RELIABILITY OF ENERGY MIX IN DEVL COUNTR

UNIVERSITY OF NIGERIA NSUKKAFACULTY OF ENGINEERING DEPARTMENT OF ELECTRONICS ENGINEERING A TERM PAPER TOPIC PRESENTED IN PARTIAL FULFILLMENT OF THE COURSE, EEE331: ELECTRIC POWER SYSTEM

UNIVERSITY OF NIGERIA NSUKKA

FACULTY OF ENGINEERING

DEPARTMENT OF ELECTRONICS ENGINEERING

A TERM PAPER TOPIC PRESENTED IN PARTIAL FULFILLMENT OF THE

COURSE, EEE331: ELECTRIC POWER SYSTEMS

ON

RELIABILITY OF ENERGY MIX IN DEVELOPING COUNTRIES: NIGERIA AS

A CASE STUDY

PRESENTED BY: NWOSU CHIMA SAMUEL

REG NO.: ECE/2010/170488

LECTURER: DR B.O ANYAKAH

JUNE 2013.

RELIABILITY OF ENERGY MIX IN DEVELOPING COUNTRIES: NIGERIA AS A CASE STUDY

I want to say a very big thank you to God, my parents, lecturers and friends and also to every author who shared their idea on the subject matter.

I foremost appreciate all my lecturers in the department of electrical engineering for their sacrifice

in shaping me and my other course mates to appreciate their every lecture on electric power

systems

From you distinguish lecturers have we been able to differentiate between power generation,

transmission, distribution I say thank you sirs and ma

Furthermore, I appreciate every author, columnist and journalist who made their resources available for study so that I could compare varying opinions on the subject matter

Thank you all God bless you

Nwosu Chima SamuelECE/10/170488

22-06-13

The work has four chapters The first chapter talks about the socio-economic effect of energy and what the energy mix briefly entails.

Chapter two gives a broader analysis of the individual resources making up energy mix and also discusses the various energy sources particular to Nigeria with the intention of challenging the reader to uncover the reliability of energy mix Chapter three discusses the historic energy trends in Nigeria, the technological options that will enable rural energy development; it further reveals the effect government policies and actions have on energy generation; the energy consumption pattern

in Nigeria; the current electricity situation in Nigeria; the Nigerian challenge, energy demand projection…and renewable energy and energy efficiency as climate change mitigation strategies Lastly, the fourth chapter gives a detailed but very interesting conclusion that gives a mouth-

watering and brain-tasking summary at a glance alongside rich recommendations that promote energy mix as a reliable tool for energy growth in Nigeria

I strongly recommend this work to all calibers: electrical and electronic engineers, technologists, engineering educationist and investors who are passionate about discovering other viable means of electrical energy generation This work is also rich with references that expose you to the writings

of great minds that contributed to the success of this informative work

Table of Content:

Dedication

Acknowledgement

Preface

Chapter 1: INTRODUCTION

1.1: The Socio-economic context………1

1.2: Nigeria Energy mix……… 2

Chapter 2: Broad Analysis of Nigeria’ Energy mix 2.1: The Energy Mix………3

2.1.1: Non-renewable……… 4

2.1.2: Renewable……… 4

2.2: The Coal Resources……… 5

2.2.1: The Role of the Federal Government’s Policy in Reviving Coal Energy……… 5

2.2.2: Historical Perspectives……… 6

2.2.3: Challenges and Opportunities in the Coal Industry……… 6

2.3: Oil and Gas……… 8

2.4: Petroleum Products……… 8

2.5: Electricity………10

2.6: The Imperative of Energy Mix in Eradicating Poverty and Boosting National Development in Nigeria………10

Chapter 3: Energy Trends 3.1: Historic Energy Trends……… 12

3.2: Technological Options for Rural Energy……….12

3.3: Energy Policies and Actions………12

3.4: Energy Consumption pattern in Nigeria……… 13

3.5: Current Electricity situation in Nigeria……… 13

3.6: The Nigerian Challenge……… 18

3.7: Energy Demand Projection……… 20

3.8: Energy Efficiency and Energy Conservation in Sustainable Development………22

3.9: Renewable Energy and Energy Efficiency as climate change mitigation strategies……… 24

