IEA (2019), Africa Energy Outlook 2019, IEA, Paris https://www.iea.org/reports/africa-energy-outlook-2019
Rapid economic and population growth in Africa, particularly in the continent’s burgeoning cities, will have profound implications for the energy sector, both regionally and globally. The stage is set for a new wave of dynamism among African policy makers and business communities, with falling costs of key renewable technologies opening up new avenues for innovation and growth. Chief among the challenges is providing universal access to reliable, modern, affordable and sustainable energy. How to do this is a crucial component of Africa’s Agenda 2063 strategic framework for the continent’s future and of global Sustainable Development Goals. Realising the potential of the continent’s natural gas and mineral resources presents another key challenge.
Five years after the World Energy Outlook’s first special report on Africa, the International Energy Agency has updated and expanded its outlook for the continent based on in-depth, data-rich and country-specific analysis. This new report provides important policy insights to help African energy stakeholders achieve the continent’s growth ambitions in a sustainable and inclusive manner. It also explores how the rise of consumerism in Africa might affect global trends.
Africa’s population is among the fastest growing and youngest in the world. One-in-two people added to the world population between today and 2040 are set to be African, and the continent becomes the world’s most populous region by 2023, overtaking China and India.
More than half a billion people are added to Africa’s urban population by 2040, much higher than the growth seen in China’s urban population in the two decades of China’s economic and energy boom. How Africa meets its growing energy needs is crucial for the continent’s economic and energy future, as well as for global trends.
Growing urban populations mean rapid growth in energy demand for industrial production, cooling and mobility. With the growing appetite for modern and efficient energy sources, Africa also emerges as a major force in global oil and gas markets. The projected growth in oil demand is higher than that of China and second only to that of India as the size of the car fleet more than doubles (the bulk of which have low fuel efficiency) and liquefied petroleum gas (LPG) is increasingly used for clean cooking. Africa’s growing weight is also felt in natural gas markets as the continent becomes the third-largest source of global gas demand growth over the same period.
A critical task for policy makers is to address the persistent lack of access to electricity and clean cooking, and the unreliability of electricity supply, which have acted as brakes on the continent’s development. Today some 600 million people do not have access to electricity and around 900 million people lack access to clean cooking. Nonetheless, the momentum behind today’s policy and investment plans is not yet enough to meet the energy needs of Africa’s population in full.
Despite progress in several countries (e.g. Kenya, Ethiopia, Ghana, Senegal, Rwanda), current and planned efforts to provide access to modern energy services barely outpace population growth. In 2030, 530 million people still lack access to electricity and nearly one billion people lack access to clean cooking. As a result, the global population without access to energy becomes increasingly concentrated with 90% without access to electricity and almost 50% without access to clean cooking in 2040 living on the African continent.
The Africa Case outlines a way to lift these constraints. It is also built on the premise of “Agenda 2063”, the continent’s own vision of accelerated economic and industrial development, which was established by the Heads of State and Governments of the African Union in 2015 and is incorporated in the national planning framework of over 30 countries. In this case, faster economic expansion is accompanied by the full achievement of access to electricity and clean cooking, in line with Sustainable Development Goal 7.
In the case of electricity, this would require tripling the average number of people gaining access every year from around 20 million today to over 60 million people. Grid extension and densification is the least cost option for nearly 45% of the population gaining access by 2030, mini-grids for 30% and stand-alone systems for around a quarter. LPG is used by more than half of those gaining access to clean cooking in urban areas across sub-Saharan Africa, while improved cookstoves are the preferred solution in rural areas. Electrification, biogas, ethanol and other solutions also play important roles.
In the Africa Case, although the size of the economy in 2040 is four-times larger than today, total primary energy demand is only 50% higher - energy use in this case is actually lower than in the Stated Policies Scenario even though economic growth is significantly stronger.
The reasons are linked not only to the accelerated move away from solid biomass but also strengthened policies for energy efficiency: these include fuel economy standards for cars and two/three-wheelers, more efficient industrial processes, building codes and efficiency standards for appliances and cooling systems.
Electricity demand in Africa today is 700 terawatt-hours (TWh), with the North African economies and South Africa accounting for over 70% of the total. Yet it is the other sub-Saharan Africa countries that see the fastest growth to 2040. Electricity demand more than doubles in the Stated Policies Scenario to over 1 600 TWh in 2040, and reaches 2 300 TWh in the Africa Case, with most of the additional demand stemming from productive uses and emerging middle- and higher-income households.
Renewables play a leading role in meeting this demand. To date, the continent with the richest solar resources in the world has installed only 5 gigawatts (GW) of solar PV, less than 1% of the global total. However, Africa’s vast renewables resources and falling technology costs drive double-digit growth in deployment of utility-scale and distributed solar photovoltaics (PV), and other renewables, across the continent.
