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The sun may yet shine on Africa
6 min read
Africa, especially sub-Saharan Africa, is a region in dire need of alternative forms of energy as a heating planet wreaks havoc on its climate and people. But will salvation come from fossil fuels or renewables? asks Selwyn Parker.
This was one of the burning issues at COP27 as one African leader after another made pleas for compensation for climate damage triggered elsewhere that has caused chronic water shortages that hamper food production, extreme weather events ranging from floods to droughts, declining energy supply and, as a consequence, rising poverty.
Right now, Africa as a whole is going backwards in energy terms. As the International Energy Agency’s (IEA) timely Africa Energy Outlook released in November 2022 reports, 4% more people had no electricity in 2021 than in 2019. Meanwhile, many utilities in sub-Saharan nations are running into financial difficulties with increasing risk of blackouts and energy rationing.
In short, the opposite of what should be happening.
Dr Fatih Birol, IEA Executive Director, has strong views on the subject. ‘I find it profoundly unjust that Africa, the continent that has contributed the least to global warming, is the one bearing the brunt of the most severe climate impacts,’ he points out, especially considering the relatively low cost of fixing the situation. ‘Bringing access to modern energy for all Africans calls for investment of $25bn per year – a sum equivalent to the cost of building just one liquefied natural gas terminal.’
No blank cheque
Yet where will that money come from? Despite impassioned appeals for financial retribution, it is unlikely that Africa will see the emergence of a compensation fund big enough to foot the bill. As experts from the Oxford Institute for Energy Studies (OIES) point out, developed countries are extremely reluctant to write what they fear will be a blank cheque. And one American energy authority warned that public opinion would turn against the Biden Administration’s entire renewables programme if the US were to sign up to such a fund.
Another hindrance is that few countries – or more likely none –would admit to any liability for climate damage in Africa, which would put them on the hook for potentially unlimited claims.
But there’s hope. According to the IEA’s view of Africa’s energy future, the solution comes in the form of a renewables revolution that is eminently affordable provided the right kind of funding is developed. ‘The global clean energy transition holds new promise for Africa’s economic and social development,’ its analysis argues.
And that view is gaining support where it’s most needed. A total of 12 African countries, representing over 40% of the continent’s total CO2 emissions, have signed up to a net zero goal by 2050 and nearly all African countries are pledged to the Paris Agreement. After all, universal access to affordable electricity is a vote winner. Ghana, Kenya and Rwanda are already on track to achieve exactly that as soon as 2030, which proves it can be done.
According to the IEA’s view of Africa’s energy future, the solution comes in the form of a renewables revolution that is eminently affordable provided the right kind of funding is developed.
Fossil fuels aren’t going away though, both as sources of domestic energy and export revenues. Vast reserves of natural gas, as much as 5,000bn m3, await approval for development in Africa. If the permits are signed, the fuel will be used to power new industries and to rescue battered economies, like that of Mozambique.
One of the poorest countries in the world, in November 2022 Mozambique shipped off its first consignment of natural gas to Europe after waiting for three years for funds from abroad to help it recover from cyclone Idai that devastated large swathes of the country. In an interview with Bloomberg Green in November, President Filipe Nyusi made no apologies, arguing that export revenues would pay for the greening of the economy.
This is a familiar refrain in a situation distorted by the war in Ukraine. Other African nations such as oil-rich Algeria have signed deals to deliver gas to Europe. And LNG terminals are being developed or expanded in Congo, Mauritania and Senegal ahead of Europe’s determination to wean itself off Russian gas by the end of the decade.
However, Nigeria provides a cautionary tale for African countries that may be tempted to rely on fossil fuels for export revenues. The enduring slump in its oil sector, on which the country relies, is creating serious economic consequences. In 3Q2022 alone, oil revenues plummeted by nearly a quarter, prompting the Governor of the Central Bank, Godwin Emefiele, to say: ‘The official foreign exchange receipts from crude oil sales into our official reserves have dried up steadily from above $3bn monthly in 2014 to absolute zero dollars today.’ As a result, the Nigerian currency, the naira, is in trouble.
