Despite low carbon emissions, Africa is disproportionately on the front line of climate change effects. Africa produces just two percent of global energy-related carbon dioxide according to Dr Fatih Birol, the executive director of International Energy Agency (IEA) in his foreword in the Africa Energy Outlook 2019 Report.
Africa accounts for a relatively small, but nonetheless growing share of the world’s carbon dioxide emissions. In 2010, the continent accounted for 3.3 percent of global energy-related carbon dioxide emissions; by 2018 this share had increased to 3.7 percent or around 1.2 gigatones (Gt) with North Africa accounting for the largest share of the continent’s energy-related carbon dioxide emissions of around 40 percent or 490 million tones (Mt) and South Africa accounting for 35 percent (420 Mt of carbon dioxide emissions).
As Africa’s population rapidly expands and urbanizes, its need for reliable and sustainable energy supply will become greater than ever. The energy alluded to is needed not only to drive the continent’s economic development but also to provide modern energy services to the large numbers of the Africans currently living without them.
Africa has the richest solar resources on the planet, but has installed only five gigawatts of solar photovoltaics (PV), accounting for less than one percent of global capacity. With the right policies, “solar could become one of the continent’s top energy sources”.
Natural gas, meanwhile, is likely to correspond well with Africa’s industrial growth drive and need for reliable electricity supply. Today, the share of gas in Sub-Saharan Africa (SSA)’s energy mix is among the lowest in the world.
But that could be about to change, especially considering the supplies the continent has at its disposal: it is home to more than 40 percent of global gas discoveries so far this decade.
Africa’s rich natural resources aren’t limited to sunshine and other energy sources. Its major reserves of minerals such as cobalt and platinum that are crucial for clean energy technologies mean the continent holds the key to ingredients for global energy transitions.
The Africa Energy Outlook Report acknowledges that due to natural resource endowments and technology improvements, “Africa could pursue a much less carbon-intensive development model than many parts of the world have. The challenges and opportunities differ widely across the diverse continent.
“But renewable, together with natural gas in many areas, are poised to lead Africa’s energy consumption growth as the continent moves away from the traditional use of biomass that currently accounts for almost half of final energy needs”.
The report laments that “despite its large and growing population, Africa accounts for a very small share global energy sector investment. In 2018, around US$100 billion was invested in the energy in Africa, or about 5.5 percent of the global total. Of this, $70 billion was invested in fossil fuels and $13 billion in renewable. Another $13 billion was spent on electricity networks”.
The Africa Case research study undertaken by the IEA is built on the premise of the African Unions (AU)’s Agenda 2063, continent’s inclusive and sustainable vision for accelerated economic and industrial development.
Faster economic expansion is accompanied by the full achievement of key Sustainable Development Goals (SDGs) by 2030. These include full access to electricity and clean cooking and a significant reduction in premature deaths related to pollution.
The Africa case outlines a way to lift constraints, starting with the achievement of full access to modern energy by 2030. In the case of electricity, this would require tripling the average number of people gaining access per year from around 20 million to over 60 million people.
Grid expansion and densification is the least cost option for nearly 45 percent of the currently deprived, mini-grids for 30 percent and stand-alone systems for around a quarter.
The report further reckons that “whichever pathway Africa follows, the continent becomes increasingly influential in shaping global energy trends” as growing urban populations mean rapid growth in energy demand for industrial production, cooling and mobility.
Liquefied Petroleum Gas (LPG) is used by more than half of those gaining access to clean cooking in urban areas across SSA, while in rural areas, home to the majority of those without access, improved cook stoves are by far the preferred solution. Electrification, biogas, ethanol and other solutions also play important roles.
According to the report, “energy demand in Africa grows twice as fast as the global average, and Africa’s vast renewable resources and falling technology costs drive double-digit growth in deployment of utility-scale and distributed solar PVs, and other renewables, across the continent”.
With the growing appetite for modern and efficient energy sources, “Africa emerges as a major force in global oil and gas markets. As the size of the car fleet more than doubles (the bulk of which have low fuel efficiency) and LPG is increasingly used for clean cooking, oil demand grows by 3.1 million barrels per day between today and 2020, higher than the projected growth in China and second only to that of India. Africa’s growing weight is also felt in natural gas markets and the continent becomes the third-largest source of global gas demand growth over the same period”.
While the future looks bright in the development of clean energy sector, “a critical task for policy makers is to address the persistent lack of access to electricity and clean cooking – and the unreliability of electricity supply. These have acted as brakes on the continent’s development”.
Nearly half of Africans (600 million people) did not have access to electricity in 2018, while around 80 percent of SSA companies suffered frequent electricity disruptions leading to economic losses.
In addition, more than 70 percent of the population, around 900 million people lack access to clean cooking. The resulting household air pollution from traditional use of biomass is causing 500 000 premature deaths a year. It also contributes to forest depletion resulting from unsustainable harvesting of fuel-wood, as well as imposing a considerable burden and loss of productive time, mostly on women.
The report also recognizes that the momentum behind today’s policy and investment plans is not yet enough to meet the energy needs of Africa’s population in full. In the Stated Policies Scenario, 530 million people still lack access to electricity and nearly one billion have no access to clean cooking by 2030.
“The continent’s ambition to accelerate an industrial expansion continues to be hampered in many countries by unreliable energy supply. Only a handful of countries – including South Africa, Ethiopia, Ghana, Kenya, Rwanda and Senegal – are successful in reaching full access to electricity by 2030”, laments the report.
