Economic Implications of Renewable Energy Transition in Nigeria Udoka C. Nwaneto, Udochukwu B. Akuru, Peter I. Udenze, Chukwuemeka C. Awah and Ogbonnaya I. Okoro
Abstract—The energy system worldwide is undergoing transition to renewable energy (RE) due to concerns over depletion and environmental impacts of fossil-fuel sources, energy security, as well as the volatile nature of crude oil prices. In Nigeria, the need to support this transition is underpinned by the deplorable state of Nigeria’s electricity sector which is marred by electricity shortage, domination of fossil-fired systems, struggling power infrastructure and bad governmental influences, among others. The transition to RE is to be considered a viable solution to the aforementioned problems because it encourages decentralised generation which makes room to bypass the bottlenecks in Nigeria’s current electricity system. However, the transition to RE in Nigeria has been slow due to policy inconsistencies as noted by the REMP policy document in 2005. In reality, RE transition is complicated because it demands multidisciplinary approach to address social, economic, and environmental issues. Thus, this study is undertaken to analyse the economic implications of RE transition in Nigeria by linking the effect of macroeconomic factors such as investments and energy costs, industrial competitiveness, energy efficiency (EE), GDP changes, employment, income level and standard of living on the progress of transition. Afterwards, the result of the analyses is used to develop a set of criteria useful in measuring the progress of the proposed RE transition. Lastly, some inputs are made towards the sustenance and intensity of the transition process. Index Terms—Economic, electricity, energy efficiency (EE), Nigeria, REMP, renewable energy (RE), transition
1
INTRODUCTION
Energy is fundamental to economic development and sustenance of life. It is often stated that the amount of energy available and utilised in a country is strongly related to the rate of industrial growth and development in such country. In the early period of human existence, energy for domestic heating and cooking were derived from
U. C. Nwaneto is with the Department of Electrical and Computer Engineering, University of Calgary, Calgary, Canada, on leave from the Department of Electrical Engineering, University of Nigeria, Nsukka, Nigeria (e-mail:
[email protected]). U. B. Akuru is with the Department of Electrical and Electronic Engineering, Stellenbosch University, Stellenbosch, South Africa, on leave from the Department of Electrical Engineering, University of Nigeria, Nsukka, Nigeria (e-mail:
[email protected]). P. I. Udenze is with Department of Electrical and Electronic Engineering, University of Agriculture, Makurdi, Benue State, Nigeria (email:
[email protected]). C. C. Awah, is with the College of Engineering and Engineering Technology (CEET), Department of Electrical and Electronic Engineering, Michael Okpara University of Agriculture, Umudike, Umuahia, Abia State, Nigeria (e-mail:
[email protected]). O. I. Okoro, is with the College of Engineering and Engineering Technology (CEET), Department of Electrical and Electronic Engineering, Michael Okpara University of Agriculture, Umudike, Umuahia, Abia State, Nigeria (e-mail:
[email protected]).
combustion of firewood. As economies developed and became more complex due to civilisation and increase in population, energy needs skyrocketed. Consequently, supplies of firewood and other types of biomass proved inadequate to meet the energy needs of the growing economies [1]. Then, hydropower and wind power (indirect forms of solar energy), and later coal (during the industrial revolution) were included in the energy mix to meet the increasing energy needs. In the early 1900’s, oil and natural gas became major energy sources in most industrialised countries while in the 1950’s, nuclear power was included in the energy mix [1]. All the aforementioned major changes in energy sources exemplify energy transitions. Energy transitions have always been driven by economic growth, population growth, depletion of existing energy resources, change in technology, and quest to reduce cost and inefficiency. In recent times, fossil fuels such as coal, oil and natural gas, which have been the dominant energy source in industrial economies, are gradually being phased out. Consequently, the next great transition in energy sources has commenced—from non-renewable fossil fuels such as coal and diesel to renewable energy (RE) sources such as wind, solar and biomass. This transition, which is termed decarbonisation of the energy system, is being driven by factors which can be viewed from economic, sustainable and social perspectives, and they include concerns about environmental impacts of fossil-fuels (particularly climate change), limited nature of fossil-fuel supplies, energy supply security and prices [1], [2]. The transition has also encouraged decentralised generation, open electricity market and the creation of prosumers i.e. electricity customers who also produce energy and sell same to utility. Even though at the time of writing this paper, Nigeria still grapples with irregular power supply and generates greater amount of its electricity through fossil-fuels [3]-[5], it has gradually started committing to the global trend in supporting initiatives to decrease greenhouse gas emissions, promote use of energy-efficient devices, and increase the share of renewables in its energy mix because of the inherent benefits in doing so. For example, in readiness to adopt RE and leverage on it to engender sustainable development in Nigeria, the Federal Government of Nigeria (FGN) through the Energy Commission of Nigeria (ECN) working in conjunction with United Nations Development Programme (UNDP), in 2005 released the Renewable Energy Master Plan (REMP) [6]. The REMP articulates Nigeria’s vision and road maps to provide an increasing role for RE in attaining sustainable develop-
