ENERGY INDUSTRY RECAP AND OUTLOOK FOR 2023: THE SUB-SAHARAN AFRICA LENS
“… at today’s rate of progress, the world is still not on track to achieve the SDG 7 goals by 2030.” ((Tracking SDG7: 2022 Energy Progress Report)[i]
There is no better way to start and forecast the activities for the year than to look back into previous years regarding the activities in the energy industry.
Based on data from the International Energy Agency (IEA), as of 2021, only 48% of the population in Sub-Saharan Africa (SSA) had access to electricity.[ii] 20 countries, mostly SSA countries, currently form the quota for countries with the largest energy deficits. Closing the access gap by 2030 hangs on electrification progress in these 20 countries. The largest unserved populations are in Nigeria (92 million people), the Democratic Republic of Congo (72 million), and Ethiopia (56 million). Access growth outpaced population growth in Ethiopia between 2010 and 2020; but failed to do so in Nigeria and the Democratic Republic of Congo, where electrification failed to keep pace with population growth. In contrast, Kenya and Uganda made the fastest progress in electrification among the top 20, with annualized increases of more than 3.0 percentage points between 2010 and 2020[iii]. More so, just four of the top 10 most populous nations in Africa – Egypt, South Africa, Kenya, and Algeria- have achieved an electricity access rate of over 70%.[iv]
While the world was still recovering from the impacts of Covid-19, which specifically widened the electricity access gap further in SSA, thus pushing many countries farther away from achieving the goal of universal access by 2030,[v] a war between Russia and Ukraine commenced. Several sectors were negatively impacted, and the energy sector was not spared. For the energy sector, the most significant impact of this war was seen in the disruption of the global gas supply, which occasioned a sharp increase in energy costs for most economies in the world. For SSA, it exposed the prevalent weak energy systems and further increased energy poverty on the continent. The IEA also highlighted that for the first time in decades, the number of people without access to electricity would increase in 2022 by 20 million, reaching a total of 775 million[vi]. Expectedly, the rise is mostly in sub-Saharan Africa.[vii]
According to IEA estimates, in 2030, 50% of the global population without access will be concentrated in 7 countries- the Democratic Republic of Congo, Nigeria, Uganda, Pakistan, Tanzania, Niger, and Sudan.[viii]
Renewable energy sources remain the least expensive way to achieve universal access to electricity.[ix] For SSA, the national energy plans and targets, including the Nationally Determined Contributions (NDCs), demonstrate that renewables will form a substantial part of future electrification efforts across the continent.[x]
Data from SGD 7 2022 tracking reveals that over 80% of the world’s population without access to electricity resided in rural areas in 2020, which limited their opportunities to access public services like healthcare, rise out of poverty and generally improve their livelihoods. More so, out of this 80%, 75% lived in Sub-Saharan Africa.[xi]
On renewables, despite ongoing supply chain issues brought on by the pandemic, delays in the construction process, and record-high prices for raw materials and other commodities, the addition of renewable capacity in 2021 climbed by 6% and set a new record, reaching almost 295 GW.[xiii] In 2022, renewable capacity was expected to increase by over 8% in 2022 in comparison with last year[xiv]. In 2022, Utility-scale projects accounted for almost two-thirds of overall PV expansion[xv]. By 2023, global renewables growth is expected to exceed additional electricity demand by 8%[xviii]. A rebound for nuclear power generation is also expected. The impact will result in further decline of fossil fuel powered generation[xix]. Additionally gas-fired generation could decline by 0.5% if the high gas prices continues, while coal generation is expected to decline by 1%[xx].
The IEA also highlights that the high costs witnessed in solar PV and wind are here to stay in 2022 and 2023, but they do not challenge competitiveness. The increase in renewables cost has not hindered their competitiveness due to the prices of fossil fuels and electricity, which have risen much faster since the last quarter of 2021[xxiv].
On a global scale, the Russian invasion of Ukraine has sparked an urgency to accelerate clean energy transitions and divest from fossil fuels to reduce dependence on Russia and foster energy security. The high cost of fossil fuels has made renewable electricity technologies more cost-competitive with coal and natural gas-fired power facilities. In the meantime, solar PV applications for homes and businesses are assisting consumers in cutting their electricity costs. Global renewable power generation grew by more than 10% in 2022[xxv].
Nonetheless, government-led competitive wind and solar PV auctions in 2019 and 2020 remain a key driver for renewables expansion through 2023[xxvi]. Also, although geopolitical tensions and trade uncertainty have slowed down the progress of solar, global solar power generation is likely to surpass a terawatt by 2023.[xxvii]
By 2023, storage will occupy its proper position as a crucial grid asset, enhancing the dependability and resilience of increasingly decentralised power networks.[xxviii] More so, the adoption of diverse energy storage solutions such as long duration batteries for utility-scale renewable integration is projected to grow by 30% in 2023.[xxix]
For the African continent, the African Energy Chamber estimates that to eliminate energy poverty on the African continent by 2023, electricity generation capacity needs to be almost tripled, rising by 188% from 897 TWh in 2021 to 2,586 TWh in 2040 to foster economic growth and improve the overall wellbeing of its growing population.[xxxii] The IEA however predicts that the continent will experience around 3% electricity demand growth in 2023.[xxxiii]
To have a fighting chance at achieving universal energy access by 2030, the World Bank’s Energy Sector Management Assistance Program co-led Technical Working Group 1 on energy access, proffers recommendations that include[xxxiv]:
- Reinforcing enabling policy and regulatory frameworks
- Enhancing the social and economic inclusiveness of energy access
- Aligning the costs, reliability, quality, and affordability of energy services
- Catalyzing, harnessing, and redirecting energy-access financing as needed to deliver universal energy access by 2030.
