Markets

Decentralised Renewable Energy as Magic Wand to Electricity Access

Published

8 years ago

November 6, 2016

Decentralised Renewable Energy as Magic Wand to Electricity Access

With multi-national oil companies looking more to the international market, where projects are huge and leaving the domestic gas market gasping for oil, Nigeria’s power sector doesn’t seem to be getting off the woods just yet.

Nigeria’s electricity power sector is largely dependent on gas. Low gas availability, occasioned largely by poor pricing, transportation infrastructure and a market that is skewed largely in favour of exports, has continued to plague Nigeria’s power sector over the years. This has, in turn, made a huge mockery of efforts to provide efficient and reliable electricity to the country’s large population.

Government spoke recently of a renewable energy plan. While there is limited information on actual implementation strategies, stakeholders are pointing to a new untapped possibility for solving Nigeria’s age-long energy crisis.

To improve electricity access, guarantee rural economic development and generally demystify supply, experts are pushing for Nigeria to pay attention to decentralised renewable energy (DRE).

At the forefront of this campaign is the Power for All Initiative, championed by international energy policy expert, Ify Malo and the newly formed Renewable Energy Association of Nigeria (REAN).

A renewable energy specialist, Dotun Tokun, described the concept as a world of untapped potentials. Tokun, who is the promoter of Solarmate Engineering Ltd., said: “DRE for rural Agribusiness, with proper financing plan is a win-win situation. Land for the panels would not be a problem. It will increase productivity of the plants, prevent/reduce rural to urban migration and provides gainful employment. Not forgetting the positive impact of renewables on the environment.”

On how renewable energy could become the game changer in Nigeria’s energy revolution, the Campaign Director for Power For All in Nigeria and Co-founder of the Clean Tech Hub, Ifeoma Malo, explained: “Nigeria’s current grid capacity is able to generate about 12,000 megawatts and yet, only 5,000 megawatts is actually available to meet the needs of the country’s teeming population. This means that about 60 percent of Nigerians lack access to the grid. This gap between demand for electricity and available supply means that many Nigerian businesses and home owners are into widespread self-generation of power for their commercial, industrial and residential uses.

“Furthermore, with an ageing grid system, several Nigerians connected to the grid face extensive power outages, due to low reliability. Therefore, the use of diesel fueled generators, as an alternative to the grid and kerosene lamps for the rural poor are still widespread and compensate for the lack of electricity supply across the country. The increased militancy on oil and gas pipeline means that there will be increasingly low reliability to generate power from the grid.

“However, there is another path-way that is cheaper, simpler and more sustainable to get electrified in Nigeria. That is decentralised renewable energy, which specifically involve mini-grid systems and stand-alone home systems. These systems are easy to deploy – usually within a six-month time frame; and the costs for the end user, especially when spread over time, are comparable to both grid based electricity connections. Decentralised Renewable Energy is certainly cheaper than the diesel and kerosene alternatives that many Nigerians currently deploy in their self-generation efforts.

“The market for decentralised renewables in Nigeria is at the cusp of a major take off. However, some of the market enablers for this market to truly emerge are yet to be in place. Despite little incentives from the government for private investor participation, we have seen increased interest and projects targeted at this market.

“There are several programmes and projects springing up in several rural and peri-urban communities across Nigeria, either as pilots or commercial ventures and are increasing, especially in urban centres across the country. These projects are funded either with capital from grant donors or through commercial partnerships, including bank loans and credit facilities. The projects range from stand-alone home systems (SHS), mini grid systems, and solar home appliances, such as, lamps and cooking stoves. Yet, for this market to scale up and meet the latent demand for electricity across the country, there has to be the right enabling policies and market incentives. It is also important to have clear targets and timelines for the decentralised renewable energy sector and broad support by stakeholders.

“This is why the preparations for the emergence of an industry association to help catalyse a collective voice for the sector is one of the most important things happening in recent times. This industry association aims to be a reputable umbrella association, supporting and enabling the sustainable growth of the renewable energy sector throughout Nigeria. The mission of the association is to promote all forms of renewable energy technologies into the mainstream of the Nigerian economy and lifestyle by emphasising the need for quality and best practices in the sector for the benefit of members, consumers and other stakeholders. The association also seeks to facilitate information dissemination, formulate proposals for improvements in the renewable energy sector and make recommendations to the responsible governing and policy authorities, amongst the other stated goals. We believe that decentralised renewable energy will play an important role in meeting these objectives, and help to activate and support the market in sustainable ways, particularly as this sub-sector is the quickest and cheapest way to grow the renewable energy industry and market overall.”

On ways to accelerate renewable energy rates and penetration, she called for the integration of rural access with decentralised renewable energy development.

