Africa is Not a Country is the title of a new book seeking to correct foreigners’ views of the continent. Its author wants her international readers to see Africa just as its own peoples see it: huge, varied and facing many different circumstances.
Anyone who works in the African energy sector knows this already. There are vast differences between the markets in Egypt and Equatorial Guinea or between Senegal and South Africa. There is no one-size-fits-all solution to the continent’s yawning electricity gaps.
Africa as a whole generates about 600 kilowatt-hours (kWh) of electricity per person per year, according to the United States’ Energy Information Administration. But this number is almost meaningless since it erases the differences between South Africa, where output is over 3,500 kWh/person, and Chad, where the figure is a mere 13 kWh/person.
The continental average is only useful as indicating the scale of the challenge: telling us that, overall, Africa’s electricity generation per head is just 10% of the global average.
The way that that electricity is generated also varies hugely from country to country. South Africa not only generates the most power per capita, it is also the African country that relies most on coal to do so. In fact, 86% of the entire continent’s coal-fired generation capacity can be found in South Africa.
It is a regional thing: most of the continent’s other coal-fired plants are located in South Africa’s neighbours: Namibia, Botswana and Zimbabwe. Only five other African states burn coal for power: Morocco, Madagascar, Mauritius, Zambia and Senegal.
Coal-fired power stations on hold
There is no shortage of coal deposits in these countries and some of their governments once held great hopes of turning these reserves into electrical power. According to the Global Coal Plant Tracker, a project run by the San Francisco-based NGO Global Energy Monitor, 22 coal-based power projects are currently under consideration across the continent.
This does not, however, mean that all 22 will be built. A more detailed examination of the data shows that few, if any, of these plans will come to fruition. Most have failed to obtain funding; most of those that had funding agreed have been delayed while others are still on the drawing board.
Of the few actually making progress, two are Chinese-backed projects in Zimbabwe and the third is in South Africa. Even the future of these plants is unclear. Although the generating plants in Zimbabwe are largely complete, there has been strong opposition to the associated coal mining plans. The Kusile project in South Africa has been delayed and mired in allegations of corruption.
At the 2021 United Nations Climate Change Conference (Cop26) in Glasgow last November, both Morocco – the second-largest consumer of coal in Africa – and Egypt – which had been planning several major investments in coal-fired power stations, signed up to the Powering Past Coal alliance, the group of countries committed to a complete phasing out of coal by 2050.
The overall situation has led the US-based monitoring organisation Global Energy Hub to conclude that “the future of coal in Africa is dead”.
Big lenders cease funding for fossil fuel projects
The main reason for the demise of coal is the refusal of the big lending institutions to provide further funding for overseas fossil fuel projects. The latest such commitment was announced at Cop26 in November.
Six members of the G7 group of advanced economies (Japan was the exception) plus 28 others from around the world together with five development banks declared they would “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement”.
While they left themselves some “wiggle room”, the direction of travel is clear.
Even China, which is by far the largest public financier of coal-fired power plants around the world, has pledged to “completely stop the construction of new overseas coal power projects”.
Although private sector funders, particularly in the United States and Japan, provide the bulk of funding to coal-fired electricity plants around the world, very little of this financing is deployed in Africa.
So, if the future of African electricity is not coal, what is going to fill the continent’s energy gaps?
Africa looks for support on clean energy
There is an assumption embedded in statements such as those made at Cop26 that the future sources of African countries’ electricity supplies must be renewable. The 39 signatories of the November statement declared that “We will prioritise our support fully towards the clean energy transition”.
As the world prepares for Cop27, to be held in the Egyptian resort of Sharm el-Sheikh in November, African states will be looking for evidence of real support for clean energy in Africa.
Prospects for solar and wind energy in African countries look very good, at least on paper. A 2020 survey by the International Finance Corporation estimated a total wind potential on the African continent of over 59,000 GW, enough to meet its entire energy demand. But according to PWC’s Africa Energy Review 2021, currently installed capacity amounts to just 0.01% of this figure.
It is the same story with solar. A 2014 study by the International Renewable Energy Agency (IRENA) estimated the continent’s solar PV potential at over 650,000 tWh per year.
Yet, the African Solar Industry Association calculates that by the end of 2021, only 8.7 GWp had been installed across the continent. It also found that African countries accounted for just 0.5% of the total solar capacity installed around the world during 2021.
Wind and solar are not the only options for renewables. Hydro-electric power has long been a part of the energy mix for several African countries. Over 80% of the electricity generated in the Democratic Republic of Congo, Ethiopia, Malawi, Mozambique, Uganda, and Zambia comes from hydropower, for example.
However, the potential for future hydropower development is limited by concerns about the environmental and social impacts of very large dams and concerns that climate change may affect future water supplies.
Another emerging option for some countries is geothermal energy, particularly for countries in the tectonically active East African Rift System (EARS). Kenya is the outstanding example, generating 44% of its electricity from geothermal sources, along with a further 36% from hydropower.
So far, however, only Ethiopia has followed in Kenya’s footsteps. A 2020 report from IRENA noted the further developments were being hampered by limited awareness of the technology, poor regulatory regimes and limited financing.
Can renewables replace coal?
There is no shortage of public statements from officials and agencies about their support for renewable energy.
