Nigeria’s energy efficiency business model: A single N500 billion market now on the table

 

Editorial

Rising energy cost in Nigeria amidst inflationary pressure has thus put pressure on the cost of living and production, and this has continued to constrain the expected economic growth.

 

This is, however, happening in the face of the current global energy crisis as a result of Russia’s gas monopoly, which has further worsened the crisis globally.

Evidently, Nigeria is in for a serious economic battle which will likely worsen before it gets better only if deliberate efforts are made.

It is therefore instructive for the Nigerian government to urgently advance bold measures aimed at implementing energy conservation and management plans. The people must also be sensitive to their consumption pattern to avoid wastage and reduce energy cost.

Energy consumers at domestic, corporate, and industrial levels in the country should start adopting energy efficiency mechanisms, especially in their consumption patterns.

Regulations requiring detailed monitoring of energy consumption in buildings and facilities can be put in place to drive energy-saving changes in practices and behaviours.

Facility managers, landlords, and employers need to deploy energy-monitoring solutions to ensure data-driven energy efficiency and gain detailed knowledge of consumption patterns. This will go a long way to reducing energy costs and promoting efficiency.

Nigerians also need to be conscious of transiting to efficient engines and machines. It is not sustainable at this time for anyone to consider owning any car with 600 Brake horsepower (BHp)  and mostly inside traffic jams burning fuel in idle mode.

High-energy consuming cars such as Sports Utility Vehicles (SUVs) should be regulated.

Recall that the International Energy Agency(IEA) said that SUVs are the second-largest contributor to the increase in global emissions since 2010. The agency said that the size, weight, and drag of SUVs mean they consume more fuel and emit more carbon dioxide than average cars.

 

Therefore the idea of breaking down barriers to harness Nigeria’s rich potential is now coming to the fore more strongly, and EnergyDay is convinced that those barriers are not as strong as ignorance by the Nigerian business community.

 

There are employment opportunities, economic value, and money waiting to be unlocked in this economic area that’s poorly amplified and generally referred to as “Energy Efficiency Services.”

Aliko Dangote understood this very clearly, as he ventured into the establishment of a Compressed Natural Gas (CNG) facility to supply fuel for his trucking business in Edo State.

The cost difference between the use of CNG and conventional fuels gives the business mogul a 50% profit margin in fuel savings. This is a huge amount of money and economic value in addition to creating employment opportunities.

EnergyDay checks reveal that about 4000 trucks are currently running on CNG instead of Premium Motor Spirit or Diesel and are operated by the Aliko Dangote Company.

 

In contrast, the Federal Government expends an unquantifiable amount of money to finance the cost of moving petroleum products across the country, and diesel is a major cost component in this regard.

There is really no fixed budget by the government for this service and the cost keeps rising by the day and then, passed into a cesspit called “subsidy”.

Recall that EnergyDay, in its previous report said that the sum of N500 billion in debt is owed to the Independent Petroleum Marketers Association of Nigeria (IPMAN) by the management of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The major component of this huge debt is the cost of diesel that haulage operators rely on in moving petroleum products across the country. This practice is largely responsible for the demand for diesel and the intermittent occurrences of fuel scarcity in the country.

Perhaps, a second look at the CNG option by members of the Organised Business Group will lead the country closer to energy efficiency in this regard.

EnergyDay wishes to submit that the economy of scale permits other large businesses in Nigeria to pay attention to this important market and find a way to adjust their operational facilities to take good advantage of those resources that are available in the country, particularly the unfolding gas economy.

Lessons from Ghana are instructive to assist the Nigerian public and government institutions respond quickly in a very affirmative manner.

In the words of Kofi Agyarko, Head of the Energy Efficiency and Climate Change Division of the Ghana Energy Commission, “Ghana has achieved significant success in turning its economy into an energy efficient economy.”

 

The energy efficiency drive was prompted by periodic energy supply shortages dating back to the 1980s. The energy supply challenges were caused by the actions of oil cartels, long droughts that reduced the water volumes in the major hydro dams, and the use of old and inefficient end-user appliances.