ment based on the convergence of values, principles and targets as ingrained in the National Economic Empowerment and Development Strategy (NEEDS), National Energy Policy on Integrated Rural Development, the Millennium Development Goals (MDGs) and the international conventions to reduce poverty and halt global environmental change [7]. In another report produced in 2012, FGN seeks to increase the share of renewables in electricity generation from 13% in 2015 to 23% in 2025 and 36% by 2030 [8]. To this end, while it is pertinent to make a good case for adoption of RE by enumerating its benefits to the economy, security, health and wellbeing of citizens, it is however vital to investigate the economic implications of transitioning from non-RE sources to RE sources. The result of such investigation will enable government to map out realistic plans, understand deliverables and targets, measure gains and costs, and carry out adjustments where necessary to keep the transition on track. In [6], authors of the REMP recognised the importance of bringing to the knowledge of all stakeholders, the economic implications of RE transition. While they spelt out the financial implications of switching to RE, including investments needed to be made and the timeline to achieve them, developed the tariff regime required to encourage private sector participation, projected the number of jobs that would be created, and the economic benefits accruable to rural dwellers by way of improved standard of living, they failed to consider other macro-economic variables such as the impact of energy costs on industrial competitiveness and competitiveness drivers (such as worker’s productivity, wage, skills, innovation, regulatory framework), the number of jobs that would be lost, the cost of retraining those who hitherto where versed in operating fossil-fuels power plants, and the effect of the transition on GDP size and distribution. It is important to recognise the impact of energy costs on industries as it could alter export and import bills, as well as balance of payments. Akuru and Okoro [7] reviewed the REMP but focus on ways to increase investments in RE resources while failing to make known the economic implications of deploying renewables on stakeholders i.e. government, business owners and individuals. In [4], [5], [9] cases were made for Nigeria’s transition massive investment in RE because of adverse effect of fossil fuels on the environment and economy, but no mention was made of economic implications of adopting solar energy. In [10], the financial implications of adopting utility-scale and micro-rooftop photovoltaic solutions were analysed and detailed, while regulatory frameworks, technological models and financial incentives to make it a reality were proposed. However, the author failed to consider the implication of adopting solar energy on other macro-economic variables such as GDP, employment, industrial competitiveness. The authors of this paper believe that one of the impediments to smooth transition to RE in Nigeria is because of lack of holistic guidelines, criteria and a template for the economic implications. As a result, it has robbed the country of the necessary trigger
to compel the government and the people to fast-track the transition to RE. Therefore, the paper is written to analyse the economic implications of RE transition in Nigeria by considering macro-economic factors such as investments costs, energy costs, industrial competitiveness, GDP changes, employment, income level, and standard of living. Then, a set of criteria that can be utilised to measure the progress of the transition to RE in Nigeria is developed. Finally, approaches to adopt to sustain and intensify the transition are recommended. The rest of the paper is organised as follows: section 2 presents the financial implications of infrastructures for RE transition, while section 3 is used to discuss the impact of RE transition on industrial competitiveness. In section 4, the influence on GDP in the midst of RE transition is presented, leading to Section 5, wherein the socioeconomic impacts of RE transition are highlighted. Section 6 is then used to suggest steps to enhance measure the economic progress of RE transition. Lastly, some concluding remarks are given in section 7. 2
INVESTMENT AND ENERGY COSTS OF RE INFRASTRUCTURE
The transformation and decarbonization of the energy system are associated with both technical and economic efforts [11]. In terms of economic considerations, all decarbonization scenarios characteristically model a transition from energy systems based on high fuel and operational costs, to systems based on higher capital expenditure (CAPEX) and lower fuel costs [12]. Thus, the transition from non-RE sources to RE sources will no doubt require huge investment cost in form of CAPEX. CAPEX in this contest refers to the total cost of developing and constructing RE-based plant, excluding any gridconnection charges [12]. Meanwhile, the amount required to develop and deploy a certain type of RE source depends on the technology, their size in terms of power output, environmental impact and connection type. The connection type has to do with whether the RE source is grid-connected (utilityscale) or off-grid. On the one hand, off-grid renewables which are usually deployed in remote or rural areas require substantial investments in energy storage systems in order to counteract the intermittency associated with renewables and ensure reliable power supply. On the other hand, grid-connected renewables demand that existing transmission and distribution facilities are upgraded, and grid-scale energy storage systems provided in a bid to satisfy grid-codes as prescribed by the utility regulator and resultantly, preserve the stability of the power system. Table I shows the projected CAPEX of specific RE technologies in 2018 in Germany as given in [11], while Table II shows the cost of installation of hydro power plants. A prevailing exchange rate of €1=NGN 420.11 was used to convert cost in Euros (€) to Nigerian Naira (NGN). Though the data displayed in Table 1 was based on market research in Germany, it correlates with the average installation cost for renewables in specific countries as
