Environmental Implication of Electricity Trade between Nigeria and other Countries Dr. M.A.

N Anikwe Department of Agronomy and Ecological Management Enugu State University of Science and Technology, P.M.B 01660 ENUGU Nigeria.
Overview of the Electricity Market The electricity industry is made up of four functions: generation, transmission, distribution and supply. Both generation and transmission are highly capital intensive and transmission is a natural monopoly. Also, unlike other commodities, electricity cannot be stored. Once produced, it travels along the transmission grid according to Kirchoffs law, i.e., following the path of least resistance, and at the speed of light. The further electricity is transmitted, the greater the loss in efficiency. These characteristics, combined with the requirement of guaranteeing universal access to the electrical grid, led most governments to nationalise their electricity utilities. Demand for electricity also varies on a near constant basis. Factors such as weather and popular television programmes can cause sharp spikes in the demand curve. The difficulty of foreseeing these and balancing electricity supply and demand meant that technical considerations long dominated how the industry was run. Unless supply and demand were perfectly matched either wastage or blackouts could occur. This affected how electricity was calculated and sold. While average electricity needs over a day would be covered by a base load, an additional peak supply was necessary to top up when demand increased. Over time however, technological advances made the task of predicting demand easier. By the late 1980s computerised systems were capable of delivering minute-byminute demand measurements. These developments led proponents of liberalisation to begin highlighting the efficiency and cost gains that a freer market would bring.

The reliable provision of low-cost electricity is critical for industrial development, employment and poverty alleviation. In West Africa, economic growth is currently being stifled by insufficient supply of electricity to meet burgeoning demand. Ironically, as a whole, the region is an energy surplus region. This irony is explained by the fact that the policy environment and institutions that could induce new investments to increase generation and transmission capacity to produce and trade electric energy have been absent. Each national utility now works independently of its neighbors, evaluating its operation and expansion options on a project-byproject basis. Moreover, no framework exists within which electricity utilities can coordinate their investment plans and develop reliable trading relationships as is the case in Southern Africa.

The West African Generation and Transmission Network

The West African electricity network is characterized by many small national utilities with one large national utility in Nigeria. Most of the small utilities depend on thermal power, with hydropower available primarily in Ghana. Some countries, such as Benin, depend heavily on diesel generators, which are not connected to its national grid. The projected demand for the region in the year 2000 is shown in Table 1.

TABLE 1. ELECTRICITY-DEMAND FORECASTS FOR WEST AFRICA IN THE YEAR 2000

Peak power demand High forecast (MW) 190 130 40 1700 40 1500 500 130 60 290 5200 550 130 340

Country Benin Burkina Faso Gambia Ghana Guinea Bissau Ivory coast Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leone Togo

Low forecast (MW) 50 65 20 1300 20 1100 290 80 40 130 3400 360 95 190

TABLE 2. GENERATION AND TRADE IN SELECTED AFRICAN COUNTRIES

Country Electricity Production (1982-TWh) 0.01 Electricity Production (1994-TWh) 0.01 Electricity Electricity Hydropower Imports Exports Generation (1994 GWh) (1994 GWh) (1994 GWh) 242 -

West Africa Benin

Ghana Ivory Coast Nigeria Senegal Southern Africa RSA Zambia Zimbabwe

5.01 1.95 8.57 0.63 120.53 10.86 4.06

6.12 2.31 15.53 1.0 189.32 7.79 7.33

4 34 58 20 1716

263 138 1583 1500 -

6077 971 5561 1074 7745 2370

Source [3] Many generators in the West Africa region are old and have high operating costs. Investment in new power generation is a top priority for most nations in this region of Africa. The crisis resulting from electricity shortages in Nigeria is causing major damage to the manufacturing and commercial sectors and the prospects for the regional economy in general. In 1998 it was estimated that $5.3 billion dollars were required to rehabilitate Nigerias four thermal stations [2]. In an area of the world where positive foreign trade balances are small or non-existent there is a critical need for economizing on investments which use foreign currency. West Africa is similar also to Southern Africa in that it has one major utility in the region. Nigerias NEPA now PHCN (4,548 MW installed capacity in 1995) is much larger than any other electricity authority in the West Africa region, much like the Republic of South Africas (RSA) Eskom (38,000 MW installed capacity) is the largest in the Southern African region. The electrical energy consumed in Nigeria is smaller though than South Africa although it has more than double the population of South Africa. 1994 statistics show Nigeria generating 15.53 TWh compared with South Africas 189.32 TWh (Table 2). Ghana is the second largest utility in the region with Ivory Coast being the third (Table 2). The Nigerian power sector operates well below its estimated capacity, with power outages being a frequent occurrence. To compensate for the power outages, the commercial and industrialsectors are increasingly using privately operated diesel generators to supply electricity. In 2004, total installed electricity capacity was 5.9 gigawatts (GW). Total electricity generation during 2004 was 19 billion kilowatthours (Bkwh), while total consumption was 18 Bkwh. Only 40 percent of Nigerians have access to electricity, the majority of whom are concentrated in urban areas. Despite endemic blackouts, customers are billed for services rendered, partially

explaining Nigeria's widespread vandalism, power theft and Power Company Holding of Nigerias (PHCN) problems with payment collection.

