By Kayode Ogunbunmi
Globally, the march to renewable energy is inexorable. Led mostly by the western, industrialised nations, the world appears to be moving away from fossils fuel towards ‘cleaner’ energy sources like solar, wind and possibly hydrogen. The shift is in reaction to the evident climate change-induced distortions to the earth’s environment. There is therefore a need to explore alternative energy options. Cost is not the only reason for this; another is the need for clean, environment friendly energy.
According to optimistic forecasts by the International Energy Agency (IEA), cheap electricity from renewable sources could provide 65 per cent of the world’s total electricity supply by 2030, with solar alone providing close to half of this. The EU set itself the goal to abolish ‘unabated’ fossil fuel – such as coal, oil and gas – by 2050. Hundreds of billions of dollars have been poured into research by first world, industrialised nations to make this possible.
But not everyone is fully on board. For most citizens of the global south, this rush towards renewable energy smacks of another attempt by the industrialised nations to change the nature of the game even before they have mastered it. Not only do global south nations lack the resources and technical ability to join in this new rush – which means they will be consumers of this new tech, much as they were of the last one – a lot of the southern countries are actually exporters of fossil fuel and their economies depend on the funds they realize from the sale of these commodities.
They have therefore, as the Permanent Secretary for the (Nigerian) Federal Ministry of Petroleum Resources, Gabriel Aduda said, likely to be forced to hold the short end of the stick. Not only would global south countries not be able to sell their resources, they will have to find fund to buy the new tech from the global north.
Africa is known as producer of raw materials, but the continent needs to now go the way of value addition.
Speaking at a recent OTL Week, Aduda said although countries like Nigeria needs to find ways to reduce fossil fuel-linked emissions, they could not afford to reduce production of the fuel. If anything, Aduda said Africa, as a known producer of raw materials, needs to go the way of value addition to secure more income for their resources.
“As the petroleum sector leads the way to a future of clean, accessible and affordable energy, we have to find ways to balance the availability of massive hydrocarbons in the country with the need to move to cleaner energy sources. We cannot afford to be re-victimised in this new energy transition equation.”
An example of the unfair power dynamics between Africa and the west, for instance, is playing out in the gasoline sector and this is making policymakers leery of forging another kind of dependency on the west.
Africa is suffering the brunt of the Ukraine war because the European refiners the country relied on are themselves unable to access cheap Russian crude that they were built to process. Africans were previously told it was cheaper to get refined products from Europe instead of building their own refineries, but now local refiners are being sought after by government.
By 2040, there is expected to be a 53 % increase in demand for oil products on the continent. So there is a lot investment needed in the areas of imports, refining, storage and distribution.
Despite this, the Nigerian government has several initiatives towards achieving its energy transition goals. One is the adoption of CNG and LPG for home usage and for transportation – along with adoption of electric cars. Of course, the government is also seeking to reduce the cost – and carbon footprint of AGO and diesel used in the country – by resuscitating its moribund refineries and encouraging private investment in the sector. This has led to the successful entry of Dangote Refinery and other modular ones into the market – with a few others still under construction.
Decade of Gas
The Nigerian government has declared a decade of gas to mobilize resources towards provision of sufficient gas to meet the needs of Nigerians with the establishment of a Presidential Initiative on CNG. This is even as the oil regulators talked of working towards a NetZero carbon target.
Engr Farouk Ahmed, Managing Director of NMDPRA, said recently that the Nigerian government has identified gas as the transition fuel and NNPC is building infrastructure to take advantage of this process. CNG stations are also coming on stream to further promote the transition to gas, even for transportation purposes.
Mr Ed Ubong, Coordinator of the Decade of Gas, said if Nigeria was able to unlock its gas reserves and find ways to bring it to the surface, it will not only be enough for local needs but would also be good revenue earners from exports.
There has been lot of talk of introducing CNG-powered vehicles, and of conversion of vehicles presently using petrol and diesel to autogas. But the lack of infrastructure to support this, along with the cost has slowed the adoption.
Ready for Autogas?
According to statistics from the Vitol, West Africa is the fastest growing region for LPG in Africa, although consumption remain low compared to other regions, such as MENA. The fundamentals for the LPG market growth include rapid population growth, scarcity of tradition fuel such as biomas and this is becoming increasingly unsustainable, and the national electricity supply system that is weak.
Maryo Medez, a Refining and Refined Products Research Analyst at global energy firm Vitol, explained that Nigeria’s gas expansion programme is tasked with ensuring adoption of gas as fuel of choice for cooking, power generation and as autogas. He said the potential for autogas in Nigeria is vast because it is a much cleaner fuel to burn.
“The removal of subsidy (on imported petroleum products by the federal government) has removed the wall of negative pricing that autogas has faced. Now it is competitive with other fuels and the demand can only soar,” she said.
“Nigeria has everything to make autogas work. The natural resource is here, the market is here, the unfair market price advantage of PMS is gone. We have less than 1000gas-run vehicles in Nigeria and until recently, there was no incentive to convert vehicles to run on gas.”
