Developing Nigeria’s Renewable Energy Potential
Nigeria is facing significant challenges in reforming and providing the required impetus for development of its power sector. The country’s Electricity Supply Industry (ESI) has been plagued by a variety of legacy, structural and institutional challenges which have resulted in overall decline in service levels across generation, transmission and distribution segments of the industry. In response, the government over the past decade and half has initiated various transformational projects, including the National Integrated Power Project (NIPP) aimed at increasing capacity, upgrading existing infrastructures as well as encouraging investment in the sector through various privatisation and market liberalisation initiatives. These privatisation programmes have presented a myriad of policy and regulatory challenges and have placed additional burden on policy makers and industry regulators as they try to contend with the dynamic phase that the ESI is undergoing at the moment. Huge sums of capital have been invested by the government in their attempt to find lasting solution to the industry’s sub-optimal performance. However, the growing deficit in terms of power generation and power demand when considering our economic growth trajectory of around 6% per annum, remains formidable.
There is a pressing need to accelerate the development of the electricity supply industry to meet rising energy demand and to support industrialisation of our bourgeoning economy. The question that begs so much to be desired is how do we address the multifaceted challenges facing the industry, from a practical standpoint? Availability of reliable power supply and economic development are easily correlated. Industrial outputs and productivity are linked to efficient delivery of electricity to end users. Within the Nigerian context, the power generation landscape is dominated by output from thermal and hydroelectric power plants with installed capacity and those coming on stream cumulatively accounting for roughly 13,000MW to date. These sources have long supported and will remain the main focus for development of the ESI utilising essentially fossil fuel such as gas and abundant hydro resources. These sources hold significant promise if harnessed efficiently despite their negative environmental footprint. Natural gas, which Nigeria has an estimated 182TCF reserve is preferred to other fossil fuel sources such as coal due to lower hazardous emissions and its perceived cleanliness. Hydro power is seen as ultra clean but with unpleasant consequences on the physical environment and displacement of host communities. Despite these negative externalities, these sources of energy will continue to dominate the generation matrix in the near term.
The electricity supply industry is fraught with multifaceted challenges such as non-availability of gas, operation and maintenance difficulties, defective delivery/dispatch and planning systems as well as under-funding. One believes that it is time for our energy policy makers to change their frame of reference and accept that other energy sources can play a significant role in addressing our energy deficit debacle. The focus should be on developing credible policies aimed at encouraging investments in renewable energy sources such as wind and solar power.
Nigeria is well placed to exploit its abundant solar energy resources considering its geographic location around the equatorial sun-belt. The country receives abundant sunshine all year round ranging from 6.70kwh/m2/day in Borno State to roughly 4.06kwh/m2/d to 5.86kwh/m2/d in locations such as Calabar in Cross Rivers State. The Federal Capital Territory has a daily horizontal solar radiation ranging from a high of 6.07/kwh/m2/d to a low of 4.42/kwh/m2/d during the month of August. This level of solar radiation across the country can support huge deployment of solar power infrastructures designed to primarily feed in to the regional power distribution entities. The size of the area currently occupied by the insurgents can supply sufficient power required by the entire country if harnessed. Despite the glaring economic constraints of solar power generation, its limited competitiveness, a low capacity factor, in addition to high cost of PV cells, renewable power sources mainly solar power development can support peak time energy consumption and can add considerable capacity directly to the grid or embedded network of distribution enclaves. However, for this to happen, the industry need a clear signal from the government through policy and fiscal inducement aimed at addressing the economic and technical disadvantage of solar power production. These could include measures such as a guaranteed feed-in-tariff, fiscal adjustments to favour industry participants, tax credits, capital subsidies and grants and numerous other financial incentives that can be leveraged upon to support growth of the industry.
The solar PV industry has witnessed unprecedented growth in the past five years, with countries such as Germany in pole position. Germany installed around 12.8GW of solar capacity between 2012 and 2014. Through a scheme, on Granting Priority to Renewable Energy Sources (EEG), the German government made it a policy objective whereby renewable energy producers are statutorily entitled to receive payments from the grid operators for any unit of electricity exported to the grid. The policy further supports essential training and capacity building, certifications and extensive research programmes.
