One of the pressing issues globally is Climate Change. Climate change is the significant and long-lasting change of the earth’s temperature and weather patterns attributed to human activities, mainly burning fossil fuels which increase atmospheric carbon dioxide levels. It is significant because of the broad range of effects that the term “climate change” connote. Amongst the impact of climate change, which includes global warming, droughts, floods and extreme weather events, global warming is the most devastating.
Global warming is the continuous heating of the earth’s surface. According to the UN’s intergovernmental Panel on Climate Change (IPCC) 2021 report, the global surface temperature has increased by 1.09 degree Celsius (1.09oC) within the last decade since 1850. The rise resulted in more frequent heatwaves, lower cold events and a significant increase in sea level. Simply put, oceans will get warm, flood and become acidic, making usable water less available.
The report signalled “a code red for humanity” but predicted that the warming could be kept at 1.5oC in the next decade if due care is taken. In 2015, 194 countries, including Nigeria, signed the Paris Agreement to keep the rise in global temperatures below 2oC this century by substantially reducing their greenhouse gas (GHG) emissions.
At the 26th edition of the UN Climate Change Conference of the Parties (COP26) 2021, while highlighting the importance of gas as a transition fuel, the president of the Federal Republic of Nigeria committed to achieving net-zero carbon emissions by 2060. This commitment aligned with the recent pledges of other Organization of the Petroleum Exporting Countries (OPEC) members and oil producers to attain carbon neutrality by 2060.
Closely following the commitment was the announcement of the Climate Change Act 2021 and the approval of the Energy Transition Plan by the Federal Government and the Energy Transition Working Group that the Vice President, Prof. Yemi Osibanjo, leads. His Excellency President Muhammad Buhari established Nigeria’s Energy Transition Plan to address two major concerns of the nation: Economic Development and Climate Action.
With about 43% of Nigeria’s population lacking access to grid electricity, Nigeria has become the country with the largest energy access deficit in the world. According to a press release by the World Bank, this lack of access to and unreliability of power poses a considerable challenge for businesses in Nigeria, negatively impacting the nation’s economy with losses estimated at USD26.2 billion (₦10.1 trillion), which is about 2% of its GDP. Therefore, the goal of the ETP was to reduce carbon emissions while powering development.
Despite the actions taken to achieve this goal, there is a need to ramp it up if we must reach universal access to power by 2050 and net-zero carbon emissions by 2060. Many have recommended decarbonising developments as the fastest way to bridge this gap and achieve the desired results within a set timeline.
The underlying principle of decarbonising development is that as a developing economy, Nigeria is making considerable investments to close the development gaps in some key sectors such as power, industry and oil gas. These investments should therefore be streamlined to the use of low-carbon emitting resources. The aim is to commence the transition by replacing failing assets in the sector with their renewable counterparts rather than starting the decarbonisation journey at the latter end. For example, instead of building gas plants in the country to cater to electricity generation constraints in Nigeria, investments should be channelled towards renewable energy either in isolation or interconnected with the national grid.
Decarbonising development makes logical sense, but it is not practicable on a large scale, given the challenges in the renewable energy space in Nigeria today. Also, this approach will impede the closure of the energy access gap as the renewable energy market is still in its formative stage. Additionally, this approach will contradict Nigeria’s goal of playing a leadership role in Africa by promoting a fair, inclusive and equitable energy transition in Africa that will include gas as a transitionary fuel.
However, promoting conservative and productive energy use can accelerate Nigeria’s decarbonisation and development empowerment goals because it symbolises the idiomatic expression of “killing two birds with one stone”.
The concept of productive energy use is subsumed in using energy for activities that enhance the people’s income, welfare and overall standard of living. It refers to power uses that improve the development of businesses and sectors that impact the country’s overall development. These activities are mainly in the agriculture, health and education sectors. Such activities include food processing, storage of food and medicine, pumping water, and general production of power for industrial and commercial purposes.
On the other hand, the conservative use of energy addresses using low-carbon energy sources to ensure the protection and preservation of the environment. In the face of the rising threats of global warming, among other effects of climate change, the urgency for the switch away from fossil fuels for energy generation is apparent, yet, the Nigerian government has declared gas to be its transitional fuel, particularly in the power sector.