Two policy trends appear to contradict each other in the electricity sector. On the one hand, increasing demand, improved economic efficiency and market liberalisation have increased international trading of electricity for most developed countries. Liberalisation and competition in the power sector have affected most world regions over the past few years. In the European Union, the opening up of a minimum of 25% of electricity and gas markets to competition took place on 9 February 1999 . Canada, Mexico and the United States have entered the North American Free Trade Agreement (NAFTA). Competition in the domestic electricity -supply industry has developed rapidly in the United States, and it now extends to full retail competition. The introduction of competition in the power industry has been carried out without any explicit recognition of the greenhouse gas-implications of such far-reaching structural change. For the past 30 years, electricity has contributed most of the increase in energy-related CO2 emissions. This has served the purpose of an economically efficient and secure electricity system. But it has also resulted in increased emissions for exporters of fossil-based electricity. Since 1997, all industrialised countries, as parties to the United Nations Framework Convention on Climate Change, have taken individual commitments under the Kyoto Protocol to limit their greenhouse gas emissions by 2008-2012. The power sector is a major and growing source of CO 2 emissions internationally. Exporters of electricity produced from fossil fuels would be disadvantaged under national emission caps whereas electricity importers have no emission disadvantage from the trade. Will structural changes of the power sector, and the increase in electricity trade that they may generate, be compatible with the newly agreed targets for greenhouse gas emissions at domestic level? It is important that experts explore the ways in which participation of power producers in an international emission trading system may help to reconcile increasing competition with the climate change obligations of the Kyoto Protocol. Electricity trade is a problem if it causes increased emissions in exporting countries. But it could, in fact, become a solution to the increase in electricity -related emissions.

The economic efficiency brought about by international electricity trade, if harnessed to an international emissions trading system, could contribute to cost-effective emissions reductions. There are however minimum requirements for setting such a system at the international level. The introduction of competition in the power industry has been carried out without any explicit recognition of the greenhouse gas-implications of such far-reaching structural change. For the past 30 years, electricity has contributed most of the increase in energy-related CO2 emissions. Nigeria participated in and ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1998 wherein government delegates, NGOs, businesses and civil society bound themselves to reducing and stabilising greenhouse gas (GHG) emissions below levels that would prevent dangerous human-induced climate change. PHCN should identify focus areas for immediate attention including: the development of a climate change policy; the evaluation of potential Clean Development Mechanism (CDM) projects and the adoption of an integrated electricity planning, among other things. Many studies in the literature find that dangerous gas emissions cause changes in temperature and precipitation with serious consequences for ecosystem functions and huge losses of terrestrial and marine biodiversity. Aridification will cause a shrinkage of those regions well suited for the countrys biomes to almost half their current size. Infrastructure damage is also likely to occur owing to sea-level rise and the increased threat of storms. Increased hydrology is a breeding ground for malaria and other water-borne diseases. These effects will feed into the tourism sector which may be affected by climate change due to a loss of habitats and biodiversity, and due to changes in temperature, humidity and malaria risk. The burden of an increased incidence of diseases on state healthcare expenditure will be enormous. Consequently, productivity and therefore economic growth are likely to decline. Nigeria ranked high out of 170 countries on a cumulative aggregate tonnage of CO2 emissions for the period 1950-1995, and also ranked low out of the same number of countries in terms of energy consumption per unit GDP. One of the reasons for such a high-energy intensity is the countrys reliance on thermal power. It can be argued that in the presence of international

multilateral agreements such as the Kyoto Protocol, potential barriers to trade and restricted access to markets via the application of environmental standards as well as civil resistance to products on environmental grounds, industries could be motivated to use cleaner electricity, and PHCN might be compelled to adopt technologies for cleaner energy. Very few countries can leave the power sector out of their GHG mitigation strategies, if they are to meet their Kyoto targets. The picture is obviously not as clear-cut as it seems when seen from an aggregate viewpoint. Some countries are considering an increase in the domestic production of fossil-fuel-based electricity in order to satisfy a growing demand for electricity exports and to generate revenues. This could, on the one hand, contribute to significant increases in domestic greenhouse gas emissions (GHG). Such exports could put the exporting Party in a difficult situation to meet its Kyoto target. On the other hand, it could also result in decreased regional or global emissions of greenhouse gases if, for example, imported gas-fired electricity displaces domestic electricity generation from a more carbon-intensive source. Under the Kyoto Protocol, however, each country is accountable for its own domestic emissions, regardless of the destination of the product which directly or indirectly causes them.