On the argument of whether more effort should go towards promotion of CNG as autogas, Mendez said both CNG and LPG would work in Nigeria, although CNG has advantage of easier refueling infrastructure and it works better for vehicles with larger chassis. Autogas adoption will create jobs in many areas, including conversion specialists, dispensers etc. It is however important that autogas remain cheaper than cooking gas.
Mr Akachukwu Nwokedi of the Nigerian Gas Association supported this position. He noted that the global LPG market is 320m tonnes, valued at $117b in 2022 and this is expected to grow at the rate of 3.4% by 2025.
Nwokedi said despite its huge gas reserves, Nigeria produces only five million tonnes of LPG annually, which meets about 45 per cent of local consumption. So, 53 per cent of the local need is met by imports. LPG itsell only accounts for 5% of the Nigerian energy need.
“The debate over which is of optimal value between LPG and CNG is unnecessary as both are crucial and both should be promoted,” he said. “LPG is the low hanging fruit in efforts to ensure quick adoption of gas for use. Domestic use has led the market and the growth areas are now in the untapped rural areas. Autogas is the next growth area, but it will be problematic if the gas competes with domestic use.”
Sunshine everywhere, but dysfunctional grid
Adetunji Oyebanji, chair of the Board of OTL, an energy industry forum, was of the view that even as it joins the global push for renewables, Nigeria must not throw away its advantage as home to huge petroleum resources.
“The west pushing the narrative of energy transition is doing so because they are resource poor,” he said. “Oil and gas would remain mainstay of our economy and government needs to also support private businesses in the sector as much as it supports NNPC. As part of the energy transition process, government also needs to wake up to the fact that apart from oil and gas, Nigeria is also blessed with year-round sunshine that could be harnessed for energy.”
For Adetunji Iromini of Solacentric Technologies, the commercial viability of wind energy is not there in Nigeria and it does not come into the mix at all at this time. He however noted that solar works and it is readily available at cost if it is considered as alternative source of energy.
“The price of oil is likely to remain high as demand increases, so solar integration is desirable for big businesses seeking to reduce cost,” he said.
He however cautioned that Nigeria’s energy transmission system needs to be upgraded if Nigeria was going to enjoy benefits of its immense solar potentials.
“In the west, customers do not need to invest in storage because the electricity grid is stable,” he said. “But in Nigeria, this is not so. So, customers have to spend a lot building storage for solar generated electricity. Even the power generated by solar firms could not be integrated into the grid because the system could not absorb it. Our energy system does not really have a generation problem. The elephant in the room is transmission, as the grid is weak and liable to collapse if overloaded.”
Financial support is needed to jumpstart the industry
Dr Mansur Alkali, head of the government’s gas intervention fund, said the cost for new players in the sector is high, hence readiness of government to provide funds to all those who have obtained licences, for example for CNG plants. There is also a glaring lack of local knowhow in manufacturing and maintenance of specialised equipment needed for the new energy streams.
Alkali how said the modalities for accessing the funds have been established and is freely available for those qualified to utilize it, including in the areas of training.
To achieve energy transition goals, Nigeria is in need of huge infrastructural development in the areas of terminals, trucks, spheres, bottles, etc.
Although it has the reserve, but government must incentivize exploration for gas itself and move away from the current reliance on associated gas
People are also ready to convert their vehicles (even tricycles) to gas. The demand is there and the people are willing. But the cost of conversion is too high at present and government needs to step in to make this process less costly in the light of little support from the financial industry.
According to Olabanji Alimi, a renewables expert at Sterling Bank, a recent Sterling Bank survey shows that a quarter of firms say power is their number one worry. South Africa has 30 times the energy to GDP ratio that Nigeria has.
But industry players warn that the funding for this much trumpeted energy transition is simply not there. Even if they wanted to fund the sector, there is also a reality that Nigerians banks are not liquid enough and the current capitalization level of local banks is insufficient for needs of the sector – coupled with the fact that historical marginal returns deter capital flows to the sector
Sterling Bank has raised some $15million to finance renewable energy and sustainable agriculture. The bank has also built the first publicly available e-charging platform in Nigeria for electric vehicles and this was built by local expertise supported by the bank. But the bank is an outlier.
Unsure of the policy and regulatory environment, Nigerian banks are cautious in advancing huge sums to promoters of energy transition projects.
The sceptics are watching
Of course there are also many who queried the rationale for African countries to join the energy transition train, as the continent is responsible for the littlest amount of global emissions.
Mr Temitope Ogunbanjo,a senior official of Aradel Refinery pointedly queried what was the point of breathing clean air when you live in darkness?
Africa accounts for less than three percent of global energy related carbon dioxide emissions,” he said. “Yet, by 2030, about 50 per cent of the global population that will be without electricity will be in Africa. There is therefore a need for a just energy transition policy that cares for the environment as well as African needs. In Africa, only 37 of its 67 refineries are currently in operation and a majority of the functional ones are in North Africa.”
*Article first published by Development Agenda
