–Professor Omowumi O. Iledare
1.0 Preamble
The global energy system is more likely than not to undergo a fundamental restructuring to decarbonize, which will create challenges and opportunities for the petroleum industry and petroleum-dependent economies. Unfortunately, the key and most dependable primary energy sources are fossil fuels that have been identified as the primary source of greenhouse gas emissions and consequently, classified as one of the major causes of the global warming phenomenon. It is natural, therefore, to assume that the fight against climate change must largely begin with the advocacy to end or reduce as much as possible, the use of fossil fuels. So, the global quest to either stop or drastically reduce the use of fossil fuels as the primary energy source has more than ever created the need to adopt zero or less carbon dioxide emitting energy sources otherwise known as green energy sources.
Interestingly, tackling the global warming phenomenon requires strategic thinking to find the optimal transitioning pathway from fossil fuels to non-fossil fuels. This is necessary to safeguard energy security, energy equity and energy sustainability, in the long run, worldwide. Thus, I agree totally with the statement by the Secretary-General of OPEC at COP26 that divestments from petroleum resources may be adversative to energy trilemma balance between energy equity, security, and sustainability. Thus, while there is the recognition of the importance of renewable energy in reducing global warming, there is the pervading view that total energy transition may be a threat to energy security since renewables like solar and wind are intermittent, making them unpredictable and unreliable without technology advancement in energy storage.
Regardless of the side of the debate one might belong, global energy transition either in part or in whole will have some consequences on petroleum producing and consuming economies. The effect on these economies will differ relative to the level of petroleum dependency as evidently seen during and aftermath of COVID-19 pandemic, as well as the adopted transition speed. It is, therefore, not conjectural to suggest that the vulnerability of global economies to rapid global energy transition from fossil fuels to zero-carbon emission energies is going to be dissimilar. A possible rapid shock to the petroleum industry is expected with an increase in the use of renewable energy, all things being equal, translating to a decrease in the use and production of fossil fuels. This decrease will be a loss to agents in the petroleum-dependent economies and thus, make them high incidence of economic vulnerability. Also, rapid energy transition may also increase the volatility of petroleum prices and therefore increase the vulnerability of petroleum-producing and consuming countries to either energy inequity, energy insecurity and or energy sustainability, respectively. Perhaps, using technology to optimize energy supply mix and adopting natural gas as the global transition fuel would facilitate the reduction of carbon emissions with less unintended consequences in the journey to net-zero carbon emissions.
2.0. Transition and Energy Resources Outlook
The forces shaping the global energy transition trend to 2050 and the key parameters surrounding the transition are not deterministic. The key players in the global energy supply dynamics are many with diverse interests and attaining the global transition goals requires heterogeneous approach rather than a homogenous strategy. For example, the energy transition era has not changed OPEC strategic objective, which is to maximize the economic wellbeing of its members through optimal petroleum resource development. The petroleum importing countries represented mostly by the G7 Countries or IEA countries consider energy affordability, energy sustainability, and energy security to be paramount to the economic wellbeing of their citizens as well. Thus, one thing held in common among all energy transition stakeholders is enhancing the quality of life of human beings, which petroleum has sustained over the years. Energy trilemma suggests that not paying attention to one at the expense of the other two dimensions, inequity, or security, is as detrimental to enhance human quality of life, as environmental sustainability. The world may not farewell solving one aspect of the trilemma at the expense of the other two.
There seems to be a global urgency and determination to shift global energy mix towards renewable energy system, which has a unique attribute to produce energy with no associated emission of greenhouse. To the extent that some are debating whether natural gas is green enough to be the consensus transition fuel. Of course, that renewable energy offers a clear path net-zero emissions is not conjectural but the transition speed to zero carbon emissions is conjectural and cannot be homogeneous. Three main scenarios in consideration now are Rapid, Net Zero, and Business-as-usual. These scenarios provide a range of possible outcomes to understand the range of uncertainties ahead for global economies. A historical review of renewable energy contribution to primary energy mix shows the extent of the daunting task ahead and why proffering uniform approach to effectively mitigate global warming by mandate is less likely to succeed.
