The African Development Bank (AfDB) president, Akinwumi Adesina, describes energy as “the lifeblood of any society and the passport to economic transformation”. As such, energy is at the top of the bank’s “High 5” priorities – 1) light up and power Africa, 2) feed Africa, 3) industrialise Africa, 4) integrate Africa, and 5) improve the quality of life for Africans.
Access to electricity is important for improving everything from education and agricultural productivity to employment. Even though Africa is endowed with inexhaustible raw energy potential, over 640 million people do not have access to electricity. Electrification of Africa will also help its people get rid of indoor pollution associated with kerosene lamps, which is a leading cause of respiratory diseases. Some 600,000 people in sub-Saharan Africa die every year from indoor pollution.
According to the AfDB, the rural electrification rate in sub-Saharan Africa is the lowest in the world, at less than 20%. The electrification of rural areas face challenges such as the high costs of capital, low revenue collection rates, and insufficient generation capacity (infrastructure), amongst others. For example, Tanzania’s national electricity coverage is estimated at just over 20%, with the transmission grid covering a minor part of the country and leaving out most of the territory. Access is even lower for the rural population at 7%; thus nearly 30 million Tanzanians lack a connection to the electricity grid. The vastness of the country, coupled with low population densities, makes grid extension too expensive. This is typical of most African countries.
In addition to the lack of energy infrastructure, Africa also has an inefficient generation, transmission and distribution system, which leads to increasing costs. For example, the average efficiency of the fleet of gas-fired power plants was 38% in 2012. Had the average efficiency been equal to that of gas-fired power plants in India (46%), the unused fuel could have generated 8 TWh (21%) more electricity.
Transmission and distribution (T&D) losses also reduce the supply ultimately available to end user sectors by more than 20% in some countries in sub-Saharan Africa. Such high-loss rates reduce the reliability of the power supply, which is already insufficient to meet demand in most countries. In addition, high losses increase the cost of the power actually delivered, by as much as US$25 per MWh consumed. All these additional costs, including the T&D infrastructure and retail costs, can add $50-$80 per MWh to the average cost of the consumer.
A positive phenomenon is that installed grid-based power generation capacity in Africa has been steadily increasing in recent years and reached 158 gigawatts (GW) in 2012. Grid-based power generation capacity in sub-Saharan Africa has increased from around 68 GW in 2000 to 90 GW in 2012, with South Africa alone accounting for about half of the total. Coal-fired generation capacity is 45% of the sub-Saharan total, followed by hydropower (22%), oil-fired (17%), gas-fired (14%), nuclear (2%) and other renewables (less than 1%).
In September 2015, the AFDB articulated a “New Deal on Energy for Africa” and launched a “Transformative Partnership on Energy for Africa” to add 160 GW of new generation capacity through the existing grid, and deliver 130 million new grid and 75 million off-grid connections, bringing electricity to 900 million people. It believes this will play a catalytic role in accelerating the pace of structural transformation in the energy sector. It would also enhance inclusive green growth in Africa, and unlock the potential for industrialisation and wealth creation. It will drive agricultural transformation and regional power pooling to integrate Africa, create jobs and ultimately improve the quality of life for Africans. The inclusion of energy in the UN Sustainable Development Goals in 2015 emphasises the importance of energy to society.
RENEWABLE ENERGY POTENTIAL
Adesina believes that Africa is blessed with limitless potential for solar, wind, hydropower and geothermal energy resources. Africa therefore needs to unlock its energy potential – both conventional and renewable. Global improvements in the development of renewable energy technology have brought down costs and made it easier to install renewable energy grids. The importance of renewable energy for Africa is reflected by the fact that the AU’s Agenda 2063 has also identified renewable energy as a priority area for the first 10 years.
Africa has a vast growth potential in renewable energy, i.e. 11 terrawatts of solar power, 350 gigawatts (GW) of hydropower, 110 GW of wind power, and 15 GW of geothermal power. By 2040, it is forecast that renewables could provide more than 40% of all power generation capacity.
Africa’s governments are quite aware of the potential of renewable energy, and have been seen to actively tap into these opportunities. Utilities are upgrading and expanding dilapidated power grids so they can carry the electricity generated by the growing number of new producers.
