Journal of Energy in Southern Africa • Vol 26 No 3 • August 2015 pp 130

Financial Nigeria (2016) – Prospects of solar power in diversifying Nigeria’s energy mix. Detail Commercial Solicitors Available: http://www.financialnigeria.com/prospects-of-solar-power-in-diversifying-nigeria-s-energy-mix-feature-67.html#sthash.903KeNfo.dpuf

IEA (2014a) World Energy Outlook 2014, International Energy Agency.

IEA (2014b) Nigeria: Indicators for 2014. International Energy Agency Statistical Reports Online:http://www.iea.org/statistics/statisticssearch/report/?year=2014&country=NIGERIA&product=Indicators

KPMG (2013)  A Guide to the Nigerian Power Sector. KPMG Advisory Service, Nigeria pp 6

NEM (2014) National Energy Masterplan (Draft Revised Edition), Energy Commission of Nigeria, Federal Ministry of Science and Technology.

NERC (2015) MYTO-2015 Distribution Tariffs (2015-2024) Effective 1st February 2016 Nigerian Electricity Regulatory Commission, Abuja. www.nercng.org

Newsom C. (2012) Renewable Energy Potential in Nigeria. The SunGas Project Report. International Institute for Environment and Development.

NPBR (2015) Nigeria Power Baseline Report . This report was developed by the Advisory Power Team, Office of the Vice President, Federal Government of Nigeria in conjunction with Power Africa. Disclaimer: The information provided is current as of 15 August 2015.

NPC (2016) National Population Commission, http://www.population.gov.ng/index.php/80-publications/216-nigeria-s-population-now-182-million-dg-npopc

NREEEP (2015) National Renewable Energy And Energy Efficiency Policy. Federal Minister of Power, Approved by the Federal Executive Council, Federal Republic of Nigeria,– on the 4/20/3015

Olayinka S. O., Adaramola M. S.,  Oyewola O.M., .Fagbenle R.O. (2014) Solar energy applications and development in Nigeria: Drivers and barriers. Renewable and Sustainable Energy Reviews 32 (2014) 296

Onifade, T.T. (2015) Renewable Energy in Nigeria: A Peep into Science, A Conclusion on Policy. International Journal for Innovations in Science, Business & Technology, vol  1, 49-72. Available at: http://wwhsdc.org/ijisbt/articles

REAP (2006) Renewable Electricity Action Program, Federal Ministry of Power and Steel, Abuja, Nigeria

REMP (2006) Renewable Energy Master Plan (Draft) Energy Commission of Nigeria, Federal Ministry of Science and Technology

REPG 2006 Renewable Electricity Policy Guidelines, International Centre for Energy, Environment And Development, Federal Ministry Of Power And Steel, Federal Republic of Nigeria .

Sesan (2008) Status of Renewable Energy Policy and Implementation in Nigeria,

Institute for Science and Society, Faculty of Social Sciences, Law and Education,

University of Nottingham, United Kingdom.

Spinoni J.,  Brunetti, M., Maugeri M.,  and C. Simolo C. (2012) 1961–1990 monthly high-resolution solar radiation climatologies for Italy, Institute of Atmospheric Sciences and Climate, National Research Council (ISAC-CNR), Bologna, Italy Available: www.adv-sci-res.net/8/19/2012/

Sussams L, Leaton J., Drew T. (2015). Lost in transition: How the energy sector in missing the potential demand destruction. (Report) Carbon Tracker.

World Bank Data (2013) Electric power consumption (kWh per capita) http://data.worldbank.org/indicator/EG.USE.ELEC.KH.PC?end=2013&locations=XN&start=2013&view=bar

Yohanna, J. K. and Umogbai, V. I. (2010). Solar energy potentials and utilization in Nigeria Agriculture. Journal of Environmental Issues and Agriculture in Developing Countries, 2 & 3, 10-21.

 

ABBREVIATIONS

ANFP                     –              Approved National Forest Policy

COP                       –              Conference of Parties

ECN                        –              Energy Commission of Nigeria

EPSRA                   –              Electric Power Sector Reform Act

GDP                       –              Gross Domestic Product

GHG                      –              Green House Gas

GW                        –              GigaWatts

IEA                         –              International Energy Agency

kW                         –              Kilowatts

kWh                       –              kilowatt-hour

LHP                        –              Large Hydro Power

MJm-²                   –              Mega Joule per Square Metre

MW                       –              Megawatts

MWH                    –              megawatt hour

MYTO                    –              Multi-Year Tariff Order

NCERD                  –              National Center for Energy Research and Development

NEM                      –              National Energy Masterplan

NEP                        –              Nigerian Energy Policy

NERC                     –              Nigeria Electricity Regulatory Commission

NGO                      –              Non-Governmental Organization

NPBR                    –              Nigeria Power Baseline Report

NPC                       –              Nigerian Population Commission

NREEEP               –              National Renewable Energy And Energy Efficiency Policy

OPEC                     –              Organisation of Petroleum Exporting Countries

REAP                     –              Renewable Electricity Action Program

ROC                       –              Renewable Obligation Certificates

SERC                      –              Sokoto Energy Research Centre

SHP                        –              Small Hydro Power

SON                       –              Standards Organization of Nigeria

SPV                        –              Special Purpose Vehicle