Chapter 4: Conclusion……….26

Recommendation……… 28 References

CHAPTER ONE: INTRODUCTION

Nigeria is richly endowed with numerous energy resources, which offers the nation an enormous opportunity to tap into the strength of the various energy media available The energy sector however, has not exploited this gift of nature; the progress in the use and development of oil and gas, in the past thirty or so years has created an impression that hydrocarbon is the only viable energy medium available to Nigeria This has negatively impacted on a comprehensive assessment and use of all Nigeria’s energy resources But the other clean forms of energy that could be

available to Nigerians are electricity, gas, and kerosene plus renewable energy sources such as solarpower, wind power, hydropower and biomass Despite the country’s high potential to generate andmake these energy services available to the people, government’s incapacity to do so has

generated great pessimism among the populace Most households depend on electricity as a majorsource of energy because it is mainly used for lighting In addition, clean and affordable energy services are recognized by the people as important for their well being and productivity of their household members

In order to ensure that Nigerians can enjoy a reliable and robust energy system at a reasonable cost, it is essential that supply be generated from a variety of sources With the cost of oil

approaching very exorbitant levels and local refineries having to pay the market value for this input, alternative energy options need to be assessed and development plans expedited to enable

a broad-based infrastructure

1.1: THE SOCIO-ECONOMIC CONTEXT

In a report given on Nigeria’s energy consumption by the internationally respected research

institute, Twente Centre for Studies in Technology and Sustainable Development in the year 2005, the body states that “Nigeria’s current population is estimated to be about 130 million This is based on the 1991 figure of 89 million with an annual growth rate of 2.8% Women constitute about 51% of the population total, but they generally have lower social status than their male counterparts The country’s gender development index was below 0.425 in 1998, which was lower than the average for the Sub-Saharan Africa (0.459) “

“The Nigerian economy is unwholesomely dependent on oil, earning the country up to 98 percent

of foreign exchange receipts This has rendered the economy highly vulnerable to externalinfluences In particular, the high revenue receipts from crude oil export in the late 1970s and early1980s induced an unsustainable spending profile which proved catastrophic when internationalpetroleum price crashed in 1986 This induced massive dislocation in the economy and, coupledwith massive mismanagement, External debt currently stands at about US$35 billion despite thefact that over a period of 35 years, the country has earned about US$350 billion from oil resources.Because much of the resources earned from oil were not used for meaningful development,poverty continues to be pervasive, and the access of people to efficient energy services andsustainable livelihoods remains poor Nigeria has low socio-economic indicators It ranked 151st out

of 187 countries surveyed in 2004 by the United Nations Development Programme with a lowhuman development index of 0.43 In the Human Development Index just released by UNDP, lifeexpectancy has reduced from 51 years to 43!”

“To improve the lot of the people government is currently implementing public sector reformprogrammes geared towards reducing poverty, eradicating corruption, and enabling the privatesector to become the engine for economic growth

1.2: NIGERIA ENERGY MIX

The energy mix in Nigeria according to Energy Commission of Nigeria(2001) is estimated to bemade of 55percent traditional energy resources and 45percent commercial energy resources.Furthermore, the Twente institute asserts thus “Nigeria is well endowed with energy resources.The main energy resources are crude oil, natural gas, coal, tar sand, biomass and other renewableenergy resources such as solar energy, tidal and wind power, as well as large hydroelectricpotential Proven crude oil reserves stand at about 40 billion barrels, and this is expected to reachabout 55 million barrels in the very near future There is also an abundant natural gas resource,which currently stands at about 2.7 billion cubic metres The estimate for tar sand deposits stands

at about 31 billion tons, while coal resource estimates are estimated to be between 2 and 10 billiontons

More so, the combined micro, mini, small and large hydroelectricity potential of Nigeria isestimated at 10,000 MW The potential annual sustainable yield of wood in Nigeria is estimated to

be about 22 million cubic metres, while total biomass potentials consisting of animal andagricultural wastes, as well as wood residues has been estimated to be about 1931 million tons in

1990 The biomass energy potential is capable of generating 1.2 PJ of energy In addition, about1,500 PJ (about 258 million barrels of oil equivalent) could be available to Nigeria annually fromsolar energy if solar appliances with 5% conversion efficiency were used over only 1% of the totalland area of the country for about six months of the year In a similar vein, there are indicationsthat annual wind energy potential ranges between 1,000 and 97,000 kWh in the country while thepotential for geothermal energy is also high

Despite the abundance of oil and gas and high potential for hydro-electricity, Nigeria still depends

to a large extent on traditional energy sources such as fuel wood, biogases and crop residue for itsdomestic energy needs Nigeria’s fuel wood consumption is estimated at about 80 million cubicmeters (about 25 million tonnes) Fuel wood is widely used for heating and cooking, cottageindustrial applications and food processing