quoted in [13]. Therefore, the data can be used nonconservatively to make estimates for the market scenario in Nigeria. Examining in detail the values in Tables I and II, it is obvious that the cost of installation of photovoltaics (PV) is the least among the various RE technologies listed. As Nigeria is blessed with higher insolation levels or solar energy resource compared to wind resource, it is expected that a greater share of investment in electricity generation would be made towards deploying PV in Nigeria. In fact, this assertion is supported by projections in the study cited in [8] whereby solar power production is expected to become the second key pillar of energy delivery in the nation. Moreover, the National Renewable Energy and Energy Efficiency Policy (NREEEP) [14] projects RE to supply 20% of our total projected electricity demand (115674 MW) by 2030, with the share of different RE technologies as follows [8], [14]: wind - 3211 MW or 2.77%; solar - 6831 MW or 5.90%; biomass - 292 MW or 0.25%; large hydropower - 4627 MW or 4%; and small hydropower - 8174 MW or 7.07%. Using the above-stated NREEEP projections and the investment cost estimations in Tables I and II, it is found that over NGN 19 trillion or USD 52.8 billion (based on the average of USD1 = NGN360) would be needed between 2015 and 2030 to achieve the target of deriving 20% of our electricity from renewables by 2030, with solar power alone gulping an estimated NGN 2.774 trillion. At this rate, the projected total investment cost is two times the amount of Nigeria’s national budget in 2018. However, assuming other factors remain invariant, the estimated total investment cost could be less in the future considering significant reductions in cost of RE technologies which are clearly noticeable in the cost projections made between 2012 and 2018 in the report presented in [11]. Such cost reductions are attributed to improved manufacturing techniques driven by technological innovations such as the use of cheaper and better-performing materials, reduced material consumption, more-efficient production processes, increasing efficiencies and automated mass production of components, among others. Furthermore, further cost savings could be made by deploying grid-scale solar power as 6.83 GW of power can be generated with about NGN 1.72 trillion, though at the expense of increased complexity of grid management. From this initial analysis, it may appear that the investment cost of renewable transition in Nigeria is very high. Considering that between 1999 and 2015, the total investments in Nigeria’s power sector summed up to 2.74 trillion naira as shown in Fig. 1, it begs the question. This is just about the same evaluation required to install 23.14 GW of RE generated electricity over a period of 15 years. Essentially, Nigeria spent a whopping 18.26 billion USD according to 2010 conversion rates on large centralised non-renewable power projects in 16 years, which fell short of 3000 MW power delivered to the grid, and this cost is not accountable for operational fuelling costs [4]. Going by the rate of 875 USD/kW as proclaimed by FGN
in [15], such huge investments should have fetched Nigeria at least 18000 MW of electricity grid capacity. Essentially, what this means is that although, renewable electricity transition may appear very expensive to Nigeria in the beginning, but with possibilities of its increasing cost– competiveness, decentralised power networks and zerofuelling operational costs, such concerns become dissolved in the long run [16], [17]. 3
IMPACT OF RE TRANSITION ON INDUSTRIAL COMPETITIVENESS AND PRODUCTION COST
The epileptic power supply in Nigeria has been documented in several literatures to affect cost of production and by extension, Nigeria’s industrial competiveness [18]. For example, several manufacturing companies in Nigeria closed shop in the last three decades due to high cost of production underpinned by reliance on expensive diesel generators for self-generation [19]. Fortunately, deployment of renewable energy is seen as a key strategy to solve the problem of epileptic power supply in Nigeria as it is expected to reduce or completely eliminate power supply cuts. Moreover, deployment of renewable energy is always accompanied by energy efficiency (EE) programs. As such, apart from renewable energy transition offering hope of regular power supply for industries in Nigeria thereby reducing their cost of production and enhancing their competitiveness, it is also offers opportunity to save fuel expenses and reduce cost of production via EE strategy. For example, in Nigeria, industries are major consumers of electricity, which make it necessary for them to invest in EE programmes to reduce their electricity consumption and make RE a viable option. EE is currently driving sustainable development in many economies in the world [20]. In other words, it is an effective way for industries to achieve reduced energy costs [21]. According to [5], energy costs for instance can be small proportion of total expenses in an industry operation; however they are critical extent of controllable expenses and further convey a high danger of being partly unnecessary. Independently, investing in EE measures result in economic and environmental benefits [22], [23]. At the moment, industries in Nigeria have a very poor EE outlook, bearing major implications. Studies have shown that about 25% of energy consumption can be saved in an industrial sector by adopting some housekeeping measures and these include putting off electrical machinery on no-load, avoiding material wastages and plugging steam leaks [20]. The major barriers militating against adoption of more energy efficient practices in Nigeria are unawareness of the importance and potential of EE, inadequate skilled manpower to carry out energy audit studies and unawareness of alternative sources such as RE technologies [9]. For instance, in Lagos, the commercial heartbeat of Nigeria, energy taxes have been used in form of incentives to reduce unsustainable energy consumption so as to promote EE [24].
Table I. Specific CAPEX in NGN/kW of current renewable energy-based power plant installations.
Investment 2018 low
PV rooftop small (5-15 kWp) 504132
PV rooftop large (100-1000 kWp) 336088
PV utility-scale (> 2 MWp) 252066
Wind onshore 630165
Wind offshore 1302341
Investment 2018 high
588154
420110
336088
840220
1974517
CAPEX [NGN/kW]
Biogas 840220 1680440
Adapted after [11]; Note: kWp means kilowatts, peak. Table II. CAPEX of hydro power plant installations. CAPEX (NGN million/MW)
Type Small hydro
504–1325
Large hydro
572–1494
Adapted after [13]; prevailing exchange rate of USD1=NGN360 used. 1600 Cummulative sector allocation NIPP and intervantion funds
1400
Billion naira
1200 1000 800 600 400 200 0 1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Year
Fig. 1. Power sector investments in Nigeria from 1999-2015.
