#IEA estimates that 60% of the expansion of Africa's generation capacity to 2040 will be covered by gas, amounting to 225.2 GW
Promoting a new energy mix to resume growth; this could be the key to the future of Sub-Saharan Africa, which is hanging in the balance between rapid expansion and drastic contraction. Two supporting figures: the first indicates that, according to the World Bank, the growth in Sub-Saharan Africa’s GDP in 2016 reached the lowest level of the last twenty years (1.9%), against a population that increases by 2.8% per year. Future forecasts are equally negative, and are largely influenced by the lack of electrification in a continent that still has over 600 million people with no access to energy. The other figure concerns precisely this portion of the population; in 2014, according to the IEA and the OECD, the percentage of Africa’s energy-deprived population dropped for the first time, after growing for years. A positive sign for a future in which new factors, such as major gas discoveries, the decline in the cost of renewables and new technologies for rural electrification will play a crucial role. This is provided, however, that other factors act as facilitators and eliminate the many regulatory, financial and infrastructural management obstacles that have so far acted as a restraint to Africa’s energy industry and, in general, to its economy.
Gas: building the backbone of African electrification
Each year, Sub-Saharan Africa is discovered to be richer in gas and oil; 30% of the major hydrocarbon discoveries between 2009 and 2014 were made in the region and this wealth could significantly contribute towards the growth in African electrification. The IEA estimates that 60% of the expansion of Africa’s generation capacity to 2040 will in fact be covered by gas, amounting to 225.2 GW of new generation, a value higher than any other source. Gas offers Africa not only a solution to the intermittence of renewables, but also an alternative to hydropower plants, which are central to countries such as Ethiopia and Mozambique, but risky due to the growing scarcity of water, which threatened the lives of millions of people in East Africa as early as the summer of 2016.
In order for this growth to materialize however, substantial changes are required in the industry. First and foremost, a real development of significant gas resources is crucial. These are still largely wasted: in 2012, in Sub-Saharan Africa, the amount of flared gas burned was almost identical to the exported volume and the consumed volume (27 bcm – billion cubic meters). Strong regulatory and investment uncertainties preclude the development of infrastructure for exploiting these gas resources, especially for national transmission and for generation. The case of Nigeria is emblematic: it is the second country in the world for flaring and, with 45% of its population still lacking access to electricity, the country has so far only achieved a quarter of its goal to increase gas generation to 20,000 MW by 2020 – mainly due to a lack of resources to fuel new plants. The drive to develop the industry provided by exports therefore risks being stalled by the fluctuations in the cost of liquefied natural gas (LNG), the main means for exporting the resource to Africa, and by the possible future competition of Australia and the United States. These factors, for instance, have blocked projects for three new liquefaction plants in Nigeria in the last ten years.
Even if these exports were to reach the desired level, it will be necessary to find a balance between these and domestic consumption. It is possible to focus on both only for certain countries, such as Mozambique and Nigeria. Other countries with more limited resources, such as Ghana and, especially, Tanzania, have instead had to give priority to domestic consumption, thus risking compromising the ability to export and, therefore, attract investment.
Renewables: the key to rural electrification
Thanks to a constant decrease in the cost of renewables worldwide, especially due to increasingly competitive tenders (such as those for solar panels in South Africa), renewables could be another determining factor for the electrification of Sub-Saharan Africa. Despite the great potential, however, progress of on-grid renewables, that is, those connected to the national grid, has been disappointing: few countries have managed to pursue projects above 50 MW (especially Nigeria and Ghana) and certain ambitious plans, such as that of Mali, have failed due to the country’s instability. In East Africa, priority is instead given to hydroelectric projects which, due to having great untapped potential, are incurring problems resulting from the increasingly devastating drought in the region. Large and small dams therefore have to deal with an intermittent generation and the strong impact of these projects on the surrounding regions (as in the case of dams in northern Ethiopia and along the basin of the Omo River).