Currently, these traditional energy sources account for about 55 percent of Nigeria’s primaryenergy requirements, even though they are usually not included in a country’s commercial energyconsumption calculations This is because their importance decreases as the country’s economytransforms Commercial energy sources in Nigeria include oil and gas, electricity and coal Theirrelative importance in the national economy is now discussed

CHAPTER TWO: ANALYSIS OF NIGERIA’S ENERGY MIX

2.1: THE ENERGY MIX

The energy mix is divided into renewable and non-renewable

2.1.1: NONRENEWABLE

A nonrenewable resource is a resource that can be used up Fossil fuels, which include coal, oil, and

natural gas, are nonrenewable because it took millions of years for them to form Once we use up our fossil fuels, they will be gone for good Many power plants use fossil fuels The fossil fuel is burned to produce heat, which is used to make steam The steam is then used to turn the blades of

a turbine

Some power plants run on nuclear power, which is another nonrenewable resource

Nuclear power plants rely on uranium, a type of metal that is mined from the ground and specially processed Heat released from splitting uranium atoms is used to convert water into steam that turns turbines

2.1.2: RENEWABLE

A renewable resource is fairly easy to replace Renewable energy resources include wood, wind, sunshine, geothermal energy, biomass, and water stored behind dams in lakes and reservoirs Electricity can be produced using several kinds of renewable resources

Wind energy can produce electricity in regions where steady winds blow Giant wind turbines capture the wind’s energy and use it to power generators

Biomass is material that is formed from living organisms, such as wood or agricultural wastes Biomass can be burned to produce electricity, or be converted to a gas and used for fuel

Geothermal energy uses hot water or steam from deep beneath the earth’s surface to produce electricity

Hydroelectric power plants use the energy of falling water to spin generator turbines

Solar energy can also be used to produce electricity Solar cells change the radiant energy of the sun into electrical energy Some calculators and portable radios are powered by solar cells Solar panels, or modules, placed on a rooftop can supply electricity to the building below

2.2: THE COAL RESOURCES

In his technical paper entitled, Opportunities and Challenges of an Integrated Energy Policy for Nigeria - Perspectives from a Competing Energy Product - Coal (2005) Obi Timothy Nwasike,

Principal Consultant, Chester Mead Associates, Port Harcourt, gives a brief analysis on coal and the bright potential it has as a viable tool of energy generation In the introduction he states: “…With the cost of oil approaching very exorbitant levels and local refineries having to pay the market value for this input, alternative energy options need to be assessed and development plans

expedited to enable a broad-based infrastructure Coal is an alternative energy medium that could

be used with oil and gas to give the nation the desired mix that will ensure a reliable, affordable and environmentally friendly energy medium He further asserts that, Nigeria is the only country inWest Africa producing coal at present and the producing coalfields are mostly located in the

Eastern and middle-belt parts of Nigeria The total remaining coal deposit in Nigeria is estimated to

be over two and half billion tons with about fifteen percent of this proven in nine coalfields

Unhappy with government attitudes towards reviving the coal industry, he laments that, “ A total installed production capacity of about 5,000 tons per day is said to be feasible however most of theinfrastructure is run down and with most of the deep mines flooded, significant funds are needed

to revive this industry Productivity is low at less than 0.1 tons/miner/shift; this is much less than industry norm worldwide.”

“The management of the Nigerian Coal Corporation recently quoted a sum of about $40 million as the minimum that is needed to revive the industry In terms of project scale, this is equivalent to the typical cost of developing a small onshore oil field with no more than 20 million barrels of oil reserves in the same environment This would suggest that the cost of reviving the coal industry is small in comparison with the funding requirements for the same level of energy release through the oil industry.”

2.2.1: THE ROLE OF THE FEDERAL GOVERNMENT’S POLICY IN REVIVING COAL ENERGY

According to Nwasike, “the Federal Government of Nigeria is said to be trying to revitalize the coal industry by way of privatization The incentive placed in 2002 to seek privation through the Bureau

of Privatization appears to have hit stalemate and no progress has been made in the past three years Additionally, part of what is missing is the absence of a clear energy policy that articulates the role and scope that each of the various energy media should play in our national development Although a revised version of the national Energy Policy was submitted to the Federal Government

in 1997, no policy has been implemented till date.” To buttress this argument, he asserts that, there is need to formulate and implement an energy policy that will increase and diversify Nigeria’ssources of traditional and alternative fuels in order to furnish families and businesses with reliable and affordable energy, to enhance national development, and with minimum impact on the

environment

2.2.2: HISTORICAL PERSPECTIVES

Coal was first discovered in 1909 at Enugu in the south-eastern part of Nigeria Forty-seven

years later, oil was discovered at Olobiri in the Niger Delta area of Nigeria

Coal measures in Nigeria consist of mamu formation (lower coal measure), Ajali Sandstone and theNsukka formation They are maastrichian in age Underground mining is still largely confined to the Enugu district The first coal mine in the Enugu area was underground mine that was opened in

