By: Ken Silverstein
Indeed, Africa may become a harbinger of things to come for the developing world — to skip right over centralized generation and into on site, or distributed power. The goal is to bring electricity to the 500 million people there without it, which is the primary building block when it comes to quality of life and economic progress. The World Bank Group will invest $200 billion globally to 2025 to help developing countries move to a low-carbon future.
“While the market is still small, it has great potential,” says Takehiro Kawahara, lead frontier power analyst at Bloomberg New Energy Finance, in a just-released report. “An immense energy deficit and crumbling infrastructure makes Sub-Saharan Africa fertile ground for solar.”
As of November 2018, the firm says that Africa built 74 megawatts of on site solar power and that it is cheaper than what a centralized, grid-connected system could have provided. Kenya and Ghana have made the most progress. Granted, it is a less than 1% of the worldwide total installed solar capacity. But Bloomberg says that the cost of such projects should continue to fall, from the current 10-14 cents per kilowatt-hour to 5 cents per kW/h.
The lack of financing is a key reason why those solar projects have not rolled out faster. The World Bank has loaned billions of dollars to dozens of projects in Africa. The United States Power Africa initiative, which began in 2013, is providing $7 billion. Most of that is getting used to build transmission lines to deliver power via a centralized system.
The greater focus on electrification has delivered results: The World Bank says that the number of people getting access to electricity is exceeding the population growth, in Sub-Saharan Africa. It also says that more than 700,000 on site solar systems have been installed. At the same time, African governments are striving to hit 1,000 megawatts in all of solar power by 2023, which would deliver electricity to 56 million new users.
“Climate change is an existential threat to the world’s poorest and most vulnerable,” World Bank Group President, Jim Yong Kim said, noting that renewable energy is central to its loan portfolio and its electrification plans.
To be sure, Africa needs to use all of its available resources to meet its energy needs. And to be frank, natural gas is expected to play the biggest role in North Africa, providing 66,000 megawatts by 2022, according to the African Energy Atlas, which equates to 45% of the total mix. Solar will make up 9% while wind will comprise 7%. But renewables will have a greater prominence in Sub-Saharan Africa, with solar making up 12%. Natural gas will still comprise 26%.
By 2050, Africa is expected to grow from 1.1 billion people to 2 billion, with a total economic output of $15 trillion — money to be targeted to infrastructure and specifically energy and transportation. Global businesses see potential, having already invested tens of billions: General Electric, ABB, Alstom, Siemens and Schneider Electric are among the risk takers.
While the United States has been slow in coming, the European Union and China have been flocking there. Still, the U.S. has the $7 billion Power Africa initiative established in 2013 and the African Growth and Opportunity Act of 2000, which has given Africans duty-free access to thousands of U.S. products. It is a non-reciprocal agreement but, it has opened up the continent to American capital and the possibility for closer economic links.
“There are gaps in infrastructure today,” says K.Y. Amoako, founder and president of the African Center for Economic Transformation. “About 30 countries (of the 54 in Africa) have serious issues” with transportation and power generation. “If we can solve this, we add two percentage points to our gross domestic product.”
To get money off the sideline, the World Bank says that political risks coverage and credit enhancements must be attached to investor packages.
For those African countries dedicated to reform, there is a strong predilection that foreign investment would open new doors. While countries need to safeguard their peoples, they must also reward the risk-takers. As Africa continues to make headway, energy markets will open. And on site solar energy could power forward, creating a wealth of opportunity for businesses and investors — progress that would ripple throughout the continent.
This article was first published by Forbes