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The future of energy in Africa – special report

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Investments in fossil fuels are declining across the world, but many African nations are keen to exploit their natural resources. Tough choices face policymakers as they weigh up economic benefits and environmental costs.

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Neil Ford examines the outlook for African energy in our special report.

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The world is in the middle of a profound energy transition. A global energy sector dominated by hydrocarbons is in the process of a wholesale shift to renewable energy, including solar, wind and hydrogen power. Tackling climate change has long demanded a complete transition and now the falling cost of renewables is making it easier to achieve.

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But the transition presents huge challenges for the African continent, both in terms of technological adoption and cost.

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Most electricity on the continent is currently produced by hydro schemes and thermal plants: gas in many coastal areas, including North Africa; coal in South Africa in particular; and older, generally smaller oil fuel plants almost everywhere.

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Gas produces roughly half the greenhouse gas emissions of coal, so is seen as a bridging fuel in the transition from hydrocarbons to renewables. Egypt, Algeria and Tanzania rely heavily on gas, while Mozambique and Nigeria have the biggest gas reserves in sub-Saharan Africa but have struggled to maximise their gas potential because of insecurity.

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Yet one thing is clear: the current power supply is inadequate across the African continent as a whole. According to International Energy Association figures, more than 590m people are still without access to electricity in Africa.

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Opinion turns against coal

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Although global coal consumption remains high, global opinion has firmly turned against the most polluting form of power generation. The South African government remains reluctant to wind down coal production given its plentiful reserves, a large industry and a power generation mix dominated by coal.

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Under its 2019 Integrated Resource Plan, South Africa intends to build another 1,500 MW of coal capacity but the pressure for it to abandon the proposal is growing. The country is the 12th biggest greenhouse gas emitter in the world, although it is ranked 38^th in per capita terms.

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New coal plants have been planned in other parts of the continent, including Kenya, Ghana and Zimbabwe, but local and international opposition has proved difficult to overcome.

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Although China, India, Russia, Saudi Arabia and Turkey managed to block any mention of phasing out coal worldwide in a joint statement by G20 climate and energy ministers in July, Beijing has agreed to stop financing any new coal plants in other countries.

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More than 70% of proposed coal plants, including almost all in Africa, relied on Chinese financing, so their construction now seems more unlikely than ever.

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Mixed blessings of hydro

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Hydro occupies an uncertain position in the energy transition. Although there can be significant methane emissions from rotting reservoir vegetation, hydroelectricity produced by turbines using vast water power behind dams is considered a low carbon source of power.

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Hydro also offers baseload power production – constant generation, providing water levels are high enough – to help balance out intermittent solar and wind power output.

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However, dam and reservoir construction has a huge impact on flora and fauna, as well as agricultural land and human settlements. Moreover, increasingly irregular rainfall in much of Africa makes hydro production increasingly unreliable. It is a tool in the battle against climate change but one that does not come without costs.

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Still, the government of Ethiopia has based its entire power sector strategy on hydro and the construction of a succession of huge dams. The biggest of all is the Grand Ethiopian Renaissance Dam (GERD), which with 6,450 MW of capacity, could help to electrify large parts of the country and neighbouring states through a series of long-term bilateral power purchase agreements.

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The process of filling the reservoir began last year and should take seven years in total. However, the project has proved a diplomatic minefield, outraging Egypt, which fears that the dam will impact its access to Nile waters and has contested the fill rate.

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Little role for nuclear power in Africa

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Despite occasional proclamations by Nigeria, Egypt and other governments, nuclear energy has always been of marginal interest in Africa.

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The continent’s only commercial nuclear power plant, South Africa’s 1,900 MW Koeberg facility, began operations in the 1980s and generates 5% of the country’s electricity. In September, Pretoria announced plans for a new 2,500 MW project, for which it hopes to end the procurement process by 2024, but this is the latest in a long line of similar announcements, many of which involved far bigger generating capacities.

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Moreover, the technological challenges and costs of building reactors and managing nuclear waste must compete with the plummeting prices of renewables such as solar and wind.