Meanwhile, off-grid solutions, that is, those not connected to the national grid, represent an increasingly attractive option for many countries, such as Kenya and Uganda. The International Renewable Energy Agency (IRENA) estimates that off-grid options will provide 60% of the energy needed to ensure universal access to the African population in the coming years. Most of these will be mini-grids, networks that connect individual or groups of villages, or clusters of companies, with autonomous generation, – often solar or hydroelectric – supported by a back-up diesel generator. The reduced cost of renewables has made off-grid solutions potentially competitive with those connected to the grid, while also ensuring stability in generation thanks to the development of technologies related to energy storage. These systems therefore resolve the problem of the dispersion of the population over the territory and over large distances, which makes traditional electrical connections uneconomic and the maintenance of those already existing particularly expensive (and, therefore, often absent). This is the reason for a concentrated 80% of the population having no access to energy in rural African regions.
Off-grid solutions also face significant difficulties. Although they are cheaper now than they were in the past, systems such as mini-grids are generally still more expensive than grid-connected generation. Also, given the need to involve the private sector in the development of the industry, facilitations in terms of tariffs and permits are essential but often absent, as in the case of Kenya. Finally, an accurate planning is necessary on a national level, in order not to compete with the development of the national grid.
IRENA estimates that off-grid options will provide 60% of the energy needed to ensure universal access to the African population in the coming years, Most of these will be mini-grids
Three game-changers for African electrification
Faced with great potential and strong uncertainty, the fate of African electrification and, therefore of its economic development, are associated with the development of certain key factors, the three main ones being:
-Technological and resource development. The IEA estimates a 60% to 80% reduction in battery and storage technology costs, with 40 to 60% off-grid solar power by 2030. If this trend continues, these factors would help to rapidly accelerate the electrification of rural and more remote areas, which would unlikely be achieved by large thermal or hydropower plants. The exploitation of unconventional resources, such as shale gas in South Africa, would then provide more resources for domestic consumption and would make their distribution more even.
-A more efficient and integrated energy system. The development of the mini-grids in rural areas and the so-called mega-projects for gas liquefaction in East Africa both have a common need for stability and transparency in the energy industry. This touches on a number of points, which are often very different but equally important: a need for appropriate and stable tariffs, facility in obtaining permits for building the plants (or no permit required, as in the case of Tanzania for plants less than 1 MW), involvement and compensation of the local population in the exploitation of resources, to avoid errors which, for instance, have led to political instability that has seriously damaged Nigeria’s oil production. In view of the growing role of the private sector, all this becomes of primary importance. A strong integration would then be necessary between on- and off-grid solutions, with a complex planning (at least) on a national level, and considering the two options, not as competitive, but as complementary.
-Promoting an economic system that can autonomously support the expansion of access to energy. In addition to regulatory and political stability, also essential for attracting the private sector is a systematic de-risking of investments in power generation, and the possibility of increasing returns. On the first point, the role of the international cooperation could be central; as proposed by UNIDO in 2013, the transition from the construction of infrastructure to the provision of guarantees to reduce the cost of capital should however proceed further. It is no coincidence that, if this was at the same level in Africa as it is in Germany, the IEA estimates that the cost of solar power would be equal to half the current cost. Projects such as GET FiT Uganda are already good examples of this type of collaboration.
Increasing returns could then be obtained by focusing on both more productive areas and larger areas; it would therefore be necessary to develop inter-regional cooperation, by building power pools between several countries, leveraging their economies of scale and a mutual control to ensure their maintenance and reduce governance issues.
A deciding factor in all of this will, however, lie in ensuring the continuity and stability of the energy system to be built. This is what it would take to have an African economy integrated with the energy supply, which is immune to fluctuations in commodity prices (one of the first causes of the current crisis) and the sharp decreases affecting the continent. This possibility, however, in an Africa where even those who have access to energy still have to deal with an average two hours of black-outs per day, could still be far off.
The exploitation of unconventional resources, such as shale gas in South Africa, would then provide more resources for domestic consumption and would make their distribution more even