From Potential to Progress: What is the Prospective Outlook for Renewable Energy in Africa?
Africa, with 33 out of 47 of the world's least developed countries located within its borders, and over half of its population lacking access to electricity, is a veritable goldmine for those aspiring to make progress in the renewable energy sector. This article focuses on the advancements made by African countries in harnessing their renewable energy potential.
According to the International Energy Agency's (IEA) recent "Renewables 2022" report, with the rapid global adoption of renewable energy, it is projected that global renewable energy capacity will increase by 2,400 GW between 2022 and 2027, which is equivalent to the entire current installed power capacity of China.
Furthermore, renewable energy is expected to account for over 90% of the global power expansion in the next five years, with the increase in renewable energy generation over the next five years being equivalent to that of the past two decades. By 2025, renewable energy is expected to surpass coal as the world's largest source of electricity.
The Western world, consisting of developed countries, has reached the peak of energy consumption, while emerging regions such as India, China, Southeast Asia, and the Middle East are rapidly catching up. Both developed and developing countries are fully committed to transitioning to clean energy sources such as solar, wind, and hydroelectric power.
In today's widespread adoption of renewable energy, what is the status of renewable energy resources in resource-rich Africa? This article will briefly introduce the progress made by African countries in the field of renewable energy and the potential for green energy transition on the African continent.
What is the renewable energy potential in Africa?
Energy systems centered around renewable energy have the potential to address numerous challenges faced by Africa in social, economic, health, and environmental aspects. The African continent possesses vast resources in wind energy, solar energy, hydropower, and geothermal energy. Additionally, the decreasing costs of renewable energy make it increasingly accessible. Central and Southern Africa, known for their abundant mineral resources, play a crucial role in the production of batteries, wind turbines, and other low-carbon technologies.
Africa is the sunniest region in the world, with approximately 60% of the world's best solar resources. The Africa Renewable Energy Market Analysis report by the International Renewable Energy Agency indicates that the African continent has a solar photovoltaic potential of 7,900 GW. Additionally, the continent has additional potential in hydropower (1,753 GW) and wind power (461 GW). Some regions in Africa also possess geothermal and modern bioenergy potential.
By 2050, solar photovoltaic capacity is expected to reach 650 GW, and Africa is poised to become a global hub for green manufacturing within approximately 20 years.
Furthermore, energy transition will create employment opportunities by driving the development of emerging industries. Analysis by the International Renewable Energy Agency shows that renewable energy and other energy transition-related technologies have already created 1.9 million jobs in Africa, with the potential for significant growth as countries further invest in energy transition.
Reportedly, between 2020 and 2050, every million dollars invested in renewable energy will create at least 26 job years, every million dollars invested in energy efficiency will create at least 22 job years, and in terms of energy flexibility, the number is 18.
According to a joint report by the International Energy Agency, the World Bank, and the World Economic Forum in 2021, in order to put the world on track for net-zero emissions by 2050, clean energy investments in emerging markets and developing economies need to increase sevenfold annually, from less than $150 billion in 2021 to over $1 trillion.
Perhaps one of the most significant, yet often overlooked factors, is the outdated transmission grid in Africa. With only a few countries possessing true national grids, vast regions of the African continent, including major countries like Nigeria, Sudan, and even Tanzania and Kenya, provide ample room for the effective utilization of distributed renewable energy. This would result in cost savings (a key factor in a financially constrained continent) and ensure faster electrification.
Significant Developments in the Renewable Energy Sector
The deployment of renewable energy has been continuously increasing over the past decade, with over 26 GW of new renewable energy capacity added by the end of last year. The largest increase was seen in the solar energy sector. Compared to the early 2000s, annual investments in renewable energy grew tenfold in the past decade, from less than $500 million from 2000-2009 to $5 billion from 2010-2020.
Investment trends have accelerated in the early 21st century. Recently, Africa and countries worldwide have reaffirmed their commitments to exert influence and initiate strategically long-term projects that benefit energy transition and promote Africa's economic stability.
In June 2023, the specialized blended finance fund SA-H2 was established, aiming to raise $1 billion to support green hydrogen projects in South Africa. Once operational, SA-H2 will collaborate with the SDG Namibia One Fund to provide comprehensive financing solutions for the green hydrogen industry in Southern Africa. This significant development occurred approximately a month after African financial company AFC and the Japan Bank for International Cooperation (JBIC) signed a memorandum of understanding for cooperation in infrastructure projects, accelerating Africa's energy transition.
In January 2023, as part of its "Global Gateway" initiative, the European Union and its member states launched the "European Just and Green Recovery Teams Initiative" for South Africa. This initiative has greatly propelled green energy initiatives on the African continent. Additionally, the Sustainable Energy for All (SEforALL), the Africa Climate Foundation, Bloomberg Philanthropies, the Climate Works Foundation, and the China Renewable Energy Industries Association (CREIA) launched the Africa Renewable Energy Manufacturing Initiative (AREMI).
AREMI aims to facilitate necessary financial, technological, and socio-economic investments to drive the development and transformation of clean energy in Africa. Around the same time, a significant agreement providing $2 billion for solar power plant development was signed between the UAE and Zambia. Recently, Angola also secured a €1.29 billion (approximately $1.41 billion) loan with the assistance of Standard Chartered Bank.
Looking back at 2022, the Group of Seven (G7) announced the Global Partnership for Infrastructure Investment (PGII), a lending initiative with a total value of $600 billion dedicated to funding sustainable infrastructure projects in developing countries, with a particular focus on Africa. Additionally, in February of the same year, the European Commission announced a package of €150 billion in investment funds for Africa.
Major Challenges
Despite the enormous potential of renewable energy, insufficient global investment in African countries hinders the development of their renewable energy sector. Over the past 20 years, only 2% of global renewable energy investment has gone to Africa, and there are significant disparities within the region. Reliance on grants and aid is ineffective as they often do not bring the best investments in terms of technology or suppliers.
Another challenge is the dependence on fossil fuel exports. While the clean energy transition presents enormous opportunities for African countries, many of them heavily rely on commodity exports, including fossil fuels. In fact, fossil fuels remain one of Africa's largest export commodities. In a low-carbon scenario, these countries heavily dependent on fossil fuels will increasingly face the risk of stranded assets as their emerging manufacturing capacities become caught between shifting energy landscapes.