Solid biomass remains a mainstay of the energy mix as a primary fuel for cooking as clean cooking policies lag population growth and premature deaths related to inhaling fumes from cooking end up only two percent below today’s levels by 2040.
The report further argues that “a focus on energy efficiency can support economic growth while curbing the increase in energy demand. In the Africa Case, although the size of the continent’s economy in 2040 I projected to be four times higher than today, efficiency improvements help limit the rise in total primary energy demand to just 50 percent”.
As a result, even though economic growth in the Africa Case is significantly stronger than in the Stated Policies Scenario, energy use is actually lower. This is linked to an accelerated move away from solid biomass as a fuel and the increased efficiency of charcoal production and use – and to the wide application of electrification and energy efficiency policies. These include fuel economy standards for cars and two/three wheelers, more efficient industrial processes, building codes and efficiency standards for appliances.
According to the report, the development and reliability of Africa’s electricity sector will be shaped by the progress in improving power infrastructure, within and across borders. Supporting a tripling of the electricity demand as envisaged in the Africa Case requires building a more reliable power system and greater focus on transmission and distribution assets.
A key priority is targeted investment and maintenance to reduce power outages,” a major obstacle to enterprise, and to decrease losses from 16 percent to a level approaching advanced economies (less than ten percent today).
In addition, some large power-sector projects – especially for hydro-power – require regional integration to go ahead: they would not proceed if assessed only on domestic needs. That means building up the regulation and capacity to support Africa’s power pools and strengthen regional electricity markets.
It is also recognized that Africa needs a significant scale-up in electricity sector investment in generation and grids, for which it currently ranks among the lowest in the world. Despite being home 17 percent of the of the world’s population, Africa currently accounts for just four percent of global power supply investment.
Achieving reliable electricity supply for all would require an almost fourfold increase, to around $120 billion a year through to 2040. Around half of that amount would be needed for networks.
Mobilizing this level of investment is a significant undertaking, but “can be done if policy and regulatory measures are put in place to improve the financial and operational efficiency of utilities and to facilitate a more effective use of public funds to catalyze private capital. Developing the technical and regulatory capacity to support sector reform policies, as well as Africa’s own financial sector, is also critical to ensure a sustained flow of long-term financing to energy projects”.
According to the report’s projections, Africa becomes a major player in natural gas as a producer, consumer and exporter. Gas production is projected to more than double in 2040 in the Stated Policies Scenario. It rises further in Africa case to support high demand from power and industry.
The share of gas in the Africa energy mix rises to around 24 percent in 2040 in the Africa Case (close to the global average today). However, the growth in, production is considerably higher than the rise in demand, and Africa – led by Mozambique and Egypt – emerges as a major supplier of Liquefied Natural Gas (LNG) to global markets.
The report bemoans that “Africa’s energy future is not preordained: many pathways are possible, but effective policy choices can guide the continent to a more inclusive and sustainable energy future and accelerate its economic and industrial development”.
The choices that lead in this direction vary, reflecting the different resource endowments and starting points across a very diverse African energy landscape. Some have full access to modern energy services within their grasp, while others have much further to go, or are struggling with instability or a legacy of conflict.
But there are reasons for optimism, both from the dynamism of Africa’s energy sector and from the technologies that offer a cost-effective way to meet rising demand in a sustainable way.
“Whether and how African countries take advantage of these opportunities will depend in large part on the way that energy policies evolve. With the right institutional and policy foundations, a well-functioning energy can sector can be the cornerstone of economic development and make a huge difference in the lives of Africa’s people”, emphasizes the report.
The report also notes that infrastructure is an essential building block for economic development and quality of life, but Africa, especially SSA, lags behind other developing economies in virtually all aspects of infrastructure quality.
Over the past three decades, the level of per capita power generation capacity in SSA has remained flat, whereas Indian and Southeast Asia (which had less generation capacity per capita than SSA in 1990) has grown fourfold. SSA has made relatively good progress on telecommunication infrastructure but still compares unfavourably with other developing economies.
“Making up the deficit of energy infrastructure in Africa will require a massive ramp-up in investment, but actual spending has been moving in the opposite direction. Energy supply investment in SSA has dropped by over 30 percent since 2011, and oil and gas investments have more than halved because of low oil prices and investor concerns about regulation and security in major producing countries”, laments the report.
Despite the downside, some positive also emerged as “power supply investment registered strong growth in 2014, but has since stalled. The one bright spot has been the rising investment in solar PVs, which is set to surpass that in hydro-power for the first time in 2019, according to early data”.
It is further reckoned that “attracting capital for oil and gas in SSA has generally been hampered by uncertainties around fiscal and regulatory frameworks – the design of local content rules has been a particular source of contention. Moreover, difficulties in reaching agreement on contractual terms have often led to reliance in practice on a handful of large companies that have the capacity to bear the risks”.
As a result, investment in oil and gas in SSA has largely been driven by international oil companies. This contrasts with the prevailing trend in many resource-rich countries where domestic companies and in particular national oil companies take the lead.
The lack of a competitive service industry is another constraint that has weighed on development costs. The limited attractiveness of the domestic market also means that most spending in oil and gas has been directed at export-oriented projects (e.g. upstream and LNG) rather than projects geared towards the domestic market (e.g. gas pipeline, refineries).