The growing importance of renewable power in Africa

To fuel economic growth and support its growing population, Africa needs power. Renewable energy technologies and distributed infrastructure are playing an increasingly important role in the continent’s energy mix.

Around the world, 1.2 billion people live without access to electricity. Half of them are in sub-Saharan Africa. Africa trails the rest of the world in terms of access to electricity by a huge margin. In 2014, less than half the population of the continent had electrical power. Everywhere else, the equivalent figure has now passed 90%. If the region is to continue the strong pace of economic growth it has achieved since the end of the 1990s, better access to energy, especially electrical power, will be essential.

The International Energy Agency (IEA) expects demand for electricity in sub-Saharan Africa to rise considerably faster than the region’s GDP growth for at least the next 25 years. Fulfilling that demand will require electricity production in the region to increase by a factor of more than three by 2040 to 1,300 terawatt hours.

Africa’s energy challenge isn’t all about resources. The continent has plenty of coal, gas and oil, for example. What it lacks is generation capacity and, just as importantly, the transmission and distribution infrastructure to deliver that power to the homes and businesses where it is needed most. Progress in building that infrastructure has been painfully slow. Between 1990 and 2010, the fraction of the region’s population with access to electricity increased by only 0.2 percentage points a year, as new energy investments struggled to keep up with overall population growth.

A brighter outlook

Over the past seven years, Africa’s electrification rate has accelerated to around 1 percentage point a year. That’s a fivefold increase in the share of the population that gains access to electricity every year. But it still isn’t fast enough. Analysts at McKinsey & Company estimate that electrification rates on the continent will only reach 70 or 80% by 2040, noting that an electrification rate of less than 80% is almost universally associated with low per capita GDP and widespread poverty.

There’s growing consensus that, to make better progress toward full electrification, Africa will need a different approach. The continent’s phone systems provide a model. While older economies built centralised fixed line telephone networks first, Africa largely skipped that step with the rapid deployment of mobile telephone infrastructure, driven by entrepreneurial private sector companies. Africa’s energy networks may develop in a similar way, with renewable sources playing a leading role.

Energy infrastructure projects are often big, expensive and technically complex. Building them is usually the domain of large, international companies. In Africa, which has few local large-scale engineering companies, that is especially the case. Many of the world’s largest energy players have been involved in African energy investments over the years, but most recently it is contractors from China that have transformed the pattern of energy development on the continent.

China’s involvement in Africa is a core part of Beijing’s “Going Abroad” policy, which was first introduced in the country’s 10th Five-Year Plan in 2001. The motivation for the policy is simple and logical. Closer relationships with developing economies in Africa and elsewhere help develop new markets for Chinese goods and services overseas, and secure access to important commodities needed to fuel the economy at home.

IEA analysis suggests that Chinese firms were responsible for 30% of the utility-scale new power generation capacity built in sub-Saharan Africa between 2010 and 2015. Between 2010 and 2020 Chinese contractors are expected to install around 28,000 kilometres of new electricity transmission and distribution lines.

Chinese companies have been pragmatic in their choice of power technologies, building generation capacity to suit the fuel types available locally. The projects analysed by the IEA in its 2016 report include coal, gas, wind and hydroelectric power, as well as biomass and waste-to-energy facilities. Overall, however, the share of renewable energy technologies is significant, as engineering firms export technology and knowhow resulting from the huge investments in domestic renewable capacity that China has made in recent years.

Of the additional generation capacity built, under construction or planned by Chinese companies in Africa this decade, 56% is from renewable sources, with the vast majority of that being large-scale hydropower, which is dominated by contractors from the country. Looking just at projects in planning or under construction today, the renewable fraction rises to two-thirds. From the African governments’ perspective, say the IEA report’s authors, “hydropower projects are more attractive than coal- or gas-fired projects, which imply the construction of railways or pipelines. Hydropower projects use low-cost and abundant local resources, are a potential source of electricity for export, and avoid fuel supply issues.” They note, however, that big dams bring their own social and environmental challenges, which need to be thoroughly addressed.

Analysis by the International Renewable Energy Agency suggests that renewable energy could fulfil up to half of Africa’s total electrical power needs by 2030 using proven technologies. Doing that won’t be easy, however. The agency’s suggested mix of hydropower, wind and solar generation capacity would require a tenfold increase in renewables across the continent, an investment of $32 billion a year.