In South Africa, only about 4% of its 43,000 MW of generating capacity comes from renewable sources. This is despite the wind potential in the Western Cape and the solar potential in the Northern Cape. The government wants to triple the total to some 6,000 MW by 2020. This will be an important contribution as economic growth has stalled while Eskom is modernising aging power plants and transmission lines whose frequent breakdowns are regularly leaving the country in the dark. To get its grid up to speed, Eskom has spent $180m upgrading its network of transmission stations and strung hundreds of kilometres of high-voltage power lines to more than 40 private wind and solar plants.
Designing the optimal mix of power generation and grid capabilities is going to be very important. Grids will need to be sophisticated enough to handle different kinds of renewable-power generation, such as absorbing any excess power generated by home solar panels. That capability not only gives the grid access to more power, it also makes solar a more attractive option for homeowners, since any power they feed into the grid, reduces their power bills.
The New Horizons Energy waste-to-energy plant, to be launched in Cape Town, South Africa, will manufacture bio-methane and carbon dioxide by the middle of the year. All the compressed gas produced will be vended to Afrox. The bio-methane will be sold as an alternative to LPG and diesel, and the carbon dioxide will be used in agriculture, industries and waste-water treatment.
Academics in South Africa have also developed a village near Stellenbosch where biogas is being used as the primary source of cooking energy. The Sustainability Institute are literally practising what they preach. They use not only biogas, but also solar energy, wind energy, and they also recycle their water.
The Rwandan Government plans to increase off-grid power generation to 22 MW by 2018, up from 8.75 MW presently (2017). The government has therefore attracted a number of renewable energy firms, including solar power providers. Rwanda aims at connecting 70% of the population to electricity by 2018. Off-grid solutions will be important to provide a fast and robust answer to Rwanda’s energy needs. Easy payment systems will be equally important. It is also important to ensure a conducive business environment, which will help attract more investors in the sector.
Kenya is working on connecting the rural parts of the country in just seven years. Kenya added 1.3 million households to its electricity grid in 2016, raising the percentage of connected Kenyans to 55%, from just 27% in 2013. In another four years, Kenya plans to achieve “universal access” where 95% of homes will have access to electricity. Much of Kenya’s energy comes from non-fossil fuel sources – more than 60% of installed capacity comes from hydro and geothermal power. Kenya opened the world’s largest geothermal plant last year, while another plant is being built and expected to come online in two years. Kenya is also building Africa’s biggest wind energy farm to generate a fifth of its power.
We are also seeing Kenya stepping into the technology market with its plan to build large-scale solar storage batteries to link their solar systems to the national grid. This will place Kenya as a regional solar energy hub. With the development and availability of storage batteries, consumers would be able to use electricity at night and not only when the sun shines.
Kenya has also developed efficient financing mechanisms for the poor of East Africa, such as the M-Kopa application that is based on the M-Pesa platform. This transforms the high upfront capital acquisition cost into a monthly operating cost, payable through M-Kopa.
Kenya (as has Cameroon in Central Africa) has also ventured into biogas plants to complement their energy sources.
Ethiopia’s renewable energy sector has enjoyed a decade of strong growth, giving rise to profitable industries, new infrastructure, and showpiece summits. Ethiopia’s government is pressing ahead with ambitious development plans, and clean energy is core to the mission. It has invested in large-scale hydropower public investments in the Beles II (460 MW), Gilgel Gibe II (420 MW), Gilgel Gibe III (1.87 GW) and the Grand Renaissance (6 GW) dams. The next target is to become the wind power capital of Africa. Wind accounted for just 324 MW of Ethiopia’s total output of 4,180 MW at the end of 2015, with the clear majority coming from hydropower. The government has plans for at least five further wind farms, aiming to deliver up to 5,200 MW from wind power within four years. Three factors are driving Ethiopia’s shift to wind: the devastating droughts that have diminished the value of hydropower energy, the falling cost of wind power technology, and evidence that Ethiopia is blessed with ideal sites for harvesting wind.
