Energy in Africa – Challenges, Opportunities and the Way Forward

The robust and plentiful resources in the continent’s possession represent favourable gateways if proactively actioned.

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While the African continent is confronted by its fair share of challenges, there remains a myriad of viable opportunities to capitalise on. Further, the robust and plentiful resources in the continent’s possession represent favourable gateways if proactively actioned.

 Access to energy: Achieving universal access to modern energy is a critical development challenge for African countries. Many outlying rural areas lack access to electricity owing to poor grid infrastructure and vast distances between areas where power needs to be distributed. Such an energy deficit leads to a multitude of socio-economic problems.

To address the continent’s existing energy infrastructure gap, African governments are proactively aiming to expand electricity access, deliver clean cooking solutions and pursue inclusive sustainable energy development. Such efforts are supported both locally and internationally through the regional power pools and the AfCFTA respectively to expand these endeavours regionally and pursue energy development to relieve the infrastructure restraint.

Renewables: Africa is abundant in natural resources for power generation (considerable amounts of solar, hydro, wind, gas amongst others). In fact, Africa receives over two and a half times what Germany, a world leader in solar renewables, does. This is indicative of the enormous potential of Africa having access to such renewable resources, which subsequently renders renewable solutions cost efficient. Such an impetus will positively set Africa’s energy landscape on a positive trajectory.

 Nonetheless, the energy sector of most African countries trails behind in respect of defining clear courses to renewable energy development concerning legal frameworks, incentives, and support to private sector development. Achieving access to modern energy for all will not only necessitate considerable investments, but further efforts in terms of policy formulation and implementation.

As African nations acknowledge their renewable energy generation capacity and action the necessary reforms to facilitate foreign investment, opportunities for investment in Africa will continue to amplify. Innovative regulatory reforms, namely establishing additional independent power producer programs, will further accelerate that momentum. Large-scale investment returns combined with steadily decreasing risk profiles imply that the continent will persist in attracting investment into its renewable energy sphere in subsequent years.

 Investment: Over the past two decades, Africa’s political and economic climate has shown much improvement, rendering the continent an increasingly viable investment decision for global stakeholders. The challenge pertaining to funding, however, lies in the source of and access to this crucial funding. While vast improvements have been observed, political and credit risk remain critical factors encumbering potential investors from investing in the continent’s energy realm.

Alleviating this investment challenge necessitates the development of new and innovative funding solutions and approaches that complement the African landscape. Successfully implemented funding initiatives should promote bankability, ultimately boosting project development in Africa’s energy landscape. These initial funding efforts will expediate direct foreign investment by renewing investor confidence in Africa, essentially enhancing skills development and job creation.

Decentralised distributed generation solutions: Implementing decentralised distributed generation solutions will provide millions of people across the continent without energy, access thereof.  Distributed generation minimises transmission losses and enables transmission of power to where it is required. Businesses and nations adopting and investing in the decentralisation of renewable energy subsequently avail themselves to considerable opportunities.

Nevertheless, regulatory hurdles still impede the spread of distributed generation as distribution network operators have minimal incentive to provide them access to the distribution network while distributed generators are unable to cash in the positive impact they have.

Integrated grids: The integration of operational reserves and installed capacity enfranchises consolidated power systems from having to invest in additional facilities. In the likelihood of a crisis, regional collaboration provides an alternative source of supply for operating reserves and support thereof. Similarly, sharing with neighbouring countries can provide progressive system flexibility and reliability by extending the supply portfolio of diverse energy resources in lieu of exclusively depending on regional and established resources and supply infrastructure.

However, integration is increasingly complex in practise as Africa is segmented into very distinct power pools (the northern, southern, eastern, western, and central power pools), with minimal integration between them.  Transmission projects required to connect grids are not only an expensive exercise resulting in a slow uptake of this task, but development in this area may take a decade or longer to progress.

As transmissions projects are the foundation of power generation, investment in this area is essential and initiatives in this regard are set to endure.  Improved energy trade and energy integration initiatives will boost economic development in Africa by reducing transaction costs and enabling market and economic collaboration, conclusively accelerating investment incentives.

It therefore stands to reason that in order to overcome Africa’s challenges and seize the abundant opportunities at hand, policy leaders need to integrate energy concerns as a cornerstone of their national developmental polices, or they will be unable to support investments in other key developmental areas such as efficient healthcare, water supply, agriculture and farming as well as employment.

The above fundamental topics are set to constitute a considerable portion of the content at this year’s Africa Energy Indaba in Cape Town.  Attendees will be privy to interactive discussions and networking sessions with astute and like-minded industry-players.

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