Can Nigeria Survive the Global Energy Transition?

Can  Nigeria Survive the Global Energy Transition?

By Daniel Alaigba

As the global society pushes towards a sustainable future, the need to transition from fossil-based systems of energy to zero-carbon systems have become imminent. Energy transition in simple terms is the move of energy production and consumption from sources that emit greenhouse gases to other sources that are more environment friendly. The aim of this energy transformation is to limit and mitigate the effects of climate change, through the reduction of greenhouse gas emissions such as carbon dioxide, carbon monoxides, nitrous oxides associated with the burning of fossil fuels. Emission and leakage of un-combusted natural gas from oil and gas facilities also contribute to increased carbon content in the atmosphere impacting the earth’s climate.

Most of the world’s energy is generated from fossil or carbon-based fuels. Carbon-based fuels account for about 85% of the energy used globally. The combustion of carbon fuels produces carbon dioxide, which contributes 76% to the total emission of greenhouse gases. Thus, the burning of carbon-based fuels is the single largest contributor to global warming and climate change. The greenhouse cases that are emitted from the burning of fossil fuels absorb infrared radiation from the sun and prevent it from leaving the atmosphere by reradiating it on the earth surface leading to a rise in temperatures. Apart from the pressing issue of climate change, there is a limited amount of fossil fuel in the ground, predetermined by nature. Current proven oil reserves will be depleted and unavailable within the next 100 years. This makes alternative eco-friendly sources of energy a top priority of the century.

In response to the pressing demand to transition to new forms of energy that are sustainable and friendlier to the environment, nations of the world are researching and making significant strides in new sources of energy which include solar, wind, nuclear, geothermal and hydroelectric technologies. These energy sources are expected to gradually and eventually replace fossil fuels by the middle of the century. In 2015, 196 countries signed the Paris Agreement on climate change to hold “the increase in the global average temperature to well below 2˚C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5˚ above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.” That decision implied that fossil fuels, which contribute significantly to global warming, needed to be replaced. Already, many countries have begun to generate a significant amount of energy from renewable sources. The European Union’s renewable energy directive seeks to increase the share of renewable sources of energy in total EU consumption to 32% by 2030 up from 20% in 2020. Denmark for instance currently generates 30% of its energy from wind turbines, reducing its fossil fuels consumption from 95% in the 1970s to 65% in the recent years. In USA, plans and major projects are in the works with a goal to achieve 100% zero carbon electricity by 2035. Some of the strategies to achieve this includes retrofitting existing fossil fuel power plants with carbon capture equipment, investing in new sources of hydrogen produced from renewable energy, nuclear energy, and waste to power industrial facilities. Also in April 2021, the US president Joe Biden announced a $2 trillion dollar infrastructure investment plan that incorporates tax incentives for clean energy, electric transmission and carbon capture technology and funding for research and development to tackle climate change. According to the United Nations Environment program (UNEP), global investments in renewable energy has been growing from $40 billion in 2004 to $304 billion in 2020 with China, USA, Europe, India, and Brazil as global leaders, respectively.

In Nigeria, the over dependence on fossil fuels (oil and gas) as a major source of revenue gives the keen observer a cause to worry as to the readiness of the country to flow with the global push for transition to renewable energy. The country, which began as an agriculture-based economy, shifted from agriculture to crude oil, during what is referred to as the oil boom. Currently, according to OPEC, petroleum exports revenue in Nigeria represents about 86% of the country’s total exports revenue. This shows that any shift in the price of oil will monumentally affect the nation’s economy. By extension, a displacement of that energy source, as things stand, will spell a near disaster.

Nigeria appears unprepared for a comprehensive energy transitioning; and it is hard not to see problems that the transformation may bring upon the economy of the nation. But it appears that there is a level of awareness in the corridors of power as to the necessity of the global call for decarbonization. The country’s minister of power said in a press conference in August 2021 that “the energy transition for Nigeria will feature both clean energy technologies and natural gas, with the aim of achieving net-zero emissions by 2050. Nigeria had developed an Energy Transition Plan on pathways to achieving universal access by 2030 and net-zero targets by 2050.” Not much is known of this plan mentioned by the minister. But if it is anything to go by, now is the right time to begin an aggressive implementation of that plan.

It is unavoidable that within the next decade there will be an upsurge in the utilization of renewable energy sources like solar systems and wind turbines. And if the target by major economies of the world, to create about 50% of energy based on renewable sources by 2050 is achieved, the demand for, or consumption of carbon-based fuels, which Nigeria heavily leans on, will be significantly affected. It is, therefore, imperative that the country finds an urgent alternative to sustain the economy. And the answer is in diversification.

Nigeria can take the following suggested approach to proactively plan for and manage the global energy transition. Firstly, the federal government needs to create the enabling fiscal environment to attract investment in the oil and gas industry especially in deep-water and gas development. While there will be a shift to renewable energy, oil and gas will continue to be in the energy mix until 2050; Natural gas is replacing coal in the mix. It will take quite some time for technological breakthrough in a commercial scale that will result in a total shift from natural gas for heating in industrial applications that powers the world’s good and services supply chain. Nigeria needs to lock in long term gas sales contract agreements in Europe, China and India and seek to assert her influence in the African regional market.

Nigeria is abundantly blessed with solid minerals. Rare earth metals are required to produce batteries which are critical for electric vehicles and solar powered electricity grids of the future. The federal government should direct some of the current oil and gas proceeds to exploration of these minerals and encourage the private sector to invest in battery technology development and manufacturing for global export to earn foreign exchange. With Nigeria’s high population and unemployment rate there are opportunities for targeted training of unemployed graduates to produce value added products in the renewable energy value chain such as electric vehicle chargers and solar panels. Lastly, the government must maintain financial discipline within the next ten years, Nigeria should learn from Norway and ensure that sovereign wealth funds from oil and gas proceeds is wisely invested for future generations.

Daniel Alaigba is a versatile Facilities Engineer with over 13 years professional experience covering Project Construction Management, Operations Management, Business Planning and Business Analytics with one of the international oil and gas companies.

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