In the USA, the Obama administration has made significant progress at encouraging investment in solar power. A number of policies both at state and federal levels have been adopted to support investment in the sector. These include the Renewable Portfolio Standards (RPS), Public Benefit Fund for Renewable Energy (PBFRE), Output Based Environmental Regulation as well as Feed-in Tariffs and other financial incentives. At the end of 2014, USA have installed solar capacity in excess of 15 GW with a huge majority deployed in the last five years. According to GTM Research and the Solar Energy Industries Association’s (SEIA), the U.S. installed 1,133 megawatts of solar photovoltaics (PV) in the second quarter of 2014 alone. Between 2012 and 2014, the grid connected utility segment quadrupled its cumulative size, growing from 1,784 megawatts in the first half of 2012 to 7,308 megawatts today.
Other countries across the world are begin- ning to take full advantage of this infinite energy resource to boost their power generating capacity. The Indian and Chinese governments have pursued vigorously policies to encourage deployment of grid connected solar power plants while the UK government through the introduction of the Renewable Obligation (RO) policy, designed to provide incentives and encourage investment in renewable energy projects has made considerable progress in this respect also. This novel policy by the UK government came into effect in 2002 and makes it mandatory for electricity suppliers, such as the distribution companies (DISCOS) we have in Nigeria, to procure a certain amount electricity from renewable sources. The Spanish government have also made impressive strides towards developing and harnessing its solar resources.
It is also important to note that of these countries especially those in Europe do not have the same level of solar radiation as we have in Nigeria. The solar radiation in some of these countries can be considered sub-optimal, yet with carefully thought out policy support from their governments, large scale solar installations have become economically and financially viable, thus leading to significant investments in both residential and commercial segments of the industry and helping in solving acute energy security problems.
On a competitive scale, solar technology in Nigeria is way below that of other widely known energy sources due to technological and economic drawbacks, in addition to deep rooted policy inertia. Accordingly, for Nigeria to make any significant progress in developing its renewable energy potentials, major policy initiatives must be developed and leveraged upon to drive interest and encourage investment. Solar power generation has the potential to ultimately achieve grid parity within two decades primarily from scale economies, research and improvement in technology. At the moment, the dire state of Nigeria’s generation capacity calls for a serious rethink.
The government through its agencies such as the Ministry of Power, The Nigerian Electricity Regulatory Commission (NERC) and the Energy Commission of Nigeria (ECN) must develop proactive fiscal, regulatory and financial stimuli in collaboration with private sector organisations that will ensure a smooth take off of the nascent industry. For the industry to be kick-started, we must not re-invent the wheels, as some of these instruments have been used in both developed and developing countries to achieve significant deployment of grid-connected and off-grid solar power plants. We can learn from Countries such as India, China and the Spanish models to evaluate how we can adapt or adopt workable framework from these countries to suit our peculiar circumstances.
Solar farms are quicker to deploy than conventional power stations. Development policy in this regard must take into account land use policy and it must be streamlined to ensure that developers face minimal challenges when building and installing solar farms. The national and state energy policy must include provision that places an obligation on regional distribution companies to purchase power from developers on preferential fixed term basis, incorporating a favourable feed-in tariff that will reflect the cost of energy units produced, financing costs etc.
The Nigerian government through a similar policy position must encourage the deployment of Solar Home & Commercial Systems (SHCS). I would consider this a key demand side intervention mechanism as this will rebalance the demand side pressure on the national grid emanating from various residential and commercial power consumers. The financial services industry must also play its role through provision of credit facilities to individuals and businesses enabling them to deploy SHCS. This has been a very successful model in Bangladesh and India where (in India) it is estimated that around 5 million residential solar systems will be sold between 2014 and 2018.
Finally, one can unequivocally make the assertion that renewable energy sources, in particular, solar power development can play a truly significant role in addressing the current power crisis in Nigeria. Solar projects are easily scalable with the possibility of deploying thousands of units within a short period. With appropriate policy direction and necessary incentives, the sector will witness remarkable growth in the coming decades with backward linkage opportunities in manufacturing and job creation.
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