Ethiopia is also the scene of a waste-to-energy plant. Danish engineering and Chinese labour and capital are being used to build this plant in Addis Ababa. Once completed, this plant will serve as proof of concept in rolling out a number of other plants into Africa. It will generate 50 MW of electricity, whilst getting rid of waste dumps in the city – a common feature of African cities.
In February 2016, Morocco commissioned the first phase of Noor 1, which provides 160 MW of the ultimate 580 MW capacity, helping Morocco to save hundreds of thousands of tonnes of carbon emissions per year. The power station will eventually provide electricity for 1.1 million people. Morocco plans to generate 42% of its energy from renewables by 2020, with one third of that total coming from solar, wind and hydropower respectively.
In Central Africa, there are ongoing efforts to add a third dam (Inga III) of 4.8 GW. Under the Grand Inga project, a multi-phase hydro power station will be built on the Congo River, with the potential to generate approximately 44 GW – half of Africa’s current installed electricity capacity.
African countries want to support private investor participation it its renewable energy sectors. Some of the top investment opportunities in sub-Saharan African include the following: Cameroon (20,000 MW in exploitable hydropower potential); Tanzania (IPPs of renewable energy are strongly encouraged); Ethiopia (hydropower, geothermal, and wind and solar generation); Ghana (wind, mini-hydro, modern biomass resources and solar); Mozambique (5,000 MW of hydropower, and large untapped biomass and biofuels potential); Kenya (7 IPPs contribute to the national grid, and private investment is necessary to grow the required 15,000 MW by 2030); and Nigeria (significant hydro, solar and wind energy sources).
MANAGING RENEWABLE ENERGY IN AFRICA
Financing new electricity facilities remain a challenge. An innovative solution is the results-based financing mechanism. This allows donors to channel climate finance into different types of energy projects. Results-based financing takes away a lot of the risks from the donor; it says, “give me the results and I will give you the money”.
Tanzania provides a glimpse in what some African countries deem to be necessary to position themselves for the future as far as renewable energy is concerned. Tanzania’s Rural Energy Agency (REA) received a grant of $870,000 from the AfDB to structure the Renewable Energy Investment Facility (REIF), which will provide affordable finance to private sector clean energy projects providing energy access to rural communities in Tanzania. The grant will include advisory support, development of operational guidelines, risk mitigation framework, fund manager identification, technical and institutional support for the REA towards the establishment of REIF and capacity building for relevant public sector institutions/agencies and private sector project developers.
Tanzania’s government has subsequently set an objective of increasing access to electricity by promoting renewable energy powered by off-grid/mini-grid electrification schemes. The government estimates that about half of the country’s rural population could be served by off-grid options in a cost-effective manner, and that mini-grids could benefit 9.1 million people in the country.
Small-scale renewable energy production is especially important in remote, rural locations for several reasons. It is incredibly expensive and time-consuming to lay large-scale grid connections and build large, central power stations. Smaller systems (mini-grids) are faster and cheaper to set up and can also be tailored to the needs of a particular location. They are scalable and adaptable as needs change and do not require a massive transmission network. Local renewable energy projects also create many employment opportunities. Given the massive opportunities for innovation, the potential for SMMEs is large to manufacture the products in Africa, cutting the length of the supply chain and creating more jobs in the manufacturing sector.
The Africa Progress Panel believes Africa can leapfrog carbon-centred energy systems and go straight to renewables. As Africa does not have large legacy systems, it can proceed with speed and use the newest types of technology. Small solar power initiatives are also gaining ground. Renewables could help supply cheaper energy to regions where people pay a large portion of their income for power.
At present, solar panels, batteries and other components are manufactured elsewhere in the world, predominantly in Asia. They are imported into Africa, mainly in East Africa, by companies who sell them on to customers. Small weekly or monthly payments are made, often by mobile phone, until the solar kit is paid off. An example of a mobile application to deal with this, is M-Kopa, which functions on the M-Pesa platform.
Individual solar PV kits in East Africa are now as cheap as kerosene as a source of energy. While it will be insufficient to provide sufficient electricity to power major household appliances, they will provide enough energy for electric light and the ability to charge mobile phones.
