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African leaders urged to pursue a “green deal” to attract renewable investment

17 January 2022 Max Tingyao Lin

African countries are facing renewed calls to work together on a "green deal" to unlock the continent's huge renewable energy resources and promote economic development.

With years of limited investment amid political instability and high commercial risks, wind and solar power expansion in Africa has been lagging behind other regions.

In its Renewable Energy Market Analysis: Africa and its Regions report published last week, the International Renewable Energy Agency (IRENA) suggests African leaders should join up to develop a policy framework to improve the investment climate.

"A 'green deal' tailored to the African context could provide the institutional and programmatic framework needed to mobilize resources and policy action at the appropriate scale," the report said.

"It would combine the objectives of achieving climate goals, fostering economic development and jobs creation, and guaranteeing social equity and welfare for society as a whole," according to the IRENA, a 167-member intergovernmental organization established to promote renewable energy.

The idea is inspired by the EU's Green Deal, a set of policy initiatives that aim at achieving net-zero emissions by 2050 and creating new jobs during the energy transition for the trade bloc.

In the High-Level EU-Africa Green Investment Forum hosted by the European Investment Bank in April, European Commission (EC) President Ursula von der Leyen said African countries should work on a similar policy package "for a stronger and more prosperous Africa." The EC plans to announce some investment initiatives focused on renewables in the EU-Africa Business Forum due to take place 14-18 February.

For an African green deal to work, IRENA Director-General Francesco La Camera said in a virtual IRENA ministerial meeting 14 January that African nations should seek to create an "overarching holistic framework" rather than "pick and choose policies selectively."

"Regional coordination can foster synergies among various countries and raise the prospect for success," La Camera said.

According to the IRENA report, which was jointly developed with the African Development Bank (ADB), such a deal should cover financial incentives for low-carbon projects, structural reforms of the power sector, and industrial policies that promote local manufacturing of renewable energy equipment.

"Policymakers must mobilize public and private investments in new or upgraded energy infrastructure (power grids, district heating and cooling networks, electric charging stations) and foster innovation," the report added.

Moreover, the framework could include continent-wide and regional renewable energy targets while allowing each nation the flexibility to have its own long-term decarbonization roadmaps.

Kevin Kanina Kariuki, vice-president for energy and climate at the ADB, said in the same meeting: "No two countries are similar.… One size does not fit all. Each will embark on energy transition from different starting points based on its particular circumstances."

Coordination projects

The African Union is currently developing a long-term plan for continent-wide power systems. The IRENA and the International Atomic Energy Agency are providing modeling tools in the planning process.

In June, the African Union proposed the African Single Electricity Market, which could eventually become one of the world's largest power markets by serving more than 1.3 billion people.

According to the 55-member intergovernmental body, the market is expected to integrate five regional networks, namely the West African Power Pool, the Eastern Power Pool, the Central African Power Pool, the Southern African Power Pool, and the Maghreb Electricity Committee. It will begin trading in 2023 and be fully operational in 2040.

Such a market could encourage individual countries to develop renewable energy based on their natural resources, which would result in lower electricity costs overall, according to experts.

"We need to push for interconnection in Africa. Because every country needs to invest where it has potential in terms of renewable energy," Burkina Faso's Minister of Energy Bachir Ismaël Ouédraogo said.

"Burkina Faso has the best solar [resources] of West Africa. We need to heavily invest in solar, and make sure that we don't only invest for the market of Burkina Faso, but [also] for the market of West Africa," he added.

The official said his country is investing in 600 MW of solar power for domestic demand and could expand the project to 1.5 GW to serve the region.

"We would have benefited from the economies of scale … and the whole region will benefit from a lower cost of the kilowatt-hour," Ouédraogo said.

Limited investment

Aside from large hydropower projects, the penetration of renewables in Africa's power sector remains low as utilities struggle to attract investors.

Of the 829 TWh of electricity generated in the continent in 2019, just 1.5% came from solar power and 1.2% from wind, according to the IRENA report.

