Energy Transition In Africa – A Bumpy Ride? - Renewables

"Energy underpins economic growth, lives and livelihoods. Energy transition underpins climate response.Energy shapes geopolitics in a very direct manner. Energy also enables digital technologies, expanding ever so rapidly into every element of human activity for good or bad. Every passing day we are become aware of how important it is to get on top of the energy questions, whether we are in governments, business or just an ordinary user." These were the words of Anish De, KPMG International's Head of Energy, Natural Resources & Chemicals, in articulating the ever-increasing importance of energy transition in a world now engrossed on the subject. Nothing could be so apt in encapsulating the global journey towards transiting from a fossil fuel-oriented economy to affordable, reliable, sustainable, and modern energy for all, pursuant to the Sustainable Development Goal (SDG) No 7 of the United Nations (UN). While the world seemed to have found solutions to the question of alternative clean energy, affordability remains a key question. Beyond affordability are the questions around infrastructural challenges, unemployment, galloping inflation and foreign exchange volatility amongst others, which seem to blur the conversation on energy transition.

This article will shed light on the above issues as they relate to Africa, in view of the myriads of other equally competing needs of the continent and its people.

Current efforts at decarbonization

A peep into the major economies across Africa would reveal a journey barely just starting. But, the baby steps being taken are key in keeping the conversations going. From the North of the continent to the South, and from the East to the West, there are stories to tell. Four major economies have been selected across these four geographies for this purpose.

Nigeria

At COP26, the Nigerian President announced the country's commitment to carbon neutrality by 2060. Working with the Sustainable Energy For All (SEforALL)¹, the government developed the Nigerian Energy Transition Plan (ETP) in 2021. The ETP aims to resolve the dual crises of energy poverty and climate change, and deliver SDG 7 by 2030, and net zero by 2060. The five areas of focus in the plan to achieve these objectives are power, cooking, transport, industry, and oil and gas; with estimated spend of about US$ 410 billion above the "business-as-usual" (BAU) spendingbetween 2021 and 2060. Pursuant to this plan, the Climate Change Act 2021 was passed by the Nigerian legislature. Nigeria adopted Natural Gas as a transition fuel for power and cooking. The government, with the support of the International Renewable Energy Agency (IRENA) and the Energy Commission of Nigeria (ECN) produced a Renewable Energy Roadmap in January 2023 that "encompasses all key sectors of the Nigerian energy system to provide additional context for energy policy discussions on how increased ambition in terms of renewable energy – beyond current government policy and targets – can be realized"².

Nigeria's Energy Transition Office (ETO) was created to monitor progress on the ETP³. Based on the plan, a sum of US$1.9 trillion is required to achieve net zero by 2060, inclusive of the US$410 BAU noted above. The plan has identified an initial US$23 billion investment opportunity across a portfolio of projects, out of which about US$17 billion is estimated as funding required from the private sector, across generation, transmission and distribution, metering, gas commercialization, clean cooking, e-mobility, and healthcare. Nigeria's ETP targets10% biofuel blends by 2030 and complete EV adoption by 2060. Pursuant to the Paris Agreement (under the United Nations Framework Convention on Climate Change, UNFCCC), the country's Nationally Determined Contribution (NDC) has unconditionally pledged to a 20% emissions reduction below BAU by 2030 and a 47% conditional commitment hinged on support from international organizations and agencies – financial assistance, technology transfer and capacity building⁴. Nigeria's national budget, going forward, will be a "green" budget to reflect the country's efforts to realizing its NDC.⁵

Egypt

Based on the United Nations Development Programme (UNDP) report of 2022, the country has more than 100 million people and a GDP growth rate of 5.6 percent. This has posed an increasing demand for energy in the North African country. Consequently, the country has embarked on an ambitious energy policy reform programme, including a set target to have 40% of its electricity come from renewable energy sources by 2035⁶. The government has also invested in various forms of solar power, given the abundance of sunlight in the country.

