The energy independence imperative in a volatile world [OpEd]

We are yet to tell the full scale of the economic damage, but we do know that the war’s impact on energy prices and supply uncertainty is already here. This “tax” on the world will ultimately result in slower economic growth and soaring lighting and heating costs. Food production will become more costly; so for the poorest it will mean choosing between the basic necessities of eating, heating and lighting.

All of this would be avoided if it were not for the world’s reliance on fossil fuels supplied by a handful of volatile countries.

The effects of energy scarcity and price increases will be felt everywhere, but it will be experienced more profoundly in Africa and all developing markets that lack access to reliable, affordable energy. These markets are highly reliant upon already high-cost fossil fuels like diesel and kerosene to power their homes and businesses.

Unfortunately, the people living in the African, Asian and Latin American markets I’m referring to already pay amongst the highest rates in the world for a painful, intermittent energy source.

Further, the people of these countries can pay up to 20% of their earnings in energy costs. We are now asking them to pay exponentially more in a world where energy freedom brought on by alternatives to carbon-based energy sources are just trying to catch up. This is untenable.

As I write this, the benchmark price of Brent Crude is $102 versus approximately $80 as we entered 2022. It reached a peak of approximately $123 in March 2022. While a significant increase, this greatly masks the impact it has on developing markets.

In Nigeria, for example, market diesel prices have increased from N275 a litre in January to almost N600 a litre today, peaking at over N700. On my visit to Abuja, the capital of Nigeria, last month, I saw long lines at gas stations that reminded me very much of the US gas crisis of 1973, where my dad and I would sit for hours waiting to fill up.

The people of Nigeria, highly dependent on diesel generators, already paying a significant percentage of their income in energy costs, just saw a two-to-three-fold increase in their energy bills. This backdrop is playing out across the globe, and impacting the people of the world that do not have the resources withstand.

We know that this will sustain for some period of time. Announcements banning Russian oil and gas – either now or in the near future – are plentiful from the US, UK and EU. The EU is seeking to cut its heavy dependency on Russian gas by 80% by winter this year. We also know we will get through this episode, prices will stabilize, and at some point in the future it will all repeat itself.

It is important not to ban fossil fuels. We may even need to become more reliant upon them in the short term to manage through these extraordinary events. It is in the longer term where we must embrace the combination of renewables and distributed energy as a means to energy independence. Build resiliency in the world energy apparatus and reduce our exposure to events such as the war in the Ukraine.

Of all the great things brought about by distributed renewable energy including cost reductions through solar generation, reduced carbon emissions through the inclusion of renewables, it is actually energy independence that the world so needs today and tomorrow.

To be overly dependent on one supplier would be unwise, even more so if that supplier is volatile and potentially hostile. Conversely, a balance across various energy sources, both domestically and internationally, is more stable and predictable. A relatively peaceful world, without energy-threatening wars, enables economic growth to lift the poorest out of poverty. But if wars cannot be avoided, we should at least ensure energy supplies are not disrupted.

Seeking to spread indigenous energy generation via renewables, was once seen as the way to combat future climate change – now it can be viewed additionally as the means to deliver energy independence.

Written by Bill Lenihan, CEO of ZOLA Electric

*The views expressed in this article are the views of a contributor at Business Insider Africa. It does not represent the views of the organisation Business Insider Africa.

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