Africa's energy trilemma

23 August 2022
Africa has historically suffered from a lack of funding, fuel sources and power coverage. However, energy transition offers the opportunity for the continent to solve this triple trilemma

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While the Middle East and North Africa regularly make the headlines for their renewable energy developments, under the radar the other 48 nations of Sub-Saharan Africa are making good progress of their own. 

Blessed with high solar irradiation levels, attractive wind profiles and even some of the world’s best geothermal potential, the continent has all the elements needed for a sustainable power generation sector.

Critically, it also has considerable hydropower resources, a feature the Middle East lacks. 

There are some 590 individual utility-scale renewable energy projects planned in Africa with a total power generating capacity of more than 210GW and an investment requirement of just under $300bn, according to MEED data.

These figures exclude the continent's 20 known hydrogen projects in the pipeline.

Considering that these numbers represent more than 140 per cent of the 147GW of current installed capacity, it is easy to see the massive potential for long-term sustainable energy growth.

Hurdles ahead

Achieving this will not be simple, however. The first issue is access. Of the 1.1 billion people in Sub-Saharan Africa, a staggering 77 per cent did not have access to electricity in 2020, up from 74 per cent in 2013, according to the International Energy Agency. 

Excluding South Africa, average per capita electricity consumption is just 153 kilowatt hours a year, a quarter of India's average per capita consumption and just 6 per cent of the global average.  

Historically, a major challenge has been the lack of fossil fuel availability to power more conventional thermal electricity generation. Many African states do not have the financial resources to pay for costly oil, gas or coal imports. Passing on the fuel cost to end users, most of whom have low incomes, is not an option without considerable subsidies, which governments cannot afford. 

And even when hydrocarbons are plentiful, such as in Nigeria, poor governance and corruption have combined to create a situation where demand far outstrips supply, if operational generation capacity is even available in the first place.

The consensus was that energy transition could create new and unique opportunities for sustainable, decentralised and well-financed projects
MEA Energy Week poll 

Triple challenge

Africa, therefore, faces what is frequently referred to as the ‘Energy Trilemma’; a triple challenge for countries to balance securing energy supplies economically, extending electricity provision and maintaining sustainability, at the same time and in equal proportion. 

Using this metric, the continent fares poorly; in the World Energy Council’s Energy Trilemma Index, nine of the bottom 10 and 19 of the lowest 25 ranked nations lie in the Sub-Sahara.

Finding solutions to this Africa energy trilemma was one of five central themes and talking points addressed at the Siemens Energy Middle East & Africa Energy Week held in June.

When polled on the main factors preventing Africa from achieving its sustainable energy goals, a large majority of the 400-plus participants cited project funding, governance and policy making as the primary stumbling blocks.

However, there was also a degree of optimism among delegates. The consensus was that energy transition could solve the problem by creating new and unique opportunities for sustainable, decentralised and well-financed projects. 

Not only do renewable energy projects negate the fuel imports issue, but they can also be built in more remote areas and closer to the main sources of demand, thereby making the extension of electricity access considerably less costly.

This location flexibility also allows renewables to be developed on a captive basis to serve off-grid industrial plants such as cement and mining complexes.  

Likewise, renewable energy projects remove the fuel feedstock risk, and because they tend to be smaller than thermal power plants, they also require less capital.

Financing and raising capital have traditionally been major hurdles in project delivery in Africa. A second poll of participants at the Energy Week revealed the majority observed that project funding was the overriding factor in preventing the continent from achieving sustainable energy, followed at some distance by governance and policy making.

Region primed for global green hydrogen leadership

Funding mechanisms

This is set to change. Many of the 210 renewable energy projects currently under construction in Africa are being implemented through the private sector on an independent power project (IPP) basis financed by private banks.

International development banks such as the World Bank and African Development Bank are also increasingly extending low-interest loans and grants to develop new production capacity and rehabilitate older power generation assets. 

Both funding mechanisms highlight the improving risk appetite for investment in Africa and suggest growing confidence that it can meet its sustainability and energy objectives. 

Yet it remains vital that energy transition is equitably spread across all segments of society and is harnessed not only as a catalyst for socio-economic growth, but also as a means to create jobs and upskill the population to ensure no one is left behind.

There is an asymmetrical distribution of wealth and capital between the countries in the north, which need a lot of these molecules to decarbonise their industries, and the countries more often in the south, which have a lot of the renewable energy resources
James Mnyupe, presidential economic adviser in Namibia 

Discussions at the event highlighted that there was no one-size-fits-all solution for the continent as a whole.

Each of the 48 Sub-Saharan nations has its own unique and complex energy challenges that need to be addressed individually using a tailor-made approach.

This was emphasised by a senior government speaker who underlined the different situations in which each country found itself:

“There is an asymmetrical distribution of wealth and capital between the countries in the north, which need a lot of these molecules to decarbonise their industries, and the countries more often in the south, which have a lot of the renewable energy resources,” explained James Mnyupe, presidential economic adviser in Namibia.

There are encouraging signs that the nations of Africa are gradually moving closer to resolving their energy trilemma. However, much needs to be done and only with good governance, accessible finance and custom approaches will these goals be reached.

And if they succeed, the continent’s nations may well set the new reference point for others to follow. 

Click here to visit Siemens Energy 

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