Back in 2009, at Cop15, developed countries pledged to provide $100bn a year in climate funding by 2020. The precise definition of ‘climate funding’ was left vague, but even with that flexibility the target still has not been reached.
Just before Cop26, the OECD noted that less than $80bn was actually being committed annually and that the original target was unlikely to be met even in 2022.
Some African countries have committed to major investments in renewables. For example, Côte d’Ivoire says it aims to generate 42% of its electricity using renewable sources by 2030.
The problem lies in the implementation. As Valerie Marcel, an associate fellow at Chatham House and director of the New Producers Group of 30 emerging oil and gas producing countries, notes, “There are renewable energy projects, but they are just not being developed fast enough or deeply enough.”
It seems likely therefore that large numbers of Africans will continue to live without access to electricity. Instead, potential consumers will keep using their traditional sources of energy. In some countries these will be wood, charcoal and other forms of biomass.
According to the African Union’s Africa Energy Commission, charcoal accounts for just over half of all domestic fuel use in East Africa. The consequences include large-scale deforestation, especially in countries such as Uganda, and deleterious health effects, caused by people breathing in smoke particles.
In West Africa, particularly Nigeria, consumers have come to rely on portable diesel-powered generators. In 2019 the IFC estimated that there were around 3m such generators in the country, one for every 12 households.
Across West Africa as a whole, generators provide more than 40 percent of the electricity consumed. This is mainly because the installed power capacity of large-scale power stations is so small compared to the market need: just over 5 GW connected to the grid, providing just 30 Watts per person.
In the words of the IFC, “The grid in Nigeria is not sufficient to serve the needs of the country, and the massive population and economy of Nigeria is instead largely powered with electricity from small-scale generators.” Unfortunately for Nigerian consumers, diesel, unlike petrol, is not subject to government price controls so the shocks caused by the Russian invasion of Ukraine are being passed on to those three million generator users.
Renewables will not meet consumer demand
As one investor in West Africa’s energy sector has noted, in Africa there are some 600m people with no access to electricity and people in Dakar are paying four times as much as people in Houston. “We need to develop Africa with African resources for Africans,” he said.
But with renewables unable to meet consumer demand for at least the next decade, consumers will be obliged to continue using dirty sources of energy such as charcoal and diesel generators, unless something else comes along to fill the gap. What that “something” will be is today’s hundred-billion-dollar question.
There is no simple answer. “Africa needs a country-by-country approach not a one-size fits all continental approach” Marcel argues.
Gas as Africa’s transition fuel
According to Leila Benali, the Moroccan Minister of Energy Transition, filling the gap in her country will require investment in gas. She told a side meeting of the International Energy Agency Ministerial Meeting in late March that, although her country agreed to join the ‘Powering Past Coal’ initiative at COP26, “powering past coal cannot be done without access to sustainable gas.”
Similar views are held by others. “We need to look at the resources available and in Nigeria this is gas” says one commentator, regarding the Nigerian market. “A few years ago, people were still talking about coal but the coal quality which is available locally means you have to import another coal to mix it. If there is plenty of gas, why import coal?”
Burning natural gas clearly contributes to climate change but it emits half the amount of carbon dioxide per unit of energy than coal. Moreover, the total volume of emissions required to meet electricity demand in African countries over the next decade is tiny compared to the volumes being produced in more developed states.
Gas is therefore being touted as the transition fuel, bridging the gap between today’s dirty fuels and tomorrow’s clean energy.
Hurdles to investment in African energy
But there are still bottlenecks to unblock, according to Valerie Marcel. She says the three big blocks relate to domestic markets and immature infrastructure, and the lack of financing.
“It’s a frustrating situation,” she concludes. If end users cannot pay the expected charges and if the regulatory framework is not sufficiently robust then commercial investors are unlikely to take the risk.
Ghana’s experience with gas-to-power has been a powerful lesson in just how costly a poorly managed transition strategy can be. The government initially hoped that the discovery of offshore gas in 2007 would bring down energy costs and boost economic development.
Instead, the combination of a weak energy grid with uncompetitive contracts has resulted in the state utility company paying for gas it cannot sell. Cumulative losses are expected to reach $4.5bn in 2023.
It is perhaps no surprise, therefore, that despite all the talk of climate funding and green finance, there is still a lack of investment in these under-developed markets.
Domestic electricity supply companies tend to be slow, bureaucratic and conservative. In most countries they lack data on demand and the solvency of their customers. If consumers do not pay their bills, then utilities do not get paid and debts mount up. It only takes a few bad experiences to scare away potential funders.
There is a big role here for governments to play, according to Marcel. Countries of the OECD should be working to reduce the risks of investing in African countries’ electricity sectors. There is a need for seed funding, credit and public-private partnerships to get things moving she argues.
At the moment, the only multinational development bank supporting gas-to-power projects is the African Development Bank. Even here, this policy has been controversial. Some of the largest stakeholders in the bank are the industrialised countries who signed up to the COP26 declaration on ending support for fossil fuels. They hold a quarter of the votes on its governing board.
What seems clear is that the promise of renewable energy is not likely to be realised in most African countries in the short or medium term. Gas is the least bad option to bridge the gap and to enable hundreds of millions of power-poor Africans to improve their lives. Bringing electrical power to the people is going to require both billions in outside investment and big shake-ups of the frameworks – physical and legal – that actually deliver it.