Impact of Oil Prices on Clean Energy Adoption and Renewable Energy Scenarios in Nigeria

  • Ishaya Jonah Tambari

    Student thesis: Doctoral Thesis


    Energy security, climate change mitigation and growing energy demand represent the current global sustainability issues. To achieve synergy between energy security and climate mitigation, climate policy requires stringent reductions in greenhouse gas emissions by mid- century. However, some countries are hindered in accomplishing this due to other development- related challenges. Nigeria, a case study in this thesis, is a middle-income developing country and a leading country in Africa in terms of population, crude oil production, and economic growth but the country faces challenges of shortages of modern electricity supply and high climate change issues due to reliance on fossil fuel (oil and gas) for electricity generation. The fundamental objective of this thesis therefore is to examine the effects of oil prices on renewable energy deployment targeted at cushioning the impacts of climate change.
    There are three research questions central to this work: (1) Is there any causality between oil price plunges and renewable energy generation in countries dependent on oil? (2) Does the oil price significantly affect renewable energy policies on future investment in renewable energy technology for electricity generation? (3) How will investment in renewable energy technology enable it to become a long-term, low-cost future electricity supply?
    This thesis applied autoregressive distributed lag (ARDL) and nonlinear autoregressive distributed lag (NARDL) models to investigate the symmetric and asymmetric relationship between oil prices and renewable energy investment using data from six (Algeria, Angola, Egypt, Ethiopia, Nigeria, and South Africa) countries in Africa. Net crude oil exporting and net crude oil importing countries are represented, as well as the most developed countries in the region. This thesis further examines the effects of CO2 emissions and economic performance. The second empirical chapter applied a panel vector autoregressive (PVAR) model to analyse the effects of oil prices and the role of macroeconomic performance on investments in renewable electricity generation based on data from the aforementioned countries. The integrated MARKAL-EFOM system (TIMES) modelling framework was applied to construct a model for a Nigerian electricity generation system. Multiple electricity demand projections and the employment factor in renewable electricity generation are key factors that have been neglected in the literature on modelling renewable energy in Nigeria.
    The ARDL and NARDL results showed that oil prices have statistically significant effects on renewable energy investment (REI) in all investigated countries, with varying degrees of significance. We found a symmetric relationship between oil prices and renewable energy investments in Algeria, Egypt and Nigeria. Angola, Ethiopia and South Africa have asymmetric relationships. The PVAR model results revealed that oil price has a negative effect on REI, whereas the GDP growth has a positive influence on REI in the sample countries. The adverse effect of oil prices on REI may imply that high oil prices decelerate the rate of change of investment in conventional energy sources to investment in renewable energy.
    The TIMES model results showed that Nigeria can achieve 100% renewable electricity supply by 2050 with the deployment of a mix of renewable energy technologies, especially utility-scale solar PV and onshore wind turbines. CO2 emissions are expected to peak by 2030 and decline to zero in 2050. In terms of total system cost, a transition to 100% renewable electricity by 2050 is a cheaper option compared to the conventional pathway. It also has the potential to create around 1.54 million jobs for Nigerians by 2050.
    Data from this thesis reveals three key insights to the energy literature: (1) Oil prices are significant factors in renewable energy investment. (2) The effects of oil prices persist from the short-run to the long-run. (3) The results showed that the effects of oil prices are symmetric in some countries while asymmetric in others. In addition, the adverse effect of oil price on REI implies that the countries are perhaps plagued by high oil prices, which decelerates the change process from investment in conventional energy sources to investment in renewable energy. This could explain the relative reluctance of these countries to use alternative energy sources because there is little incentive to stop the use of fossil fuels and utilise a more environmentally friendly policy.
    The optimisation model indicates that the two most promising renewable energy technologies (RETs) (grid-tied solar PV and wind turbine) are plagued with variability of supply and this will become a hindrance to a full renewables transition. The benefits of a full RET system are numerous. A robust and dedicated policy intervention will be needed to drive forward RETs in the country and restrict new investments in conventional power generation systems.
    Renewable energy investments; African countries; Nigeria; Climate Change; Decarbonisation; Energy System; Optimisation; Oil Pr
    Date of Award1 Feb 2024
    Original languageEnglish
    Awarding Institution
    • University of Portsmouth
    SupervisorPierre Failler (Supervisor), Shabbar Jaffry (Supervisor) & Ioannis Chatziantoniou (Supervisor)

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