Key Steps to Stabilize the Energy Market

Picture of the Week: European power prices are now lower than pre-Ukrainian times! The significant reduction in #European wholesale power prices in 2024 compared to 2021, especially in countries like #Spain and #Portugal, can be attributed to several key factors: 1. Expansion of Renewable Energy: Spain and Portugal have made substantial investments in #renewable energy, particularly #solar and #wind power. Since the onset of the Ukrainian crisis, these two countries have added nearly 20 GW of solar and wind capacity, which now represents about 15% of their total installed electricity capacity. This massive build-out of renewables has played a crucial role in reducing reliance on fossil fuels and lowering electricity prices. As a result, Spain has seen a dramatic increase in the share of #electricity generated from #renewables, rising from 51% in 2021 to 65% in 2024. This shift has significantly contributed to reducing wholesale power prices by half compared to 2021 levels. 2. Diversification Away from Russian Gas: The European Union, along with individual countries, has made concerted efforts to reduce dependence on #Russian #naturalgas, which was a major factor driving high energy prices during the 2022/2023 period. These efforts included securing alternative gas supplies, increasing LNG imports, and enhancing gas storage capacities. The shift away from Russian gas, coupled with a mild winter and lower overall demand for gas, has eased pressure on gas prices, which in turn has lowered electricity prices across much of Europe. 3. Energy Efficiency Measures: Governments across Europe have implemented #energyefficiency programs aimed at reducing overall energy consumption. These measures, along with public campaigns promoting energy savings, have contributed to reducing electricity demand, helping to stabilize or lower prices. 4. Government and Industry Cooperation: There has been close cooperation between governments and energy companies to stabilize the energy market.

Most large-scale energy initiatives follow the same pattern: start with big commitments, roll out connections, figure out the policy later. Nigeria did the opposite. And that’s why it’s working. Instead of treating private investment as an afterthought, Nigeria built the policy framework first. And that made all the difference. What Nigeria Got Right - 1. A Structured Energy Compact – Nigeria created a clear, integrated policy that combines grid expansion, mini-grids, and decentralized solutions into a single plan. Other countries still treat off-grid power as an afterthought. 2. Private Sector Was Built Into the Model – Most African energy plans rely almost entirely on government spending. Nigeria understood that public money alone won’t be enough, so they de-risked the investment landscape for private players. 3. Policy Stability That Investors Can Trust – The biggest deterrent to energy investment is regulatory unpredictability. Nigeria structured clear rules around licensing, tariffs, and long-term market participation, giving businesses and investors the ability to plan long-term—not just react to political cycles. The Results Speak for Themselves - - Nigeria is now the leading mini-grid market in Africa. - Private capital is flowing into the energy sector at scale. - The policy model is structured for real expansion—not just short-term funding cycles. Now compare this to many other Mission 300 countries - - There’s no clear strategy to integrate decentralized and centralized power. - Investment risk is still too high for private capital to flow at scale. - The policy landscape remains too unstable for long-term planning. Nigeria isn’t perfect. But it’s one of the few places where energy policy is being built for growth, not just for the next round of funding. If Mission 300 countries want to make real progress, this is the playbook - - Stable, investment-friendly regulation - A clear plan that integrates all forms of power - Long-term market structures that attract capital at scale Energy access is an industry, not a one-time intervention. And Nigeria is proving that when the policy is right, the investment follows. #NigeriaEnergy #Mission300 #SmartInvestment #EnergyForGrowth

