Lessons for Nigeria’s renewable drive as world weigh future of oil

After more than a century of rapid growth, global energy demand shows growth slowing and plateauing around 2030, primarily driven by the penetration of renewable energy sources into the energy mix.

For many Nigerian businesses and households with capacity to invest in renewables, the shift has commenced as supply from the grid has remained inadequate to serve their energy requirements.

Already, many of the trends that shape the future of energy, according to available data, are in reality driven by a multitude of local trends, which will occur with different magnitudes and speeds in specific geographies and sectors.

For economies keen on reducing global carbon footprint, natural gas might be the last standing fossil fuel to be removed from the energy mix while other economies think of ways to utilise other variants.

With the cost of renewables coming down, many countries, according to BP, are projected to reach a tipping point in the coming five years, where new-build solar or wind capacity is cost-competitive with the fuel cost of existing conventional plants. As a result, there is expected further acceleration of the ramp-up of renewables.

Similarly, as the cost of batteries continues to decline, within the next 5-10 years, many countries will reach the point at which electric vehicles are more economic than internal combustion engine vehicles. This is true for passenger cars but also for most truck segments.

Triggered by a drop in global coal demand and flattening oil demand, carbon emissions are expected to start to decline by the mid- 2020s.

For instance, the United States Energy Information Administration (EIA) in its latest long-term international outlook projected that renewable energy will displace petroleum as the most-used global energy source in the late 2040s, but oil demand is not expected to peak before 2050.

EIA predicts that renewables – including wind, solar and hydroelectric – will become the largest source of energy by 2050, surpassing oil. But they still predict fossil fuel use to grow, making net-zero emissions unlikely if not impossible to meet.

The growth projection raises concerns for economies dependent on oil and presents a challenge to governments worldwide, if they are to meet repeated warnings that the global economy must be net-zero in greenhouse gas emissions by 2050. Energy production accounts for more than 70 per cent of emissions, according to the non-profit, Centre for Climate and Energy Solutions.

The growth reference case assumes Brent oil prices at $100/b in 2050, and annual global economic growth of three per cent,“0.6 per cent annual growth in petroleum and other liquids, 0.4 per cent growth in coal, and 1.1 per cent annual growth in natural gas consumption,” the report read. “Global natural gas consumption increases more than 40 per cent between 2018 and 2050, and total consumption reaches nearly 200 quadrillions Btu by 2050”, the report showed.

EIA Administrator, Linda Capuano, said the outlook for oil demand continuing to rise through 2050 is based on economic growth, population growth, demand for new oil-based products, air-conditioning use, transportation and other factors.

“Even though you see a very aggressive change in renewables, it is just not growing fast enough to meet the demand, and we do not see demand tapering off,” she said at an event to release the report at the Centre for Strategic & International Studies.

The forecast sees global renewable energy demand increasing three per cent per year between 2018 and 2040, driven by electricity demand and government policies. The EIA expects liquid fuel consumption to decline to 27 per cent as a share of global demand in 2050, from 32 per cent in 2018.

To most stakeholders, the fact that the world is accelerating the shift from internal combustion engines as power units for transportation to electric-powered vehicles means that the demand for hydrocarbons as a fuel source would decrease and supply could exceed demand and oil price could remain low for a very long time.

They however noted that, electricity to power electric vehicles would have to be generated by oil, gas, coal and renewables with oil and coal contribution reducing over time. They added that while this is happening, the world is also adopting gas as a more environmentally friendly fuel source, stressing that remained good news for countries Nigeria with substantial gas resources/

While the demand for cleaner sources of energy is growing, due to the negative impacts of fossil fuels, some analysts believe that the dominance of crude oil will continue to decline, but how soon this goes away remains a critical question.

Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju, insisted that the rate at which developed economies are turning from oil should create concern for Nigeria.

“The world is turning away from fossil fuels, so countries are developing their economies towards carbon free energy. As we shift away from oil, the influence of crude oil will fall,” he said.

PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, said it was high time for Nigeria to focus on alternatives to crude oil.

He noted that with demand for batteries surging and the northern part of the country having huge deposit of raw materials like cobalt, graphite and lithium, countries like France, U.K., U.S., India, and Norway are already announcing plans to ban the new sale of petrol and diesel cars.

Reportedly, lithium-ion battery market is expected to grow at a 21.7 per cent rate yearly in terms of the actual energy capacity required. It was 15.9 GWh in 2015, but would hit a whopping 93.1 GWh by 2024.

The Co-founder, Sustainability School Lagos, and associate lecturer, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Dr. Olufemi Olarewaju, noted that the country has no future in oil anymore, adding that there would be continuous reduction in the demand for crude oil.

“We were worried that oil was going to finish, now we are sure that oil is going to remain in the ground. With the new aggressiveness of automobile manufacturers, there is going to be a sharp demand in battery storage. We will have sharp demand for clean energy automobile. There will be significant reduction in demand for oil and that will obviously affect our economy,” Olarewaju said.

President, Nigeria Association for Energy Economics, Prof Yinka Omorogbe, who had noted that emerging dynamics in petroleum resources require serious attention by countries like Nigeria, said that oil is no longer a scare resources as always thought.

Indeed, as most countries are discovering crude oil, she noted that new technologies, will continue to disrupt trend-making petroleum products more vulnerable, adding that it was high time countries like Nigeria took strategic decisions of diversifying from oil.

“Most major oil producers are thinking and exploring different options. The moment inventors develop a battery that can go for hundreds of miles then fossil fuels will be on the way out,” Omoregbe said.