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Nuclear power remains on South Africa’s radar because of the country’s ongoing lack of power production and fears that overreliance on intermittent forms of generation, such as solar and wind, will create supply imbalances.

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However, power storage technologies are starting to become commercially viable. As with wind and solar power, the need for solutions is driving technological change and reducing costs.

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The renewable future

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As a result of big falls in the cost of lithium-ion battery storage, industrialised markets with high solar penetration are seeing rapid battery development. Almost 90% of new solar projects under development in California, for instance, include battery storage, so that the electricity generated during the day can be stored for several hours to cover peak evening demand.

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More progress needs to be made on both the technology and cost of long duration storage but demand is increasing and commercial development seems likely, perhaps in five to 10 years’ time.

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Worldwide, investment in renewables is expected to surpass that in the upstream oil and gas sector for the first time in 2021. South Africa currently has the biggest solar capacity in Africa at 2.8 GW but plans to increase this to 8.28 GW by 2030.

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As a result of the general lack of transmission and distribution infrastructure in most parts of the continent, Africa has been at the forefront of off-grid solar development.

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The manufacture, marketing and distribution of residential solar kits have been badly affected by the global pandemic but there are signs that the rate of installations is beginning to increase again.

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The continent’s biggest solar project is at Benban in Egypt, where 32 plots have been set aside for different investors to develop projects with combined generating capacity of 1.8 GW, all taking advantage of the same grid connections.

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According to the African Solar Outlook 2021 report, published by the Africa Solar Industry Association (AFSIA), another nine African countries have at least 1 GW of solar capacity planned: Algeria, Zimbabwe, Zambia, Democratic Republic of Congo, Angola, Namibia, Ethiopia, Morocco and Botswana. The focus is on large-scale generation projects in each case.

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Algeria has the most ambitious plans for renewable energy, with a target of 22 GW by 2030. The option of exporting much of it to European customers could make it feasible, yet the country still relies on gas to produce 98% of its electricity and a huge cultural change – particularly in the government – is required if the investment regime needed to attract such massive inward investment is to be put in place.

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Wind development

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The wind power sector has developed roughly in parallel with solar energy in Africa, with falling costs driving investment. Here too, South Africa and Egypt have made the most progress, with 2,495 MW and 1,465 MW capacity introduced respectively by the end of 2020. Morocco comes next with 1,315 MW but there’s a big drop to Ethiopia in fourth place with 324 MW.

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Large parts of Africa have more plentiful solar resources than wind, so the former is likely to dominate in the longer term.

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A vast increase in Africa’s generating capacity is required to ensure more reliable supplies to the entire market. Moreover, demand will increase further as electricity is used to replace other forms of energy consumption, including vehicle fuel.

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Electric vehicles

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Industrialised countries have already begun to set targets to phase out petrol and diesel powered cars.

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As the oil industry gradually winds down production of refined petroleum products for vehicles, African countries will follow suit, putting more pressure on power supplies in the process, although growth in the market for electric vehicles (EVs) is likely to be slow for most of this decade.

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Only Cape Verde has followed the UK in announcing a ban on the import of internal combustion engine vehicles, from 2035, while in the biggest market for EVs in Africa, South Africa, only 1,000 EVs had been bought by the end of 2019.

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Green hydrogen production set to grow

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Green hydrogen could replace petroleum as a transport fuel or natural gas in power generation.

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There are three main types of hydrogen production: grey, blue and green. Grey hydrogen currently dominates the sector and uses natural gas or methane to produce hydrogen through a process known as “steam reforming” that results in high carbon emissions. Blue hydrogen involves the same process but with the carbon stored or utilised in other forms of industrial production to cut emissions.

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Green hydrogen involves the use of renewable energy to split water into hydrogen and oxygen through electrolysis. This technology is currently more expensive but offers a very low-emission method of producing hydrogen and costs are likely to fall as the industry takes off.

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Tough choices face African policymakers as they weigh up the economic benefits and environmental costs of exploiting fossil fuels.

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