In the Africa Case, solar PV deployment averages almost 15 GW a year, reaching 320 GW in 2040, overtaking hydropower and natural gas to become the largest electricity source in Africa in terms of installed capacity. Wind also expands rapidly in several countries that benefit from high quality wind resources, most notably Ethiopia, Kenya, Senegal and South Africa while Kenya is also at the forefront of geothermal deployment.
The Africa Case requires building a more reliable power system and greater focus on transmission and distribution assets. A key priority is targeted investment and maintenance to reduce power outages, a major obstacle to enterprise, and to decrease losses from 16% today to a level approaching advanced economies (less than 10%). There is also a need to build up the regulation and capacity to support Africa’s power pools and strengthen regional electricity markets.
Africa needs a significant scale-up in electricity sector investment in generation and grids, for which it currently ranks among the lowest in the world. Despite being home to 17% of the world’s population, Africa currently accounts for just 4% of global power supply investment. Achieving reliable electricity supply for all would require an almost fourfold increase, to around $120 billion a year through 2040. Mobilising this level of investment is a significant undertaking, but can be done if policy and regulatory measures are put in place to improve the financial and operational efficiency of utilities and to facilitate a more effective use of public funds to catalyse private capital. Nurturing Africa’s own financial sector is also critical to ensure a sustained flow of long-term financing to energy projects.
In North Africa, gas already meets around half of the region’s energy needs, but in sub-Saharan Africa, it has thus far been a niche fuel. The share of gas in the energy mix is around 5%, the lowest in the world. The future could be different. There have been a series of major discoveries in recent years, in Egypt, East Africa (Mozambique and Tanzania), West Africa (Senegal and Mauritania) and South Africa, which collectively accounted for over 40% of global gas discoveries between 2011 and 2018. These developments could fit well with Africa’s push for industrial growth and its need for reliable electricity supply (constraining the expansion of more polluting fossil fuels). Much will depend on the price at which gas becomes available, the development of distribution networks (including small-scale liquefied natural gas (LNG) distribution), the financing available for infrastructure and the strength of policy efforts to displace polluting fuels.
In our projections, Africa becomes a major player in natural gas as a producer, consumer and exporter. Gas demand in Africa doubles to 2040 in the Stated Policies Scenario. The growth in production is considerably higher than the rise in demand, and Africa – led by Mozambique and Egypt – emerges as a major supplier of LNG to global markets.
Africa has abundant natural resources and the associated revenues could be an important motor for development. However, changing global energy dynamics mean that resource-holders cannot assume that their oil resources will translate into reliable future revenues. This year’s outlook incorporates higher US shale oil production, which is providing very strong competition for lighter African crudes. Accelerated energy transitions could result in lower global demand and prices and cut sharply into future revenues. Our analysis underscores the need for strategic thinking on future investments, transparent resource revenue management and efforts to reform and diversify economies.
Africa is also home to many of the mineral resources that are critical in driving global energy transitions. The Democratic Republic of the Congo accounts for two-thirds of global cobalt production and South Africa produces 70% of the world’s platinum. Rising demand for the minerals that can support global energy transitions offers an opportunity for minerals-rich countries in Africa, but failure to keep up with demand could not only hamper Africa’s economic outcomes but also hold back the pace of global energy transitions. Responsible stewardship of these resources is vital. Robust regulatory and oversight mechanisms would be needed to ensure that revenues produce visible positive results for local communities and that negative impacts on the environment are minimised.
Africa has been a minor contributor to global greenhouse gas (GHG) emissions. To date, energy-related CO₂ emissions in Africa represented around 2% of cumulative global emissions. Although Africa experiences rapid economic growth, its contribution to global cumulative CO₂ emissions increases to just 3% by 2040 in the Stated Policies Scenario. Higher economic growth in the Africa Case does not result in more GHG emissions as the increase in CO₂ emissions is offset by reductions in other GHGs (methane and nitrous oxide) linked to the inefficient combustion of biomass for cooking.
But Africa is in the front line when it comes to the effects of a changing climate on the energy sector. Today, Africa has some of the lowest ownership levels of cooling devices of any region, despite almost 700 million people living in areas where the average daily temperature exceeds 25 degrees. By 2040, this number approaches 1.2 billion as population expands and average temperatures increase with climate change. Without appropriate regulations on the type of equipment used for cooling, this would create a very strong increase in electricity demand. Increased frequency and intensity of extreme weather events such as droughts and floods is set to lead to more variability in generation output, notably from hydropower. Planning and investment decisions for energy infrastructure need to be climate resilient.
Thanks to resource endowments and technology improvements, Africa has the opportunity to pursue a much less carbon-intensive model of development than seen in many other parts of the world. The challenges and opportunities differ widely across a diverse continent. But renewables, together with natural gas in many areas, are poised to lead Africa’s energy consumption growth as the continent moves away from the traditional use of biomass that currently accounts for almost half of final energy consumption. With the appropriate policies to support a strong expansion of clean technologies and sufficient emphasis on energy efficiency improvements, Africa could be the first continent to achieve a significant level of economic and industrial growth with cleaner energy sources playing a prominent role than other economies in the past.