Source: Africa Business

As efforts to combat climate change gather momentum, the developed world is in high gear about how to cool global warming. But as the pressure mounts for regions, countries and companies to meet the Paris Agreement targets on eliminating carbon emissions, where does Africa stand? Are we getting left behind in an ever-widening “energy divide”?

The International Energy Agency reminds us that while Africa is home to 17% of the world’s population, it accounts for only 4% of global power supply investment. Only half of all Africans have access to electricity and about 80% of companies operating in sub-Saharan Africa suffer from frequent electricity disruptions.

Even as solar power and other non-grid options are being rolled out across the continent, so the population continues to grow, and rapid urbanisation is increasing demand for energy.

Reliance on fossil fuels

As the developed world moves into a future characterised by new clean energy sources and driven by technology and innovation, the reality is that millions of Africans are still reliant on charcoal, kerosene lamps, battery operated flashlights, wood and candles for their power needs. Energy demand is a key driver of rampant deforestation and roadside sales of charcoal are providing livelihoods to thousands of people.

The growth of renewable energy is a potential game-changer for Africa but, given its needs, it has a long way to go. Meanwhile, many countries still rely on fossil fuels for their baseload energy supply. Research shows that more than 100 new power stations are planned in a dozen African countries, most of which will be coal- or oil-fired.

Africa’s most sophisticated economy, South Africa, is also the biggest polluter on the continent. It relies on coal for about 80% of its energy needs. The ruling party, the ANC, has previously maintained the dominance of coal-fired state-owned power utility, Eskom, which contributes about 40% of the country’s greenhouse gases. Managed blackouts have become a feature of life in South Africa as the utility battles to keep the lights on.  

The country’s much-heralded renewable energy programme stalled during the rule of former President Jacob Zuma. The government has perpetuated the marginalisation of independent power producers (IPPs) by refusing to allow them to sell excess energy into the national grid for fear of undermining the viability of the ailing state utility. Increasing blackouts and generation capacity crises forced a change of policy on IPPs in the first quarter of 2020. But coal will continue to dominate the energy mix for many years to come.

Nigeria, the biggest economy in Africa, has vast reserves of coal but has yet to exploit them effectively. Its economy relies instead on generators using dirty fuels that collectively supply an estimated 14,000 MW of electricity – nearly four times that generated into the national grid from the nation’s abundant gas reserves. The country has a bold plan to generate 30% of its total energy from renewable sources by 2030 but a history of dysfunction in this important sector makes this unlikely. Nigeria is ranked 109 out of 115 countries on the World Economic Forum’s Energy Transition Index while South Africa is second from the bottom, just above Haiti.

Meanwhile Europe is leading the charge in the energy transition, using a mix of technology, innovation, legislation and investment to help the bloc transition to a climate-neutral, green economy.

Costs of transition

Addressing carbon emissions requires a shift to a raft of new energy sources, such as hydrogen to replace coking coal, ammonia in ship engines, biofuels and others.

The transition will have significant cost and other implications for the supply chain in decarbonising industries such as transport. But new maritime fuel regulations that aim to drastically cut the sulphur content in shipping fuel came into force this year, and if Africa cannot keep up, it may become further marginalised in global trade.  

Multinational companies operating in Africa and other underdeveloped regions may have to make difficult choices in where they invest or trade as supply chains adapt to new fuels and environmental, social and governance (ESG) issues become increasingly central to investment decisions.  

Africa is not standing still. Countries such as Morocco and Egypt are becoming leaders in renewable energy and startups have mushroomed across the continent, providing solar kits to homes and small businesses.

Mini grids are also plugging the huge gaps left by national grids in Africa’s energy landscape. And remote as the hydrogen economy may seem to Africa, in fact the continent offers ideal conditions for it to leapfrog grid power and its attendant inefficiencies.

However, the sheer scale of the energy deficit means these interventions are still a drop in the ocean compared to the energy needs of the future. Demand is expected to be almost 40% higher in 20 years’ time than it is today and already population growth is outpacing efforts to improve access to energy services.

The hope that technology alone will come riding to the rescue and deliver an energy transition is flawed. It requires the active participation of policymakers, regulators and companies. The process is possible and achievable, but it will require a massive orchestration by industry and governments to make it happen.

Concerns about job losses in fossil fuel industries can be addressed by absorbing retrained workers into renewables with state support and incentives – an example shown by Germany, which is rapidly retreating from dirty fuel while preserving jobs.

Setting goals

But particularly key, and part of the strategy being employed by countries such as Sweden and Germany and African countries such as Rwanda, is setting goals on energy transition, backed by targets and timelines. Transparent public-private partnerships with an emphasis on local content are also important.  

Governments need the courage to break away from old models, to embrace new technology, and to loosen the reins of the state to allow the private sector to be a partner in moving forward into this new world.