By Daniel Agbor
The recent economic fallout due to the coronavirus pandemic has necessitated the hike in the prices of Premium Motor Spirit (PMS), popularly known as ‘fuel’, and electricity tariffs across the country essentially ending years of government subsidies.
This deregulation of the downstream sector of the oil industry means that the price of PMS will be determined by market forces, while the government would redirect subsidy funds to other productive projects. It is estimated that the federal governments spent N8.1 trillion on fuel subsidies in the period 2010 – 2018. Based on this estimate, the government plans to save N1 trillion yearly from subsidy removal.
This presents an opportunity for investments and development in other sectors that have perennially been overlooked. One of such sectors is the growing renewable energy industry.
Why Renewable Energy?
Nigeria currently depends on fossil fuels for power generation (81 per cent of total installed capacity). This does not bode well for the country in terms of energy security. With an undiversified energy mix, the Nigerian power sector is affected by challenges in fuel supply. Despite installed generation capacity of about 13,000MW, less than 400MW is suppled on average daily. Renewable energy presents an opportunity to diversify the nation’s energy mix and bridge the energy demand gap.
Nigeria receives about 4909.212 kWh of energy from the sun, which is equivalent to about 1.082 million tonnes of oil; this is about 4000 times the current crude oil production per day, and also put at about 13 thousand times of daily natural gas production based on energy unit.
Solar energy could increase the availability of electricity to almost 80 million people who have none. It can also diversify the country’s energy portfolio. The solution to the limits of the grid could be micro-grid clusters that can source energy from a variety of independent power producers. Most of this promise is based on the fact that solar-based generation capacity can be built up far quicker than traditional power plants. It can also be built in chunks, starting small and adding on the capacity as time goes on.
Harnessing these resources have the potential to supply the undersupplied grid consumers with much-needed energy. Renewable energy is the most technically feasible and cost-effective solution to the energy deficit challenge facing millions of unconnected rural dwellers.
Job Creation
Nigeria’s unemployment rate in the second quarter of 2020 stood at 27.1 per cent. Renewable energy can create millions of jobs and other economic benefits for Nigeria. In addition to direct formal employment, the sector will also create 3–4 times as many jobs in unelectrified rural and peri-urban communities by providing the energy needed for increased productivity and economic development. This increased energy security, technological and high economic activity will provide the government with increased revenue via taxes.
Environmental Benefits
Gas-fired power plants are a major source of greenhouse gases (GHG) that contribute to global warming and climate change. Renewable energy can help reverse the trend by reducing the amount of GHG associated with energy production.
Redirecting subsidy savings to such an endeavour solves not only our pressing challenges with regards to power supply but ensures a path to sustainable energy development and environmental management.