SUPPORTING THE OIL BASED ECONOMY (PT2)

Each time I have a reason to pack my car directly under the sun for more than 30 minutes, I always have to wait for a minute or two after opening the door before I step inside, because of the heat generated, what comes to mind thereafter usually is the enormous amount of solar energy and radiation available, especially in the Northern parts of Nigeria. This is Abuja, with solar irradiation average of 5.55 kW/m²/day and a wind speed average of 2.38 m/sec. I also imagine the enormous amount of solar energy available further north, in places like Birnin Kebbi with a solar irradiation average of 6.04 kW/m²/day and a wind speed average of 2.33 m/sec, Maiduguri with an average solar irradiation of 5.96 kW/m²/day and a wind speed average of 3.80 m/sec.

In the United States solar power is the largest available energy source. Renewable resources (solar, wind, geothermal, hydroelectric, biomass, and waste) provided nearly 12% electricity supply in 2003. Also as a result of the eight year extension of the 30% solar tax credit, it is estimated that an additional 28,000 megawatts (MW) of solar power will be installed by the end of 2016. The State of California is a model for the potential of alternative and renewable energy sources, it's Mojave Desert is home to the world's largest concentrating solar power facility. The State's solar irradiation averages between 4.0 - 6.0 kW/m²/day.

From the U.S. Solar Energy Industries Association (SEIA)- "2008 Solar Industry Year in Review" the U.S. solar energy capacity increased by 17% last year, with a total of about 8,775 megawatts (MW). Currently, a total of 342 MW of solar photovoltaic (PV) electric power, 139 thermal megawatts (MWTh) of solar water heating, 762 MWTh of pool heating, and 21 MWTh of solar space heating and cooling were installed in the U.S.

The question therefore is- what are the economic and energy implications of the ever increasing growth on the reliance of renewable/domestic energy sources in countries like the U.S on an oil based economy such as Nigeria? What will be the direct effect of all these indices on Nigeria in the next 20 years if current scenarios remain unchanged?

Even though Oil remains the most important and most consumed energy resource in the world right now, the simple rule of economics implies that reduction in demand due to alternatives will lead to reduction in prices and thus less revenue on the mid and long term for any state that cannot supply the preferred alternatives, people will naturally avoid buying a product that will force them to forgo the consumption of something else they value more or is more advantageous. Currently the U.S. is the biggest buyer of Nigeria's crude oil.

On the energy front, if there is a reduction in the purchase of crude oil and there is no adequate domestic refining and processing capacity, then the inevitable result will be waste.

What needs to be done is to build a structure that creates the balance between the available energy resources in the country, the paradigm shifts in the foreign market and sustaining a domestic economy.

SUPPORTING THE OIL BASED ECONOMY (PT1) CONTD

Before moving on to the second part of this discourse, it might interest you to note that there is already in place a comprehensive, incisive and well thought out plan by the U.S Government to enhance the build a sustainable biofuels industry, with an aim to strengthen energy security in the U.S. To access the U.S. Department of Energy (DOE) report, you can click on the link below:
http://www1.eere.energy.gov/biomass/pdfs/mypp_july2009.pdf

SUPPORTING THE OIL BASED ECONOMY (PT 1)

The Oil and Gas industry in Nigeria accounts for more than 98% of export earnings and over 85% of federal government revenue, as well as generating more than 40% of its GDP. It also provides 95% of foreign exchange earnings, and over 70% of government budgetary revenues. This is why there was so much panic in Government circles when the international oil prices began to crash earlier on this year.

Nigeria's proven oil reserves are estimated makes Nigeria the tenth most petroleum-rich nation, and by the far the most affluent in Africa "potentially". However, despite this enormous potential and encouraging statistics energy generation and utilization remains pathetic and epileptic. Power outages and use of diesel generators reigns in the system. it may be right to say, though a sad paradox, that the Nigerian economy runs on imported refined oil products and power generators that are powered by carbon rich fossil fuels.

The writer believes it is time to look inwards and develop an industry that will support the oil-based economy, or else the economic system might fall apart completely very soon. A viable renewable energy and biofuels industry will definitely create the much needed support, especially considering the fact that the international community will continue push for reduction in the demand for crude oil.

The renewable energy and biofuel business has great advantages (though like any other, it has some disadvantages). For example, Ethanol fuel which has an organic origin, is primarily a plant-based fuel. This fuel can then be used by itself as an alternative fuel or can be combined with regular gasoline/petrol to use as fuel. The biggest advantage of ethanol fuel is that it reduces dependence on the indexes of the international oil market and calls for more dependence on our domestic farmers. it also will boosts the creation of more jobs, thus reduces unemployment. To produce mass quantities of ethanol fuel, the oil industry would need to build large processing and distilling plants or facilities. It will also aid sustainable economic diversification, thus giving other industries, like agriculture and food processing, an opportunity to succeed with less reliance on power generators. Developing a viable renewable energy and fuels industry will also aid environmental protection, carbon dioxide emissions reduction thus enhancing Nigeria's CDM ratings.

Biofuel is any fuel that is derived from biomass, i.e masses like manure from cows, ethanol from corn or sugarcane e.t.c.

Ethanol is manufactured by the conversion of biomass materials through fermentation. The production process consists of conversion of biomass to fermentable sugars, fermentation of sugars to ethanol, and the separation and purification of the ethanol. Fermentation initially produces ethanol containing a substantial amount of water. Distillation removes the majority of water to yield about 95% pure ethanol, the balance being water. This mixture is called hydrous ethanol. If the remaining water is removed in a further process, the ethanol is called anhydrous ethanol and is suitable for blending into gasoline/petrol.

Brazil (largely through the operations of PETROBRAS, reckoned to be the 8th biggest company in the world in terms of market value) is a global leader in the use of renewable fuels, such as ethanol and biodiesel. Its National Alcohol Program (Proalcool), adopted in 1975, was the largest fossil fuel substitution program in the world, mandating the use of ethanol made from sugarcane to power automotive vehicles. Ethanol accounted for about 40% of passenger car fuel use in 2005 and 15% of total motor-vehicle fuels use.

Beyond the use of ethanol for passenger cars, Brazil is also a leader in the generation of electricity from renewable sources. Over 80% of Brazil’s electricity is produced via sustainable technology, mainly through the harnessing of hydroelectric power (77% of all generation). According to the Brazilian Ministry of Energy and Mines, taken as a whole, energy derived from biomass and hydroelectric plants account for 45% of the entire Brazilian energy matrix.

Nigeria is in the process of reforming its petroleum industry by repositioning NNPC into a fully commercial international petroleum company, the question now is- how much value will this new company have in 20 years time when the international community would have become more reliant on renewable energy, renewable fuels and gas? Recent findings from market research analyst shows that:

1. World's ethanol production is expected experience about 5% growth from 2008 - 2012.
2. U.S. and Brazil are leading the world in production of ethanol.
3. Emergence of new ethanol producers in Asia and Latin America.
4. Cuba has the capacity to manufacture as much as 3.2 billion gallons of ethanol annually from its sugar crop.
   

The factors driving the ethanol market includes:

1. High oil prices in the international market.
2. National energy security considerations in U.S and Europe.
3. Ethanol tax incentives in the U.S. and countries like Brazil.
4. Improved technology - lower costs of ethanol production.
   Climate change concerns.