The Kyoto Objectives In 1992, the Rio Earth Summit established the United Nations Framework Convention on Climate Change, whose ultimate objective is to prevent the dangerous accumulation of greenhouse gases in the atmosphere. At Rio, industrialized countries agreed to undertake actions to stabilize their emissions in the year 2000 at 1990 levels. Recognizing the inadequacy of such commitments, Parties to the UNFCCC agreed in 1997 to the provision of the Kyoto Protocol. This agreement sets legally binding emissions objectives for each of the industrialized nations listed in the Kyoto Protocol. The objectives, also called assigned amounts, were adopted for a basket of greenhouse gases (CO 2, CH4, N2O, PFCs, HFCs and SF) for the period 2008 to 2012, expressed as percentages of actual 1990 emission levels

For most countries, reaching this goal will require reductions of GHG emissions from businessas-usual emission trends. Among all sectors, the energy sector (from primary extraction to end use) has been the major source of CO2 emissions. Clean development mechanism (article 12). The protocol defines a clean development mechanism designed to help non-Annex I Parties towards sustainable development. Certified emissions reductions achieved on the territory of non-Annex I Parties through individual projects, beyond what would have otherwise occurred, can be counted by Annex I Parties in their assigned amounts. Certified emission reductions achieved between 2000 and 2008 can be credited for commitments under the first commitment period. Emissions trading (article 17). Parties listed in Annex B may participate in emissions trading, which should be supplemental to domestic actions to achieve emission objectives. The Conference of the Parties will define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for emissions trading. Under both emissions trading and joint implementation, Parties trade parts of their assigned amounts (PAA), that is, emission reductions under their Kyoto targets. These mechanisms can be used to offset some of the increased emissions from the power sector.

Environmental Requirements in Power Development Developing a set of environmental requirements for the power sector involves decisions of two distinct kinds: First, there are the specific requirements of the power plant itself. These are the responsibility of the project developer in collaboration with relevant local or other environmental authorities. These include efficiency improvements through closure of old plants, repair and maintenance of existing plants, capacity building of personnel, upgradation of technologies or introduction of efficient technologies, etc. Second, there are requirements that relate to the operation of the power system as a whole. These strategic issues must be the concern of national or regional authorities with the responsibility for setting the overall policy framework for the development of the power sector. Examples of such

requirements include measures to promote energy conservation via better demand-side management, encourage the use of renewable sources of energy rather than fossil fuels, promote hydropower development, and meet the overall targets for the reduction of emissions of sulfur dioxide, nitrogen oxides or greenhouse gases, and the economic utilization of waste products (fly ash).

National Environment Policy The National Environment Policy (NEP) should list a number of objectives as follows to deal with current key environmental challenges: 1. Conservation of critical environmental resources; 2. Integration of environmental concerns in economic and social development; 3. Efficiency in environmental resource use; 4. Environmental governance; and 5. Clean technologies and innovation. The NEP should include economic efficiency as one of its principles. Environmental resources will be assigned an economic value so that it makes the process of cost-benefit analysis of a development project more definitive by factoring in environmental costs in monetary terms. The proposed substantive reforms include the concept of economic principles in environmental decision-making. One proposed reform is strengthening the initiatives in natural resource accounting and its inclusion in the system of national income accounts. The policy directly blames the electricity pricing criteria for groundwater depletion and says that there should be explicit accounting of the impact this has on the groundwater table. Cheap/free power supply discourages efficient use of water resources. The policy specifies the need for regulatory reforms, environmental standards, standardized management system, environmental certification and indicators, and a review of pollution emission norms. The policy should have mechanisms that should review the implementation process of the policy annually and make public its findings. This will also help in building up public trust in the governments earnestness to conserve the environment. While the NEP should have a national perspective, the states should be concerned with and responsible for major environmental measures like forest conservation, wildlife preservation,

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preventing unsustainable use and contamination of water resources, preventing air and soil pollution, etc. In the absence of state environment policies, the national policy may flounder. One substantive reform should be to encourage states to formulate their own environment policy duly approved by their state assemblies. That would help in widening the ambit of the peoples involvement in environmental conservation and development.