1915, but abandoned in 1917 when the Iva Valley mine was opened to top the same locality Three other mines are now under production and these are the Okpara mine (1952), Ekulu mine (1956) and the Ribadu mine (1961) In 1916, a railway line for the transportation of coal to port for export

at Port Harcourt was completed Open cast mining is practiced in Okaba mine in Kogi/Benue states area

In Nigeria, coal deposits are restricted to sedimentary basins especially the middle and the south parts of the Benue trough Specifically, coal is found in other sedimentary basins within 13 out of

Nigeria’s 36 states, namely: Enugu, Nasarawa, Kogi, Imo, Anambra, Delta, Plateau, Kwara,

Adamawa, Edo, Ebonyi, Benue and Sokoto Areas in which coal deposits are found in commercial quantities in Nigeria include Okpara and Onyeama in Enugu and Okaba in Benue State Semi-cokingcoal is found in large quantity in Lafia and Obi in Plateau State, but their sulphur and phosphorus content are considered to be high

2.2.3: CHALLENGES AND OPPORTUNITIES IN THE COAL INDUSTRY

The main energy challenges that face Nigeria presently is how to increase energy supplies to meet the needs of its growing population; also significant is the need to repair and upgrade existing infrastructure especially for non-hydrocarbon energy sources Meeting these challenges is very critical to improving the nation’s economy and raising the standard of living in Nigeria Developing

an alternative energy source such as coal is a preferred option in meeting Nigeria’s energy

challenges Concerted effort should be made to solve some of the problems in the Nigeria coal industry

One of the main handicaps of the Nigerian coal industry that has been running at a loss during the last twenty years is the location of its mines Heavy transport costs are involved in delivering the coal to domestic consumers in Lagos and other parts of the country Coal for use in Lagos and the Western states is railed to Port Harcourt from where it is shipped to Lagos Additionally, the failure

of the Nigeria Railways to run a reliable operation has more or less made this (rail) market route very un-reliable This situation has contributed significantly to the recent tendency for users of coal

to turn to other sources of power

The poor state of the roads infrastructure in the South-East Geo-Political Zone of Nigeria has also not helped matters It is clear that the growth of the oil and gas industry and the absence of a clearenergy policy for Nigeria have created major difficulties for domestic use of coal

The main challenge of the Nigerian coal industry today is to find markets for the coal mined

During the last ten years, the largest consumer of coal have been the Nigeria Railway

Corporation, which takes about half the amount of coal, produced in the country, the electricity corporation (NEPA) and the Nkalagu cement factory that has recently been sold to private investors

as part of government’s privatization programme The conversion of the railways system to diesel fuel and the production of petroleum and gas have combined to lead to a substantial decline in thelocal demand for coal

Nigeria coal is a non-coking variety and is therefore unlikely to be in great demand when the

existing iron and steel plants become privatized Ash and moisture content are as low as 8% and 9%respectively, compared with coal quality from US-based mines and as specified by a number of power plants users In effect, from a product quality perspective, Nigerian coal potentially meets world-class specifications and this marketing option cannot be ruled out…some of the options will include the placement of micro-energy plants at selected coalmine locations to generate electrical power into the national grid.”

About the Author:

Obi Timothy Nwasike is an Energy Consultant with over 28 years experience developing technologysolutions for a variety of hydrocarbon field developments world-wide Chester Mead Associates that he leads is a technology and engineering design company that is actively participating in the

on-going initiatives to secure ethical behaviour and increased local content in the oil industry in West Africa Aspects of this paper were first presented at the SPE Nigeria Council Annual

Conference in Abuja in August 2003

2.3: OIL AND GAS

Currently, Nigeria has a proven reserve estimate of about 40 billion barrels of oil and about 180 trillion standard cubic feet of natural gas (scf) Nigeria’s proven and probable crude oil reserve is about 55 billion barrels (World Bank 2004 Report) Daily oil production is about 2.4 million barrels while natural gas production is about 4 billion standard cubic feet

It is estimated that daily total natural gas production will increase to 6 billion standard cubic feet (scf/d) in 2009, while gas sales will increase from 200 million scf/d to 3.5billion scf/d over the sameperiod

