CAIRO - 8 December 2018: Over 640 million Africans have no access to energy, with electricity access rates standing at just over 40% across the continent. Gifted with huge energy potentials, especially renewable energy (RE), Africa has enormous resources but only a fraction of them have been tapped. Fossil fuels, despite their cost and environmental impact, remain a primary source of energy across the continent, followed by oil, gas, and wood-burning stoves for cooking. Employed on a low scale in the energy mix are solar, wind, biomass, geothermal and hydropower.
Unlocking energy potentials in Africa comes at the top of Egypt’s priorities as chair of the African Caucus in 2019, especially with many countries continuing to suffer energy shortage crises and hikes in power prices. Business for Africa and the World 2018 Forum, held in Sharm El-Sheikh December 8-9, is set to discuss prospects of attracting investments in clean energy projects with a view toward energy’s crucial role in boosting economy, creating job opportunities and developing the health and education sectors.
The African Union’s agenda 2063 aims for a prosperous Africa based on inclusive growth and sustainable development, under which it has developed various programs aiming at meeting Africa’s energy-related challenges and contributed to the overall development of affordable and reliable modern energy services for all Africans.
Africa’s budget deficit in infrastructure finance stands at a whopping $100 billion; yet Dr. Amani Abou-Zeid, the new Commissioner for Infrastructure & Energy at the African Union, maintains that the “gap means there is a huge opportunity for investment especially that it is proven that investing in African infrastructure has a very high rate of return.”
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Speaking to Business Today Egypt, the AU commissioner adds that as chair of the Union Egypt can champion the implementation of these programs and support resource mobilization efforts and lobbying for commitment by member states. “When it comes to Energy, Egypt has a great story to tell and showcase—that of ensuring there is 100% access to energy, turning deficit into surplus, moving into smart grids and smart energy systems as well as diversification of energy sources, especially renewables and in gas domestication,” Abu Zeid explains.
The total average annual investment needed from 2018 to 2030 is estimated by the African Development Bank (AfDB) Group at $32-40 billion, depending on the continent’s commitment to avoiding greenhouse gas (GHG) emissions. “There is no question that these amounts are too large for public investment alone; private investment in Africa’s energy sector is therefore a must. . . . We have to realize that Africa as a whole is coming from a very low base when it comes to energy infrastructure,” Malinne Blomberg, AfDB’s country manager explains.
Looking at Egypt as a successful example, Blomberg applauds the country’s efforts in attracting both local and international investments to the renewable energy sector and explaining that Egypt can provide a lot of experience on achieving universal access and attracting private investment. She also explains that Egypt can play a major role as an energy hub supporting the Sub-Saharan area to overcome its acute energy poverty, as well as provide a lot of experience sharing how it managed to achieve universal access and attract private investment.
Powering Africa’s Grid
Egypt’s governmental policy reforms coupled with new gas discoveries have consolidated the country’s status as an energy hub, eyeing Europe as a high potential market for its surplus production. The foundation stone of the Euro-Africa interconnector will soon be laid down linking national grids of Egypt, Greece and Cyprus for electricity provision through a 1,707-kilometer cable.
But it’s not Europe but Africa that Egypt should be targeting experts argue, given the large demand for energy from the African market. “[Europe’s] demand rate is expected to slow down due to energy efficiency policies and domestic production of renewable energy,” Tessa Terpstra, the Netherland’s MENA Regional Envoy for Water and Energy had previously told Business Today Egypt.
Africa uses only 5% of its renewable energy potentials; however, it can feasibly generate 22% of its energy needs from clean resources by 2030, according to a recent International Renewable Energy Agency (IRENA) report. By relying on clean energy, Africa could eliminate power shortage in addition to opening up development opportunities in rural villages.
The solar panel of an Azuri solar home system installed\non a customer's roof - Reuters
With an energy crisis facing at least 32 out of 48 African nations, according to the World Bank, renewable energy consultant and former chief underwriting officer at the African Trade Insurance Agency Jef Vincent, explains that most governments are focusing on providing power at the lowest cost, especially that gas and coal at first glance seem cheaper. Vincent cites several challenges—varying from one country to another—hindering the full use of the continent’s energy potentials, including obsolete transmission lines and the resistance to change at the level of the off-taker.
Egypt can hold the solution to Africa’s energy crisis. Committed to environment environmentally friendly industrial development, Egypt seeks to increase renewables’ share in the energy mix from less than 3 percent to 20 percent by 2020. The Feed-in-Tariff Act is one of the legislative reforms that Egypt took to re-attract investments to the sector, especially private ones, after a significant drop.
"The government has worked extensively the past couple of years on opening up the electricity market for the private sector and encouraging investments. A milestone worth mentioning is the change in Circular Letter for the year 2018 pertaining to the net metering scheme," according to KarmSolar’s relations officer. KarmSolar is a solar technology and integration company that delivers innovative solar solutions to the agricultural, industrial, tourism and business sectors. Since its founding in 2011, KarmSolar has been Egypt’s largest private off-grid solar energy integrator, with exceptional experience in developing its award winning high-capacity solar pumping stations, MW-scale off-grid solar energy stations and grid-connected utility-scale installations, according to the company website.
With a sunlight coverage rate of 9-11 hours per day, Egypt is considered one of the top solar markets in Africa, and is planning the largest solar installation in the world in Benban city in the southern governorate of Aswan. The new plant will provide between 1.6-2GW of water power.
Energy cooperation between Egypt and African states is already under way with several electricity projects installing solar panels in the Nile Basin, in addition to full-swing capacity building programs running since 2015. The latter has welcomed and trained 134 Africans in Cairo on solar and wind energy technologies and energy efficiency.
President Abdel Fatah al-Sisi (L), Omar el-Bashir (M) and ex Ethiopian Prime Minister
Considered one of the future gateways to Africa is the 300 megawatts interconnection project that is under construction between Egypt and Sudan. Mohamed Mostafa el-Khayat, Executive Chairman of the New and Renewable Energy Authority (NREA), explains the project will yield a number of key benefits. “First, by exporting surplus power production that we have [in Egypt], the interconnector can be a source of income.
And secondly, this interconnection has a political and strategic aspect since energy is one of the soft powers that countries use as part of their mutual economic interests.”
With Egypt seeking transformation into a digital economy as part of its 2030 strategy, Vincent expects several potential developments in the energy sector when digitalization is adopted. “Intelligent metering will allow the owners of [home] solar systems to feed the grid with their excess production, and be rewarded by a proportional reduction of the bill for the power that they buy from the grid. This will help to reduce the power deficit and it will encourage more small-scale investments in PV,” he says, adding that reducing peak demand of energy, managing supply efficiently and settlement of power bills are also among the outcomes of digitalization.
Challenges of Green Finance
As energy remains vital for industrial development in any country, governments should seek provision of certain investment drivers in the renewable energy sector, maintains Vincent. Speaking about Africa, he lists a number of factors that affect investments including “the quality of legal and regulatory environment; the wording of the PPA; the feed-in-tariff setting, land rights, government’s capacity to manage demand and availability of risk mitigation instruments.”
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From here, there are a number of barriers to mobilize private investment in the energy sector in Africa, foremost among them the lack of access to affordable financing for small and medium enterprises (SMEs), according to AfDB’s Blomberg. She also mentions volatilities related to currency convertibility and exchange rate stability in many countries in Africa as other challenges to investing in clean energy.
“As of now, 100% of the new power generation and decentralized energy investments supported by the Bank in 2018 focus on renewable energy. The trend is likely to continue in 2019 based on the current pipeline of projects,” Blomberg reveals.
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