Although the European Union considers all investments in natural gas to be investments in clean energy, in reality, all sources for energy generation except renewable sources impact the environment in varying degrees. Therefore, in our journey to carbon neutrality with gas as a transitionary fuel, the efficient use of the energy generated would reduce the fuel needed to produce energy and the associated carbon emission or pollution.
The following measures can be taken to enhance the productive and conservative use of energy:
1. Electricity tariffs for industries, schools, health centres and agricultural outfits should be cross-subsidised with residential and commercial users. The former tariff regime of the Nigerian electricity supply industry placed customers in different classes with varying tariffs. The classification included residential, commercial (purposes other than as a residence and factory), industrial (manufacturing purposes), special (agriculture excluding agro-allied enterprises, water boards, teaching hospitals, research institutes and educational establishments) and street lighting. A major characteristic of these different classes was that customers with higher consumption had higher tariffs than their low-consuming counterparts.
Subsequently, the Nigerian Electricity Regulatory Commission (NERC) changed the rate design via its Multi-Year Tariff Order (MYTO) 2020. The new rate design grouped the various customer tariff classes (residential, commercial, industrial and special) into non-maximum demand (Non-MD), low voltage maximum demand (MD1) and medium/high voltage maximum demand (MD2), with non-maximum demand customers cross-subsidising maximum demand customers’ tariffs.
While the reversal is economically justified, the broad categorisation contradicts the development goals of the ETP. For instance, under new groups, small and medium enterprises (SMEs) which fall under the Non-MD category cross-subsidise electricity costs for maximum-demand customers. SMEs contribute 48% of the national GDP and 96% of businesses and 84% of employment. This data reveals that the current tariff categorisation will stifle the growth of SMEs, negatively impacting the first key objective of the ETP to lift 100 million Nigerians out of poverty and drive economic growth.
In light of the above, an unbundling of the new categories (Non-MD, MD1 and MD2) to specify industrial, agricultural, health and education purposes is necessary. In addition, a review of the rate design to ensure that consumptive users subsidise productive electricity users is advised. This modification will significantly improve the ease of doing business and encourage the establishment of enterprises and the creation of employment opportunities, as proposed in the ETP’s Vision 2060.
2. Lack of reliable and quality power supply has spurred a lack of faith in the sector, especially on the national grid, resulting in the growth of the fossil-fuel-powered self-generating sets market in Nigeria, especially among high energy consumers. The result is increased carbon emissions by the power industry.
The Eligible Customer Regulation 2017 attempts to address this issue by directly connecting a high/maximum demand customer or group of customers (with not less than 2 megawatts consumption per month) to a transmission network or generation facility.
The regulation provides a detailed license process, including a no-objection upon notifying the general public through publication in the dailies. However, most applications for an EC license have been objected to by the distribution company that operates in the franchise area of the applicant (for reasons not covered in this publication).
There is a need to ensure the full operationalisation of the EC regulation to achieve the decarbonisation and development goals of the ETP. This will provide improved availability and reliability of supply and limit the use of diesel generators and the associated pollution. Furthermore, the resultant decrease in electricity costs will decrease the operational costs of these outfits, making more funds available for business expansion and job creation.
3. Large-scale renewable projects or target-specific on-grid network investments should be deployed to cater to the needs of large businesses and industries in unserved and underserved areas. This will ensure power reliability for productive use and minimise the carbon footprints of these organisations through diesel generators. In January 2023, after a conference that assessed the viability of large-scale on-grid decentralised energy solution, the Nigerian Sovereign Investment Authority (NSIA), in collaboration with the Nigerian Energy Support Programme (NESP), commissioned a 10MW Solar Project under the on-grid sub-intervention and business model. This model should be promoted to ensure a sector-wide inclusion of renewable energy in the power industry.
4. Electricity consumers should be enlightened on the benefits of energy management and energy-efficient appliances, especially for customers connected to the national grid. This is imperative because on-grid electricity is mainly generated from burning fossil fuels.
The above notwithstanding, energy management is critical in ensuring power availability for more users on-grid and off-grid. To achieve universal access by 2050, community engagement, enlightenment campaigns and outreaches must be prioritised. The industry regulations should also back this by making it a regulatory requirement for the continued operation of all stakeholders in the Nigerian electricity supply industry.