Natural gas is utilized in many ways in Nigeria About 45 percent of daily production is flared, while the balance is exported by the Nigeria Liquefied Natural Gas Company (NLNG) and sold to thermal power stations and other industrial users as fuel The National Electric Power Authority (now PHCN), the country’s sole power company, utilizes about 70 percent of natural gas consumed in thecountry for power generation

Government controls the price of Natural Gas sold for use as fuel and feedstock in the domestic market These prices are often set on a discretionary, non-transparent basis and do not reflect the component element of end-user pricing

NEPA purchases gas from the Nigerian Gas Company (NGC), which is a subsidiary of the Nigerian National Petroleum Corporation (NNPC) at about N15/mscf while other commercial and industrial users like West African Cement Company pay as much as N400-N500 for the same unit of natural gas Therefore, the power sector does not provide encouraging signals for private investment for the supply of gas to other optimal sites for power plants

The NGC has been threatening for years to remove this price dichotomy and NEPA on its part has threatened that any increase in the price of natural gas will result in substantial increase in its regulated tariff structure The current gas pricing arrangements have therefore resulted in

difficulties in establishing potential returns from investment in different activities in the gas supply chain This poses a major challenge to Nigeria’s privatization drive

2.4: PETROLEUM PRODUCTS

Nigeria has four refineries with a total installed capacity of about 445,000 barrels per day The product yields from these refineries are petrol (PMS), diesel, kerosene, LPG, asphalt etc Since the early 1990s, capacity utilization at these refineries has declined considerably due to ageing

facilities, vandalisation of oil pipelines, corruption in the management of these refineries among others For example, in 2002 the NNPC supplied 79 million barrels of crude (160 million barrels at full capacity) to the refineries to process the following products shown in Table 1.2

Table 1.2: Petroleum Products Production in Nigeria (2002)

2.5: ELECTRICITY

Grid electricity in Nigeria is over 100 years old, and started in 1846 when two 30 kilowattgenerating units were installed in Lagos In 1973, NEPA was formed from the merger of the NigerDam Authority (NDA) and the Electricity Corporation of Nigeria (ECN) Currently, NEPA has aninstalled capacity of about 6,000 MW (compare this with South Africa’s installed capacity of42,011MW in 2003) from which only about 4,000 MW are available for distribution, even then not

on a continuous basis Another 33 percent of electricity capacity are lost to ageing and brokendown equipment, vandalization of NEPA equipment and poor management associated with publicenterprises in Nigeria The current per-capita availability of electricity to Nigerians is only 0.33kw(20kwh) This is quite low and thus explains the agony Nigerians who depend on NEPA have to gothrough In late 2004, a proposal was made by the Federal Executive Council to the legislature forNEPA to be broken into 18 semi-independent units responsible for generation, transmission anddistribution The Power Sector Reform Act was passed in 2005

2.6: THE IMPERATIVE OF ENERGY MIX IN ERADICATING POVERTY AND BOOSTING NATIONAL DEVELOPMENT IN NIGERIA

Energy is of little interest in itself But energy facilitates all human endeavours, and it is essential tolife It is used for a number of activities that are dear to humanity It is used for heating and cooling,illumination, health, food, education, industrial production and transportation In all ramifications,the development of human society and civilization has been shaped by energy The use of energy is

a necessary and vital ingredient of socio-economic development and economic growth In general,energy can contribute to widening opportunities and empowering people to exercise choices Onthe other hand, its absence can constrain both men and women from contributing todevelopment Thus, relationships have been established between energy and major socio-economic global issues such as poverty, gender disparity, population, food security, health,environment, economy, and security The energy-poverty nexus is obvious People living in povertyprimarily use wood, dung and other biomasses for their energy services, and tend to use lesselectricity and liquefied petroleum gas than those that are better off Energy, poverty and socialequity are intricately linked and intertwined For instance, the lack of access to modern fuels andelectricity emblemises poverty Energy deprivation hampers people’s prospects of escape frompoverty trap Conversely, improved energy services can help to increase incomes and create wealth

to uplift the lives of people and reduce the number of people living below the poverty level.Access, affordability and choice are the critical energy issues in poverty reduction Poor peopleoften have a limited choice of technologies that convert energy to useful services Usually, thetechnology available to them are typically inefficient and/or of low quality, for example fuel wood.Access of the poor to electricity, which is the most sought after source of energy, is often limitedbecause of high cost The poor usually lack the purchasing power in the absence of financialsupport and alternatives Thus, most poor people currently meet the bulk of their energy needs bycollecting fuel wood, biomass and other less efficient energy sources, thereby foregoing thebenefits of energy services that could have been used to promote income generation and poverty

reduction In general, therefore, the poor suffer from what is regarded as “a vicious circle of energy