Here are some important facts on primary fossil fuel energy sources—coal, crude oil, and natural gas. First, Coal supplies a third of all energy used worldwide and makes up 38% of electricity generation, as well as playing a crucial role in industries such as iron and steel. Coal reserves grew by 20 percent from 2010 to 2020, perhaps because of declining consumption and nearly 50% of the growth was in the Asia pacific region. Climate change mitigation demands, transition to cleaner energy forms and increased competition from other resources are presenting challenges for the coal sector. The Asia-Pacific region accounted for a significant carbon emission over the period, 2010-2020. Secondly, Crude oil is the base for lots of products. These include transportation fuels such as gasoline, diesel, and jet fuel, which accounts for about 30% of primary energy consumption worldwide. They also include fuel oils used for heating and electricity generation. Crude oil also creates petroleum products. When combined with other chemicals, oil is the base for over 6,000 items. Petroleum byproducts are tar, asphalt, paraffin wax, and lubricating oils.
Crude oil reserves increased by 26% from 1,300 billion Barrels in 2010 to 1,637 billion barrels in 2010. Despite rising production worldwide, the estimated crude oil reserves at the beginning of the year in 2021 was 1,732 billion barrels. Certainly, the world is not running out of oil but into oil. Natural gas supplies 22% of the energy used worldwide, and makes up nearly a quarter of electricity generation, as well as playing a crucial role as a feedstock for industry. The hydrocarbon is a versatile fuel, and its growth is linked in part to its environmental benefits relative to other. fossil fuels, particularly for air quality as well as greenhouse gas emissions. The estimated 6,800 TCF of reserves can last 50 years at the current global consumption level. Thus, natural gas fits the gap as a global transition fuel very well as the world seeks after green energy with net-zero carbon emission. Reserves year in non-OECD countries, however, is significantly higher at 70 years compared to OECD reserves production ratio of just 13.7 years. The Middle East has gas reserves life index of 110 years, while Africa has about 56 years. It is going to be foolhardy to not investigate Natural Gas in the Middle East and Africa as a legitimate transition fuel to green energy in the transition era.
Non-fossil fuels are receiving increasing attention within the context of addressing global climate challenges. Some well-known alternative fuels include biodiesel, bio alcohol (methanol, ethanol, butane), refuse-derived fuel, chemically stored electricity (batteries and fuel cells), hydrogen, non-fossil methane, non-fossil natural gas, vegetable oil, propane, and other biomass sources. Solar, wind, nuclear and hydroelectric are contributing about 15% to generate power. Renewables contribute less than 10% to primary global energy mix in 2020, but the contribution, though inching up, may not be able to turn the tide against natural gas by 2050. In a global sense, even though the growth in the last 10 years is about 10 percent per year, according to BP statistical Review, 2021, renewables alone may not lead us to the net-zero target and divestment in petroleum would make the matter worse off because of the unintended impact on energy trilemma index.
3.0. Energy Transition and Trilemma Quandary
As mentioned earlier, carbon dioxide emissions are the primary driver of global climate change and to avoid the worst impacts of climate change, the world needs to urgently reduce emissions. Unfortunately, sharing the responsibility between regions, countries, and individuals has been an endless point of contention in international discussions. The reasons for the contention are obvious and anchoring mostly on energy security, energy sustainability and energy equity aptly described as energy trilemma. Some regions are more energy secured than others, while energy equity in terms of affordability and accessibility leave much to be desired in some regions. Yet the need for environmental sustainability cuts across the globe even though contributions to carbon emissions differ significantly, across the regions. Africa, for example, contributes cumulatively to date, less than 3%, of the aggregate CO2 emissions.
Thus, for regions that are energy poor, like Africa South of Sahara, there is the anxiety, and rightly so, that transitioning rapidly to renewables from fossil fuels, will more likely than not, reduce the ability to supply reliable and affordable energy to households and commercial users in such regions in Africa making the region very vulnerable in terms of energy equity. Africa remains the region with the lowest average consumption (15 GJ/head) and four (4) out of five (5)people in Africa use some form of wood fuel as their primary source of domestic energy. Additionally, even with petroleum produced in these African countries, physical and economic access to modern energy sources is still a major challenge buttressing home the fact that having resources without being resourceful can be detrimental to energy equity and security in the long run. Adopting energy transition in Africa, requires a lot more strategic thinking and apolitical planning than sentiments or mantra, like the ‘Decade of Gas’ mantra in Nigeria.
Invariably, then, energy transition and trilemma quandary demand dissimilar energy transition strategies keeping in perspective that each of the three aspects of energy trilemma cannot be treated in isolation. Does a region, because of sustainability, abandon cheaper power sources in its region to maintain energy affordability or go for the more expensive renewable energy, which promotes sustainability? This looks like a classic energy sustainability and equity quandary. Additionally, do country with poor energy infrastructure and low natural resources import expensive sources of energy and compromise energy affordability. This permits importation of more affordable sources, which compete with ambitions for more sustainable energy. This is also a classic rapidity versus adaptability quandary in this energy transition discourse. Africa must not take the bait of aids and grants to transit from its abundant resources in the race to attain energy sustainability at the expense of energy security and equity. The optimal transition rapidity must be such that the strategic arrangements, simultaneously, keep in balance the three energy trilemma anchors in s dynamic sense. It cannot and must not be a static equilibration because of intergenerational implications.
