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Can we solve Africa’s energy dearth?

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The shortage of electricity in many African countries is approximately equivalent to 1% of the global average. Image credit: Leon Louw for WhyAfrica

Can we solve Africa’s energy dearth?

Energy is key to the growth and prosperity of any modern economy, but it is estimated that nearly one billion Africans lack access to clean, sustainable energy.

The shortage of electricity in many African countries is approximately equivalent to 1% of the global average. If this energy poverty gap is to be bridged by renewable energy in line with carbon neutral targets, PwC estimates that Africa would need to deploy an additional 2,354 GW of renewable generation by 2050 to bring Africa up to the world average for electricity access and meet decarbonisation commitments.

This increase of nearly forty times the current installed renewables capacity of 59 GW is estimated to cost Africa approximately USD2.6-trillion (roughly the current size of Africa’s GDP).

Adding to this seemingly insurmountable task is the rapidly changing global landscape including climate change policy pressure, geo-political tensions such as the Ukraine conflict, societal changes triggered by the Covid-19 pandemic, and a greater awareness of planetary boundaries and social justice.

Africa must optimise fossil fuels

However, Africa still has great energy potential, both in fossil fuel and renewable energy resources. The continent needs to optimise value from its fossil fuel endowments through a just transition to support the sustainable development of a green energy base.

The potential for increased investment and foreign earnings from the export of fossil fuels, especially natural gas, is evident. Africa also has high-quality renewable resources across solar, wind, geothermal and hydro. Despite the quality of renewable resources, Africa has less than 1% of global installed solar photovoltaic (PV) capacity as an example.

Andries Rossouw, PwC’s Africa Energy, Utilities and Resources Leader says that energy poverty and transitioning to green energy will be unaffordable to Africa if it is left to self-fund and forced to forfeit its fossil fuel endowment — or to phase down its fossil fuel sectors under global policy and market pressure.

The developed world needs to support Africa’s energy growth as part of its just transition commitment. Although it has made significant commitments to climate reparations for Africa, the speed and scale of execution remains insufficient.”

PwC’s newly released 2022 Africa Energy Review, outline the objectives and pressures facing Africa’s energy sector, giving an outlook on opportunities in both fossil fuels and renewables. Despite the obvious opportunities across Africa’s energy landscape, the continent is currently not on track to achieving its ambitions of meeting both the planet’s needs as well as the needs of its people.

According to Nino Manus, PwC’s Africa Operations Transformation partner the global focus on ESG emphasises that reliable access to clean and affordable energy, as per the United Nations’ Sustainable Development Goals, serves as a critical economic multiplier, enabling inclusion to the digital world, and increasing productivity and industrialisation, which in turn creates financial inclusion and social upliftment.

Africa’s renewable energy landscape

Rossouw says that to turn the tide on the continent’s energy poverty and achieve a sustainable energy transition, a significant increase in energy sector investment is required. “If these investments can harness the abundant, quality renewable resources, enabled by strong local policy and sector reform, then Africa will attract large-scale international support and sustainably transition to become globally competitive, meeting both the needs of the planet and its people.”

More than 59 GW of installed capacity is present in Africa (based on the 2021 baseline). Hydropower and pumped storage, together account for 63.8% of the continent’s installed capacity and provide most of the continent’s renewable energy. Solar and wind installed capacity makes up 19.3% and 12.4% respectively. The remaining 4.5% of the installed capacity is made up of various other renewable energy sources, including geothermal, biofuels, and others.

However, renewable energy growth in Africa has slowed over the past five years, with lower growth attributed to disruptions in construction due to Covid-19 and delays to South Africa’s large-scale Renewable Independent Power Producer Programme.

The cost of unserved energy

Many African countries are grappling with power shortages despite having a wealth of energy generation resources. In the report PwC outlines the cost of unserved energy (CoUE), known in South Africa as load-shedding.

In South Africa, the state power utility shed 2,276 GWh of power in the first half of 2022, in order to maintain a stable power grid. PwC estimates this CoUE at between USD2.54/kWh and USD2.88/kWh.

When these values are applied to the actual load-shedding that was implemented during 2021, the loss of real gross domestic product growth was between 2.4 and 2.9 percentage points — which would have equated to an additional 290,000 to 350,000 potential jobs being created.

This highlights that reliable and affordable access to electricity is the single biggest economic growth and job creation lever for Africa’s most industrialised economy, which is likely to hold true for other economies on the continent.

Lullu Krugel, PwC South Africa Chief Economist and Africa ESG Leader, says that energy is key to the growth and prosperity of any modern economy. “Africa has the added complexity of having to address both the energy transition and vast energy poverty. Africa’s existing domestic energy supply remains dominated by fossil fuels, but the vast and high-quality renewable resources across the continent present an opportunity to transition towards viable green growth. Such scaling of clean technologies will create much needed economic growth, job creation and vibrant green economic sectors,” says Krugel.

Climate change, energy law and policy lack coherence

The report also looks at international climate change policy and the commitments set out in African Nationally Determined Contributions which have resulted in the rapid adoption of domestic climate change laws and policies.

According to Asif Joosub, PwC Africa’s International Trade and Environmental Tax Lead, it is clear that Africa is committed to decarbonise and scale up renewable energy generation, however, much is still required to enable greater investment through market reform, strong regulatory frameworks and incentive mechanisms.

“While 2021 saw several renewable energy-related regulatory improvements, implementation frameworks and policy support — as seen in developed economies — is still lacking across Africa and considered an area of development,” says Joosub.

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