Egypt Vision 2030, launched in February 2016, reflects the country's long-term strategic plan to achieve sustainable development principles and objectives in all areas. The Vision identified a series of targeted development indicators to be achieved by 2020 and 2030. These included significant targets for renewable energy deployment (MoPMaAR, 2016). The plan originally envisaged that the energy sector's share of GDP should reach 20% in 2020 and 25% in 2030. Renewables' share was targeted at 8% in 2020 and 12% in 2030, along with 21% and 32.5% shares in power generation in 2020 and 2030, respectively (IRENA, 2018b). At the beginning of 2018, Egypt then launched its Integrated Sustainable Energy Strategy (ISES) 2035, which now sets Egypt's target at 42% of renewable in power generation by 2035 (Informa Markets, 2022).

At COP 27 in 2022, Egypt made a significant commitment to reducing emissions. These commitments were contained in its first updated NDC in June 2022, which included quantitative targets for emissions reduction. Some of the initiatives in the NDC are: mitigating 33% of electricity sector emissions, 65% of the emissions from the associated gases subsector of the oil and gas industry, and 7% from transportation by 2030⁷. The updated NDC also outlines the USD50billion needed for adaptation through to 2030. The estimated cost of implementing these targets is USD196billion for mitigation⁸. The National Council for Climate Change (NCCC) adopted the National Climate Change Strategy (NCCS) 2050 in May 2022, with all relevant ministries required to develop action plans in co-ordination with the NCCC to address the fragmentation issue. Egypt has restructured its institutional framework for climate action with a national climate change committee headed by the prime minister.

South Africa

At COP26, the government of South Africa, and those of the United States, the United Kingdom, France, Germany, and the European Union formed a ground-breaking Just Energy Transition Partnership (JET-P). The JET international partners group (IPG) collectively pledged $8.5 billion to support South Africa's accelerated and inclusive transition towards a net zero and climate resilient economy, subject to the concurrence on an investment framework.⁹ In 2022, South Africa released its Just Energy Transition Investment Plan (JET-IP) to outline the priorities and investments required to achieve its decarbonization commitments in a just manner that ensures works and communities are not negatively impacted by the transition away from coal¹⁰. Majority of the funds would be deployed to the country's electricity sector, which will see the transitioning from a coal-fired power plants to a renewable energy dependent sector; and some on new energy vehicles (NEVs) and green hydrogen (GH).

The JET-IP covers an initial period of five years from 2023 to 2027, with the country's NDC committing to reduce carbon emissions to a range of 420 to 350 megatons carbon dioxide equivalent (MtCO-eq) by 2030. Total investment outlay over the five-year horizon is expected to be ZAR1.5Trillion (US$100 billion). Availability of funds within and by international partners will facilitate achieving the lower range emissions. Municipalities and skills development form part of the JET-IP's target areas of support. The National Energy Regulator of South Africa (NERSA) implemented the Renewable Energy Feed-In Tariff (REFIT) in 2009. The REFIT works to progressively reduce carbon-based power generation by moving in the direction of renewable energy sources¹¹. To incentivize the further rollout of renewable energy generation by the private sector, the South African Revenue Service has of 1 January 2016 amended the Income Tax Act No. 58 of 1962 to include accelerated depreciation for renewable energy assets commissioned by a tax paying entity¹². This tax incentive is not limited to new renewable generation systems.

Kenya

Kenya is the largest geothermal power producer in Africa¹³. With the support of the SEforALL, Kenya developed its Energy Transition & Investment Plan (KETIP) in 2022, aiming to achieve net zero by 2050¹⁴. Under the plan, the country hoped to achieve this goal by focusing on decarbonization technologies as follows:

Electrification and renewable energy
Carbon capture & storage
Low carbon hydrogen
Battery electric technology
Clean cooking technology
Negative-emission solutions

The KETIP envisages CAPEX spending of about US$600 billion (including US$165 billion more than under the BAU scenario). Based on the Energy Sector Roadmap 2040 developed in 2022, the country hopes to amongst others, achieve 100 GW renewables by 2040 in the power sector and 100% electrification by 2030 in the buildings sector.

It was one of the first countries in Sub-Sahara Africa to exploit geothermal power on a significant scale. The development of new and renewable sources of energy is one of the key projects in Kenya Vision 2030¹⁵, a program launched by the former late President Mwai Kibaki to transform Kenya into a newly industrializing, middle-income country.