4.0. Transition and Energy Mix Strategy for Africa
The energy trilemma forces Africa to think strategically in response to energy transition. There ought to be a balance between energy security, equity and sustainability in the accessibility and applicability of energy to promote quality of life. The train is moving and not responding is not an option but to strategically think of how to find the balance. Thus, Africa must keep talking the energy transition talk and embrace the transition and strategize to find optimal roadmap to net-zero emission in 2050. An energy mix roadmap with natural gas as the transition fuel seems to be worthy of exploring. Fortunately, Nigeria has taken the right steps with the adoption of a gas-to-power strategy along with hydroelectricity and renewable energy policy. The design of the fiscal framework in the Petroleum Industry Act 2021 lends credence to the Decade of Gas mantra of the Federal Government. The three classical instruments; taxation, the royalty scheme, and incentives are highly favorable to natural gas development for domestic use. So also, is the infrastructure fund for midstream natural gas investments. Of course, government still struggles with petroleum subsidy removal, which is antithetical to a smooth energy transition because subsidies crowds out private investment significantly and renders ineffectual Forex management and the aggregate money supply.
The benefits of energy mix is substantial towards balancing energy security in terms of current and the future at a reliably affordable price, energy sustainability in terms of high environmental quality in production and use of energy, as well and resource depletion. Of course, energy equity is maximized when it is affordable and available. For Africa with cumulatively low emissions so far, and abundant natural gas resources in the golden Gulf of Guinea, waiting to be explored and extracted, the energy transition dynamics is not complicated though a transformational leadership mindset is required. Further, energy mix strategy offers Africa to ameliorate the growing energy poverty even as technology advancements help to mitigate carbon emission from oil and gas production. This is ongoing right away with carbon capture technology. Adding renewables to energy resources at a pace not detrimental to energy equity is actually good as long as the comparative advantage of natural gas is not compromised because of unsustainable aids or grants as mentioned earlier. Additionally, too, energy mix protects countries from energy disruptions and strengthens energy security. It protects importing countries in Africa from market risks such as fluctuations in supply or pricing. Energy mix reduces the risks posed by political unrest or natural disasters and the development of renewable resources such as solar and wind power diminishes the threat of energy scarcity.
5.0. Concluding Remarks and Recommendations
Energy is life, its consumption drives prosperity and sustainability. Africa must go after a robust energy mix driven purely by economics, technology, public policy, and good governance. Through Strategic thinking, which disavows political expediency, government in Africa needs energy transition framework that balances energy security, equity, and sustainability in an efficient, effective way, with a transparent and accountable mindset.
The essential steps to finding an optimal transition pathway rest on government because energy transition is policy issue. Government must set the transition agenda and perhaps the AU needs to have an AU strategy think tank like its counterparts in the EU. Government should create energy transition frameworks that attract investment by rewarding entrepreneurship and innovation and constraining inefficiency and waste. Public-private partnership is required in identifying and developing alternative energy sources. I must add quickly too, that Africa may have to look inward for the type of investment fund required for the energy mix strategy to work if petroleum is defunded. It is also imperative to not work in isolation but work with the international community to establish and enforce environmental standards related to energy exploration and generation. I know this is easier said than done, government must learn to be apolitical when it comes to engaging experts to identify the best mix of energy resources.
Finally, there are other essential skill sets needed for effective transition strategy. In the energy transition era, transformational leadership must be enshrined in the energy sector. Meaning transactional leadership with Esau’s syndrome must be disavowed to balance the energy trilemma challenges. Management team must have operational control skillsets and possess the capability to be an effective manager of energy workforce. Professional promotion must be apolitical along the cadre. Energy transition and trilemma quandary call for a rekindling of our engineering education. Without being too sentimental, I remember with good feelings my petroleum engineering education days in the 1970s and we may need to revisit those years to reinvent what we did right as energy transition evolves. One thing we did right was practical training in the field to complement the classroom experience then. Equally important is technical education. Unfortunately, nearly every African country, even at their low level of infrastructure development, did not appreciate the relevance of technical education for sustainable development. I am hopeful that as Africa begins to understand the transition dynamics from fossil fuels to renewable, it will dawn on the continent the relevance of technical education in diminishing the effects of energy trilemma anxieties on transition dynamics.
