Understanding the furore over energy transition

By Clara Nwachukwu

Simply put, energy transition, also referred to as decarbonisation, is the shift from the use of hydrocarbon or fossil fuels – oil and gas, to cleaner energy or renewables such as solar, wind, hydrogen and more to reduce carbon emissions.

While the change is being driven by the developed economies over climate concerns, many resource-rich countries are suspicious since the western world was built on the back of coal (now considered to be dirty), and hydrocarbons.

Besides, because of its plethora of uses, oil and gas producers like Nigeria, believe that hydrocarbon fuels will outlive those promoting their termination, especially as more exploration and production activities have yielded new finds across many African countries.

Indeed, Covid-19 has impacted almost every aspect of how energy is produced, supplied, and consumed around the world. Reports said: “The pandemic defined energy and emissions trends in 2020 – it drove down fossil fuel consumption for much of the year, whereas renewables and electric vehicles, two of the main building blocks of clean energy transitions, were largely immune.”

Specifically, Executive Director, United Nations Environment Programme (UNEP), Inger Andersen, suggests that “If governments take advantage of the ever-falling price tag of renewables to put clean energy at the heart of Covid-19 economic recovery, they can take a big step towards a healthy natural world, which is the best insurance policy against global pandemics.”

Expressing similar sentiments, Chief Executive of BloombergNEF, Jon Moore, said: “Clean energy finds itself at a crossroads in 2020. The last decade produced huge progress, but official targets for 2030 are far short of what is required to address climate change. When the current crisis eases, governments will need to strengthen their ambitions not just on renewable power, but also on the decarbonisation of transport, buildings and industry.”

How sustainable is energy transition?

For Nigeria, which wants “to use oil to exit from oil,” it plans to maximise its hydrocarbon resources and has even devoted 30 per cent of the profits of the Nigerian National Petroleum Corporation (NNPC) for oil search in the frontier basins as provided in the recently passed Petroleum Industry Bill (PIB).

Such thinking was given further credence when the Secretary General, Organization of the Petroleum Exporting Countries (OPEC), Mohammad Barkindo, argued that oil and gas have an important role to play in the energy transition.

Barkindo, who spoke at the recently-concluded, Nigerian Oil and Gas (NOG) Conference in Abuja, noted that prescribing a 2050 deadline for full energy transition “is a dangerous and unrealistic scenario,” as there is no “one-size-fits-all” solution to addressing climate change even as OPEC supports the need to reduce emissions, bolster efficiency and embrace innovation.

In his opinion, technologies such as carbon capture, utilisation and storage (CCUS), hydrogen and other technologies are viable options for reducing carbon footprint.

From his perspective, the Group Managing Director, NNPC, Mele Kyari, said transition shouldn’t be about abandoning one energy source for another but creating the right balance, seeing as developing countries like Nigeria, still need to develop existing resources to meet energy needs.

Many of the respondents told Sustainable Economy that countries, particularly those in the developing economies should be allowed to set their own pace in the energy transition.  

Agreeing with Kyari, Professor Emeritus, Wumi Iledare, said he supports competitive advantage from technology, economics and to provide energy in an affordable and sustainable manner. “Therefore, I will not in any way support the West crowding out development of energy in Africa, because it is immoral for them to have used oil and gas for their own economic development and now want to crowd out emerging economies from getting money to develop their natural resources.”

But petroleum economist, Dr. Chijioke Nwaozuzu, argues that given the “unbridled investment in renewables” such as solar, wind, electric batteries, fuel cells, hydropower, hydrogen, and nuclear and a host of others, and stifling funding for all new fossil fuel final investment decisions (FIDs) will hit developing countries hard.

Nwaozuzu, also the Director, Emerald Energy Institute for Petroleum and Energy Economics and Policy, University of Port Harcourt, notes that for an import-dependent country like Nigeria will face even greater challenges in its transport sector once the original equipment manufacturers stopped production of internal combustion engines for the transportation chain by 2035.

Petroleum engineer, Dr Diran Fawibe, admits that low demand has changed the dynamics of world oil, given new investments in alternative energy whereby increasing patronage of solar, wind, and biomass, which used to be energy of the future with higher cost factor, became popular worldwide.”

Another expert, Nosa Omorodion, insists that “the twist in energy security is that environmentalists want to change the narrative, with major consumers and importing nations pushing the fight for transition.”

For Omorodion, also the Executive Director, National Directorate & Independents, Schlumberger Companies, Nigeria & West Africa, it’ll take the next 10 to 20 years before changes to alternatives can be felt. “Until then, the country has to keep moving until it can optimize technology to produce cleaner fuels.”

Ironically, he notes that while renewables may be better and cleaner, some of them are also tied to hydrocarbons like electricity, which also uses gas proven to be a cheaper source of energy, and petrochemicals for industries.            

He argued that Nigeria’s biggest mistake was to have abandoned coal when it found oil, “because with current technology, coal could have effectively provided up to 20% of the electricity needs, but it focused on turbines and started importing generators, and see where that has got us today. But coal is coming back into the energy mix because of the development of newer technologies that can produce cleaner coal.

“Besides, a larger percentage of Nigerians especially those in the rural areas still do not have access to electricity, and so we don’t just want to jump the bandwagon of the clamour for energy transition.”

Agreeing that Nigeria shouldn’t have abandoned coal, Emeka Ene, Vice Chairman, E&P Coordinating Committee, International Gas Union (IGU), notes that the energy industry will continue to be driven by technology, saying: “even though coal is seen as a dirty fuel, China and Europe still has a significant proportion of their energy mix driven by coal.”