The study in reference [22] revealed that the driving forces for EE improvements in a Swedish industry are related to in-house industrial management i.e., mostly people and management driven. In another instance, the increased demand for EE technologies is capable of creating a national system with more competition and better performance in terms of job creation and economic growth [25], [26]. In [27], it is anticipated that the ongoing energy transition would be highly facilitated by EE at a very fast rate in the coming decades. Before now, there was the NREEEP, which was developed to provide conducive political environment that would attract investments in the area of RE and EE. The Ministry of Power developed the NREEEP in 2015 and had it approved by the Federal Executive Council in 2015 [14]. However, reference [28] pointed out that the unlimited access of the power generation companies (GENCOs) and distribution companies (DISCOs) is hindering both individual and collective efforts to actualizing the policy. To this end, the authors are of the opinion that EE will be a silent revolution supporting the energy transition in Nigeria. In reality, to achieve RE transition in Nigeria, EE practices need to be made a priority, especially in high electricity consuming industries, to enable them achieve a competitive status. The transition would be definitely a gradual process because of the need to combine both technical and policy solutions to champion such drive.
4
EXPECTED INFLUENCES ON GDP CHANGES
Several factors have been shown to influence the magnitude of the impacts of RE transition on gross domestic product (GDP). The factors include the structure of economy of the country, the costs of alternative energy sources (e.g. fossil fuel prices, technological costs of fossil-fuel driven energy sources), electricity prices, investment in RE deployment and whether the infrastructure, equipment and required services are imported or sourced locally [29]. In reality, the global deployment of RE affects fossil fuel exporters in the short term in accordance with the degree of diversification in their economies. It affects oil and gas exporters more compared to coal exporters because oil and gas production generally accounts for a higher share of their GDP than is the case for coal in coalexporting countries [29]. In [8], it was stated that electricity and gas sector contributed 0.5% of Nigeria GDP in 2012, while crude oil and gas contributed 15.8%. Thus, as Nigeria depends heavily on oil and gas sales for revenue, the transition to RE is going to have negative impact on the country’s GDP in the short term due to reduction in revenues from export and local sale of petroleum products and notably, high investment costs of renewables. Fig. 2 shows the GDP impacts of RE transition in selected countries [29]. Note that in Fig. 2, REmapE case entails analysis of RE impacts on GDP when RE is doubled through a higher rate of electrification of final energy uses and lower reliance on bioenergy, while REmap case entails when bioenergy contributes more in doubling RE capacity and the large share of bioenergy is assumed to come from agricultural and forestry residues, which do not create additional output in the agriculture and forestry sectors. As depicted in Fig. 2, the RE impact on GDP impact on Nigeria is projected to be negative in REmapE case due to large dependence of Nigeria on fossil fuels for revenue purposes and low electrification of final energy uses. This was also the case for Russia because of its heavy dependence on oil and gas sales unlike developed countries such as Germany, UK, and Australia which had positive GDP impacts for both cases. Furthermore, in Fig. 2, Japan is seen to experience the greatest positive GDP impact (2.3%) which is due to large investment in solar PV and substantial reduction of fossil fuel imports. Thus, the negative effect of extractive industry sector on GDP could be offset by positive effect of RE deployment on the following sectors: i. Service sector: For example, reduction of electricity prices (some RE technologies are projected to have lower generation costs than conventional technologies by 2030, contributing to a reduction in electricity pric-
es as RE penetration deepens) may cause decreases in inflation, increases in real household income and these resultantly stimulate activity in the retail and hospitality sectors. Finally, they induce increases in employment and improvement in general well-being. ii. Engineering, construction, and manufacturing sectors will benefit from increased demand for RE-related equipment, and increase in employment generation. Therefore, the negative impact of RE on Nigeria’s GDP can be reversed if investment in RE is done in a way that it creates ripple effect on all sectors of the economy. This can be achieved through a clear-cut but wellthought-out strategy, which favours local manufacturers and service providers in RE deployment contracts, and eliminates bottlenecks that plague high employmentgenerating and RE deployment supporting sectors of the economy such as construction, manufacturing and engineering sectors. 5
SOCIO-ECONOMIC IMPACT OF TRANSITION TO RE GENERATION
Many developed countries like the USA, UK, Germany, and Spain that are massively transiting from traditional fossil-fuel energy to RE generation have equally enjoyed and are still benefitting from the enormous advantages associated with it. Nevertheless, it requires a lot of technical skills, with regard to the maintainability of the power electronic components and storage devices necessary for RE generation. Moreover, as earlier implied, it requires more upfront funding for low carbon technologies to be actualised. Also, as mentioned in the introduction of this paper, Nigeria has proposed a strategic plan to transit to large-scale use of RE through its energy reform acts and policies such as the REMP, although the transition is not currently 100% planned since conventional energy generation would still be employed during peak demand. Notwithstanding, it is hoped that if Nigeria could implement the REMP initiative as is, it will go a long way in solving her energy problems, and helping her
to meet up with the expected energy demand of its populace, who currently suffer epileptic power supply in spite of geometrically growing population. Thus, in this section, the authors have identified potential effects of transition from conventional fossil-fuel energy generation to RE production with particular reference to employment, health, standard of living and general well-being of the populace. Without doubt, Nigeria is still at the embryonic stage in the implementation of large-scale green technology. It is also on record that Nigeria has abundant RE sources such as solar energy, bioenergy and ocean energy resources, yet the country is still lagging behind the current global RE revolution, probably due to her indulgent technical backlog, negative socio-political will and economic disenfranchisement. It is worth noting that the average daily solar intensity in Nigeria is higher than that obtainable in the world leading solar energy countries like the Germany and the Spain, as presented in [30]. Although, roof-top installations of PV panels are increasing on daily basis, however, large-scale integration into the Nigerian power grid is yet to be realized. Therefore, presently, the percentage of RE job creation in Nigeria is poor, but this trend is expected to reverse should it emulate other African regions such as in the Southern and the Northern African countries, where major steps in utilising RE technologies/resources have been taken. Hence, it is inevitable to say that intensive effort is required in order to achieve the objective(s) outlined in the Nigerian REMP program. It is demonstrated in [31], that a shift from conventional fuel-based lighting to solar-based ones will not only improve on the working environment of that sector and balance with good margin the possible job displacement as result of the conversion. Manufacturing of materials and components plus its sales and marketing could be additional means of job creation. Also, it is estimated that over two million employment opportunities could be realized from this venture worldwide, in addition to enhanced quality of life [31].