“With the high demand for electricity amongst urban and rural dwellers, and with Nigeria having one of the best solar radiation rates in the world, achieving rural access electrification is a quick win, using decentralized renewable energy,” she explained. “With several countries in East Africa, such as, Kenya, Tanzania, and Uganda, already leading the way in deploying decentralised renewable energy to increase and optimise their electrification rates, particularly in rural communities, Nigeria cannot afford to be left behind. Although, financing the sector remains a challenge, the government, with active stakeholder participation, can make policies and build partnerships with the private sector to subsidise the cost of financing such projects in rural Nigeria to solve the country’s energy challenge.”

On his part, Segun Adaju, President of the Renewable Energy Association of Nigeria (REAN), said the opportunity for decentralised renewable energy is so huge that it has become hard to ignore.

He said: “It is clear that Nigerians have a choice—either to continue with the old pathway to electrification through on-grid methodologies, which has kept electricity access rates static for many years now, or choose a new path, which involves making decentralised renewable energy main stream to meet improved electrification rate. As many Nigerians, especially the growing workforce of the country, buoy by the teeming youth population depend on electricity to make ends meet, it is clear that turning around our current economic crisis, while growing and contributing to the GDP of the country, is dependent on deploying decentralized renewable energy. The time to gain independence from blackouts is now. The time to act is now, and decentralised renewable energy provides the way forward.”

Indeed, stakeholders are making a strong case for Nigeria to scale up the deployment of renewable energy solutions in the country through improved market incentives.

Among other things, they are asking for the abolition of VAT and import duties on renewable energy components brought into the country for projects.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Dip on Sluggish Demand Signs and Fed’s Interest Rate Outlook

Published

2 days ago

May 13, 2024

Samed Olukoya

Oil prices on Monday dipped as the U.S. Federal Reserve officials’ comments showed a cautious approach to interest rate adjustments.

The dip in prices reflects concerns over the outlook for global economic growth and its implications for energy consumption in the world’s largest economy.

Brent crude oil, against which Nigerian oil is priced, slipped by 7 cents or 0.1% to $82.72 per barrel while U.S. West Texas Intermediate crude oil stood at $78.21 per barrel, a 5 cents decline.

Auckland-based independent analyst Tina Teng highlighted that the oil market’s focus has shifted from geopolitical tensions in the Middle East to the broader world economic outlook.

Concerns arose as China’s producer price index (PPI) contracted in April, signaling continued sluggishness in business demand.

Similarly, recent U.S. economic data suggested a slowdown, further dampening market sentiment.

The discussions among Federal Reserve officials regarding the adequacy of current interest rates to stimulate inflation back to the desired 2% level added to market jitters.

While earlier in the week, concerns over supply disruptions stemming from the Israel-Gaza conflict had provided some support to oil prices, the attention has now turned to macroeconomic indicators.

Analysts anticipate that the U.S. central bank will maintain its policy rate at the current level for an extended period, bolstering the dollar.

A stronger dollar typically makes dollar-denominated oil more expensive for investors holding other currencies, thus contributing to downward pressure on oil prices.

Furthermore, signs of weak demand added to the bearish sentiment in the oil market. ANZ analysts noted that U.S. gasoline and distillate inventories increased in the week preceding the start of the U.S. driving season, indicating subdued demand for fuel.

Refiners globally are grappling with declining profits for diesel, driven by increased supplies and lackluster economic activity.

Despite the prevailing challenges, expectations persist that the Organization of the Petroleum Exporting Countries (OPEC) and their allies, collectively known as OPEC+, may extend supply cuts into the second half of the year.

Iraq, the second-largest OPEC producer, expressed commitment to voluntary oil production cuts and emphasized cooperation with member countries to stabilize global oil markets.

However, Iraq’s suggestion that it had fulfilled its voluntary reductions and reluctance to agree to additional cuts proposed by OPEC+ members stirred speculation and uncertainty in the market.

ING analysts pointed out that Iraq’s ability to implement further cuts might be limited, given its previous shortfall in adhering to voluntary reductions.

Meanwhile, in the United States, the oil rig count declined to its lowest level since November, signaling a potential slowdown in domestic oil production.

As oil markets continue to grapple with a complex web of factors influencing supply and demand dynamics, investors and industry stakeholders remain vigilant, closely monitoring developments and adjusting their strategies accordingly in an ever-evolving landscape.

Crude Oil

Brent Crude Hovers Above $84 as Demand Rises in U.S. and China

Published

5 days ago

May 10, 2024

Samed Olukoya

Brent crude oil continued its upward trajectory above $84 a barrel as demand in the United States and China, the two largest consumers of crude globally increased.