Imported old appliances from Europe and elsewhere have dominated the market for a long time. Until recently, these old and inefficient appliances accounted for 30% of all electricity generated. The efficiency drive was started with the development of minimum energy standards for end user appliances.

Standards were developed for three major end-user appliances: lighting, air-conditioning, and refrigerators.

In order to make compliance mandatory, laws were passed to lend legal support to the enforcement of the standards.

Another law was passed to prohibit the importation of used refrigeration and air-conditioning appliances as well as the manufacturing and sale of incandescent filament bulbs.

 

The country then put in place an appliance labelling regime which made it an offence to sell appliances without the labels. The labels became a ‘mark of efficiency” through consumer education.

The objectives of the appliance standards and labeling regime were to reduce the electricity bills of consumers, prevent the country from becoming a dumping ground for obsolete appliances, and finally to transform the appliance market.

Two categories of appliances—lighting and refrigeration—were selected for definite interventions to achieve market transformation.

The government then funded the purchase of six million compact fluorescent lamps to be distributed free of charge to consumers to replace incandescent lamps. the results were amazing: 124 megawatts were shaved off the peak load, which delayed a USD 105 million investment to expand thermal energy generation.

With an average crude oil price of USD 105 per barrel during that period of time, the savings realized equaled USD 33.3 million per annum, with carbon dioxide savings of 112,320 tons per annum.

Furthermore, a refrigerator energy efficiency project was launched aimed at reducing the electricity consumption of refrigerating appliances and transforming the market from old, inefficient refrigerating appliances to new and efficient ones.

The project ran for three years, at the end of which the refrigerating appliance market had been transformed and the average consumption of refrigerators reduced from 1,200 kilowatt hours (kWh) per annum to 600 kWh per annum.

A rebate scheme was put in place to serve as a special purpose vehicle to entice consumers to voluntarily turn-in their old and inefficient refrigerators in exchange for new and efficient ones.

At the end of the project, 10,000 old and inefficient refrigerators were retrieved from homes and replaced with the same number of energy efficient ones.

About 30,000 illegally imported used refrigerators were seized and destroyed to prevent them from being used. The project yielded 400 gigawatt hours (GWh) of savings, i.e., a third of the total national generation. Carbon dioxide savings equaled one million tons.

Back home in Nigeria, a similar perspective is shared by Elohor Aiboni, Managing Director of Shell Nigeria Exploration and Production Company (SNEPCo).

She advised Nigerians to start embracing a consumption habit that guarantees that available power is efficiently utilized.

“In broad daylight, why do you leave your lights on? She asked, “The energy transition journey is not a sprint but a marathon, and we all have a role to play, no matter how small!” Be it in our consumption pattern or our supply pattern.

“Every single one of us in this country has a role to play, even as individuals,” she said.

“Behavioral attitudes are changing because those who are currently on prepaid meters are presently compelled by the current electricity cost, which is about N60.67/kWh (Kilowatts per hour), to conserve power at their offices and homes.”

The changes are beginning to happen. .

“When we started installing the prepaid meters, a lot of people started putting off the air conditioners. They started putting off the heaters. Most people have stopped using dryers to dry their clothes. “With the new N60. 67/kWh electricity tariff as reviewed by the Nigerian Electricity Regulatory Commission (NERC) in May 2022, an average Nigerian household not having heavy electronics in use may be spending an estimated N40,000 monthly.

This is even worse for business owners and homes running on heavy machines, air conditioners, electric cookers, and the like.

EnergyDay holds strongly to the view that Nigeria should consciously recognise that energy efficiency has enormous potential to increase productivity and prosperity while cutting waste.

Appropriate laws are needed to fast track the new vision that the country is confronted with. Strong political leadership with a strong commitment to fighting corruption is a must!

The organized private sector business community is rather too docile , too dependent on political patronage and needs to set a new agenda for industrial excellence, innovation and the transformation of the country.