The Impact of COVID-19 on Africa’s Energy Transition

AOP talks to CSIR Energy Center Head Dr. Clinton Carter-Brown about the effect of COVID-19 on Africa’s clean energy evolution.

How does the CSIR see COVID-19 impacting the energy transition in Africa from fossil fuels to renewables in the short and long-term future?

The extent to which renewable energy will be a growth area post-COVID-19 will in part depend on government policies and the extent to which countries have the fiscal depth to provide stimulus packages that could simulate the acceleration of green economies. Ironically, we will likely see deeper investment and growth in sustainable energy industries in developed economies such as Europe, as they are in a financial position to stimulate these industries as part of their broader economic growth strategies in response to COVID-19. The unfortunate reality is that many African countries do not have the fiscal resources to stimulate that kind of economic recourse, especially in countries where export revenues are expected to decline as links to reduced demand and pricing of coal and oil. For example, South Africa’s coal exports are likely to further decline as demand in India and China reduces with a contraction or slow-down in those economies. Likewise, the export revenues of Africa’s oil-producing countries will be impacted with the reduced oil market pricing.

A stimulus in developed economies to accelerate green industries and technologies is likely to benefit Africa in the medium to longer term. Continued research and development, commercialization and mass production and manufacturing will lead to further cost reductions. Renewable energy technology costs, in particular solar photovoltaic (PV) and wind, have reduced substantially to the point that they are now an integral part of a least cost energy mix in many systems in Africa and globally. Further cost reduction in low or zero carbon energy sources, combined with improved performance and cost reduction of energy storage systems, will collectively reduce the cost and increase the options for the continued electrification of Africa. Such new energy options will complement the traditional technologies including Africa’s considerable hydro resources. Increasing levels of small-scale embedded generation, in particular rooftop solar PV, will drive smart grid technology development, with direct application and benefits in mini-grid and hybrid power solutions.

In Africa, some countries have contested a transition to renewable energies, as their hydrocarbon production accounts for a negligible percent of global CO2 emissions. How should the approach to cleaner energy sources differ between developed and emerging markets?

Every country needs to make its own contribution to the global climate change crisis in its own way, leveraging the opportunities that reduced emission technologies have in creating new economies and reducing environmental impact. Africa’s emissions may be relatively low on an international scale, but considerable work remains in the continued electrification of the continent, as needs to be done in a sustainable manner without unnecessarily adding to greenhouse gas emissions. The leveraging of renewable energy presents substantial opportunities to develop local technologies and create employment within the region. Africa sits with the base minerals and resources used in the manufacture of these technologies and has a considerable future market for deployment. The core technologies need to be developed and manufactured locally, reducing the dependency on global supply chains. Renewable energy development and procurement needs to be coordinated across the continent to stimulate regional manufacturing, leveraging the different skills and resources in the region. Africa should not only benefit from cheaper, sustainable sources of energy, but also from the economic opportunities created by local manufacturing, construction and maintenance.

COVID-19 has affirmed the impacts of shocks to global supply chains and will be a further driver to localize technologies. This can be done in partnership with major equipment suppliers, utilities and project developers. A key factor is policy and market certainty, which is necessary to create an attractive environment for global players to invest in local African manufacturing.

With the European Investment Bank recently announcing strategies to phase out fossil fuel project funding by the end of 2021, what impact will the lending behavior of financial institutions have on the shift from oil to carbon-free technologies?

In South Africa, many of the local banks have adopted reduced or zero fossil fuel investment strategies, specifically in relation to coal-fired power generation. The reduced cost of alternatives, specifically renewable energy in power generation, will make the financing of new coal-fired power difficult. Opportunities will continue in the financing of retrofit technologies and efficiency and flexibility improvements of existing coal-fired stations. Such investments can include mid-life overhauls and plant life-extension.

Access to attractive funding terms and project development support for renewable energy projects by development banks and commercial financial institutions will further drive the shift to carbon-free technologies.

To what extent is the development of renewable energy contingent on the continued development of fossil fuels?

Renewable energy is complimented by flexible gas-fired generation, leveraging Africa’s considerable natural gas resources. The financing of gas-fired generation, as part of a portfolio of energy sources to balance the variably inherent in mainstream solar PV and wind supply, is a bridge towards a low carbon energy system. As such, it is likely to present attractive returns and interest from investors, especially if investing in a portfolio of natural gas and renewable energy projects.

The majority of end use energy is in the transportation and heat sectors, as are inherently more difficult and costly to transition to renewable energy sources (as compared to electricity where this is no longer the case). For the immediate future, fossil fuel development is likely to continue in these heat and transportation sectors given their cost advantages and the lack of practical renewable energy-based alternatives. However, that is changing, as the continued cost reductions in renewable electricity generation open opportunities for the production of green hydrogen as a feedstock for sustainable carbon neutral fuels for use in Africa and for export into global markets. This presents considerable opportunities for Africa to export its renewable energy resources in a manner similar to the traditional export of oil and gas.

The decarbonization of developed world economies will create a substantial market for clean/green fuels, manufactured in countries that have the renewable energy resources and land mass for such production. Africa would do well to develop its energy system to leverage this huge opportunity.

The Council for Scientific and Industrial Research (CSIR) is a leading scientific and technology research organization that researches, develops, localizes and diffuses technologies to accelerate the socioeconomic prosperity in South Africa, while contributing to its industrial development.