Policy Reforms and Strategies for Environmental Management 1. Greater thrust on hydropower development in the short, medium, and long terms. The emerging profile of the generation mix indicates the necessity of hydroelectric schemes. Hydropower would not only make available a reliable energy source but would also reduce carbon dioxide and other emissions. Under clean development mechanism untapped hydropower potential offers a unique opportunity to potential investors, both domestic and overseas. 2. For thermal power generation, the cleanest fuel economically available to be chosen. (Natural gas is preferable to coal subject to its availability and price.) 3. Greater thrust on renewables as a decentralized source of energy.

Importance of Economic Instruments Economic instruments for environmental protection may be direct or indirect. Direct economic instruments are pollution taxes/charges, emission trading rights, deposit refund systems, performance bond, and strict liability for pollution. The indirect economic instruments are taxes on outputs or inputs of polluting activities, fiscal incentives such as rebates on excise and customs duties, accelerated depreciation allowances, subsidies for the adoption of cleaner technologies and effluent treatment plants, eco-certification of products, and environmental audit. Economic instruments can, by altering the costs and benefits, provide signals to polluters to internalize the environmental costs in their decision-making and make them behave in a socially acceptable manner. They provide incentives to polluters to search for least-cost options of complying with the regulations.

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Currently, national-level policies for controlling pollutant emissions from power plants rely on command-and-control instruments that mandate the use of specific technologies. However, such technology-push policies are not an optimal solution, since they do not take into account the differences in marginal abatement costs between different power plants. Therefore, it is necessary for policymakers to consider alternative policy tools, such as carbon tax and emissions trading, which can be more cost-effective and achieve greater leverage over effluents. When compared to a technology-push policy, an emissions trading regime is expected to generate cost savings for equivalent reductions. These savings could be invested in clean-coal technologies, strengthening institutions for effective policy implementation, and other air-quality management measures. Such an approach would align the economic considerations of power plants with environmental interests. However, it is necessary to precisely formulate this regime in terms of policies, implementing agencies, regulators, etc. CEnergy Environmental Impacts Although power plants are regulated by federal and state laws to protect human health and the environment, there is a wide variation of environmental impacts associated with power generation technologies. The purpose of the following section is to give consumers a better idea of the specific air, water, and solid waste releases associated with natural gas-fired generation. Electricity from Natural Gas Natural gas is a fossil fuel formed when layers of buried plants and animals are exposed to intense heat and pressure over thousands of years. The energy that the plants and animals originally obtained from the sun is stored in the form of carbon in natural gas. Natural gas is combusted to generate electricity, enabling this stored energy to be transformed into usable power. Natural gas is a nonrenewable resource because it cannot be replenished on a human time frame.

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The natural gas power production process begins with the extraction of natural gas, continues with its treatment and transport to the power plants, and ends with its combustion in boilers and turbines to generate electricity. Initially, wells are drilled into the ground to remove the natural gas. After the natural gas is extracted, it is treated at gas plants to remove impurities such as hydrogen sulfide, helium, carbon dioxide, hydrocarbons, and moisture. Pipelines then transport the natural gas from the gas plants to power plants. Power plants use several methods to convert gas to electricity. One method is to burn the gas in a boiler to produce steam, which is then used by a steam turbine to generate electricity. A more common approach is to burn the gas in a combustion turbine to generate electricity. Another technology, that is growing in popularity is to burn the natural gas in a combustion turbine and use the hot combustion turbine exhaust to make steam to drive a steam turbine. This technology is called "combined cycle" and achieves a higher efficiency by using the same fuel source twice. Air Emissions At the power plant, the burning of natural gas produces nitrogen oxides and carbon dioxide, but in lower quantities than burning coal or oil. Methane, a primary component of natural gas and a greenhouse gas, can also be emitted into the air when natural gas is not burned completely. Similarly, methane can be emitted as the result of leaks and losses during transportation. Emissions of sulfur dioxide and mercury compounds from burning natural gas are negligible. Compared to the average air emissions from coal-fired generation, natural gas produces half as much carbon dioxide, less than a third as much nitrogen oxides, and one percent as much sulfur oxides at the power plant. In addition, the process of extraction, treatment, and transport of the natural gas to the power plant generates additional emissions. Water Resource Use

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The burning of natural gas in combustion turbines requires very little water. However, natural gas-fired boiler and combined cycle systems do require water for cooling purposes. When power plants remove water from a lake or river, fish and other aquatic life can be killed, affecting animals and people who depend on these aquatic resources. Water Discharges Combustion turbines do not produce any water discharges. However, pollutants and heat build up in the water used in natural gas boilers and combined cycle systems. When these pollutants and heat reach certain levels, the water is often discharged into lakes or rivers. This discharge usually requires a permit and is monitored.

