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Africa needs to act now to seize energy opportunity says PwC

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The road to Africa’s clean energy transition is long. Image credit: Leon Louw for WhyAfrica

Africa needs to act now to seize energy opportunity says PwC

According to a new PwC report, Africa is making progress towards a clean energy transition, but these efforts need to be coupled with the development of fossil fuel energy resources to make the transition happen faster.    

Africa is progressing positively in its efforts to make a clean energy transition as several countries on the continent are leveraging the region’s enormous renewable energy potential. However, these efforts need to be coupled with the development of fossil fuel energy resources for Africa to make the transition faster and reap the full range of its benefits.

Despite the continent’s monumental fossil fuel and renewable energy potential, it faces high energy poverty levels. African countries are also faced with the challenge of how to balance energy security, climate change, and sustainable development objectives.

According to Andries Rossouw, PwC Africa Energy, Utilities and Resources Leader, it has become increasingly clear that Africa plays a critical role in addressing global energy issues.

“The future of African energy is lower carbon technologies, driven by strategies that can see oil, gas and renewable production grow while reducing emissions in order to meet sustainability commitments,” says Rossouw.

In PwC’s newly launched report, Africa Energy Review 2023: Africa’s challenges and opportunities in the energy transition, they provide a detailed overview of the advancement and deployment of renewable energy across the continent’s northern, western, eastern, central and southern regions. The report also highlights key areas of progress and provide an outlook of what is needed to drive Africa’s renewable energy efforts forward.

Investment into renewables is pivotal (Africa needs to act now to seize energy opportunity says PwC)

The investment into Africa’s renewables, oil and gas is pivotal to its growth as domestic and international energy market demands can be met through its resources.

According to Pedro Omontuemhen, PwC Africa Oil & Gas Leader Africa’s decarbonisation is important, however the eradication of energy poverty and improving energy security needs to be considered.

“This can be done if governments and the private sector collaborate to ensure that investments in new technologies are optimised — and this will ensure that sustainability commitments are achieved,” says Omontuemhen.

Russia has reduced its supply of gas to Europe, and as Europe seeks to limit its dependence on Russian gas, Africa has an opportunity to fill the gap — but in order to do so, it needs to act now. “What is evident from the recent energy market volatility is that reliable energy availability and pricing are key considerations for many governments in the selection of their respective energy strategies,” says Omontuemhen.

“The solution for the power sector is not an either/or, renewables or natural gas, proposition. It requires a multi-pronged approach to decarbonisation with renewables and natural gas power at its core.”

Gas will continue to be a key contributor to energy and industrial systems in many countries and will retain a critical role in power generation as a fuel for baseload and flexible generation, even as new power technologies emerge.

“While significant emphasis has been placed on developing the hydrogen economy, it remains nascent and is likely to take time to develop to its full potential. However, it can play a pivotal role in Africa’s energy transition,” says David Tarimo, PwC Energy, Utilities & Resources Leader in Eastern Africa.

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Africa’s energy overview (Africa needs to act now to seize energy opportunity says PwC)

Northern Africa: the region remains the most developed in respect to energy security and having the highest levels of access to electricity. The area is endowed with significant oil and gas reserves, particularly in Algeria, Egypt, and Libya.

Aside from fossil fuel abundance, Northern Africa has excellent solar photovoltaic electricity potential and wind resources, which provides significant opportunities to produce renewable energy at global best rates. The region is also a net exporter of energy, primarily gas, via a pipeline into the European Union, and its piped gas has become more important after the ceasing of Russian imports.

Western Africa: the region is a net exporter of fossil fuels primarily from Nigeria. Export growth will be driven by liquified natural gas (LNG) exports with the Senegal and Mauritania Greater Tortue Ahmeyim (GTA) LNG project coming online. “The vision for West Africa is to drive and accelerate LNG exports from 4% to 6% to drive industrialisation and energy security,” says Omontuemhen. “The region also has huge potential for investment and growth, as 70% of the population is below 30 years.”

Central Africa: the region’s energy sector is dominated by Angola’s oil exports. Angola is also the only country that has started to invest in renewables with the rest of the region’s renewable energy being negligible.

The small-scale LNG export market may grow modestly however a lack of new discoveries could hamper growth as gas fields in Equatorial Guinea and Cameroon deplete. “Both gas and renewable energy need to be developed in order to spur economic growth and reduce energy poverty in a region where population growth is 3.1% annually,” Rossouw says.

Eastern Africa: PwC energy experts believe that East Africa is ready for growth and energy security through fossil fuels. “The significant discoveries between 2010 and 2015 are starting to regain traction as strategic investment decisions and security concerns are being addressed,” says Tarimo.

East Africa became a global exporter with the region’s first production coming from Coral floating liquefied natural gas in Q4 2022. Tanzania now also appears to be moving forward with gas production that is pegged to start in 2031. The Uganda Tilenga final investment decision was approved in 2022 and the East African Crude Oil Pipeline (EACOP) will be able to carry 246,000 bpd of oil to Tanga for export.

Southern Africa: Namibia made significant discoveries in 2022 and 2023, primarily ‘oil plays’, which provides significant opportunities for the region to become energy sufficient, and in future, become an exporter. “The country’s business friendly and localisation legislation aims to stimulate growth in this sector as it learns from the ‘oil curse’ of other nations,” says Dr Roelof van Huyssteen, PwC South Africa energy law expert.

Southern Africa has significant solar and wind potential, with South Africa having installed 10GW of renewable projects. However, that has not been enough to stop rolling blackouts (loadshedding) as the ageing coal infrastructure energy availability factor (EAF) has dropped from 58% in 2022 down to 54% in 2023 year to date.

“Changes in legislation, the start of the unbundling of Eskom into transmission, generation and distribution units, and the draft South Africa Renewable Energy plan all indicate that there is a drive to accelerate renewable energy deployment anchored with dispatchable power,” van Huyssteen says. “The first Hybrid Renewable Independent Power Producer Programme project with dispatchable power will commence in 2023.”

He adds that both Namibia and South Africa have the potential to become global green hydrogen exporters, with Namibia taking the lead with 2 mtpa expected for the export market by 2029.

Opportunity for coordinated approach (Africa needs to act now to seize energy opportunity says PwC)

The scale and complexity associated with unlocking Africa’s energy potential is a significant challenge given the continent’s historical lack of ability to fully realise areas of opportunity. There is the opportunity for a more coordinated approach between government and business to execute national strategies that will improve energy security, and this will in turn aid economic development while realising responsible new power programs and decarbonisation goals.

“Most nations have various strategies and plans for infrastructure development,” Rossouw says. “However, the execution of those strategies has almost always fallen well short of expectations. Having an effective execution approach is key, and this will place countries in a better position to see their renewable energy efforts come to fruition.”

Africa needs to act now to seize energy opportunity says PwC

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Africa needs to act now to seize energy opportunity says PwC

 

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