African Energy Outlook 2014: Bittersweet outlook for Africa’s energy future

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African Energy Outlook 2014

Nearly one billion people will have access to electricity in Sub-Saharan Africa by 2040, but projected population growth means that 300 million people will remain in the dark, a new report finds.
The Africa Energy Outlook, published last week by the International Energy Agency (IEA), highlights challenges facing Sub-Saharan Africa as it strives for economic and social improvement. African Energy Outlook is a comprehensive collection of data on the energy sector in the region, and illustrates different potential scenarios for the future.

It finds that despite the abundance of local resources such as natural gas, oil, wind, hydropower and geothermal energy, the supply infrastructure is still hugely underdeveloped and unable to meet local demand, which is set to increase by 80 per cent by 2040.

The following are extracts from an interview with Maria van der Hoeven, executive director of the International Energy Agency, where she recently answered some key questions about how Sub-Saharan Africa’s energy system might evolve in the coming decades.

Maria-van-der-Hoeven

Maria van der Hoeven: Executive Director IEA

Is energy production in Sub-Saharan Africa going to meet demand by 2040?

About 13 per cent of the global population lives in Sub-Saharan Africa, consuming just 4 per cent of all energy. Importantly, local energy resources are more than sufficient to meet the population’s needs. For example, African Energy Outlook has found that the region accounts for almost 30 per cent of the world’s oil and gas reserves discovered in the past 5 years. Power generation is set to quadruple by 2040, coal supplies will increase by 50 per cent and renewable energy production will also grow significantly.

However, about two-thirds of the growing investments in the region are aimed at developing resources for export. Two out of three dollars invested in Sub-Saharan Africa since 2000 have gone to produce energy for export. There is interest in the region’s extractive industry, but the real shortfall is the lack of investors ready to commit their capital to domestic energy provision. As a result, grid generation capacity continues to fall very short of domestic needs, with half of the region’s capacity located in just one country — South Africa. So despite an increase in energy capacity, the outlook for providing electricity is bittersweet.
If investors diverted their capital from export to domestic provision, how would that affect the region’s economic growth? 

It’s not a choice between the two. Export and domestic energy supply should grow together in a more balanced manner. To do so, we can’t subtract investments from one area to benefit another. Our study found that an additional US$450 billion is needed in the power sector to enhance domestic energy supply without penalising the export market.

Other than increasing investments, what actions are needed to improve Sub-Saharan Africa’s energy outlook?

It is important to adopt an integrated approach to the management of revenues. For example, solar photovoltaic is a key technology to supply rural areas with electricity, but it’s not cheap. To pay for the research and development of this sector, money must come from other energy sources, primarily fossil fuels.
Regional cooperation should also be improved as it is key for the development of cross-national energy systems, as in the case of large dams. Countries can have conflicting interests in the shared waters of a river, hence it is crucial to have a coordination platform in place when designing a new hydropower project.
Will renewable sources be able to compete with fossil fuels in 2040?  

Economic growth is crucial for the future of Sub-Saharan Africa, and to achieve it there is a need to tap into the energy potential of the whole region. We find that there is a huge potential in hydropower, solar, geothermal and wind energy, but to be able to exploit that we will need revenues from the export of fossil fuels. At the moment, renewable energy can’t compete with biomass or coal, which are much cheaper and still relatively insignificant in terms of global emissions. Our study finds that in 2040, Sub-Saharan Africa will produce just 3 per cent of the global carbon dioxide emissions from the energy sector.

What is the role of mini and off-grid solutions in tackling energy poverty? 

In urban centres, providing electricity through the grid makes more sense, because the population is very dense and it is cheaper to connect households within a relatively small area. But in more remote areas, far from existing transmission lines, the best solutions are mini and off-grid systems.These are often hybrid systems that combine fossil fuel-powered generators with solar photo-voltaic, and can make a big difference in improving the overall energy supply in Sub-Saharan Africa. The good news is that according to our best-case scenario, of the additional 230 million people gaining access to electricity in 2040, 70 per cent will be in rural areas.

Summary of Findings 

  • Africa has vast energy resources but lacks the infrastructure to meet demand.
  • Two out of three dollars invested in Sub-Saharan Africa since 2000 have gone to produce energy for export.
  • Investing in domestic production without sacrificing the export market will be key.
  • African Energy Outlook finds that in 2040, Sub-Saharan Africa will produce just 3 per cent of the global carbon dioxide emissions from the energy sector.
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