From VenturesAfrica. Story by Jennifer Ehidiamen.

Some Nigerian oil companies have started diversifying into other sectors. That in turn is increasing the pressure on the government to invest in the power sector, which remains a major barrier to economic growth.

Demand for electricity is forecast to grow twice as fast as total energy consumption. To meet this demand, $37 billion in production and supply infrastructure needs to be invested over the next two decades, said Kayode Omosebi, an energy analyst with Lagos-based financial management company United Capital.

To meet this growing demand, Lagos energy company Beacon Power Services is working with commercial and industrial companies to revamp their energy source and make it more affordable and reliable.

Nigeria generates about 3,454 megawatts of electricity for less than 50 percent of its 174 million population, according to Beacon Vice President Vivian Nwakah. By comparison, South Africa generates about 44,175 megawatts of electricity for 85 percent of its 53 million population.

Although renewable energy adoption in Nigeria is still in its nascent stage, it might become a plausible solution to Nigeria’s power challenge.

An average commercial facility in Nigeria spends billions of dollars on diesel generators to meet its power needs and remain in business, Nwakah said.

Though renewable energy such as solar requires high capital expenses to set up, the average cost in Nigeria is around 9-to-12 cents US per kWh, much lower than running a diesel generator. The kWh for diesel can be anywhere from 40-to-60 cents U.S. per kWh when you factor in wrongly sized generators, theft, and maintenance, Nwakah said.

In September, U.S. investment bank Goldman Sachs warned that oil prices could fall to $20 per barrel if supply continues to exceed demand. World Energy Outlook 2015 forecast that oil and gas investment would fall if oil surplus persists into 2016.

Some analysts believe that more investment in the oil sector will be channeled towards renewable energy in the near future.

“The energy industry landscape is gradually shifting energy consumption from coal, oil and natural gas towards renewable energy sources,” said Omosebi. Renewable energy investment can also earn oil and gas companies more favorable political capital among climate-conscious community members and decision makers, added the United Capital’s Energy analyst.

Renewable energy sources in Nigeria include hydro-power, biomass, wind and solar. Low oil prices alone are not sufficient to create the pressure needed to jumpstart renewable energy initiatives, Nwakah said.

During the U.N. Convention on Climate Change in Paris, world leaders renewed their commitment to reduce fossil fuel emissions.

Africa leaders launched the African Renewable Energy Initiative to address barriers to renewable energy projects such as the lack of project financing, low availability of capital and public-private partnerships. They also pledged to increase the continent’s renewable energy capacity to generate 300 GW by 2030.

“Nigeria is actually leading in terms of the reform in the energy sector with the unbundling of the utilities and the privatization of both power generation, power transmission and distribution,” said Akinwunmi Adesina, president of the African Development Bank and  Nigeria’s former Minister of Agriculture.

Over the past decade, Nigeria has launched several initiatives to strengthen its renewable energy sector. In August 2005, the government established a renewable energy department within Nigerian National Petroleum Corporation, the agency that regulates the country’s petroleum industry. The Renewable Energy Division was set up to coordinate the development of the automotive biofuels industry in the country. In 2013, the government privatized about 18 thermal generation and distribution power firms, which initially heightened interest in the renewable energy sector, Daily Trust, a local newspaper reports.

President Muhammadu Buhari also serves as petroleum minister. He has a five-year plan to build the country’s renewable energy capacity through different initiatives, including a boost in solar power generation. But mere policies and initiatives without actual adaptation and investment in the sector will not yield much.

“For renewable energy to gain more investment there needs to be a more concerted effort between the government, private sector, and investors,” Nwakah said. Renewable energy needs to be incentivized by the government through subsidies, government support and an easing of the process to approve renewable energy projects.

Launching various renewable energy projects without the right infrastructure is putting the cart before the horse.

“Renewable energy is not the way for Africans at this point,” said Ben Ayade, Cross River governor, in an interview with the Nation newspaper. ” in time. “Renewable energy means put an end to the sale of your hydrocarbon, it means Nigeria should stop exporting crude oil. Africa cannot be in a haste to adopt renewable technology.”

Ayade said a swift shift from oil to renewable energy would be harmful to the Nigerian economy.

 

AIICO is one of the leading insurance companies in Nigeria, with offices spread across the country. Beacon Power Services manages their multiple facilities in Lagos by providing an upgrade of electrical infrastructure, improvement of power sources, and an upgrade to energy efficient equipment and lighting.

“We are completely revamping the entire building to be energy efficient. This client is typical of all of our clients such as Kilimanjaro Restaurant, APM Terminals, Protea Hotels, IrokoTV, and Skye Bank just to name a few,” Nakwah said.

In October, Nigeria will host over 4,000 renewable energy power professionals and exhibiting companies from all over the world at the Nigeria Alternative Energy Expo.

The volatility of the power sector creates a great opportunity for renewable energy options to continue to prosper. Entrepreneurs and business leaders like Nwakah are driven by a vision for an improved Africa. Through the impact of their work, they hope to continue to showcase possibilities in the sector until it replaces oil as the new gold—that is if it ever will. But until then, oil will remain an important source of revenue for the Nigeria economy.

Read more at VenturesAfrica.