Fig. 2. GDP impacts (2030 GDP size, % change vs the Reference Case) [29].
Further, studies in [32] using the 3D-Global simulation models, including the Jobs and economic impact model, show that the United States (US) would transit completely to the use of RE by the year 2050. Consequent upon this, over 5.9 million jobs are also estimated to emerge on construction and operation of energy facilities only, in lieu of 3.9 million jobs that would be lost as well. Although, it is estimated that about 270 billion US Dollars (USD) would be lost as per income per year, however this would be recovered through a net gain of about 85 billion USD per year. Similarly, it is reported that over 10 million jobs were created from RE sector worldwide in 2017 with China taking a greater percentage [33]. It is worth mentioning that RE deployment is capable of creating jobs more than any other energy sources, as noted in [34], in addition to enhanced quality of livelihood and improved education [35]. Moreover, the complete transition to RE generation by 2050 is expected to yield better and low cost healthcare and improved standard of living in the US. For Nigeria, some insights can be drawn from the scenarios occurring elsewhere on how its transition to RE production would shape the employment rate. The study in [36] confirms that although transition to RE will entail loss of jobs in the fossil-based energy generation sector, however net job that is expected to emanate from RE production would be enormous. The fundamental benefits of clean energy is the increase in power quality and reduced energy losses during transmission and distribution owing to its proximity to the consumers as noted in [17]. This will indirectly affect the net savings obtained by acquiring renewable technology, and hence an improved welfare for the consumers. The net income derived from deployment of RE would be a consequence of the availability of more jobs, increased salary and other improved incentives from the energy suppliers gained from more efficient and reduced energy demand. Note that the level of human capability development through training and workshops in the transition to RE generation, which invariably would positively influence the lives of the citizenry in Nigeria, cannot be overemphasized. Nevertheless, consumption pattern by the consumers will determine the overall efficiency and potentials of this transition. It is worth mentioning that, more risks and hazards are linked with the use of fuel-based energy generation/products compared to utilization of the RE devices/resources. Note also, that, there is a correlation between the use of RE and quality of livelihood in the society, as detailed in [31]. Health issues such as cancer, lungs and heart diseases as well as mortality rate will definitely reduce if Nigeria deploys renewable technology, since it is more environmentally-friendly compared to combustion energy generation. Also, the safety in the use of batteries, solar panels, etc. outweighs the ones of fuel, diesel, etc.; this assertion is confirmed in [31]. Further, business opportunities could emerge from RE generation through sales and marketing of RE goods and services, including importations and indigenous manufacturing of these items. Moreover, the Government and other energy stakeholders could invest and attract investors for
business and profit/gain making which would be impacted on the lives of average Nigerian citizens. In particular, taxes and other revenue duties generated from investors could be utilized for the well-being of the general public. 6
ACHIEVING RENEWABLE ENERGY TRANSITION IN NIGERIA
6.1
Progress Evaluation In order to measure the progress of RE transition, it is important to establish a set of criteria that would enable the government and stakeholders measure the gains of the transition. The set of criteria and their possible indicators as proposed in [37] can be applied in the case of Nigeria but with minor modifications. These set of criteria will be discussed in the following subsections. 6.1.1 EE Measures EE is an important strategy to reduce the level of investment needed to guarantee steady supply in Nigeria and make savings on fuel expenses, and this was recognized in NREEEP. In Nigeria, the residential sector accounts for about 78% of the total energy consumption [8]. Thus, the EE measures would show more effect on the residential sector. Therefore, the measure of improvement in EE could be revealed by the demand (in GWh) per annum in the residential sector, amount of transmission and distribution losses, the rate of use of energy-saving bulbs in comparison to incandescent bulbs, and the rate of adoption of energy-saving building code. 6.1.2 CO2 Reduction Rate This is the most adopted criterion for measuring progress of RE transition. It stipulates goals and measures to achieve a certain percentage reduction of emissions by a certain period of time. Indicators of this criterion include rate of decarbonizaton (in GWh/year) and the amount generated from carbon tax in Nigeria. For e.g., year-to-year increase in carbon tax means RE technologies are not being adopted. 6.1.3 Supply Security and Generation in Nigeria This criterion focusses on ascertaining the influence of RE technologies on the reliability of Nigerian power sector. The adoption of RE is expected to reduce the generation deficit and thus eliminate frequent power cuts. Possible indicators of this criterion include the level of electricity consumer satisfaction (which can be gleaned from survey), number of blackouts per year, and number of load-shedding events experienced in a year (can be sourced from the transmission and distribution system operators in Nigeria). 6.1.4 Economic Competitiveness of RE in Nigeria This criterion looks at the cost competitiveness of RE technologies relative to conventional generation technologies. It is expected that as the transition progresses coupled with fluctuating prices of fossil fuels, RE technologies would become economically competitive. Possible criterion indicators include energy cost of RE technologies and RE technology adoption rates in Nigeria, as well as the level of investment in RE technologies in the Nigerian power sector per year.