This surge in demand coupled with geopolitical tensions in the Middle East has bolstered oil markets, maintaining Brent crude’s resilience above $84 a barrel.

The latest data revealed a surge in demand, particularly in the U.S. where falling crude inventories coincided with higher refinery runs.

This trend indicates growing consumption patterns and a positive outlook for oil demand in the world’s largest economy.

In China, oil imports for April exceeded last year’s figures, driven by signs of improving trade activity, as exports and imports returned to growth after a previous contraction.

ANZ Research analysts highlighted the ongoing strength in demand from China, suggesting that this could keep commodity markets well supported in the near term.

The positive momentum in demand from these key economies has provided a significant boost to oil prices in recent trading sessions.

However, amidst these bullish indicators, geopolitical tensions in the Middle East have added further support to oil markets. Reports of a Ukrainian drone attack setting fire to an oil refinery in Russia’s Kaluga region have heightened concerns about supply disruptions and escalated tensions in the region.

Also, ongoing conflict in the Gaza Strip has fueled apprehensions of broader unrest, particularly given Iran’s support for Palestinian group Hamas.

Citi analysts emphasized the geopolitical risks facing the oil market, pointing to Israel’s actions in Rafah and growing tensions along its northern border. They cautioned that such risks could persist throughout the second quarter of 2024.

Despite the current bullish sentiment, analysts anticipate a moderation in oil prices as global demand growth appears to be moderating with Brent crude expected to average $86 a barrel in the second quarter and $74 in the third quarter.

The combination of robust demand from key economies like the U.S. and China, coupled with geopolitical tensions in the Middle East, continues to influence oil markets with Brent crude hovering above $84 a barrel.

As investors closely monitor developments in both demand dynamics and geopolitical events, the outlook for oil prices remains subject to ongoing market volatility and uncertainty.

Crude Oil

Brent Plunges Below $83 Amidst Rising US Stockpiles and Middle East Uncertainty

Published

7 days ago

May 8, 2024

Samed Olukoya

The global oil declined today as Brent crude prices plummeted below $83 per barrel, its lowest level since mid-March.

This steep decline comes amidst a confluence of factors, including a worrisome surge in US oil inventories and escalating geopolitical tensions in the Middle East.

On the commodity exchanges, Brent crude, the international benchmark for oil prices, experienced a sharp decline, dipping below the psychologically crucial threshold of $83 per barrel.

West Texas Intermediate (WTI) crude oil, the US benchmark, also saw a notable decrease to $77 per barrel.

The downward spiral in oil prices has been attributed to a plethora of factors rattling the market’s stability.

One of the primary drivers behind the recent slump in oil prices is the mounting stockpiles of crude oil in the United States.

According to industry estimates, crude inventories at Cushing, Oklahoma, the delivery point for WTI futures contracts, surged by over 1 million barrels last week.

Also, reports indicate a significant buildup in nationwide holdings of gasoline and distillates, further exacerbating concerns about oversupply in the market.

Meanwhile, geopolitical tensions in the Middle East continue to add a layer of uncertainty to the oil market dynamics.

The Israeli military’s incursion into the Gazan city of Rafah has intensified concerns about the potential escalation of conflicts in the region.

Despite efforts to broker a truce between Israel and Hamas, designated as a terrorist organization by both the US and the European Union, a lasting peace agreement remains elusive, fostering an environment of instability that reverberates across global energy markets.

Analysts and investors alike are closely monitoring these developments, with many expressing apprehension about the implications for oil prices in the near term.

The recent downturn in oil prices reflects a broader trend of market pessimism, with indicators such as timespreads and processing margins signaling a weakening outlook for the commodity.

The narrowing of Brent and WTI’s prompt spreads to multi-month lows suggests that market conditions are becoming increasingly less favorable for oil producers.

Furthermore, the strengthening of the US dollar is compounding the challenges facing the oil market, as a stronger dollar renders commodities more expensive for investors using other currencies.

The dollar’s upward trajectory, coupled with oil’s breach below its 100-day moving average, has intensified selling pressure on crude futures, exacerbating the latest bout of price weakness.

In the face of these headwinds, some market observers remain cautiously optimistic, citing ongoing supply-side risks as a potential source of support for oil prices.

Factors such as the upcoming June meeting of the Organization of the Petroleum Exporting Countries (OPEC+) and the prospect of renewed curbs on Iranian and Venezuelan oil production could potentially mitigate downward pressure on prices in the coming months.

However, uncertainties surrounding the trajectory of global oil demand, geopolitical developments, and the efficacy of OPEC+ supply policies continue to cast a shadow of uncertainty over the oil market outlook.

As traders await official data on crude inventories and monitor geopolitical developments in the Middle East, the coming days are likely to be marked by heightened volatility and uncertainty in the oil markets.