The pandemic is already significantly impacting energy access trends in Africa
The Covid-19 pandemic has been dismantling steady progress made in recent years to increase access to affordable, reliable, sustainable and modern energy – an objective enshrined in the UN Sustainable Development Goal 7 (SDG 7). Sub-Saharan Africa – home to three-quarters of the almost 800 million people around the world who don’t have access to electricity – is bearing the brunt of this reversal.
Since 2013, the number of people without access to electricity had been steadily decreasing on the African continent. This was thanks to the progress made in countries – such as Kenya, Senegal, Rwanda and Ghana – that adopted strong electricity access policies and supported off-grid initiatives.
The pandemic has put this progress into reverse, with the number of those lacking electricity in Africa rising to more than 590 million people in 2020, an increase of 13 million people, or 2%, from last year, according to analysis in the World Energy Outlook 2020.
There are several underlying reasons for this mainly stemming from a lack of available financial resources for governments, the private sector and individual households. The health crisis has forced governments to shift their immediate priorities to purely emergency measures, resulting in a lack of financing available for expanding and improving electricity infrastructure. In Uganda, for instance, public subsidies for the electricity access programme have been put on hold, while in South Africa, authorities had to redirect funds to health and welfare programmes and facilities at the expense of expanding rural electrification.
Furthermore, private companies deploying decentralised energy solutions like solar home systems and mini-grids have faced operational and financial challenges because of the pandemic. In large countries like Ethiopia, lockdown measures have affected distribution chains and reduced sales by 20% in the first half of 2020 compared with the same period last year, according to the latest data gathered by the Global Off-Grid Lighting Association. In other markets, such as Zambia and Uganda, disruptions in upstream supply chains have hindered imports. Although a few markets like Kenya, Rwanda and Togo have remained dynamic, the total number of solar products sold in Africa has dropped by more than 10% in the first half of this year. While this decline is not large enough to undermine the overall expansion of solar PV capacity worldwide, it does means that hundreds of thousands of households do not have access to basic electricity services.
The cost of borrowing has also increased dramatically, limiting the ability of governments to expand energy access. This is particularly true for the Democratic Republic of the Congo, Nigeria, Ethiopia, Tanzania and Uganda. Together, those countries were home to more than one-third of all people without electricity access globally in 2019. Our analysis finds that in the first half of 2020, sovereign risks perceived by investors (i.e. the premium on top of the long-term cost of borrowing) rose by two percentage points compared with the end of 2019, reaching 7%. This increase happened even as borrowing costs fell in other parts of the world.
These rising financing costs have been felt the most in the countries where progress on expanding access is most needed. In the Democratic Republic of the Congo, the country with the largest number of people without electricity, sovereign risk rose to over 9%. In Nigeria and Ethiopia, with 75 and 60 million people without access respectively, the risk rates rose to 6.5%. Other risks, such as deteriorating exchange rates, could worsen access to finance further by discouraging international investors. Unless action is taken, this will result in a slowdown in new annual electricity connections in sub-Saharan Africa.
Covid-19 pushes 30 million people back into energy poverty
The pandemic is also affecting populations that are already connected, preventing them from being able to afford modern energy services. In sub-Saharan Africa, 30 million people who had access to electricity in 2019 may no longer be able to afford basic electricity services by the end this year, representing around 6% of the connected population.
In terms of the number of people affected, the worst effects are being felt in Nigeria, Ethiopia, Kenya, Tanzania and Cote d’Ivoire. Those countries account for 70% of the population that is no longer able to afford basic electricity services. In parallel, Chad, Niger, Sierra Leone, Burkina Faso and the Democratric Republic of Congo are seeing more than 10% of their connected population affected. This will potentially have huge negative effects on the progress made in these countries previously as well as revenues needed for future investment.
This also applies to access to clean cooking, with millions of households just outside cities or in rural areas at risk of slipping back from modern fuels to charcoal, kerosene or fuelwood. This would further increase the number of people who still rely on traditional fuels for preparing their daily meals. In turn, this means higher negative impacts on health, gender and socio-economic development.
It is vital to keep energy access high on national and international agendas
Reaching universal electricity access in Africa, a goal in line with SDG 7.1, requires around USD 20 billion of annual investments from 2021 to 2030, according to the IEA Sustainable Development Scenario. These investements would go to decentralised electricity systems as well as centralised power generation, distribution and transmission. Mobilising development finance institutions and donors is critical to enable energy access to start expanding again and to continue to do so.
To ensure sustainable progress, it is important for governments and donors to make sure access remains a top priority in international and domestic agendas and to include it in recovery plans. This could involve, for example, measures to support the emerging private solar sector or the setting of action-based targets to achieve the goal of universal access. In a world where finance is constrained, access projects will need to be smart (e.g. linked with agriculture to unlock related benefits), effective and capable of being implemented quickly.
Critically, it is difficult to see how universal access could be achieved by 2030 without decentralised energy solutions. They are the least costly solutions for more than half of the connections needed to reach this goal by 2030, according to our geospatial analysis performed in collaboration with the university of KTH-dESA for our Africa Energy Outlook 2019.
Some countries are moving ahead. Integrated national electricity access plans using both centralised and decentralised solutions adapted to the local context are already showing benefits in Ghana, Senegal, Ethiopia, Nigeria and Rwanda. Many of these plans aim to maximise the benefits of energy access by considering the needs of health services, schools, agricultural enterprises and similar organisations alongside those of households. In its stimulus plan, Nigeria emphasised the role of both decentralised solar PV systems and LPG in providing modern fuel.
Prioritising access to modern and reliable energy services remains an essential requirement for expanding healthcare solutions, modernising agriculture and other parts of the economy, as well as protecting the poorest populations. The need is even more urgent during a global pandemic.