Ene, the CEO of Oildata Energy Group, and a former Chairman, Petroleum Technology Association of Nigeria (PETAN), urged Nigeria to find a balance for hybrid technology to prepare for the energy transition, even as it focuses on its gas resources. “But abandoning coal because it is no longer fashionable is not wise. The question then is: how do you create a hybrid technology and how do you transit? So, there has to be an integration approach rather than monolithic.”

Omorodion also urged Nigeria to look inward to harness its hydrocarbons by channelling these resources into the local market seeing as it can’t even meet her daily demand for energy especially with the refineries being down to enhance revenue earnings.

To this, Chairman, Society for Petroleum Engineers (SPE), Nigerian Council, Tunji Akinwunmi, who spoke before the passage of the PIB, said: “We have a production capacity that is not matched to our significant reserves and resources potential in both oil and gas. We at SPE have said on several occasions and we would continue to reiterate that there is an urgency to pass the PIB with investor-friendly fiscal terms that would help attract the flow of investments into the country to develop these resources for the benefit of the people of Nigeria. Of course, SPE is ready, willing, and able to support government in this drive.”

Nwaozuzu observed that Nigeria lost FIDs estimated at over $235billion for delaying the passage of the Bill. “These are investments that would have gone into oil and gas development within the two decades delay of the bill at the National Assembly.”

He equally warned that time is of essence because of the planned phase-out of combustion engines, which will be replaced with renewable engines. For the Nigerian economy characterised by high debt profile, high inflation, high exchange rate, interest rate, the government should develop the political will to diversify its energy resources and use fossil fuel to drive industrialization very fast.

Nwaozuzu therefore advised developing countries to “plough back whatever profit they get from the upstream (deep water) and use them to develop the downstream, especially refineries, petrochemicals and gas-to-liquids (GTLs) to drive industrialization and economic growth before the decline sets in.”

For Ene, “Nigeria has always had an inefficient economy and the potential is for the continued use of fossil fuel. But it has to deepen its approach to the energy transition because selling oil as a commodity without value addition is a no-no, rather, it should be selling fuel products with added value.”

Despite the transition challenges, he still believes there’s no need for the country to panic, as Nigeria remains a land of opportunities for oil and gas.

Speaking further, Iledare, who is also the UCC GNPC Petroleum Chair, Oil and Gas Studies, Ghana, insists that “Renewable energy requires huge investments, but there are some countries that have cheaper resources and may not be able to acquire the requisite technology, they should not be crowded out from having access to funds to develop these resources.”

Instead, he advised the West to develop technologies that will reduce the emissions from oil, noting that oil displaced coal through new technology, adding that arguments on ethics are merely for selfish interests.

While admitting that climate change is a major concern, he added that mediation calls for collaborative efforts to reduce emissions and improve the environment.

As a result, Fawibe and Iledare, argued that Nigeria and other developing countries should not be stampeded into abandoning their hydrocarbon resources for renewables just yet, as many are still battling to supply electricity to homes and industries, therefore substitution of oil is relatively low and will affect the international oil dynamics.

According to Fawibe, also the Chairman/CEO, International Energy Services Limited, OPEC and African countries’ contribution to carbon emissions is actually low, as such forcing them to stop the development of their petroleum resources might lead to real energy supply shortages and possibly herald another global crisis.

“Fundamental changes needed to realise a sustainable energy transition, substantial modification of a wide range of household energy behaviour is needed.”

Agreeing, the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), said: “Indeed, powerful trends including the ongoing energy transition or the collapse of exploration spend globally in recent years are likely to add to price volatility in the near- to medium-term.”

It added that “While global oil demand is expected to peak in the next decade, many developing economies will continue relying on oil and oil products for growth and increased access to energy.”

A call to action

According to experts, sustainable energy transition implies that future energy systems will more strongly rely on renewable energy sources than fossil fuels, as global climate change poses a major threat to the health, economic prospects, and basic food and water sources of billions of people.

This is further compounded by current negative effects of global climate change, such as extreme weather events and reductions in global food supply, which are anticipated to become even more severe due to the emission of greenhouse gasses.

Scientists also insist that carbon dioxide is the most dangerous, as it is responsible for about 84% of the total emissions of greenhouse gases that occur from human activities, which are traceable to the combustion of fossil fuels for energy and transportation.

To combat the effects of these activities, they called for “fundamental changes needed to realise a sustainable energy transition, substantial modification of a wide range of household energy behaviour is needed.”

Such actions will include “the adoption of sustainable energy sources and technologies, the adoption of energy efficiency measures in buildings, the adoption of energy-efficient appliances, and changing user behaviour to reduce total energy demand and to match energy demand to available supply of (renewable) energy carriers.”

Despite the arguments in favour of continued hydrocarbon production particularly in developing countries, the International Renewable Energy Agency (IRENA), believes the transition to renewable energy in Africa has been progressing impressively over the last decade, with many countries working to increase renewable energy capacity in recent years.

According to the IRENA, “Countries like Egypt, Ethiopia, Kenya, Morocco and South Africa have shown firm commitment towards accelerated use of modern renewable energy and are leading energy transition efforts, while some of Africa’s smaller countries including Cape Verde, Djibouti, Rwanda and Swaziland have also set ambitious renewable energy targets.”

Similarly, the Acting Director for Renewable Energy and Energy Efficiency, African Development Bank (AfDB), Daniel-Alexander Schroth, is excited that things are heading to the right path and Africa’s renewable energy is on accelerated growth.

Also, the Executive Secretary, United Nations Economic Commission for Africa, Vera Songwe, said: “The good news is that the compelling case for clean energy in Africa has never been stronger than now, with so much demand for energy owing to population growth, increasing urbanization, industrialization and trade, and climate change among other factors.

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