Opinion: Getting Africa’s Energy Transformation Right Will Involve Policies, Investments That Boost Diversity
Unlike in past decades, African countries no longer need be tied to a single energy source. Because much of Africa’s energy infrastructure remains to be built, governments have a chance to get their energy and infrastructure policies right the first time, maximizing returns on investment.
Policymakers should take a few key steps to help transform Africa’s energy sector and boost long-term economic growth. For starters, making it easier, safer, and more financially attractive for private investors to enter power markets would boost competition, thereby spurring innovation and lowering costs.
Moreover, African countries should seek opportunities to share infrastructure and create cross-border power pools.
From Project Syndicate. Story by Carlos Lopes, a professor at the University of Cape Town and a visiting fellow at the Oxford Martin School, University of Oxford.
Africa’s energy revolution will itself be challenged by some of the worst effects of climate change. For example, as rainfall becomes more erratic, hydropower production and revenues may decline. This risk can be managed by modifying existing investment plans to account for large climate swings. Still, for the region to adapt, the United Nations Environment Programme estimates that it will need annual investments of about $7-to-$15 billion by 2020, and $50 billion by 2050.
Rather than treating new climate-related risks as hurdles to overcome, we should view them as opportunities for investment and innovation. We are standing on the threshold of an exciting new era in which technological progress allows us to use a range of conventional and unconventional energy options (excluding nuclear energy).
African countries can now combine energy sources to adapt to realities on the ground.
Policymakers should take a few key steps to help transform Africa’s energy sector and boost long-term economic growth. For starters, making it easier, safer, and more financially attractive for private investors to enter power markets would boost competition, thereby spurring innovation and lowering costs. Moreover, African countries should seek opportunities to share infrastructure and create cross-border power pools.
Another important step is to invest in renewable energy. Africa has an exceptionally rich portfolio of clean-energy assets, including almost nine terawatts of solar capacity, more than 350 gigawatts of hydropower capacity, and more than 100 GW of wind-power potential. This is more than enough to meet the continent’s future demand.
At the same time, renewable-energy sources are becoming less expensive, making them increasingly competitive with fossil-fuel alternatives. For example, the price of utility-scale photovoltaic solar energy in Africa fell by 50 percent between 2010 and 2014, and continues to decrease today. And South Africa’s Renewable Energy Independent Power Producer Procurement Programme has seen an overall decline in bid prices and oversubscription rates.
Innovative off-grid and mini-grid electricity-distribution systems, meanwhile, are already transforming Africa’s energy landscape and multiplying the ways to exploit clean-energy sources and expand electricity access for the poor, particularly in areas where consumers are widely dispersed. Companies such as M-kopa and Mobisol have made small solar-energy systems available to thousands of African homes, by allowing their customers to pay in installments on their mobile devices.
Still, to accelerate a market shift on the scale that Africa needs will require increased financing from export credit agencies, development banks, commercial financial institutions, and other cross-border sources.
Africa has a chance to bring hundreds of millions of people without electricity into the modern economy; and we have an opportunity to pioneer the next investment frontier. Getting Africa’s energy transformation right, by pursuing a mix of policies and investments that boost diversity and strengthen resilience, will ensure a brighter future for us all.
Read more at Project Syndicate.