A country that remains tethered to imported fossil fuels will keep importing geopolitical risk along with them. A country that builds domestic clean power, domestic manufacturing, domestic storage and domestic mineral processing capacity will be better placed to ride out external shocks. That is the strategic opportunity hidden inside the present turmoil, and India must move with urgency to convert this moment into a decisive shift toward energy sovereignty. We can accelerate this process by: 1. Raising renewable target to 1,500 GW by 2030. 2. Strengthening grids in Gujarat, Rajasthan, Karnataka, Tamil Nadu, and adding more Renewable Energy Management Centres. 3. Mandating battery storage in all tenders; boosting pumped hydro, and cutting GST for storage assets to 5%. 4. Scaling clean cooking via Ujjwala-linked induction cooker aggregation. 5. Electrifying new buses fully, 2/3-wheelers by 2030, cars/trucks by 2035; fixing advanced chemistry-cell battery storage PLI. 6. Executing 100 GW nuclear by 2047 and diversifying critical minerals from China. My article in todays Business Standard: https://lnkd.in/gn9dc3-r

Can We Finally End Nigeria’s Fuel Crisis? In 1975—as seen in the newspaper headline on the left—we were discussing strategies to address the fuel crisis. Yet, nearly five decades later, our newspapers still report the same issues. So, the question remains: Can we ever end the fuel crisis in Nigeria? While the solution is complex, I am convinced that it is possible.   The key lies in a genuinely market-driven approach. This means letting the market—not quasi-market policies—truly dictate fuel supply. A fully independent, private-sector-led market will ensure a consistent supply. The government’s role should be limited to strategic interventions, ensuring energy security only during emergencies. 1. Real subsidy elimination must be front and center. We all know that subsidies distort the market, leading to inefficiencies, fuel scarcity, and corruption. That has been our story for several years. Eliminating them entirely and in all forms will allow fuel prices to reflect true market conditions. This shift is difficult but necessary. Short-term pain for long-term gain is the principle we must embrace. Any government intervention as we have seen recently, through funding the pegging and control of pricing, only prolongs the pain and delays the resolution of the problem. 2. An Independent NNPC Limited is non-negotiable. NNPC’s transition from a government appendage to a truly commercial entity must be real and not cosmetic. Only then can we realize the benefits of the Petroleum Industry Act (PIA) 2021. The global energy landscape is competitive, and NNPC must operate independently to tap into the market opportunities and drive Nigeria’s energy sector forward. 3. Reducing fuel demand is equally critical. In many other countries, mass transit systems significantly reduce fuel consumption. Nigeria’s current over-reliance on personal vehicles puts enormous pressure on fuel demand. We must invest in efficient, affordable, and sustainable public transportation systems. This will not only alleviate demand but also promote environmental sustainability. 4. Boosting domestic refining capacity. Projects like the Dangote Refinery and the revitalization of existing state-owned refineries are crucial, but we must go further. Encouraging modular refineries—which can be established quickly and with lower capital costs—will help meet local demand and reduce our dependence on fuel imports. These also create jobs and foster economic growth in various regions of the country. 5. Strengthening fuel distribution infrastructure must also be a priority. The current reliance on trucking leads to fuel scarcity due to road degradation, hijackings, and logistical delays. We need to invest in pipelines and rail networks to efficiently distribute fuel across the country, reducing costs and ensuring timely delivery to all regions.   Yes, the challenge is immense, but we must ask ourselves: In 50 years, will we still be facing the same fuel crisis?  

