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Africa’s energy sector transformation hinges on addressing core challenges

Policymakers and the private sector are increasingly becoming concerned about the future of Africa’s energy sector. And with good reason. Current energy systems on the continent must expand rapidly to meet rising energy demand. This must be achieved in dependable, resilient, and cost-effective ways, while staying the course of climate compatibility and ensuring access for all.

Since the link between fossil fuel combustion and the negative effects of climate change became widely known, the future of energy systems has been a hotly debated topic on a global scale. Energy transitions, or pathways from fossil fuels to cleaner energy sources, have long been debated in Europe and North America. Among the many visible outcomes is the increased use of electric vehicles.

Majority of international media attention on Africa’s energy systems has simply focused on highlighting the magnitude of the challenge, as evidenced by statistics such as ‘570 million people living in Africa without electricity’. Beyond this, however, other aspects need to be looked at.

Business opportunity or fundamental development goal

The critical topic of energy transition in Africa has engendered renewed investor interest the sector – resulting in gas contracts, and the use of solar, wind and hydrogen. In many cases, it appears to be a business opportunity rather than a fundamental development goal or commitment to climate change – albeit a positive shift in narrative notwithstanding.

The continent as a whole is abundant in clean energy resources; solar, wind, hydropower, geothermal, and others. These are scattered across countries, but each has promising prospects, which need to be maximised.


Addressing these impediments, however, require a thorough understanding of the issues, the multi-faceted approaches to resolving them, and settling on the most viable and contextually apposite.

1. Counting the actual cost of RE in Africa

Modern renewables like the solar PV and wind power have the potential to produce electricity more cheaply than fossil fuel plants, which it does in many parts of the world. The International Energy Agency recently dubbed solar the ‘cheapest electricity source in history’. But is this always the case? Since most African countries face relatively high risks in comparison to the developed world, investors demand higher returns to justify investments. To break even, power plants must charge customers a higher price per kilowatt hour. Failure to account for such trends tends to bias model predictions towards overestimation of the role of solar and wind. Thus, the main question remains: how to de-risk investments in order to make solar and wind power affordable not only on paper or on a worldwide scale, but also in every single country.

2. Adaptable solar and wind energy

It is proven that modern power grids can operate reliably while using variable solar and wind power. However, countries where this works well –Denmark, Germany, and Uruguay– already had 100% access to electricity, with reliable and stable power grids before investing in solar and wind plants.

Many Sub-Saharan African countries cannot currently say the same. As a result, the main question is what interventions are required to allow African countries expand their underperforming power grids with solar PV and wind power.

Power system models have suggested that solar and wind power may be the cheapest way to provide electricity in the long run, but these models typically do not consider grid stability in depth. When used incorrectly, solar and wind power may exacerbate rather than improve the situation.

3. Matching supply and demand

Majority of the world’s power utilities are kept afloat by a relatively small number of high-consuming customers. These are usually commercial or industrial in nature. This pattern can be found across diverse geographies, including the United States and Kenya.

Many countries in Sub-Saharan Africa lack a strong industrial base. Meanwhile, utility companies must connect a large number of low-consumption customers with low-cost electricity bills. All of this must occur while electricity prices remain reasonable.

As a result, any future projections for increasing electricity access in Africa must account for the problem of reliable demand and reliable supply. Investing in new power plants will be unprofitable if no reliable customers exist. Without dependable customers, utilities will be unable to afford grid expansion. However, if the grid cannot provide dependable services, these customers will also lose faith in it.

4. Electrification and alternative fuels

The primary path to global decarbonisation of energy systems would entail electrifying end-use sectors (buildings, transportation, and industry) to the greatest extent possible, and using alternative green fuels in sectors where this is more difficult, such as steel and fertiliser production.

Reality is that traditional biomass is still the primary source of energy in most Sub-Saharan African households. The transportation system is heavily reliant on imported used vehicles. And industrialisation is just getting started. Most of these countries will experience a different transition to electrification and fuel substitution than the global north.

It is unclear how far Africa can ‘leapfrog’ fossil fuel use and move straight to clean energy, as is frequently claimed. What is imperative is how quickly fossil fuel consumption will increase across Africa and when it will peak. This will shed light on Africa’s economic and environmental implications.

5. Oil and gas opportunities and risks

The discovery of oil and gas for export can be a significant boom to a country’s national wealth. Several prominent African leaders insist on continued investment in oil and gas exploration and exportation to boost government revenue and meet global demand. At the same time, the Paris Agreement’s goals have prompted some investors to refrain from funding additional fossil fuel projects.

These mixed signals cause investors and planners to be uncertain. If countries invest in new oil and gas infrastructure, they may be left with stranded assets. Furthermore, governments focused on fossil fuel extraction may overlook clean alternatives (like e-fuels). More clarity is required regarding the opportunities and risks associated with such investments.

What now?

Debates on African energy transitions are likely to be oversimplified unless these issues are addressed in detail. Answering these questions will provide the objective facts required as the foundation for energy finance.

The implied questions can be answered through country-specific research. Existing modelling approaches must be expanded to account for current gaps. The country coverage must be expanded. Furthermore, funders should encourage research on understudied regions and industries. The term “electronic commerce” refers to the sale of electronic goods.

Source: Energy Ghana