As Songhai Advisory, a business consultancy specialising in West Africa, explains: ‘Nigeria’s oil output has now fallen to nearly half the amount it was eight years ago’, citing large-scale theft from pipelines mainly because of long-standing dissatisfaction with the way oil revenues are being distributed. As the firm notes, a 2021 law designed to stamp out theft and corruption ‘has evidently not yielded the desired results’.
Kigali, capital of Rwanda is one of the most advanced city in Africa in terms of renewables
However, there’s money on the table for the right projects. Among the 40,000 attendees at COP27 were representatives of the multilateral lenders, development banks and private-public finance who are ready to engage in the ‘blended financing’ – essentially multiple funding sources – that will make the transition to renewables happen. Simultaneously, the World Bank is under pressure to take the lead on this.
Investment in energy of all types would have to more than double during the present decade, a rate requiring $190bn/y between 2026 and 2030. Two thirds of that, calculates the IEA, would have to go into clean energy. Although that seems a big budget, it would still be a fraction of the total global spend on the pursuit of net zero.
The multilateral financiers, including the World Bank, were talking in the backrooms of COP27 about ‘concessional finance’, a low-cost form of debt that encourages other lending, notably private capital from domestic financial markets. However, as bankers have pointed out for years, Africa does not have the best record in the use of capital, either private or official, and some governments will have to raise their game in terms of transparency if they wish to attract what lenders call ‘foundational investments’ in the energy revolution.
One overdue reform is in the fraught area of energy subsidies. As the price of oil and gas spikes in the wake of the war in Ukraine, the cost of subsidising households is rising disproportionately. Indeed, some African countries have been doubling subsidies – ‘an untenable outcome for many facing debt distress’, points out the IEA. The solution, say most economists, is to reduce or eliminate subsidies except for the most needy households.
There is a lot to do. Currently, reports the IEA, a staggering 600mn Africans – 43% of the entire population – lack access to electricity. To achieve universal access, 90mn people a year would have to be hooked up to the grid for the first time and no less than 130mn/y would have to be weaned off ‘dirty cooking’ that uses wood and other biomass fuels. By any standards this would require a monumental effort.
And that’s just cooking. Even with prevailing temperatures, the cost of cooling is rising and will rise much higher as Africa heats up. In its ‘Sustainability Scenario’ the IEA sees demand for fans and air-conditioning quadrupling over the decade in all kinds of buildings, with proportionate demand on the energy system.
Soaking up the sun
A belated embrace of available technology is urgent. Although Africa boasts more than half of one of the world’s best raw materials for energy, namely the sun, it can summon up just 1% of installed solar PV capacity. And that’s despite solar PV already being the cheapest source of power in much of the region.
If Africa can wake up to the potential of solar and other renewables, the prospects are impressive. By 2030, estimates the IEA, the four big renewables – solar, wind, hydropower and geothermal – would deliver more than 80% of new power generation. This would be vital for the most energy-deprived rural regions where more than 80% have no access to the grid. In these areas the IEA sees mini-grids and mainly solar-powered standalone systems as the most viable solution.
Meanwhile, change is afoot. US energy think tank Rocky Mountain Institute and Shell are training up a new generation of leaders in renewable energy in Nigeria and 15 other countries in the Caribbean and sub-Saharan Africa. The Nigerian project alone aims to add 30 GW of new installed capacity by 2030, roughly a third of which will come from renewables.
Looking further to the future, Africa could become the hydrogen-exporting capital of the world. ‘Africa has huge potential to produce hydrogen using its rich renewable resources,’ says the IEA, citing existing or potential projects in Egypt, Mauritania, Morocco, Namibia and South Africa. As production costs fall, the numbers become increasingly in the region’s favour.
Green hydrogen could yet become the miracle for Africa if it seizes the opportunity.