At end-2020, solar accounted for 4.4% of Africa's total installed capacity, or 10.4 GW. This compared with the full technical potential of 7,900 GW, the IRENA said. Wind capacity reached 6.48 GW, versus the full potential of 461 GW.

"While Africa is blessed with abundant renewable energy sources, related investment flows in remain insignificant," Kariuki said.

According to the IRENA report, renewable investment—excluding large hydropower projects—amounted to $60 billion in Africa between 2000 and 2020, or 2% of the global total. Of the investment, $55 billion was recorded in 2010-2020.

For the 2010-2020 period, solar photovoltaics attracted $18 billion, onshore wind projects $17 billion, and solar thermal $9 billion.

While renewable projects in other regions tend to attract more private investors, the IRENA found African projects are often backed by public capital.

"In Africa … projects are not able to attract private capital owing to political, legal and economic risks. Public authorities can palliate those risks and mobilize private capital through regulatory instruments, fiscal incentives, guarantees and market development," the report said.

Taking large hydropower projects into account, public commitments in renewable energy reached $55 billion in 2010-2019, the IRENA said. Private investment in renewable projects owned by independent power producers amounted to $35.1 billion in 2010-2020.

Recent news suggested public financiers continue to play a leading role in Africa. In May, the International Finance Corporation, a unit of the World Bank, inked its first certified green loan in continent. Africa Finance Corporation said in September that it planned to raise $2 billion over the coming three years for direct investment in infrastructure projects to counter climate change.

But Ditte Juul-Jørgensen, the EC's director general for energy, warned that public finance alone is insufficient in promoting low-carbon energy in Africa.

"One of our focus points is to bring private sector investments [to Africa], including those from European companies operating in the field of renewable energy," Juul-Jørgensen told the IRENA meeting.

"But of course, these investments also require a good investment climate, and a clear regulatory framework that's conducive and attractive.… That would allow these private sector Investments to take place in an open and competitive market," she added.

To improve the investment environment, Italian energy company Eni's Chief Operating Officer of Energy Evolution Giuseppe Ricci believes governments, international institutions, multilateral banks, and the private sector need to work together on a policy framework for Africa.

"[No] one subject could solve a problem that is so important.… We need the collaboration," said Ricci, whose company has developed power projects in Congo and Nigeria.

Nadja Haakansson, managing director for Africa at Siemens Energy, a renewable technology provider spun off from German's Siemens AG in 2020, suggested her company would look for business opportunities in several sectors like solar, wind, and gas in the continent.

"It's not going to be a single approach [in Africa].… A mix of technologies and solutions will play an important role," Haakansson said. "I think that there is huge potential in the African continent when it comes to local manufacturing."

Just transition

While central and southern Africa is rich in cobalt, manganese, and platinum that are necessary in manufacturing batteries, the continent has yet to develop industrial clusters across the renewable value chain.

The IRENA report said the renewables sector employs more than 12 million people worldwide today, of which less than 3% are in Africa.

"Many African countries remain consumers rather than producers of low-carbon technologies, limiting the creation of jobs and other socio-economic benefits relating to construction, operations and maintenance," the report said.

"Critical mineral producers need to leverage the energy transition to move into higher value-added segments of the renewable energy supply chains such as processing rather than merely exporting valuable raw materials," it added.

If African countries pursue policies that can help limit global warming to 1.5 degrees Celsius, the IRENA estimated their combined economies would be 6.4% larger and employment opportunities could increase by 3.5% up to 2050.

The IRENA, and some others in the ministerial meeting, also called for African leaders to embark on a "just transition" that would direct low-carbon electricity to large swaths of the population.

Only 16% of the Sub-Saharan population had access to clean cooking energy and 46% to electricity as of 2019, according to the IRENA.

"In an African context, the energy transition cannot simply be about decarbonization alone," said Amani Abou-Zeid, commissioner for infrastructure and energy of the African Union. "Importantly, it must be linked to the need on bridging the energy access depth."

Posted 17 January 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability

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