Nigeria: Harnessing Renewable Energy For Growth And Development In Nigeria

T he demand for energy globally is growing faster than the installed energy generation capacity. This energy deficit may further increase as economies reopen and recover from the effects of the COVID-19 pandemic. There are also concerns of an impending global energy crisis from supply disruptions that may be exacerbated by the ongoing Russian invasion of Ukraine. The adoption of alternative energy solutions that will guarantee energy security and efficiently meet current and future energy demand globally has therefore become crucial.

Renewable energy (RE) has become a veritable tool for combating energy access deficit, a medium for energy transition and a means for fast-tracking economic growth and development in most jurisdictions in world. Given that Nigeria is blessed with adequate RE sources such as constant sunlight, adequate wind pressure, generation of significant bio-waste, tidal waves in coastal areas, among others, the country-wide adoption of RE can propel the country on a path of economic growth and development.

As the largest economy in Africa, the economic growth potential of the country is severely constrained by epileptic power supply, as there is a wide energy gap between demand and supply of electricity in Nigeria. As stated in a press release by the World Bank in February 2021, 85 million Nigerians do not have access to grid electricity and this number of Nigerians without electricity access constitutes 43% of Nigeria's population, thus, making Nigeria the country with the largest energy access deficit in the world. It was further stated that lack of reliable power is a significant constraint for citizens and businesses, resulting in annual economic losses estimated at ₦10.1trillion (which is equivalent to about 2% of Nigeria's Gross Domestic Product).

Therefore, mobilizing the deployment of RE solutions in the country will provide the government with a viable path for solving the energy access crisis in the country, and an opportunity to improve the erratic power situation in the country. This country-wide adoption and deployment of RE can be augmented with the introduction of necessary government interventions to incentivise the supply and demand of RE in the country.

This article explores the possible measures / interventions that Nigeria can undertake to create a RE ecosystem that would address its extant energy deficit issues. This 'ecosystem' will in turn create numerous economic opportunities for operators and ultimately lead to increased national growth, while assisting the country with its energy transition agenda and the actualization of its net-zero carbon emissions commitment made at the 2021 UN Climate Change Conference (COP26).

Potential Supply-Side Interventions

Globally, supply-side interventions have proven to be an effective mechanism for reducing the risks and costs associated with developing RE products, making them more economical for consumers and consequently resulting in increased access to these products.

Reduced costs will allow RE companies to achieve internal economies of scale and allow for new entrants, which will result in lower and more competitive pricing for products. Subsequently, there will be increased affordability for consumers, as these companies will be encouraged to explore promising new markets (even in remote areas where the costs of distribution and servicing the customers may be significantly higher) while expanding their presence in the markets which they already operate.

Supply-side interventions can come in form of grants, concessional financing and results-based financing for operators in the RE sector in Nigeria. These supply-side interventions will lower the cost of production for RE products and will subsequently provide enough incentives for RE operators to make investments in Nigeria's electricity sector

Furthermore, RE sector-targeted tax incentives can also serve as an effective means for reducing the cost of production of RE products and improving their affordability. These incentives can come in form of tax and import duty exemptions on RE products, tax holidays (which may be limited to a certain period) for operators/ companies within the RE value chain, special tax rates for energy related activities, as well as tax reliefs for research and development.

Potential Demand-Side Interventions

Demand-side interventions are those targeted at customers / end-users with the aim to increase purchasing power and close the affordability gap. These interventions encourage the adoption of RE products and accelerate access to RE in unserved and under-served areas. The benefits associated with demand-side interventions can either be provided directly to the end-users or provided through the RE companies with the expectation that these companies will reduce the final costs passed on to end-users.

Demand-side interventions can come in form of RE product subsidies and staggered payment arrangements for RE product acquisition. Demand-side market interventions will make it possible for these consumers to procure RE products for deployment at home and for their businesses, thereby creating a sustained progressive demand that would attract more producers of RE technologies to the Nigerian market.

Feed-In Tariffs can also provide an incentive to stimulate RE production. For on-grid RE deployment, the existing Regulations for Feed-In Tariff (REFIT) for renewable sourced electricity introduced by the Nigerian Electricity Regulatory Commission can be further revised to accommodate tariff reductions that can make RE price-competitive to consumers. Where the

revised REFIT is cost-effective and competitive, it can foster rapid development of RE projects and sustainable growth in the RE sector.

Potential Framework for Funding Renewable Energy Interventions

Implementation of the supply-side and demand-side market interventions for RE in Nigeria would require a sizeable fund that can support nationwide deployment of RE technologies, to achieve the critical mass required for growth and development. Before embarking on these interventions, the government needs to earmark the funds needed to support these interventions.

The recently enacted Petroleum Industry Act and the expected deregulation of the downstream petroleum sector, provides an opportunity to incorporate a RE funding framework that will transfer real economic benefits in terms of energy access, employment opportunities and improved living standards to the vast majority of the Nigerian population.

Given the current revenue challenges of the government, it is imperative to devise a sustainable plan to fund RE adoption and deployment in Nigeria. As adopted in other jurisdictions, carbon emitting energy operators can be tasked with role of supporting the funding of market interventions (via tolerable green taxes and levies) required for nationwide RE deployment in the country. This way, the conventional energy industry can be positioned to be active operators in the RE sector and to support Nigeria's energy transition agenda.

Conclusion

There is a need for Nigeria to harness RE through a well thought-out policy including the aforementioned potential interventions. By doing so, Nigeria will witness increased energy access, as investment in RE sources will further complement existing plans to generate and distribute more electricity from conventional energy sources. Moreover, businesses will be provided with stable and affordable power which will allow for greater productivity.

The enormous market size and the increased demand for RE technologies will trigger an influx of investments into the Nigerian power sector. More companies will get involved in the market and given that the interventions and increased demand will make the companies more profitable, they will expand and generate more employment opportunities. The resultant effect is a positive impact on economic growth and tax revenues.

Interestingly, following the recent signing of the Climate Change Act by Nigeria, the adoption of RE interventions will assist in the country's efforts to combat climate change and attain its target of net-zero greenhouse gas emissions by 2060.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.