Over the past decade, Kenya has expanded its access to electricity from below 30% to over 75%. In line with SDG 7, Kenya aims to achieve universal access to sustainable energy to all, double the global rate of energy efficiency, and double the global share of renewable energy mix by 2030.

How effective have these efforts been?

In the KPMG International's report on "Evolution of Transport Fuels", June 2024¹⁶, the firm noted that while alternative fuels are expected to play crucial role in the future of commercial and public transportation, they may aso present several challenges to adoption, many of which could not be easily resolved. These challenges include but not limited to adoption readiness (particularly, technology availability to support the integration of systems and processes required for new fuels with those existing for fossil fuels), Infrastructure, Cost effectiveness and Regulatory and market uncertainty. While the report's focus was on transport fuels, the overarching principles of the report are applicable to other types of fuels. Thus, an assessment of the four countries against these parameters is conducted as follows:

Nigeria

Is the country ready for energy transition from the standpoint of technology availability? Using internet connectivity or access as a measure of this pillar amongst other possible yardsticks, it should be possible to rate where the country is, from the prism of a technology-based energy transition. According to DataReportal¹⁷, there were 103 million internet users in Nigeria at the start of 2024, when internet penetration stood at 45.5%. The country was also home to about 36.75 million social media users in January, which is equivalent of about 16.2% of the total population. Judging by the above data, majority of Nigerians would welcome energy transition pushed on the back of technology.

Nigeria's infrastructure needs are enormous – from poor roads to decrepit rail lines and below average airports. Thanks to major renovations of recent. Most of the existing infrastructures were built on fossil fuel being the main energy source. Can they be repurposed for alternative energy options? Does the country have the bandwidth to garner international green funds for its "green" infrastructural revolution? It is uncertain. To put it in context, Nigeria will need about US$3 trillion to fix its decrepit infrastructure for the next 30 years from 2021¹⁸; an amount that exceeds the sum of US$1.9 trillion for its energy transition by 2060? Will the government choose the latter in preference for the former? Again, this is uncertain.

Further, given that alternative fuels may be pricey in the short run, compared to conventional options, and the fact that Nigeria has been dubbed the "poverty capital" of the world, a pricey energy transition may leave many behind in the journey. On regulatory support, the Climate Change Act (CCA) should provide some comfort. The law spells out the road map towards decarbonization, including the setting up of the Nigerian Climate Change Council (NCCC). Four years after unveiling the ETP, the country's score card is a mixed bag. According to SEforALL, the ETO has, raised over US$3.6 billion for the implementation of the ETP; supported project preparation of the priority ETP Projects:On-Grid Renewable Energy (Solar IPPs); the Nigeria Gas Flare Commercialization Programme, and other scaled Decentralized Renewable Energy Programmes; advanced an FG and Sun Africa LLC implementation framework agreement for the construction of 5,000 MW of solar generation and 2,500 MW of battery energy storage power plants; and supported the development of the case for innovative financing mechanisms such as Debt-For-Clean Energy Investment and Carbon Market Development. Beyond the above, the federal government has launched the Presidential Initiative on CNG¹⁹, which has seen the deployment of 11,500 CNG-fired buses for public transportation, with the target to distribute at least one million CNG-fueled cars by 2027. In demonstration of its commitment to providing alternative energy for Nigerians, the Federal Government has unveiled the roll out of the National Gas Expansion Programme. The launch of the Programme marked the official entry of the three streams of Autogas: Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG), and Liquefied Petroleum Gas) as energy options for industrial, transportation and domestic uses.

Egypt

There were 82.01 million internet users in Egypt at the start of 2024, when internet penetration stood at 72.2 percent²⁰. This shows the level of internet awareness and education of the populace, and a signal that majority of the population should be ready to adopt energy transition on the back of technological appeal. On infrastructure, based on the projections by the country's Ministry of International Cooperation, Egypt will require the sum of $675 billion of investments over 20 years to achieve its goals in building sustainable infrastructure²¹.However, the country is adopting technology – digital platforms to connect fund providers with sustainable infrastructure projects in the country. One of such is the Finance to Accelerate Sustainable Transition – Infrastructure (FAST-Infra) initiative²². This is a digital platform created by Climate Policy Initiative (CPI), HSBC, the International Finance Corporation (IFC), OECD and the Global Infrastructure Facility. FAST-Infra platform's design and development is led by IBM. With the adoption of the platform, it provides seamless automation, speeding up documentation processes and the flow of capital, making collaboration on environmentally-friendly projects faster, easier, and more transparent.

