Page 88

S14 ATR April 2016 Power_3_Layout 1 24/03/2016 16:06 Page 86

PoWeR

Markets

In search of clean, affordable energy Viable power generation solutions are essential for the development of West African companies and communities

N

igerians need reliable, affordable, safe, clean energy, but not just any energy at any cost. These are the key words that politicians, development agencies and, increasingly savvy business operators are using. Today, the West African nation's households pay a high poverty penalty. A poor rural household in Nigeria spends about N65–N200 (US$0.33-1.00) on energy per day. How much does one Kilowatt from a dieselgenerator cost? How much productive time is lost in Nigeria every day because of blackouts? Whenever the argument is made that solar systems have a higher initial (upfront investment) cost, all these factors are mostly ignored. Where the cost of solar is compared only with the kilowatt hour price of grid electricity, the poverty factor is left out of the equation, thus leaving a distorted picture of the true and affordable price of renewables. Reliable and sustainable? People connected to the grid would hardly describe the grid as being reliable. A different approach to the grid is required that combines management and technological improvements to stabilize the grid with renewable energy solutions that can close the gaps. Energy resilience can be enhanced by connecting many smaller units of electricity generation. This requires a shift in investment towards smart mini-grids and energy solutions for individual households. This is especially relevant for those areas that the power lines currently pass by. Large hydro-power dams, which provide up to 30 per cent of Nigeria's power, longviewed as the most reliable sources of electricity, are suffering from inadequate maintenance. With climate change their reliability is further undermined, as drought and other extreme weather events affect their installations. No single energy size fits all Nigeria's electricity market operates at

86

Management and technological improvements are needed to stabilize West Africa’s power grid

different scales and the most appropriate solutions differ significantly depending on the scale. The pros of a massive ramp up of renewables on- and off-grid are clear: ● Solar PV and wind power are increasingly affordable. Their low cost can help drive grid penetration. ● At scale, renewables are cost competitive. Grid parity has been reached for wind and PV solar, i.e. the cost per Kwh over the lifetime of a project are now lower when compared to fossil fueled power. ● Renewables can lead to reductions in the wholesale price of electricity, if regulation grants it priority grid access. ● Renewables technology is fast to deploy: One-two years for a solar plant, three-five years for a wind park, 20 years or more for a nuclear plant. The rapid deployment of renewables needs to be managed properly: ● There are in the short-term higher upfronts costs that need to be borne by the investor, a community or the prosumer (a

African Review of Business and Technology - April 2016

consumer who also produces electricity that is fed into the grid). These can often be recouped within 2-3 years. There is a risk of dumping of sub-standard technologies, like second-hand PV panels.

Grid service With plentiful renewable energy coming into the grid, combined with unbundling and privatisation, earnings in the electricity sector have moved up the value chain. Exploration and production are marginal earners, grid operation is neutral and most profits are being made in energy services. This has attracted many start-ups to the (renewable) energy services market. New services are being provided by incumbent operators as well as new companies (eg from telecoms, banking and electronics). We observe a trend towards selling new services in bundles (solar energy, mobile phone, home automation and Internet). If designed well, an energy services market promotes energy efficiency and demand-side management, thus reducing demand growth and pressure on the grid. ■ www.africanreview.com

Profile for Alain Charles Publishing

African Review April 2016  

African Review April 2016