Back to the grid…. Most people who use electricity don’t fully appreciate where it comes from or how the cost is calculated for them as a consumer. Energy spot price auctions are a mechanism used in electricity markets to price electricity according to real-time, market based supply and demand conditions at a particular moment. The goal of spot price auctions is to create a competitive market for electricity and facilitate efficient allocation of resources. However, the volatility in spot prices has created significant challenges for all stakeholders. The symptoms include price volatility and instability in electricity markets. To enhance grid reliability and stability, alternative approaches must be considered. While spot pricing may seem like a straightforward way to determine prices, it fails to account for the unique dynamics of the power grid and the long-term investments required to maintain a reliable and resilient energy ecosystem. The primary issue with spot price auctions is that they treat electricity as a commodity, subject to the whims of the market. Dramatic price fluctuations have severe consequences for both consumers and energy providers. When prices spike during periods of high demand or supply disruptions, it imposes enormous financial burdens on households and businesses, threatening economic stability. From the perspective of energy suppliers, the unpredictability of spot prices makes it challenging to plan for long-term capital investments in new generation capacity, transmission infrastructure, and grid modernization. These investments are crucial for ensuring the continued reliability and sustainability of the power grid, but they require a level of price certainty that spot markets simply cannot provide. It is time for policymakers and industry leaders to explore alternative pricing mechanisms that prioritize stability and long-term planning. One alternative is the use of capacity markets, where energy providers are compensated not only for the #electricity they generate but also for the availability of their generation assets. This model would provide a more reliable revenue stream for suppliers, enabling them to make the necessary investments in the grid's future. Another alternative is the implementation of forward contracts and hedging strategies. By locking in prices for electricity over longer time horizons, these mechanisms can help smooth out price volatility and provide the predictability that energy providers and consumers require. Transitioning to a more resilient energy system will not be easy, but it is a necessary step to ensure the long-term prosperity and security of our communities. By moving beyond the limitations of #energy spot price auctions, we can build a power grid that is truly fit for the future. The #grid of the future should reward a diverse portfolio of generation sources. It is time to move past demonizing reasonable energy sources even if they don’t fit certain ideologies.

Today, the European Commission presented two flagship initiatives for a competitive Europe: the Clean Industrial Deal and the Action Plan for Affordable Energy. The message is clear: a secure, resilient and cost-efficient #energysystem is the basis for #economicgrowth and security of supply in Europe. To make this transformation as cost-effective as possible, we need to accelerate grid expansion, boosting electrification, and strengthen the interconnection and efficiency of the European energy market.   For Germany, I see the following key priorities: #SecurityOfSupply: We urgently need more capacity – at least 21 GW of additional controllable capacity – to integrate more renewables while ensuring security of supply for economic centers. Complementing state aid rules to speed up the approval of such mechanisms is a step in the right direction. Our preferred model: a central mechanism with a local component, as already used in Belgium. #Independence: Turning the North Sea into Europe’s green powerhouse is key to autonomy and cost-effectiveness. To accelerate development, we need pragmatic cost-sharing mechanisms among North Sea states now. We must also take major steps towards regional planning, identifying the most beneficial projects to implement as soon as possible. The upcoming North Sea Summit later this year is an opportunity we must seize. #TimeIsMoney: To unlock the benefits of a competitive energy system, we need to streamline approval procedures across Europe and swiftly implement RED III at the national level. Aligning EU and national policies within a well-structured governance framework would be a step forward. Smart cost-reduction measures – including reforms in network charges to incentivize flexibility – are also key. Massive investment in #grid #infrastructure over the next few years is essential to transform the energy system. But as the Commission rightly stated: “The cost of inaction is higher than the cost of action.” Investing now will pay off soon and strengthen Europe's economy. #CleanIndustrialDeal #ActionPlanforAffordableEnergy #LightingTheWayAheadTogether

One thing that has been made clear from the current energy crisis: managing demand is just as critical as securing supply. The European Commission’s AccelerateEU communication, to be published on 22 April, is expected to recognize the importance of putting demand-side action and electricity market improvements firmly on the agenda. It's not just about encouraging people to reduce their daily energy use. It's about ensuring Europe's energy security and resilience by developing homegrown electricity. This requires support at national level to massively deploy available technologies - heat pumps, solar panels, EVs - to accelerate the switch to electrification of key systems like heating and transport. Likewise, reducing taxes on electricity to make it competitive and providing more incentives to grid operators to digitalize, as well as incentivize flexibility and system efficiency, has become crucial. And where energy efficiency is concerned, we already have technologies that can deliver energy (and cost) savings without compromising comfort or productivity. What matters now is execution! For governments, businesses, society… we need to take action together for Europe’s overall competitiveness and resilience. #EnergyManagement #EnergyEfficiency #Electrification #EnergyTechnology #Europe