Regarding cost effectiveness, it is instructive to note that the country increased energy tariffs in January 2024, to reduce energy subsidies²³. With the move towards renewables and the attendant huge investments, it is unlikely that energy prices will drop. Thus, there may be some resistance or hesitation by citizens of early adoption of renewables for their power needs, except subsidies in some form continues.

South Africa

There were 41.19 million internet users in South Africa in January 2022. South Africa's internet penetration rate stood at 68.2 percent of the total population at the start of 2022²⁴. Clearly, adopting technology to jumpstart the development of the country's green economy should not be difficult. But, beyond having an internet-savvy population, does the country have a formidable infrastructure for the transition? Under the National Development Plan (NDP), the government, in 2022, approved the first and second phases of the National Infrastructure Plan 2050 (NIP). Under the country's Infrastructure Fund, the focus will be on energy, road and waste management, with a R100 billion allocation from the fiscus over 10 years²⁵. With its revised NDC (submitted in 2021 at COP 26 in Glasgow), the JET-IP and the Integrated Resource Plan (IRP) 2019 (issued pursuant to the Electricity Regulation Act 2006) (which includes some 30% of existing coal capacity being retired by 2030 and nearly 80% by 2050, along with a combined new-build of 26 GW of wind and solar PV by 2030)²⁶, are amongst other policies and programs aimed at energy transition. The draft revised IRP 2023²⁷ considers two-time horizons – 2023 to 2030, which focuses on stabilizing the Country's electricity supply to end rotational power cuts; and 2031 to 2050 which focuses on ensuring that South Africa has sufficient generating capacity to meet demand for the coming decades. Under the revised IRP 2023, a combination of gas, wind, photovoltaic solar, wind, and battery storage is projected to manage the country's power load-shedding, with estimated cost of about R5.9 trillion to R8.4 trillion, depending on the options adopted by the country. It is safe to assume that the country is supporting the journey to clean energy with action.

Affordability of the transition could still pose a challenge, given that the country's electricity usage is still subsidized. Expectedly, energy transition may be pricey in the short to medium term and may leave more citizens unable to quickly embrace renewables.

Kenya

There were 22.71 million internet users in Kenya at the start of 2024, when internet penetration stood at 40.8 percent.²⁸ This means almost one in every two Kenyans has access to the internet. In Kenya, renewable energy presently accounts for 70% of the installed power capacity, which include large hydro-power. It accounts for more than 70% of the power generation, but production varies from year to year with hydropower production that is low in dry years²⁹. Government is also actively prioritizing the solar sector with active campaign for Solar PV electrification of public institutions and health facilities. A total of 1,500 institutions have been electrified. Furthermore, Kenya recently commissioned three renewable power projects: 310 MW wind (Lake Turkana wind power project), 100 MW Kipeto (Kajiado) and 51 MW solar (Garissa), while several renewable energy projects have been approved and are at various stages of implementation.

While energy transition initiatives are backed by appropriate policies, renewable energy extraction is still low due to poor policy implementation³⁰. For example, the original plan was to achieve 100% energy transition by 2022, but this target was missed.

What does the future holds?

