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Author – Dr. Segun Adaju
CEO –Consistent Energy
President – Renewable Energy Association of Nigeria
Article made in submission for the Green Week and Climate Online Campaign
Renewable energy according to Wikipedia is defined as energy that is collected from renewable resources, which are naturally replenished on a human timescale such as sunlight, wind, rain, tides, waves, and geothermal heat. In common terms, renewable energy is that generated from natural sources and which can be replenished such as Solar, wind, hydroelectric, geothermal, and biomass. These are the five titans that hold the pillars of renewable energy that have a positive impact on our planet. Renewable energy has proven to have several benefits cutting across environmental, social, economic and even political in terms of energy security. However, this brief article is to review the economic benefits of adopting renewable energy sources as against other sources such as fossil fuels.
A key feature of renewable energy sources is Sustainability. We will never run out of vital sources such as the sun’s rays, strong winds, flowing water, and heat from the earth. On the other hand, coal, oil, and gas are limited sources that will ultimately be run out. This is fundamental bedrock of the adoption of renewable energy sources especially in the development and achievement of the Sustainable Development Goals.
According to IRENA (International Renewable Energy Agency), doubling the share of renewables in the global energy mix by 2030 would increase global GDP by up to 1.1% or USD 1.3 trillion. The report shows that such a transition increases global GDP in 2030 between 0.6% and 1.1%, or between around USD 700 billion and USD 1.3 trillion compared to business as usual. Most of these positive impacts on GDP are driven by the increased investment in renewable energy deployment, which triggers ripple effects throughout the economy. If the doubling of the renewable share is achieved through a higher rate of electrification of final energy uses, the increase in global GDP is even higher, amounting to some 1.1%, or USD 1.3 trillion globally.
The IRENA report further states that improvements in human well-being and welfare would go far beyond gains in GDP. The benefits of renewables reach well beyond the traditional and limited measurements of economic performance. Doubling the share of renewables by 2030 has a positive impact on global welfare, which increases by 2.7 % compared to a 0.6% GDP improvement. If achieved through higher electrification of heat and transport, global welfare would further rise by 3.7%.
Renewable energy improves human well-being and overall welfare well beyond GDP.  Given the distributed and labour-intensive nature of renewable energy, direct and indirect employment in the renewable energy sector could reach 24.4 million people in 2030. Doubling the share of renewables will increase direct and indirect employment in the sector to 24.4 million by 2030. Renewable energy jobs will grow across all technologies, with a high concentration in the same technologies that account for a majority of the employment today, namely bioenergy, hydropower and solar. Along the renewable energy value chain, most renewable energy jobs will come from fuel supply (bioenergy feedstocks), installations and equipment manufacturing.
Compared with fossil fuel technologies, which are typically mechanized and capital intensive, the renewable energy industry is more labor-intensive. This means that, on average, more jobs are created for each unit of electricity generated from renewable sources than from fossil fuels.
In addition to the jobs directly created in the renewable energy industry, growth in renewable energy industry creates positive economic “ripple” effects. For example, industries in the renewable energy supply chain will benefit, and unrelated local businesses will benefit from increased household and business incomes.
The costs of renewable energy technologies have declined steadily, and are projected to drop even more. For example, the average price of a solar panel has dropped almost 60 percent since 2011. In contrast, fossil fuel prices can vary dramatically and are prone to substantial price swings.
Let us now narrow down to a practical case study of how renewable energy technologies such as solar for a small and medium scale barber shop in Lagos can create economic benefits. Our company, Consistent Energy introduced a scheme known as SolarDirect for SMEs and small businesses about 2 years ago with a pilot through the Barbers Association in Lagos. We installed a 600Wp solar technology for barber Efe in Magodo Isgeri Lagos to displace the small generator popularly known as ‘I better pass my neighbor’.
Before the project kick-off, we conducted a survey amongst barbers in Lagos and results shows that Efe was spending average of N7,000 every week to buy fuel alone for his generator. The economics of running his generator is as shown below (in current prices):
Cost of buying a 1000VA generator                 =          N30,000
Cost of monthly fuelling at N7,000/week       =          N28,000
Cost of monthly engine oil @N500/week       =          N2,000
Cost of monthly maintenance                           =          N1,000
Annual cost of running generator                  =          N372,000
This brings the total cost of powering his business to N402,000 a year. We designed a solar solution for his business that cost N450,000 with his paying a deposit of N45,000 down payment and subsequent weekly rentals of N5,000. This has resulted in an immediate savings of N2,000 per week on his cost of fueling his business.
He will repay a total sum of N260,000 in a year of 52 weeks. His payback period is 2o months and we will transfer ownership of the system to him. He will thus access free energy from the sum from after 20 months and he can use the inverter and batteries for another 2 years at the least while the solar panels will last for 2o years more! Let us look at the immediate economic benefits of this solution:
  1. Reduced energy cost and savings of N2,000 per week from purchase of fossil fuel
  2. Zero cost of energy from month 20 for another 2 years more. If we compute his normal spending of N7,000 on fossil fuels weekly, that will be N728,000 over 2 years. If we assume he will replace his batteries after 2 years at the cost of N280,000 (2 batteries of 200Ah at N140,000 each), then he would have saved N448,000 to expand his business more. In this case study, Barber Efe actually opened another barber shop from his savings.
  3. His income increases by 40% after the installation of the solar system given increased patronage due to regular power supply. Also, he attracted more clients because of no noise and pollution from solar power.
  4. Barber efe hired additional 2 hands in his shop after installing solar to cope with increased traffic to his shop while he hired 2 new hands for the new shop. This is increased income for 4 households which will impact at least 20 people (assuming a family of 5 each).
This is the power of renewable energy in impacting the economy of a nation starting from the micro level. And we still have other environmental and social impact such as earning carbon credit on emissions sequestered, improving the climate of the earth with its positive impact on health and productivity.