The so-called “sun continent” has not taken advantage of its eponymous resource. African energy output amounts to less than 25% than other regions with similar sunlight levels like Middle East. It is clear that Africa is less developed than Arab countries, but the level of economic exploitation of a natural resource should not be so dramatically different (4 to 1). Especially when this energy source has become so competitive against fossil fuels, as one can see in the chart below:
Solar technology has become a source of great interest to many: its cost has fallen more than 80% in the last decade and more than 99% if we go back three decades. It can be now 65% cheaper than fossil fuels. The push towards green technology has made solar energy even more desirable, especially when sun is plentiful (like in Africa) and many people are still left without access to the electric grid. So, the continent's total solar energy capacity grew 23-fold since 2011 to over 10 GW, as one can see below:
This shift is bolstered by the lack of an established and centralized grid network in many African countries. This has allowed renewables to enter the market facing far less resistance than in peer countries with fossil fuel generation linked to an existing grid. In the later, markets and business relationships were more reluctant to accept solar, seen as less reliable (even when it was not the case).
Yet, this alone may not suffice to lead Africa into a full immediate transition to clean energy. Fossil fuels still today make up 80% of the continent’s energy mix. Even by the next decade, fossil fuels are expected to represent at least 45% of the continent's energy mix. As one can see on the graph below, coal, natural gas and oil are expected to decline in both absolute and percentage terms. Conversely, renewables, hydro, solar and wind are projected to become the main sources:
The pie chart above confirms in the aggregate what the discreet sector by sector analysis from the upper chart says: - That Africa is decisively moving from fossil to green, while keeping costs competitive. Energy growth helps support economic growth: energy enters the Total factor productivity account on GDP estimates, (thus more energy investment often leads to higher growth) and it is actually high correlated with industrialization as well. But African demand for electricity is expected to increase even faster than supply: - 270% in the next 8 years, from 500 TWh to 1.2 TWh. In order to tap that, African countries might have to invest more in fossil fuels, to cater to this unserved demand and keep economic growth closer to full potential.
Despite the need for additional fossil fuel projects, we at Weaver Advisory remain optimistic about the transition. After all, many countries have set renewable energy targets. Rwanda has set that 60% of its energy should be renewable, and Swaziland goal is to reach 20% of its commercial buildings using solar water heaters. Nigeria, Africa largest economy with US$ 1 Trillion (in PPP terms), and a very large oil producer, declared a 20% renewable energy target for 2030. As a result of these efforts, Weaver Advisory forecasts that solar energy could make up to 70% of rural areas electricity by 2030, from a mere 10% a decade ago. As a result of these efforts, Africa is moving toward solar power at a blistering rate, with the continent projected to be the largest solar power zone by 2025. As one can see on the map below, Africa is still behind (but we at Weaver see it clearly catching up, on our forecasts:)
Solar power has finally gotten its chance to shine in the sun continent, but the road ahead remains long and winding. Yet, we at Weaver believe in African economic and green energy growth…