The IEA also forecasts a significant increase in renewables generation as numerous projects (including hydro, solar PV, and wind) are expected to come online in several countries.[xxxv] Further, electricity demand in Africa is projected to grow from 783 TWh in 2022 to 805 TWh in 2023. Globally, renewable electricity supply is projected to hit a 7.7% growth rate which translates to growth from 8 744 TWh in 2022 to 9416 TWh in 2023.[xxxvii]
At the COP 27 conference held this year in Egypt, countries reaffirmed their commitment to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels.
Climate change remains a pressing challenge of the 21st century. Power Africa in its Energy Foresight Report (for Off-Grid Energy in 2030), forecasts that the increasing frequency and severity of extreme weather and natural disasters through 2030 and beyond driven by climate change will pose a significant risk to the growth and development of countries in Sub-Saharan Africa, resulting in people abandoning their homelands due to the persistent shocks occasioned by climate change, changing weather conditions, prevalence of diseases due to increased temperatures, etc. Climate adaptation strategies will need to factor off-grid solutions, including containerized solar powered solutions, productive uses of energy (PUE), flexible and modularized off-grid infrastructure, etc.[xl]
To effectively adopt, adapt and possibly develop strategies for increased electrification, electricity access, and any climate adaptation strategies across SSA countries, the regulatory environment must attract and enable investments to thrive to achieve increased access in the respective electricity industries. To assess key areas of country regulatory frameworks and provide a reference source for regulatory development in Africa, the African Development Bank, since 2018, developed the Electricity Regulatory Index for Africa (ERI). In its 2022 (fifth edition), 43 countries were covered and assessed based on three pillars or sub-indices: the Regulatory Governance Index (RGI), the Regulatory Substance Index (RSI), and the Regulatory Outcome Index (ROI)[xli].
In more recent events, as the Russian- Ukraine war continues to disrupt the energy supply, western countries have started to lay recourse to fossil fuels. German Chancellor, Olaf Scholz, back tracked on years of German national energy policy due to the Russia-Ukraine war by contracting with Qatar to build two new LNG import terminals, in order to reduce its energy dependence on Russia.[xlii] On the 7th of December 2022, the UK approved the opening of its first coal mine in more than 30 years, which was a big U-turn from its Glasgow COP26 campaign to consign coal to history.[xliii]
These events serve as caution for African governments against making binary choices on their energy transition plans. As such, it is instrumental that Africa leverages its available energy sources, particularly natural gas, to increase energy access and end energy poverty in the region.
[i] https://trackingsdg7.esmap.org/data/files/download-documents/sdg7-report2022-full_report.pdf
[ii] The-State-of-African-Energy-2023-Report_dg_sp_oct-25.pdf
[iii] Ibid.
[iv] https://www.iea.org/reports/tracking-sdg7-the-energy-progress-report-2022
[v] ENERGY INDUSTRY RECAP AND OUTLOOK FOR 2022 THE SUB-SAHARAN AFRICA LENS < ENERGY INDUSTRY RECAP AND OUTLOOK FOR 2022- FINAL.pdf>
[vi] https://www.iea.org/commentaries/for-the-first-time-in-decades-the-number-of-people-without-access-to-electricity-is-set-to-increase-in-2022
[vii] Ibid.
[viii] Kabir Yusuf, ‘About 770 million Africans have no access to electricity – Report’ < https://www.premiumtimesng.com/news/top-news/475589-about-770-million-africans-have-no-access-to-electricity-report.html>
[ix] https://www.iea.org/reports/sdg7-data-and-projections/access-to-electricity
[x] The-State-of-African-Energy-2023-Report_dg_sp_oct-25.pdf
[xi] Ibid
[xii] Ibid.
[xiii] Ibid
[xiv] ElectricityMarketReport-July2022.pdf
[xv] Ibid.
[xvi] Ibid.
[xvii] Ibid
[xviii] ElectricityMarketReport-July2022.pdf
[xix] Ibid.
[xx] Ibid.
[xxi] Ibid.
[xxii] Ibid
[xxiii] https://www.iea.org/commentaries/for-the-first-time-in-decades-the-number-of-people-without-access-to-electricity-is-set-to-increase-in-2022
[xxiv] Ibid
[xxv] ElectricityMarketReport-July2022.pdf
[xxvi] Ibid
[xxvii] BDO Global, ‘2023: The Near Future of Renewables’ < https://www.bdo.global/en-gb/industries-en/natural-resources-energy/the-near-future-of/2023-the-near-future-of-renewables >
[xxviii] Ibid.
[xxix] Ibid.
[xxx] https://www.reuters.com/article/sponsored/shell-energy-renewable-energy-trends-2023
[xxxi] Ibid.
[xxxii] The-State-of-African-Energy-2023-Report_dg_sp_oct-25.pdf
[xxxiii] ElectricityMarketReport-July2022.pdf
[xxxiv] sdg7-report2022-full_report.pdf
[xxxv] Ibid.
[xxxvi] Ibid
[xxxvii] ibid
[xxxviii] https://unfccc.int/news/cop27-reaches-breakthrough-agreement-on-new-loss-and-damage-fund-for-vulnerable-countries
[xxxix] Ibid.
[xl] ENERGY INDUSTRY RECAP AND OUTLOOK FOR 2022 THE SUB-SAHARAN AFRICA LENS < ENERGY INDUSTRY RECAP AND OUTLOOK FOR 2022- FINAL.pdf>
https://africa-energy-portal.org/
[xlii] https://www.reuters.com/article/ukraine-crisis-germany-energy-lng-idAFL8N33937R