6.1.5 Innovation and Technology In [38] and [39], innovation and technology was recognized as a key driver of socio-technical transitions. Improvement in efficiency, economies of scale is vital to the success of long-term macro level growth [37]. Thus, in order to ascertain the level of progress of RE transition in Nigeria using this criterion, RE technology adoption rates, the number of start-ups in RE sector, the cost per generation of RE sources, as well as the amount of money or share of Nigerian government budget (NGN/year) devoted to Research and Development in RE technologies are possible indicators to look into. 6.1.6 Resilience of the Nigerian Economy There is no doubt that RE transition affects GDP and its structure and therefore the economy. The abilities of the Nigerian economy to recover from temporary job losses and increase in energy and investment costs of RE generation are good indicators of this criterion. The aforementioned information can be gleaned from GDP structure, economic growth, and unemployment level. 6.1.7 Public Acceptance and Politics This criterion drives many processes in RE transition such as policy development and implementation [37]. It focusses on determining whether policy targets and goals made by private stakeholders and the ones enshrined in Nigerian government policy documents such as in [8] and [14] are achieved in the intended time-frame, how these policy goals are rejigged to guide the RE transition in the right path, and the level of acceptance by the Nigerian public of the need to have RE transition. Indicators of this criterion include policy targets achievement/fulfilment rate, consumer habits; which are reflected in data pertaining to rate of household RE generation and consumer demand.
7
In this paper, the economic implications of renewable energy transition in Nigeria, considering macro-economic factors such as investment and energy costs, industrial competitiveness, energy efficient measures, employment demographics and GDP, have been analysed. It was found that transition to renewable energy electricity generation in Nigeria may initially demand a huge financial burden, as well as large-scale structural changes in the economy, but it will eventually even out with advantages such as rising costcompetitiveness compared to traditional fossil fuels, overwhelming creation of new jobs to cater for any jobs lost as a result of full-scale transition, and improvements in EE measures, especially at industrial scales. A set of criteria to guide such transition is thus outlined to ensure financial sustainability of the process. REFERENCES [1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
Achieving Financial Sustainability Nigeria still needs to find ways of getting the needed funds to fully champion its RE transition, increase access to electricity and reduce power cuts without crowding out investments in other priority sectors of the economy or better still develop innovative ways to reduce the amount that would be spent to achieve its RE transition targets. Firstly, this could be achieved by focusing on deploying off-grid RE systems (solar) in rural areas as they do not have huge environmental cost and impact (compared to wind, biomass, and hydro) and in addition, do not require huge funds to be expended in the reinforcement of electric transmission and distribution facilities, installation of grid-scale energy storage systems. On the other hand, grid-scale solar systems should be deployed near load centres where they are economically feasible. Secondly, it can consider floating a Renewable Energy Fund (REF), which can be funded by imposing carbon tax on heavy emitters of CO2. Thirdly, by stimulating private sector participation through adopting strategies that reduce risks in the RE sector and unlock private project financing and refinancing opportunities [29]. The latter is important as private sector has the potential to contribute the most investments in RE, which may not be plagued by corruption and bureaucratic bottlenecks.