In the World Economic Forum (WEF's) Fostering Effective Energy Transition Insight Report, 2024, the Transition Readiness (TR)/core enablers identified in the Energy Transition Index Framework (ETIF), against which countries were evaluated³¹, were: Regulations and political commitment, Finance and Investment, Education and human capital, Infrastructure, and Innovation. The other critical elements of the ETIF are System performance, which identified issues around equitability (ensuring fair distribution, accessibility and affordability of energy for all), security (ensuring supply security through diversification across energy mix, energy trade partners and sources of electricity generation), and sustainability (incorporating demand- and supply-side metrics to reduce carbon dioxide and methane intensity in energy supply amongst others). According to the 2024 report and, in comparison with that of 2020, Kenya, Egypt, South Africa and Nigeria all improved in their energy transition index from 79^th, 84^th, 106^th and 113rd positions in the 2020 ranking to 70^th, 75^th, 84^th and 108^th positions, respectively, in the 2024 index. This remarkable improvement may not be unconnected to the efforts of the governments of the four countries and their local and international partners as articulated above. It is instructive to note that the highest improvement in ranking was recorded by South Africa. This may not be unconnected to the fact that it is the only country amongst the four evaluated which had some upfront financial support of its JET-IP from the IPG (US$8.5 billion), albeit, subject to the concurrence on an investment framework.

What will be the fate of African countries in the next decade on their energy transition journey? The following factors will shape how they will fare:

1 Green funding support from developed countries

It is trite that African economies are challenged in terms of revenue generation and are looking to internal sources through taxation. Given the myriads of challenges facing them – from unemployment to inflation, foreign exchange instability and imbalance in foreign trade, funding a just energy transition may pose a big problem. CoP 29, which focused on Climate Finance, ended in Baku with commitments to: triple funding to developing countries, from the previous goal of US$100 billion annually, to US$300 billion annually by 2035; and to secure efforts to scale up finance to developing countries, from public and private sources to the tune of US$1.3 trillion per year by 2035³². Great resolutions. How much of these will benefit Africa is uncertain?

Unfortunately, early March this year, the US was reported to have pulled out of the climate finance pact worth about US$9.3 billion between rich countries to assist developing nations transition from coal to cleaner energy³³. South Africa, Indonesia, Vietnam and Senegal ought to have been the first beneficiaries of the pact in the form of loans, financial guarantees and grants to move away from coal. With the exit of the US, it may be difficult for other richer countries in the pact to fill the void. Such action may therefore derail South Africa's plans on the energy transition journey.

Without a coordinated and deliberate focus by developed nations in assisting to fund ET in African economies, the journey would be bumpy and difficult to sojourn.

2 Stronger regulation/policies and alignment with annual budgetary principles

While most of the countries in Africa (including those identified in this article) have some form of laws and regulations on energy transition, the need for ruthless execution of the plans and alignment with the pillars of their annual budgetary provisions cannot be overemphasized. Where annual plans are not consistent or aligned with the overall energy transition framework in their NDCs and ETP, their road to energy transition will become uninterestingly painful. This is therefore a call on all African governments to match their words with action, by enacting laws and enforcing implementation to drive the efforts, and via their annual fiscal budgeting.

3 Leveraging comparative advantage of weather conditions

Abundance of natural "green"-oriented energy sources should assist African countries to leap-frog their journey towards net zero. Each country should as a matter of urgency evaluate the natural resources beyond fossil fuels that it can leverage to fast track its ET journey. For example, Egypt has abundance of sunshine, and therefore, it is leveraging more of solar power in its source of green energy. The country is targeting a US$40 billion investment in Green Hydrogen and renewable technology in projects located in the Suez Canal Economic Zone. Its location in the global "sun belt" means it averages 9-11 hours of sunshine a day, with few cloudy days, giving it high potential for harnessing renewables for hydrogen production³⁴. Separately, the country launched Abydos 1 Solar Power Plant in Aswan, with a capacity of 560 megawatts. It is part of the NWFE Program, launched in 2022, which aimed to develop 10 gigawatts of renewable energy by 2028³⁵. In addition to the above is the development of the Benban Solar Park, which will be the largest solar park in the Middle East and Africa with 1,465 megawatts of installed capacity and 2 Mt of GHG emissions to be saved annually.

Interestingly, Nigeria is also currently leveraging the abundant sunlight in the Northern region for developing solar-powered energy sources in that region. The pace of development should be accelerated. South Africa and Kenya should evaluate their economies for green-friendly natural resources to develop renewable energy solutions for the benefit of their citizens and achieving the SDG No 7 of the UN.

