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The World Energy Council’s (WEC’s) 2019 World Energy Trilemma Index indicates there has been a step change in progress toward basic access in some African countries, with many having made substantive improvements, particularly in access to energy and clean cooking under the United Nations Sustainable Development Goal 7.
“While these improvements are promising, the challenge of accelerating transition to clean, affordable and productive energy for all in Africa is unfolding in an era characterised by an acceleration of fintech innovation, intensifying global economic competition and new trade tensions,” the council says.
Humanising energy transition requires meeting the growing energy demand of one-fifth of all humanity, it adds.
The WEC notes that only 43% of the population of sub-Saharan Africa has access to basic electricity – less than half of the global average of 87%.
This lack of access constrains modern economic development and negatively impacts on life expectancy and quality of life, but also severely limits the adoption of emerging technologies in areas from banking to education to agriculture.
The lag in economic development also puts African countries at increased risk from new energy shocks – the consequences of extreme weather events and other impacts of climate change.
With Africa’s current 1.2-billion population projected to double by 2050, it adds urgency to the already pressing need for investment in an African energy transition. This could even impact the future of European neighbourhoods, in the event that mass migration along regional corridors is triggered.
GLOBAL SHIFTS
The WEC explains that as the world addresses the challenges in quickly enabling future-fit energy in Africa, financial and human investment must reflect technological and societal shifts.
Africa’s demand for coal is at its peak but, elsewhere, innovation in other energy technologies is skyrocketing.
Worldwide investment in renewable energy was $282.2-billion in 2019, up 1% on 2018.
Wind, both offshore and onshore, led the way with $138.2-billion of investment, up 6%, followed by solar at $131.1-billion of investment.
Battery storage doubled last year to 106 GW and is expected to surpass 1 000 GW by 2040, requiring an investment of $662-billion over the next two decades and enabling a halving of battery storage costs.
Various nations and large energy companies have also been signalling their intention to make huge investments in carbon capture and storage and moves toward a circular carbon economy.
Global investment in clean hydrogen continues to rise, with China leading the way, followed by the European Union.
Energy investments are increasingly linked with activism, with what was once only individual investors now reaching institutions like Blackrock, which manages $6.9-trillion of assets, leading the charge to divest from coal.
The WEC says that recipients of international investments are also shifting, with cities, not countries, the starting point for investment decisions. There is, however, consensus that there is a significant gap in global energy investment – and an investment cliff in the case of Europe – which amounts to trillions of dollars globally.
Estimating the level of investment needed for whole energy system's transition is not an easy task, but one that depends on the developments of regionally diverse energy systems and unique policy contexts.
The WEC’s World Energy Scenarios report estimates investments of between roughly $670-billion and $890-billion a year will be needed just for power generation.
THE AFRICAN CASE
The flow of money into Africa is changing, says the WEC. Remittance flows to sub-Saharan Africa are estimated to have reached $49-billion in 2019, up by 5.1% compared with 2018.
Remittances globally have exceeded official aid – by a factor of three – since the mid-1990s, and this year they are on track to overtake foreign direct investment flows to low and middle-income countries including sub-Saharan Africa.
The New Partnership for Africa's Development, in partnership with the African Development Bank Group, has worked to address barriers caused by the issue of multiple currencies and exchange rates, creating opportunities for countries to pool their monetary resources and work for common objectives, including energy infrastructure investments.
Moreover, the WEC says banks are increasingly facilitating microfinance opportunities – enabling social entrepreneurs to transform rural access challenges using new business models which combine data and renewables.
The development of modular clean energy technologies also opens a new opportunity for mid-scale financing options to help avoid the risk of rapid urbanisation without commensurate development of industrial and manufacturing sectors.
New financing options that identify synergies emerging across different sectors of the economy, and which attend to the co-benefits of affordable and productive clean energy access for all, will be needed to avoid the derailing of climate mitigation by the social impacts energy agenda.
With all of this, there remains a realistic hope for Africa – an energy transition that enables the region to “leapfrog” to a new hydrogen economy, the development of circular carbon economy models and access to new global trade and digital economy opportunities.
“The largest challenge we currently face is how to move forward faster and together by ensuring a seat for new energy society at the table. Faced with investors focused on quick returns, there is a growing imperative to incentivise new and long-term energy investment thought market design innovation,” the WEC states.
The challenges include to focus on the development of blended digital and engineering skills within rural and autonomous renewable energy communities, as well as on a national basis.
Another challenge is to elevate the importance of systems governance – linking energy and industrial reinforcing regulatory resilience, infrastructure action planning and new market design.
Lastly, there is a challenge around ensuring social cohesion – aligning urban-national development frameworks with a recognition of structural inequalities in the emerging pattern of urban rich compared with rural rich and/or rural/urban poor divides.