Looking further ahead, there will be increasing pressure to integrate on- and off-grid power provision so that people with multiple solar panels can sell electricity to others, as well as tapping into grid supplies when they need more power, or require back-up.
The big question is whether this process will be centred on national grids or on more localised mini-grids, perhaps covering just single villages. The latter seems more likely in the short-term, but in the long-term the former may become more important, turning power utilities into infrastructure operators and power trading platforms more than generators in their own right.
RECENT DEVELOPMENTS IN NIGERIA
An interesting recent development is the announcement by Nigeria of the construction of the first solar power project in Nigeria, i.e. the 1.2 MW solar power plant in the lower Usuma Dam in Abuja. The project is aimed at boosting Nigeria’s renewable energy position. Nigeria is home to enormous energy resources such as petroleum, natural gas, coal, nuclear power and tar sands. So far Nigeria has failed to tap into its enormous resources, making it not only one of the harshest business environments in the world, but also very uncompetitive. Nigeria is said to be endowed with all it takes to succeed in this venture. Experts predict that Nigeria will surpass Africa’s renewable energy target by 2020.
Various commentators have stated that it seems that solar is the new business model for energy in Africa. With its vast oil reserves, Nigeria must have been massively tempted to keep on backing oil. It is therefore refreshing to see Nigeria moving into the field of renewable energy (solar), especially given the massive resources they have in this field. It will allow Nigeria to use renewable energy for the home market and export its oil products abroad (first adding value at home). Should they develop a consistent supply of electricity from renewable energy sources, it would go a long way to stabilise the internal supply (with happy households, who now currently frequently need to revert to generators for backup supply) and have a beneficial impact on the manufacturing sector as well.
From the above, African countries will no longer be tied to a single energy source. Given the lack of current infrastructure throughout most of Africa, Africa’s governments can design their systems from scratch, and in the process, leapfrog the industrial age electricity systems.
If we look at the rate at which regions such as East Africa are tapping into renewable energy sources, Africa seems to be latching on to renewables, in the process leapfrogging the conventional coal-fired system. The latter has become more expensive, and contributes quite negatively to global warming and climate change, something that Africa cannot afford.
Governments will have to ensure that they adopt business-enabling policy frameworks. This includes making it easier for independent power producers to enter the market and earn acceptable returns. More competition will increase innovation and lead to lower costs.
Africa will need to keep on investing in renewable energy. They will also need to look at producing the required technology instead of importing panels and batteries for solar systems. Kenya’s progress with battery production will serve as a benchmark. Although the current planning for its battery production seems to be for supplying energy to the national grid in the absence of sunlight, this development would provide the opportunity to sell cheaper batteries to the individual home users. It will also boost the development and spread of mini-grids, which have become quite useful.
Africa will see an increase in waste-to-energy plants. The plants in Addis Ababa and Cape Town will serve as proof of concept. Cities such as Johannesburg generate 5,000 tonnes of waste daily, and is running out of landfill sites. The logical next step is to move towards waste-to-energy plants, which has the additional advantage of creating electricity generation capacity.
Biogas is an additional form of renewable energy that has the potential to make a contribution.
Wind power will become more visible in Africa, as the wind farms in East Africa demonstrate. The same can be said of hydro power.
Given the importance of electricity to the growth and development of industry at large, the above developments in the field of energy will have a beneficial impact on Africa’s economies. The UN, AU and the African Development Bank have all propagated the industrialisation of industry and the development of Africa’s manufacturing sectors. These developments will require substantial electricity sources. Tapping into renewable energy as an important source of electricity will play a major role in supporting the growth of industry, in addition to improving the quality of life of Africa’s citizens.
As for solar, there is a good case to be made that it will be the next business model for energy in Africa. Africa has an abundance of sunlight on the one hand, and a severe shortage of conventional energy infrastructure on the other. Given that the cost of solar technology and generation, and other forms of renewable energy, is constantly being reduced, it stands to reason that solar will become the dominant form of renewable energy, with the potential of eventually taking over from coal-fired systems. This, however, will still take quite a while as economies such as that of South Africa require a substantial base capacity, something which renewable energy in the foreseeable future will be unable to provide.
The author, Johan Burger, is the director of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. Johan can be reached at [email protected]