Renewable Energy in Africa
Feb 13th 2012
Over the past decade, global use of renewable energy sources (solar, wind, hydropower, geothermal, biomass, and biofuel) for generation of electricity has grown significantly, reaching 19% of total power generation in 2010 compared with 14% in 2002. The rise in the use of renewable energy has mainly been driven by increased awareness of effects of climate change and governments’ incentive programs aimed at enhancing the development and the use of green energy.
Africa, however, still lags behind other regions of the world with regard to electricity consumption and generation. Electric power in many African countries is still inaccessible, unaffordable, and highly unreliable. About 90% of the rural population in Sub-Saharan Africa has no access to electricity, with Ethiopia, Kenya, Mali and Sierra Leone among the most severely under-powered. Some USD23 billion per annum (AfDB, 2010)* is needed to meet existing and future demand in this sector. In the absence of massive investments, the continent’s future development is under threat.
Yet Africa is rich in renewable resources and could benefit from the increasing use of renewable energy, such as hydro-power (potential estimated around 1,750 TWh) and geo-thermal energy (estimated at 9,000 MW). Over 80% of the continent receives about 2000 kWh per square meter of solar resources per annum and a solar generating facility covering just 0.3% of North Africa could supply all the energy requirements of the European Union. These energy sources offer a clean alternative to traditional sources of energy, particularly fossil fuels. Thus, the adoption of renewable energy sources for electricity generation in Africa would signal a shift to low-carbon development in the continent. Various African countries have set targets for the share of renewable energy sources. For instance, the governments of Egypt, Ghana, Madagascar, and South Africa respectively set targets of 20%, 10%, 75%, and 13% by 2020 for the share of electricity from renewable sources (Renewable Energy Policy Network, 2009).
Potential benefits of renewable energy to Africa
Renewable energy sources offer numerous benefits ranging from contributing to economic growth through the creation of new enterprises and jobs to mitigating the effects of climate change and providing electricity to rural areas.
The fast global growth of the renewable energy industry would foster economic growth mainly through investment and direct and indirect jobs creation.
According to the United Nations Industrial Development Organization (UNIDO), 26% of the total reduction in carbon emissions worldwide in 2010 was on account of efficiency gains in renewable energy sources. Increasing the share of renewable energy as a source of power generation will likely accelerate further reductions in these emissions.
In rural areas, the transmission and distribution of power generated from fossil fuels is very costly.
Therefore, using off-grid renewable energy sources in rural areas will help increase access to basic services, including lighting, communications, and water pumping. The use of these increasingly affordable technologies would facilitate the integration and development of African rural populations.
Impediments to the development of renewable energy in Africa
Many factors may compromise the development of renewable energy in Africa:
- Subsidies on fossil fuel-based energy coupled with insufficient access to finance make the adoption of renewable energy sources challenging.
- Given the low load factor and the high marginal cost of renewable energy plants (compared to other power plants), access to the electricity grid is also restricted and the use of incentivized feed-in tariffs for priority of access to the grid is still limited.
- Inadequate regulatory and institutional environments in most African countries further impede the development of the renewable energy industry.
- Moreover, there is still a huge knowledge gap on the potential benefits of renewable energy and many countries consider it a less-reliable energy source compared to traditional fossil fuel power plants.
The renewable energy industry is capital-intensive, with heavy funding requirements for development. In order to catch up with other emerging countries that have succeeded in developing the renewable energy sector, the main priority for African countries would be to gain access to affordable and sustainable financing to develop the industry in its early stage. New innovative financing instruments and public-private partnerships will help stimulate investment in the renewable energy sector. This may require provision of incentivized tariff schemes and adoptions of new regulations allowing for priority of access to the electricity grid. Public awareness campaigns on the attractiveness and beneficial effects of renewable energy as a clean source of electricity should also be undertaken.
Professor Mthuli Ncube is the Chief Economist and Vice President of the African Development Bank, and holds a PhD in Mathematical Finance from Cambridge University, UK, on “Pricing Options under Stochastic Volatility”.