Gas and renewable power are expected to be the two major sources of energy growth on the African continent in the coming years.
Addressing the continent’s developmental challenges, however, hinges on fixing its energy sector, which – despite a wealth of resources – is poor in energy supply, according to Fatih Birol, chief economist at the International Energy Agency (IEA).
Birol was speaking ahead of the release of the IEA’s Africa Energy Outlook, launched on Monday.
In the past five years, 30% of the world’s new oil and gas discoveries have been made in Africa, while there was huge potential for renewable energies, namely hydropower, wind and solar, said Birol.
“It is extremely important because I believe the economic and social development of Africa, critically hinges on … fixing the energy sector,” he said.
According to the report, around 250-million people in sub-Saharan Africa have no access to electricity. Although the IEA forecasts that those with access to electricity will rise to 960-million by 2040, more than half a billion people will still remain without it.
Although many governments were intensifying efforts to tackle the regulatory and political barriers holding back investments in domestic energy supply, “inadequate energy infrastructure risks [are] putting a brake on urgently needed improvements in living standards”, according to the report.
Crucial to the growth of these and other energy sources, which could boost the sub-Saharan economy by 30% by 2040, is the need for additional investment of $450-billion in power infrastructure, better regional co-operation and integration and better management of resources and revenues, said the report.
The use of energy subsidies in many African countries was not benefiting the poor, Birol said. This was evidenced by the fact that so many people still lacked access to commercial energy and relied on the use of bio-energy such as wood and charcoal.
The poor still needed to be supported, but subsidies could be more targeted rather than being granted “[across] the board”, as they aided middle to higher income earners more, and led to higher electricity prices, he said.
Most countries in sub-Saharan Africa had higher electricity prices on average than France, he noted.
According to Birol, prices in the region averaged about $180 per megawatt hour (MWh), compared to $ 175/MWh in France, $135/MWh in Norway and $70/MWh in India.
This was as a result, in many cases, of the reliance on oil, as well as transmission and distribution losses, according to Birol. Apart from South Africa, these losses came to about 20% – more than twice the global average, he noted.
Growth in gas and renewables
Given this context, it was important to look at “all power options in hand” and here, hydropower, solar and wind would play a key role, said Birol. Almost half the growth in electricity generation to 2040 was expected to come from renewable energy, according to the report.
Hydro-power accounted for one-fifth of today’s supply, but less than 10% of the estimated technical potential has been utilised, it said. “Political instability, limited access to finance, small market size and weak transmission connections with neighbouring countries have all held back exploitation of hydro resources,” it said.
“These constraints are gradually being lifted, not least because of greater regional co-operation and the emergence of China, alongside the traditional lenders, as a major funder of large infrastructure projects.”
The report also anticipated the rise of mini-grid and off-grid power in rural areas, two-thirds of which would be powered by solar photovoltaics, small hydropower or wind. “As technology costs come down, the attraction of renewable systems versus diesel generators grows (although they are often used in combination), especially where financing is available to cover the higher upfront expense,” the report said.
Meanwhile, countries with natural gas resources, could power domestic economic development and grow export revenues if the right regulation, prices and infrastructure were put in place. In its main scenario forecast, the IEA expected natural gas to triple its share in the energy mix to 11% by 2040.
Nigeria was expected to remain the region’s largest gas consumer and producer, but the focus for new gas projects would shift east, to the huge offshore discoveries in Mozambique and Tanzania, according to the report.
“The size of these developments and remoteness of their location raises questions about how quickly production can begin, but they provide a 75-billion cubic-metre boost to annual regional output by 2040 … with projects in Mozambique larger in scale and earlier in realisation,” it said.
Not much nuclear in sight
Apart from South Africa’s nuclear procurement plans, Birol said nuclear power was not expected to see much growth in Africa. “The main reason here is because nuclear projects are very capital intensive projects,” he said.
The current large-scale nuclear power plants required huge financial down payments, and many African countries were unable “to put this money on the table”, he said. Nor were they able to provide the framework conditions to attract the private capital for such huge investments, he added.