4 Culture versus energy efficiency

According to the International Energy Agency (IEA), "energy not consumed due to efficiency is carbon-free by default", and "smart and efficient electricity use facilitates a faster decarbonisation of the power sector and supports the integration of renewable energies"³⁶. Therefore, a major step towards a carbon-free Africa, and indeed, a carbon-free world would be to manage the amount of energy consumed or not consumed. It also implies that electricity consumers must demonstrate behaviors that apply "efficiency" in the use of energy. Across cities in Nigeria as an example, there are inefficiencies in the use of energy, driven by building architecture and inhabitants' disposition to energy conservation. Energy subsidies have existed for decades which has encouraged inefficiency in energy consumption, and exacerbated GHG emission.

In conclusion, the ship of energy transition has sailed. Every country needs to evaluate where they are on the journey and accelerate the speed, to ensure that they are not left behind. African countries need assistance, if they must turn the curve by 2060. Otherwise, it may be a farce!

Acknowledgements and References

Footnotes

1 Nigeria Energy Transition Plan | Sustainable Energy for All

2 World Economic Forum Report, June 2023

3 Nigeria Energy Transition Plan

4 Nigeria's First Nationally Determined Contribution 2021 Update

5 Nigeria's First Nationally Determined Contribution 2021 Update

6 Transforming Egypt's energy market | United Nations Development Programme (undp.org)

7 IRENASocio-economic footprint of the energy transition_ Egypt.pdf

8 IRENASocio-economic footprint of the energy transition_ Egypt.pdf

9 Power Africa Supporting South Africa's Just Energy Transition | Power Africa | U.S. Agency for International Development

10 South Africa's Just Energy Transition Investment Plan (JET-IP) Full...

11 South African Renewable Energy Feed-in Tariff - energypedia

12 Legal-Pub-Guide-IT39-Guide-on-the-Allowances-and-Deductions-Relating-to-Assets-Used-in-the-Generation-of-Electricity.pdf

13 Energy in Kenya - Wikipedia

14 Kenya Energy Transition and Investment Plan

15 Kenya Vision 2030 | Kenya Vision 2030

16 Evolution of Transport fuels: The role of alternative fuels on the path to sustainability

17 Digital 2024: Nigeria — DataReportal – Global Digital Insights

18 Nigeria infrastructure splurge to boost economy (ft.com)

19 Nigerian government launches CNG conversion programme in Ogun (premiumtimesng.com)

20 Digital 2024: Egypt — DataReportal – Global Digital Insights

21 Sustainable Infrastructure: Will Egypt Get There by 2030? - Opinion - Ahram Online

22 Sustainable Infrastructure: Will Egypt Get There by 2030? - Opinion - Ahram Online

23 Electricity prices increased, effective Jan. 1, 2024 - EgyptToday

24 Digital 2022: South Africa — DataReportal – Global Digital Insights

25 Highlights of the State of the Nation Address 2022 - Infrastructure development | South African Government (www.gov.za)

26 Implementation-Check-South-Africa-Energy-transition-Nov-2023.pdf (climate-transparency.org)

27 South Africa unveils R6 trillion comprehensive energy plan

28 Digital 2024: Kenya — DataReportal – Global Digital Insights

29 100 % Renewable Energy Scenario and Plan by 2050

30 Renewable energy status and uptake in Kenya - ScienceDirect

31 World Economic Forum (in collaboration with Accenture): Fostering Effective Energy Transition, Insight Report June 2024

32 UN Climate Change Conference Baku - November 2024 | UNFCCC

33 U.S. pulls out of climate finance deal for South Africa, Senegal, and others | Business Insider Africa

34 Egypt signs green hydrogen agreement - and other energy news | World Economic Forum

35 Egypt to develop 10 GW of renewable energy projects by 2028 under NWFE-SIS

36 Perspectives for the Energy Transition: The Role of Energy Efficicency

The opinion expressed in this article is solely personal and does not represent the views of any organization or association to which the authors belong.

Energy Transition In Africa – A Bumpy Ride?

Contributor

Current efforts at decarbonization

Nigeria

Egypt

South Africa

Kenya

How effective have these efforts been?

Nigeria

Egypt

South Africa

Kenya

What does the future holds?

Acknowledgements and References

Energy and Natural Resources

Contributor

Nigeria