CONCLUSION
6.2
[9]
[10]
[11]
[12]
[13] [14]
[15]
[16] [17]
J. M. Harris and B. Roach, Energy: The Great Transition, in Environmental and Natural Resource Economics: A Contemporary Approach, 4th ed., Somerville, Taylor & Francis, 2017, ch. 11, pp. 1–39. N. T. du Plooy, A. C. Brent and I. H. de Kock, “Fostering sustainable energy transitions for South Africa's electricity sector: A set of criteria,” in IEEE TEMSCON, Santa Clara, CA, 2017, pp. 131-136. A. Agbongiarhuoyi. “Promoting renewable energy use in Nigeria,” Vanguard, Nigeria, Aug. 13, 2015. Available: http://www.vanguardngr.com/2015/08/promoting-renewable-energyuse-in-nigeria/ U. B. Akuru, I. E. Onukwube, O. I. Okoro, E. S. Obe. (2017) Towards 100% renewable energy in Nigeria. Renewable and Sustainable Energy Reviews, 71, pp. 943-953. S. C. Amaefula, “Renewable energy: Solution to Nigeria’s energy crisis,” The Guardian, Nigeria. May 14, 2015. Available: https://guardian.ng/features/youthspeak/renewable-energy-solutionto-nigerias-energy-crisis/ United Nations Development Programme and Energy Commission of Nigeria, “Renewable Energy Master Plan,” November 2005. Federal Republic of Nigeria. U. B. Akuru and O. I. Okoro (2010), “Renewable energy investment in Nigeria: A review of the renewable energy master plan,” in IEEE International Energy Conference, Manama, 2010, pp. 166-171. The Nigerian Energy Sector: An Overview with a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification, 2nd Edition, June 2015. Available: https://www.giz.de/en/downloads/giz2015-en-nigerian-energysector.pdf U. B. Akuru, O. I. Okoro. (2011). A prediction on Nigeria's oil depletion based on Hubbert's model and the need for renewable energy. ISRN Renewable Energy Journal, pp. 1-6. C. Opara-Ndudu, “The case for a Nigerian renewable energy development fund,” ThisDay, Nigeria, June 25, 2016. Available: http://www.thisdaylive.com/index.php/2016/06/25/the-case-for-anigerian-renewable-energy-development-fund/ . C. Kost, S. Shammugam, V. Julch, H-T Nguyen, and T. Schlegl, “Levelized Cost of Electricity Renewable Energy Technologies,” Fraunhofer ISE, Germany, March 2018. Ernst & Young et Associés, “Macro-economic impacts of the low carbon transition,” 2014. Available: https://europeanclimate.org/wpcontent/uploads/2014/06/EY_ECF_Macro-economic-impacts-of-thelow-carbon-transition_Report_2014-06-05.pdf World Energy Council, “World Energy Perspective: Cost of Energy Technologies,” 2013. FEC, “National Renewable Energy and Energy Efficiency (NREEEP) Policy 2015,” Ministry of Power, Federal Republic of Nigeria, Approved by FEC for the Electricity Sector, 4/20/2015. Available: http://www.energyplatformnigeria.com/images/Library/NREEE_Polic y_2015_FEC%20aproved_-_FGN.pdf Presidential Task Force on Power, “Roadmap for Power Sector Reform: Revision 1; Presidential Task Force on Power,” the Presidency, Federal Republic of Nigeria, Abuja, August 2013. REN21, “Renewables 2016 Global Status Report,” REN21 Secretariat, Paris. Available: www.ren21.net/gsr E. Adhekpukoli. (2018). The democratization of electricity in Nigeria. The Electricity Journal, 31(2), pp. 1–6.
[18] L. N. Chete, J. O. Adeoti, F. M. Adeyinka and O. Ogundele, “Industrial development and growth in Nigeria: Lessons and challenges,” WIDER Working Paper Series 019, World Institute for Development Economic Research (UNU-WIDER), 2014. [19] U.B. Akuru and O.I. Okoro. (2014) Economic Implications of Constant Power Outages in Nigeria. Journal of Energy in Southern Africa, (25)3, pp. 61-66. [20] T. Lins and R. A. R. Olivera, “Energy efficiency in industry 4.0 using SDN” in IEEE 15th INDIN, Emden, Germany, 2017, pp. 609-614. [21] M. T. Johansson and P. Thollander. (2018). A review of barriers to and driving forces for improved energy efficiency in Swedish industry- Recommendations for successful in-house energy management. Renewable and Sustainable Energy Reviews, 82(1), pp. 618-628. [22] L. Alcorta, M. Bazilian, G. De Simeon, and A. Pedersen. (2014, Feb.). Return on investment from industrial energy efficiency: evidence from developing countries. Energy Efficiency, 7(1), pp. 43-53. [23] S. O. Oyedepo. (2014). Towards achieving energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews. 34, pp. 255-272. [24] O. Osunmuyiwa and A. Kalfagianni. (2017). Transitions in unlikely places: Exploring the conditions for renewable energy adoption in Nigeria. Environmental Innovation and Societal Transitions, 22, pp. 2640. [25] D. C. Mowery, R. R. Nelson, and B. R. Martin. (2010). Technology policy and global warming: Why new policy models are needed (or why putting new wine in old bottles won’t work). Research Policy. 39(8), pp. 1011-1023. [26] C. Ghisetti and F. Quatraro. (2017). Green technologies and environmental productivity: a cross-sectoral analysis of direct and indirect effects in Italian regions. Ecological Economics, 132, pp. 1-13. [27] S. Alvik, “Energy Efficiency – The Defining Feature of the Energy Transition,” DNV GL 2018. [28] O. Adanikin, “FG urged to ban importation of power generating sets for MDAs,” The Nation, Nigeria, September 6, 2017. Available: http://thenationonlineng.net/fg-urged-ban-importation-powergenerating-sets-mdas/. [29] R. Ferroukhi, A. Lopez-Peña, G. Kieffer, D. Nagpal, D. Hawila, A. Khalid, L. El-Katiri, S. Vinci and A. Fernandez “Renewable Energy Benefits: Measuring the Economics,” International Renewable Energy Agency, Abu Dhabi, United Arab Emirates, 2016. [30] E. J. Bala, “Nigeria’s Power Sector Reform: What Next after Privatization,” in Power and Electricity World Africa Conference, Johannesburg, 10-12 March, 2014. [31] E. Mills. (2016). Job creation and energy savings through a transition to modern off-grid lighting. Energy for Sustainable Development, 33, pp. 155-166. [32] M.Z. Jacobson, M.A. Delucchi, G. Bazouin, Z.A.F. Bauer, C.C. Heav ey, E. Fisher, S.B. Morris, D.J.Y.Piekutowski, T.A. Vencilla, T.W. Y eskoo. (2015). 