Solid Waste Generation The use of natural gas to create electricity does not produce substantial amounts of solid waste.

Land Resource Use The extraction of natural gas and the construction of natural gas power plants can destroy natural habitat for animals and plants. Possible land resource impacts include erosion, loss of soil productivity, and landslides. Other Power Genetraion technologies The air emissions impacts of electricity generation from other technologies vary from technology to technology, as described below. Coal
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When coal is burned, carbon dioxide, sulfur dioxide, nitrogen oxides, and mercury compounds are released. For that reason, coal-fired boilers are required to have control devices to reduce the amount of emissions that are released. Mining, cleaning, and transporting coal to the power plant generate additional emissions. For example, methane, a potent greenhouse gas that is trapped in the coal, is often vented during these processes to increase safety. Oil Burning oil at power plants produces nitrogen oxides, sulfur dioxide, carbon dioxide, methane, and mercury compounds. The amount of sulfur dioxide and mercury compounds can vary greatly depending on the sulfur and mercury content of the oil that is burned. In addition, oil wells and oil collection equipment are a source of emissions of methane, a potent greenhouse gas. The large engines that are used in the oil drilling, production, and transportation processes burn natural gas or diesel that also produce emissions.

Nuclear Energy Nuclear power plants do not emit carbon dioxide, sulfur dioxide, or nitrogen oxides. However, fossil fuel emissions are associated with the uranium mining and uranium enrichment process as well as the transport of the uranium fuel to the nuclear plant. Municipal Solid Waste Although municipal solid waste (MSW) includes renewable resources, its use as a source of energy has been met with controversy. Despite recent toughening of emission standards for MSW combustion, the process creates significant emissions, including trace amounts of hazardous air pollutants.

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Burning MSW produces nitrogen oxides and sulfur dioxide as well as trace amounts of toxic pollutants, such as mercury compounds and dioxins. Although MSW power plants do emit carbon dioxide, the primary greenhouse gas, the biomass-derived portion is considered to be part of the Earth's natural carbon cycle. The plants and trees that make up the paper, food, and other biogenic waste remove carbon dioxide from the air while they are growing, which is returned to the air when this material is burned. In contrast, when fossil fuels are burned, they release carbon dioxide that has not been part of the Earth's atmosphere for a very long time (i.e., within a human time scale). The variation in the composition of MSW raises concerns. For example, if MSW containing batteries and tires are burned, toxic materials are released into the air. A variety of air pollution control technologies are used to reduce most toxic air pollutants from MSW power plants. If MSW were to be incinerated anyway, little or no environmental impact would be attributable to using the resulting heat to generate electricity. However, there are alternatives to incineration, such as recycling waste, storing waste in landfills, and source reduction.

Hydroelectricity Hydropower's air emissions are negligible because no fuels are burned. However, if a large amount of vegetation is growing along the riverbed when a dam is built, it can decay in the lake that is created, causing the buildup and release of methane, a potent greenhouse gas. Non-Hydroelectric Renewable Energy Solar Emissions associated with generating electricity from solar technologies are negligible because no fuels are combusted.

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Geothermal Emissions associated with generating electricity from geothermal technologies are negligible because no fuels are combusted. Biomass Biomass power plants emit nitrogen oxides and a small amount of sulfur dioxide. The amounts emitted depend on the type of biomass that is burned and the type of generator used. Although the burning of biomass also produces carbon dioxide, the primary greenhouse gas, it is considered to be part of the natural carbon cycle of the earth. The plants take up carbon dioxide from the air while they are growing and then return it to the air when they are burned, thereby causing no net increase. Biomass contains much less sulfur and nitrogen than coal; therefore, when biomass is co-fired with coal, sulfur dioxide and nitrogen oxides emissions are lower than when coal is burned alone. When the role of renewable biomass in the carbon cycle is considered, the carbon dioxide emissions that result from co-firing biomass with coal are lower than those from burning coal alone.

Landfill Gas Burning landfill gas produces nitrogen oxides emissions as well as trace amounts of toxic materials. The amount of these emissions can vary widely, depending on the waste from which the landfill gas was created. The carbon dioxide released from burning landfill gas is considered to be a part of the natural carbon cycle of the earth. Producing electricity from landfill gas avoids the need to use non-renewable resources to produce the same amount of electricity. In addition, burning landfill gas prevents the release of methane, a potent greenhouse gas, into the atmosphere. Wind

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Emissions associated with generating electricity from wind technology are negligible because no fuels are combusted.

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