A means to an industrialisation end? Demand Side Management in Nigeria
Introduction
Electricity is an essential element of economic progress in the developing world. Energy use has accompanied economic development on account of a range of factors including industrialisation (Narayan and Smyth, 2009). This point supports an extant logic of the importance of modern energy sources for the manufacturing sector. Indeed, Ebohon (1996) and Templet (1999) have argued that energy is a necessary complement to labour and capital for production processes. The significance of access to electricity is also very relevant to contemporary debates on sustainable development. Menegaki and Tugcu (2016) suggest that limited access to modern energy sources is cited as a main obstacle to the achievement of sustainable development in Africa.
In Nigeria, the lack of electrification has been pointed out as a main factor undermining economic development and the expansion of industrialisation (Akinlo, 2009). Yet, the country features significant opportunities for further electrification and higher industrialisation. Much attention has been paid in research to the problems associated with generation and transmission systems in Nigeria. For instance, it has been pointed out that generation is low for the most populous country in Africa (Aliyu et al., 2013) and that the transmission network lacks the level of investment required to cover the size of the country (Adenikinju, 2005). The challenges of balancing electricity demand and supply in Nigeria are recognised as large cost drivers and have significantly negative environmental connotations.
The relationship between industrialisation and electrification is complex. One the one hand, industrialisation can facilitate further electrification. This was certainly the case in the independence period in Nigeria, as industrial development progressed from the 1950s to the mid-1960s leading to increased electricity generation of about 20% per annum to meet demand (Kilby, 1969: 104–105). More recently, expanding electrification in response to industrial development is especially evident with small-scale private electricity generation systems. However, these are renowned for high production costs burdens that impact negatively on competitiveness. On the other hand, electrification can underscore improved industrial development. For Nigeria, Yahaya et al. (2015) find that manufacturing output is reliant on stable and adequate access to electricity especially in the long-run. Against this background, the Nigerian state is attempting redress the challenge of access to electricity especially given its significance to industrialisation (Chete et al., 2014).
Much focus on addressing the problems presented by inadequate access to electricity in Nigeria are concerned with supply-side initiatives (Akinlo, 2009, Yahaya et al., 2015). Yet, a set of solutions from the demand side –also known as ‘Demand Side Management’ (DSM) – could prove more cost-effective than some new generation developments. DSM could address insufficient power supply against the background of intended expansion of industrial activities. Steep increases in demand may occur mainly due to large industrial end-use. Industrialisation is likely to trigger the dual effect of increasing the need for reliable supply whilst offering back flexibility in the form of DSM.
The aim of this paper is to assess the technical and economic potential of DSM in Nigeria given different future levels of industrialisation. In developing as well as developed countries, DSM has been operated mainly by utilities using industrial end-users as the main enablers. The history of the Nigerian electricity market shows that the steepest increases in electricity demand historically have been associated with changes in industrialisation processes. Contemporary reflections also highlight the reliance of industrial expansion on electricity access. For these reasons, the paper places industrialisation at the centrefold of the appraisal of DSM potential in Nigeria. It does so by designing industrialisation scenarios and consequently deriving different DSM penetration levels in the future using a cost-optimisation model.
After this introduction, the paper provides background information around the role of DSM for electricity systems in developing countries (Section 2); highlights the history of balancing demand and supply in the electricity market in Nigeria (Section 3); describes the methodology underpinning this work (Section 4); presents findings from a cost-optimisation model runs (Section 5); and concludes by discussing findings on the dynamics between industrialisation and demand-side measures and presenting potential policy options for incentivising DSM in Nigeria (Section 6).
Section snippets
Demand Side Management: definition, objectives and measures
DSM can be defined as a wide ranging actions to reduce demand for electricity (or gas) and/or to shift demand from peak to off peak times (International Energy Agency, 2011). Traditionally, objectives associated with DSM were generally restricted to efficiency and conservation programmes. Hence, the measures were mainly focused on energy efficiency, including more efficient light bulbs (as explained in the case of Nigeria in Section 3.3).
With time DSM objectives encompassed programs emphasising
The electricity market in Nigeria: a brief history
Balancing demand and supply is a recurrent problem in the Nigerian electricity market. Interruptions in electricity supply are frequent and pose continuous stress to the grid. Issue with balancing electricity demand and supply in Nigeria are not new and found different solutions over the years.
In the 1950s electricity demand in Nigeria was lower than supply. However, with industrial development, the demand for electricity gradually increased and later exceeded supply (Makwe et al., 2012). The
Methodology
The methodological approach of this paper consists of two main steps. First, stylised industrialisation scenarios are defined based on available literature. Secondly, a cost optimisation model for electricity systems is run based on three industrialisation scenarios.
We derive three scenario of industrialisation in Nigeria based on the work on drivers for electricity-demand projections by Ibitoye and Adenikinju (2007). The three scenarios of high, medium and low industrialisation are based on
Modelling industrialisation scenarios
The modelling results for the high, medium and low industrialisation scenarios are summarized in Table 1. During the period from 2005 to 2050, the final energy consumption in Nigeria is expected to increase from 1780 to 2073 PJ for the medium industrialisation scenario with industrial in the total energy consumption increasing from 368 to 497 PJ, i.e. from 20% to 24%. In the low industrialisation scenario final energy consumption in 2050 will be 1696 PJ with industry decreasing to 275 PJ due to
Conclusions
This paper highlights the nexus between future industrialisation, electrification and DSM development in Nigeria. Industrialisation can facilitate further electrification and, at the same time, electrification can underscore improved industrial development. It is argued that the two processes are mutually beneficial for the Nigerian electricity system since the presence of industrial loads will increase demand for electricity, but also contribute to higher demand flexibility. This is because
Acknowledgements
This work was supported by the Engineering and Physical Sciences Research Council (grant number EP/P000630/1).
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