100% clean and renewable wind, water, and sunlight (WWS) all-sector energy roadmaps for the 50 United States. Energy Environment Science 8(7), pp. 2093-2117. [33] Renewable Energy and Jobs - Annual Review 2018, International Renewable Energy Agency, May 2018. [34] H.G. Huntington. (2009) Creating Jobs With ‘Green’ Power Sources. USAEE Dialogue, 17(1), pp. 12-15. [35] B. K. Venkata, “World Energy Resources Bioenergy,” World Energy Council, 2016. [36] G. Sinden and Z. Leffler, “Renewable Energy Jobs: Future Growth in Australia,” Ernst & Young and the Climate Council of Australia, Climate Council of Australia, 2016, pp. 1-55. [37] N. T. du Plooy, A. C. Brent and I. H. de Kock, “Fostering sustainable energy transitions for South Africa’s electricity sector: A set of criteria,” in IEEE TEMSCON, Santa Clara, CA, 2017, pp. 131-136. [38] A. Grubler. (2012). Energy transitions research: Insights and cautionary tales. Energy Policy, 50, pp. 8–16. [39] P. O’Keefe, G. O’Brein, G. and N. Pearsall, “The Future of Energy Use”. Second ed., 2010, London, Earthscan.
AUTHORS BIOS Udoka C. Nwaneto was born in Owerri, Nigeria, on January 27, 1990. He received the MSc degree in New and Renewable Energy (Distinction) from Durham University, United Kingdom in January 2018, and BEng degree (Hons.) in Electrical Engineering (First Class), from the University of Nigeria, Nsukka, in June 2013. He was a Commonwealth Shared Scholar during his MSc studies. He is currently a PhD student in the De-
partment of Electrical and Computer Engineering, University of Calgary, Canada on leave from the University of Nigeria, Nsukka where he is a lecturer. His main research interests include modelling and control of renewable energy technologies, renewable energy integration, energy storage systems, modular multilevel converters, microgrids, and power system dynamics. Udochukwu B. Akuru (M’13) was born in Lagos, Nigeria, on June 6, 1983. He obtained the PhD degree in Electrical Engineering from Stellenbosch University, South Africa in December 2017, and both the MEng and BEng degrees from University of Nigeria, Nsukka, in June 2013 and August 2008, respectively. He is lecturing at University of Nigeria, Nsukka, but is currently on secondment at Stellenbosch University, South Africa, as a postdoctoral researcher. He is a registered member of the Council for the regulation of Engineering in Nigeria (COREN), member of IEEE and volunteer to its associated societies, committees and groups such as IEEE IAS EMC and IEEE IES EMTC. His main research interests are in electrical drives and renewable energy technologies. Dr. Akuru has over twenty peer–reviewed journal and conference papers, and also acts as a reviewer to major IEEE conferences and transactions. Peter I. Udenze was born in Lagos, Nigeria, on January 31, 1984. He recieved the BEng degree in Electrical Engineering from University of Nigeria, Nsukka, in 2008, and the MSc(Eng) degree in Energy and Power Systems from the University of Liverpool, UK, in 2017. From 2011 to 2014, he worked as an Electrical Engineer with a Gas Powerplant in Nigeria. He is currently lecturing at the University of Agriculture, Makurdi. His research interests include power systems and control, renewable energy technologies and electric storage systems. Chukwuemeka C. Awah received the B.Eng, M.Eng degrees in Electrical Engineering from the University of Nigeria, Nsukka in 2005 and 2009, respectively, and the PhD degree in 2016 from the Department of Electronic and Electrical Engineering, The University of Sheffield, UK under the Commonwealth scholarship award scheme. Dr. Awah is a member of the Institute of Electrical and Electronics Engineers (IEEE). He holds an academic position in the Department of Electrical and Electronics Engineering, Michael Okpara University of Agriculture, Umudike, Nigeria. His main research interests include modelling, design and analysis of electrical machines. Professor Ogbonnaya I. Okoro received the B.Eng and M.Eng. degrees in Electrical Engineering from the University of Nigeria, Nsukka in 1991 and 1997 respectively. He holds a Ph.D in Electrical Machines from the University of Kassel, Germany under the DAAD scholarship programme. He is a registered Electrical Engineer (COREN) and Senior member of the IEEE. He was formerly Dean, College of Engineering and Engineering Technology, Michael Okpara University of Agriculture, Umudike, Nigeria. Prof. Okoro has published extensively in reputable international journals. His research interests are in areas of dynamic simulation and control of induction machines as well as in the thermal and dynamic analysis of AC machines. He is an Author of two Textbooks published by JUTA (South Africa): Concise Higher Electrical Engineering and The Essential Matlab/Simulink for Engineers and Scientists.
Presenting author: The paper will be presented by Udochukwu B. Akuru.
