The Covid-19 crisis has highlighted the need for Africa to develop flexible energy systems in which renewables and decentralised technologies play a far larger role, says financial services provider Standard Bank Group.
The pandemic has led to a global decline in electricity demand as commercial and industrial activity slows and people work from home.
In South Africa, for example, electricity demand reduced by as much as 7 500 MW on average in March and April – the height of the national lockdown.
However, demand is recovering in most African States as economies reopen.
Considering that numerous African countries entered the crisis with a shortfall of energy supply, governments will need to procure more power in the months ahead. The fastest and most cost-effective way to address the supply gap is through more flexible technologies, for example, renewable power projects – meaning the crisis may prompt African nations to deploy renewables at a much faster rate than before, Standard Bank notes.
“Given that renewables are currently the most economically viable source of energy in most countries, we expect the Covid-19 crisis will accelerate the pace at which these technologies are adopted on the continent, with hydro, wind and solar being the most attractive technologies,” says Standard Bank power head Rentia van Tonder.
While renewable energy units have historically only been able to provide an intermittent supply of electricity, they will become increasingly reliable owing to rapid advancements in storage technologies, which are becoming more affordable.
However, for the time being, there are no utility-scale battery storage facilities in Africa, the bank indicates.
With electricity demand recovering, South Africa’s Department of Mineral Resources and Energy recently announced that it is preparing bid documentation for the emergency procurement of 2 000 MW of generation capacity.
Given the time constraints, renewables may be best suited to plug the gap, and there are signs that these projects could include investments in storage technologies, which would further enhance the flexibility of these systems. Gas-to-power projects will also be able to provide dispatchable power solutions, complementing renewables, posits Standard Bank.
Alongside launching bid window five of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), finalising plans to enable the private sector and municipalities to secure their own power supplies would also be a welcome development in South Africa, it highlights.
Decentralised green energy solutions, which promote innovation as they are purpose-built and not connected to national grids, will continue to gain momentum as municipalities, mining houses and industrial firms seek to ensure cost certainty and reliability of supply.
Some mining groups in Africa are even turning to hydrogen power to diversify their electricity mixes – an indication that the fledgling hydrogen economy is garnering more interest, indicates the bank.
“In countries such as Nigeria – where the electricity self-generation market is 55% larger than the main grid – we expect the country will start to seriously consider pivoting to decentralised renewable solutions as oil subsidies near an end, so as to decrease the supply shortfall and better service the large and geographically fragmented population,” Van Tonder says.
Meanwhile, African nations are considered to be well placed to implement a ‘green stimulus’ strategy, as has been done by the European Union and other markets.
This approach is slated to increase the potential to secure additional green funding for the continent’s Covid-19 recovery measures.
Standard Bank is of the view that the addition of more modular, decentralised energy solutions will diversify current technology mixes and ensure greater flexibility of supply going forward.