Small is beautiful

Looking just at big utility-scale infrastructure fails to paint a complete picture of the growing importance of renewable power in Africa, however. In part, that’s because many forms of renewable energy lend themselves to smaller, widely distributed sources of generation. It’s also because Africa’s underdeveloped network infrastructure means many consumers have little choice but to take a more independent approach to their energy needs.

Motivated by the desire to improve energy security and to meet their commitments under international climate change agreements, many African countries are pursuing policies that encourage the development of grid-connected renewable energy generation capacity. The GET FiT Uganda programme, for example, aims to increase energy production in the country by 20% by encouraging private investment in small-scale renewable energy generation projects. With financial support from the governments of Norway, Germany and the U.K., as well as the EU-Africa Infrastructure Trust Fund, the programme promises to repay investors through feed-in tariffs (FiT) that guarantee a price for the power their projects produce. In 2015, companies began construction of six small-scale hydropower projects under the scheme. And in November 2017 the country’s first grid-connected solar power plant came online, a 10 megawatt site at Soroti in the east of the country.

It is off the grid, however, that private companies may be having the most impact today. Africa’s low overall electrification rate is exacerbated by the difference between urban and rural consumers. The World Bank estimates that four times as many of the people to gain access to electricity in Africa between 2010 and 2012 live in cities as in the countryside. And even where grid connections are in place, they can be plagued by poor service quality and frequent outages, encouraging many consumers to look for alternatives.

For wealthier consumers, the traditional home power source has always been the gasoline or diesel generator, but the high cost of these units puts them out of the reach of many poorer families, not to mention their impact on air quality, especially in cities. Now a new generation of entrepreneurs is making compact renewable microgeneration systems available to consumers, often allowing them to spread their cost with a fixed monthly fee. M-Kopa Solar, for example, supplies a range of packaged solar power solutions in Kenya, Tanzania and Uganda. The company’s offerings typically include a solar panel, a storage battery with mobile phone charging capabilities, several LED lights and a radio. Larger packages also include a TV. The company says it has supplied systems to around half a million homes across East Africa, creating 2,500 jobs in the process.

New energy logistics

Africa’s increasingly diverse and vibrant renewable energy market brings equally diverse logistics requirements. At one end of the scale, big hydropower projects require the transport of large, heavy equipment to sites that may be at the end of poor road links in hilly or mountainous terrain. Wind power presents similar challenges. Africa doesn’t yet have the economic and commercial justification for large-scale wind turbine manufacturing capabilities, notes Steve Harley, President, DHL Energy, so the construction of wind farms requires specialist handling on a global scale to transport towers, blades and other key components from their countries of origin and deliver them safely to sites. “At DHL, we’ve been involved with a number of large wind energy projects in Africa,” he notes. “They involve a high degree of complexity, from ensuring appropriate customs clearances to route surveys, transport escorts and of course highly specialised handling equipment.”

The logistics needs of microgeneration systems, like rooftop solar installations, are very different but equally complex. “Distributing these systems is a business-to-consumer logistics process,” says Harley. “Last-mile delivery is always the key challenge.” It’s another area that is an important focus for DHL, he says, given the strength of the company’s Express division in Africa. The development of “packaged” offerings, like M-Kopa’s, which combine energy equipment with consumer products like radios and TVs, presents extra complexity in terms of tariffs, customs clearance and fulfillment, he adds, and this is another area where DHL is working to use its facilities and expertise to make life simpler for its customers.

While renewable energy systems don’t need refueling during operation, they do require some maintenance and repair over an operating life that may span decades. “Utility-scale renewables need specialised service logistics at low cost, and that’s an area where our experience in other sectors, including conventional power generation, is helping us to develop the right maintenance, repair and operations (MRO) support offerings for our customers,” says Harley. “And while consumer-scale systems tend to be very reliable, they still contain components like storage batteries that have a finite service life. As these systems become more widespread, companies will need efficient reverse logistics networks to ensure that used batteries can be recovered and recycled.”

For DHL, concludes Harley, Africa’s fast-growing renewable energy industry presents a dual opportunity. “There is a strong commercial argument for our involvement in the sector, but the potential benefits to society are equally important. We want to support the energy revolution that is underway today, and play our part in lighting up Africa.”

This article was originally published in DHL’s Delivered magazine.

Source: How We Made It In Africa

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