Is Africa's Power Sector Ready to go Green?

It's 10pm, and suddenly the lights go off. No, it's not dad telling the kids to go to sleep, and no it's not a lunar eclipse. It's just the reality of unstable power supply. For many countries in Africa, "lights out" isn't always a choice. According to the World Bank, 540 million people, almost half of the population in Sub-Saharan Africa, have no access to electricity. On the other hand, many of those that do, have to endure frequent blackouts. These problems in Africa's power sector are not new, but with the advent of renewable energy solutions, it becomes necessary to assess just how prepared Africa is to tackle these issues in a sustainable way.

The current state of renewable energy penetration in Africa

Simply put, renewable energy refers to energy from sources that can be replenished naturally without getting depleted. In the case of electricity generation, sources such as solar, wind, hydropower and geothermal heat are the main sources of renewable energy.

So, it's really not all bad news. Renewable energy solutions are gradually penetrating the African continent although some countries are taking it up faster than others. East Africa alone has accounted for 58% of global investment in renewable electricity. Specifically, in Kenya, several initiatives have been carried out to increase renewable energy for power generation. From setting up electricity-generating plants in the Rift Valley which has geothermal energy, to allowing increased participation of the private sector through power generation technologies, the Kenyan government has been making deliberate efforts to make its power sector go green or go home.

Similarly, South Africa has had one of the fastest growing investments in renewable energy, and Ghana, which already relies on hydropower for electricity generation, also implemented initiatives such as a National Electrification scheme to provide electricity to all in 2020. Other countries quickly shifting to renewables include Algeria and Morocco.

On the other hand, some countries are still warming up (pun intended) to renewable energy solutions.

Africa's largest economy, Nigeria, was ranked as the second-worst country in terms of electricity in 2017 with almost 90million out of the 200m population living in the dark. The World Bank has asserted that the Nigerian economy loses $28 billion due to power shortages, with lack of access to electricity being a major factor dragging down the country's private sector. Of course, initiatives have been rolled out to tackle these issues such as a major renewable energy policy with high targets to radically transform the country's power situation. However, the policy only further emphasized the great need for funding, investment and private sector participation in the power sector.

The case isn't much different for countries like Niger, which has one of the lowest electricity access in the world (15%). As one of the poorest countries, renewable electricity has not been a major bone of contention as most cannot afford solar power.

Nonetheless, on a general level, the main focus of renewable energy in Africa is on electricity generation. Sectors such as transport and heating have not received much attention in Africa in terms of going green. However, over the past 10 years, renewable energy capacity installed has not surpassed 2% of total capacity installed. Also, the region still reports over 80% of the population using non-renewable cooking fuels.

Clearly, the urgency of renewable energy solutions, especially in the power sector may be sorely underestimated. Hence, the spread of renewable energy solutions across Africa will need more than just "a little push."

Challenges facing the power sector

The main challenges can broadly be divided as follows:

1. High electricity tariffs - With 40% of Africans below the poverty line, sometimes going without electricity is a choice. Compared to other developing regions such as South-East Asia, African countries have some of the highest average electricity prices, often higher than what many are able to comfortably afford. The major cause of these high tariffs is the equivalent high cost of diesel, which represents the main source of electricity generation in many of these countries.

2. Erratic power supply

The burden of unreliable electricity weighs heavily on both households and businesses. For households, comfort and certain activities that require electricity usage are delayed by unannounced blackouts. Businesses majorly cannot operate without electricity causing dependence on alternative sources such as generators which do not do any good for the environment nor the climate. Within the 10-year period of 2006-2016, almost 80% of businesses experienced power outages. This lack of reliable power supply results in losses for businesses in terms of productive time. Ultimately, the impact is much wider as regular loss of productivity reduces the African economy's competitiveness. Frankly, the continent is estimated to lose about 3% of GDP due to unreliable electricity.

What's stopping renewable energy from taking over the power sector?

Renewable energy offers the most sustainable solution to Africa's power issues, with cleaner, cheaper and more reliable access to electricity. So why is renewable energy penetration not as high as it could be?

Government policies

Besides the fact that several African governments are yet to open up their power industry to the private sector, many have not implemented policies that favour renewable electricity. Less than 10 countries in Sub-Saharan Africa allow private participation in their power sector activities such as transmission and distribution. In addition, the high interest charged on loans to private and institutional investors discourages private sector participation. The main reason Kenya is leading in the transition to renewable energy is because the government has been deliberate about including private investors and reforming it's policies. Reforms such as the Energy Act 2019 and fiscal incentives to remove duties on goods imported for sustainable power generation have accelerated the success of the nation's power sector. In order to make renewable energy a go-to solution in Africa, more African countries first need to reform their energy policies.

The renewable energy cost factor

Globally, renewable energy is becoming a cheaper alternative to fossil fuels. The IEA’s 2020 Projected Costs of Generating Electricity report found that the costs of Solar and Wind PV are now lower than electricity generated from fossil fuels in many countries around the world. In Africa, this narrative is quite different. Although the initial cost of infrastructure setup and installation is often too expensive for African countries to fully adopt, it is more cost efficient to run and maintain renewable electricity power plants on a long term basis.

The International Renewable Agency revealed that onshore wind farms built in Africa cost $0.056 per kilowatt hour which is just about the same cost of the cheapest fossil fuels. Further, solar farms cost even higher, pegged at twice the cost of wind farms.

The cost factor has long been a major hindrance to the transition to clean energy in Africa, thus, much progress cannot be made without funding.

Lack of viable project investment

Even in countries with encouraging policy reforms and initiatives, the lack of investment in viable renewable electricity projects and the power sector as a whole are still limited. Investment in the power sector in Africa has been pegged at less than 5%, ranking amongst the lowest in the world. Significant progress cannot be made without targeted investments in renewable electricity generation across the continent.

To invest or not to invest; decisions, decisions

The demand for electricity access keeps increasing as Africa's population (especially its youth population) increases. A 2020 report by RES4Africa highlighted that electricity demand in Africa is projected to accelerate twice as fast as global demand in the next 10 years. Unfortunately, electricity supply is not accelerating as quickly. Thus, opportunities to increase this supply exist for investors through renewable technologies that offer sustainable solutions. Africa has some of the most abundant sources of renewable energy, especially in solar and geothermal energy. This improves the cost-competitiveness of renewable electricity, making it more affordable for millions of Africans. Hence, investing in renewable electricity remains an option to be explored.

So yes, Africa's power sector is not completely ready to fully adopt renewable energy, but recent developments in certain countries have shown that it is not an impossible feat. There is no lack of proposed initiatives and projects to tackle the deficiencies in Africa's power sector, however, in order to get the sector fully green, these challenges can be addressed through direct and sustainable investment in the sector, and of course, the government's collaboration.


Res4Africa_Scaling Up Africa's Renewable Power

© 2020 by AfriKnowledgeBank

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