THE ROLE OF ELECTRICITY TARIFF HIKES IN PROMOTING RENEWABLE ENERGY ADOPTION IN NIGERIA

CHAPTER ONE

INTRODUCTION

Background of the Study

Renewable energy is energy derived from natural sources that are replenished at a higher rate than they are consumed. It is also referred to as clean energy (NRDC, 2022). There are different types of renewable energy sources which includes; solar energy, wind energy, geothermal energy, hydropower, bioenergy and ocean energy (NRDC, 2022). Renewable energy, often referred to as clean energy, comes from natural sources or processes that are constantly replenished. For example, sun ling and wind keep shining and blowing, even if their availability depends on time and weather (NERC, Renewable energy: clean facts,2022).

According to the World Energy Outlook 2016 report, about 1.19 billion people in the world do not have access to modern energy services (Energy access projections, 2017). It is further reported that around 55% of this population is in Sub-Sahara Africa, and the vast majority of this energy-poor people live in the rural communities, (Akinyele and Rayudu, 2016).

However, there are also challenges that are prevalent in the renewable energy emergence, such challenges include; policy and regulations, infrastructure, and intermittency (requiring energy storage solutions). Despite these challenges, there are several long term benefits of renewable energy to the society and they are, low greenhouse gas emission, job creation, sustainability, reliance, energy security, increased energy consumption which leads to increased productivity. 

In recent times, Nigeria has faced significant energy challenges, including a lack of access to electricity and a reliance on fossil fuels (International Energy Agency, 2020). With the growing population, and the government’s inefficiency in providing its population with sufficient power supply, Nigerians are tilting towards alternative and clean energy which is both reliable, affordable and accessible to them at all times. There are different sources of renewable energy which includes: solar energy, wind energy, biomass, hydropower etc. Renewable energy offers a solution to Nigeria’s energy challenges, however, there are many barriers to the development of renewable energy including high upfront cost, lack of policy support, and limited access to financing (Agboola, 2015) Based on the literature the major barriers to renewable energy are economic, policy, legal, and technical. (Adekoya, 2015). Recent electricity tariff hikes in Nigeria have raised questions about the potential impact on renewable energy adoption (Okeke. 2020).

The country’s electricity generation capacity is insufficient to meet demands, resulting in frequent power outages, and substantial economic losses (IEA, 2020). Moreover, the cost of electricity in Nigeria is among the highest in the world, with businesses and households often paying significantly more than their counterparts in other countries (Oyedepo, 2012).

1.2 Statement of the Study

With the rise in the energy consumption needs of Nigerians, and the inability of the government to fulfill these needs, it is therefore, necessary for individuals to look for more reliable, and sustainably means of generating power for themselves. Most industries, businesses, and individuals rely mostly on generator sets which pollutes the environment and generate lots of noise (National Bureau of Statistics, 2016). With the emergence of the Sustainable Development Goals SDGs, and several climate actions posed to promote sustainable development, poverty eradication, global changes etc. it became imperative for industries, businesses, and individuals to move to a more eco-friendly source of generating power(United Nations General Assembly, 2015). This gave rise to the emergence of renewable energy to mitigate the risk of greenhouse gas emission, noise pollution, and sustainable development, ensuring a better future for all (Rio+20 Conference, 2012)

Despite the efforts of the government to mitigate the electricity issues plaguing the country, significant stands has not been noted over the years, the country continue to deal with inadequate and epileptic power supply. In increase in electricity tariffs has raised concerns amongst Nigerians who are yet to feel the impact of the hike. Recent electricity hikes have aimed at addressing fiscal deficits and attract private investments in the sector (Akuru et al. 2021).

Despite the emergence of renewable energy, it is still inaccessible by most people due to its high cost, limited awareness, technical expertise etc. Addressing these challenges is crucial to increasing access to renewable energy in Nigeria, thereby decreasing greenhouse gas emission and increasing sustainability (Oyedepo, 2012). It is against this backdrop that this study becomes imperative.

1.3 Objectives of the Study

The primary objective of the study is to examine the role electricity tariff hikes has in the promotion of renewable energy adoption in Nigeria. Other specific objectives of this study are;

Investigate the relationship between electricity tariff hikes and the adoption of renewable energy in Nigeria.

Examine the impact of electricity tariff hike on renewable energy adoption in Nigeria.

Identify key challenges of renewable energy adoption in Nigeria.

1.4 Research Questions

The following research questions would be answered in the course of this study:

What is the relationship between electricity tariff hike and renewable energy in Nigeria?

What are the key challenges of renewable energy alternatives in Nigeria?

What are the impacts of electricity tariff hike on renewable energy adoption in Nigeria?

1.5 Research Hypothesis

Here are some research hypothesis based on the case study.

Ho: There is no significant relationship between electricity tariff hike and the adoption of renewable energy.

Ha: There is a significant relationship between electricity tariffs hikes and the adoption of renewable energy.

1.6 Significance of the Study

The significance of the study on the role of electricity tariff hikes in promoting renewable adoption in Nigeria would contribute to existing literature on renewable energy in Nigeria.

The study aims to shed more light on the factors that hinder the transition to renewable energy.

This study would help develop strategies which would mitigate effects of electricity hike, thus, providing economic stability.

This study would also contribute to efforts aimed at achieving sustainable development goals, reducing greenhouse emissions, and improving energy access across the county.

Scope of the Study

Primarily, this study will focus on the role of electricity tariff hike on renewable energy adoption in Nigeria. Empirically, it will investigate the relationship between electricity tariff hikes and renewable energy in Nigeria, assess the economic feasibility of renewable energy alternatives in Nigeria, examine the impact of electricity tariff hike on renewable energy adoption in Nigeria and identify key challenges of renewable energy adoption in Nigeria.

This study would be carried out in Nigeria.

1.8 Limitation of the Study

The study may not be carried out for a long period of time to determine the role electricity tariff hike had on the adoption of renewable energy in Nigeria. The sample size is also limited to Nigeria which may not reflect the overall impact of electricity hikes in the adoption of renewable energy.

The study relies of self-reported data, which is subject to biases, errors and inaccuracies.

1.9 Definition of Terms.

Definition of terms used in the study

Electricity: Electricity is the power that is carried by wires, cables etc., and is used to provide light or heat, to make machines work etc. It is the presence of energy generated to power equipment.

Tariff:  Tariff is a schedule of duties imposed by a government on imported or in some countries exported goods, a duty or rate of duty imposed in such a schedule. It is tax imposed by a government on imported goods. There are different types of tariffs which includes; ad valorem tariff, specific tariff, compound tariff and mixed tariff.

Renewable Energy: Renewable energy is a form of energy that can be derived from a natural source, such as the sun, wind, tides, or waves, without exhausting natural resources or causing severe ecological damage.

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