Towards Renewable, Alternative Source Of Power Manasseh F. Paul-Worika
Nigeria’s inability to achieve stable power supply is a pointer to the fact that its over-reliance on gas and to lesser extent, hydro electric power sources need to be reviewed.
Though gas, due to its abundance in Nigeria, appears to be the most cost-efficient and effective means of power generation and hydro is also cheap due to its abundance, experts are of the view that other alternative and renewable sources of power generation should be considered by the federal government to broaden the country’s energy mix and ensure stable power supply.
Nigeria’s installed electricity capacity of 12,522MW, is well below the current demand of 98,00MW, while the actual output is about 3,800MW, resulting in a demand short fall of 94,500MW. Though the country. As a result of this wide gap between demand and output, only 45% of Nigeria’s population have access to electricity.
This power deficit has also weighed negatively on business operations in the country. Users must seek alternative energy means, primarily through buying of gas and diesel-powered generators. But these alternatives are expensive, and most businesses use them at high production costs.
Besides curtailing domestic business activities, the low capacity of electricity hampers foreign direct investment inflows into the country, as investors are typically weary of high electricity costs and shortages.
Nigeria’s total electricity mix is largely dominated by non-renewable energy despite a vast potential in renewable sources. The exploration and adoption of these sources through private investments, offers a probable solution to the power challenges in the country. Attracting private sector investment into this area demands business-friendly measures such as lower interest and tax rates.
Electricity generation for Nigeria’s grid is largely dominated by two sources; non-renewable thermal (natural gas and coal) and renewable water or hydro. Coal and natural gas make up the largest portion of energy production in Nigeria, while energy generated from hydro is well below potential.
Nigeria depends on non-renewable energy despite its vast potential in renewable. The exploration of these potentials and the production of renewable energy on a large scale would significantly increase Nigeria’s electricity grid and ease power shortages in the country. Electricity created from renewable sources is cleaner, more efficient and more easily replenished.
Various destinations have made efforts towards harnessing renewable forms energy in the country. For instance, in 2006, the Ministry of Environment implemented the Renewable Energy Master Plan (REMP), which was a strategy to increase the contribution of renewable energy to Nigeria’s total energy production by 2025.
The plan was produced with the support of the United Nations Development Programme (UNDP). In 2015, the current administration drafted the Nigerian Renewable Energy Efficiency Policy (NREEEP), which focused on harnessing alternative energies such as hydro, solar, wind and biomass.
This policy indicated that hydro power is the most important renewable energy source to be developed to harness the country’s full energy potential. Despite these plans, there has been no significant addition of renewable energy to the national grid. Total power output remains between 3,500MW – 3,500MW, with non-renewable sources accounting for 80%-85%.
The federal government’s inability to achieve its objective is largely due to a weak commitment to the proposed plans. In line with the power sector privatization objectives, the government could consider attracting private investors into the renewable energy space.
Private investors, as complementary agents in a mixed economy, could overcome the government’s flaws and achieve more significant results if the federal government shows more commitment and offer more incentives. A Chinese firm, Shenzhen Kang Ming Sheng Technology industry incorporation, has already pledged to invest in Nigeria’s renewable energy and with business-friendly reforms, Nigeria is likely to see more of this.
Two key reforms that would be foundational to incentivizing the private sector invest in renewable energy are cheaper financing and lower taxes. Lending rates in Nigeria (currently at an average of 17.5%) is too high for investors who require capital to start businesses such as in renewable energy.
Countries such as China, the US and India, which are leading the renewable energy revolution, offer substantially lower rates. The average commercial bank lending rate in India for example, is about 9.45%.
In the US and China the rates are at an average of 4.3%. The Nigerian government has made concessions for other sectors, such as enabling cheaper financing to agriculture and manufacturing in order to encourage their growth; while the monetary policy rate is unlikely to reduce lending rates to power sector investors, particularly for those who are investing in renewable energy.
It is imperative for the federal government to show a more definite and serious commitment towards renewable and alternative energy sources so as to overcome the current power supply deficit.
Minister of State for Power, Works, and Housing, Mustapha Baba Shauri recently said the Federal Government is committed to deploying renewable energy in all forms to complement existing conventional sources to provide sustainable electricity to Nigerians.
Shauri said the Federal Government is seriously focusing on renewable energy due to environmental factors and the need to supplement energy generation from conventional sources, adding that the administration is open to foreign direct investment in renewable and conventional energy.
It is crucial to note that the solution to the Nigerian power problem will involve the generation of power from resources such as coal, wind, solar, nuclear, biomass, among others, as at where they are available in the nation and not 100percent reliance on generation from only natural gas and hydro resources.
This will ultimately ensure an effective and secure energy mix and also enable the Federal Government to adequately achieve the goals of ensuring that Nigeria’s economy and Nigerians themselves reap the long overdue benefits of stable power supply.