Africa deserves affordable energy and LNG is the first step
Africa has the lowest electricity consumption per capita of any region, having barely improved in the past 30 years
About 17% of the world’s population belongs to the beautiful continent of Africa. And although Africa has the potential to be a global economic powerhouse, we currently only generate about 5.9% of the world’s energy supply.
Eighty percent of Sub-Saharan companies suffered recurrent electricity supply disruptions in 2018, which resulted in significant financial losses for corporate companies and, more importantly, for small businesses. Worse than that, there are currently 630-million African citizens without power. The UN’s sustainable development goal number 7 is eliminating energy hunger by 2030. Are we going to hit our target or will this remain a pipedream?
In the past three decades, Africa has made some progress by almost tripling its generation capacity from about 310,000GWh to about 850,000GWh, as reported by the International Energy Agency. Advanced nations such as China, which has a similar population size to Africa, within the same period, increased its generation capacity from about 800,000GWh to just more than 7-million GWh, an almost nine-fold increase in electricity generation.
However, total generation capacity does not show the full story, with the disparity being best demonstrated when considering electricity consumption per capita.
In 2018, the electricity consumption per capita in the EU was 6MWh/capita, and in the US it was more than double at 12.8MWh/capita. China was at 4.9MWh/capita, having been at 0.5MWh/capita 30 years earlier. South Korea was at 10.9MWh/capita. And so the statistical trend continues, with developed countries usually having an electricity consumption per capita of greater than 5MWh, and countries that have seen rapid development having drastically increased this figure during the course of their development.
Africa, by contrast, has the lowest electricity consumption per capita of any region, having barely improved in the past 30 years, going from 0.46MWh to 0.57MWh.
Africa’s energy deficit is estimated to cost it between 2% and 4% of its annual GDP, and this is manifested in an increase in business operation costs due to needing to install off-grid systems and to account for delays due to frequent power disruptions. The continent will need more energy in the future, not just to keep up with developing industries and increased residential demand, but also to deal with the effects of climate change as agriculture requires more pumped irrigation, homes and business require more climate-control mechanisms, and states need to reinforce infrastructure.
So how does Africa ensure everyone has access to cheap, stable and abundant energy? The fundamental components of an effective electricity system are generation and distribution, so Africa needs massive investment in both of these.
LNG plants cost about the same as any other fossil fuel-based generation plants but, unlike coal, most finance institutions are still willing to fund their construction and operation at competitive rates
Micro-grids and off-grid systems are great for ensuring residential access to electrification, which do facilitate development through, for example, education and increased small scale commerce, but the reality is that development on the scale Africa requires means grid-scale electricity solutions are a priority.
The largest consumer of electricity globally is industry, and for industry to grow on the continent it needs to have access to abundant, stable and affordable electricity, which we would argue only comes with grid-scale electrical systems and the advantages of scale that such systems enjoy. However, these grids merely facilitate the delivery of electricity, so along with investment into electricity grids, Africa needs to massively increase investment into generation.
How, then, should Africa generate the electricity it so desperately needs?
We argue that there are two areas of investment that need to be focused on in building Africa’s generation capacity. The first is renewables. The recent cost decreases in solar photovoltaic and wind generation mechanisms have made them competitive grid-scale solutions, especially when fully pricing in the long-term maintenance costs, rising fuel costs and decommissioning costs of more traditional generation types of power generation, such as coal.
However, even if incorporating some storage solution that may be cost effective at grid scale, renewables do not provide the stability required as the sun does not always shine and the wind does not always blow. There thus needs to be a baseload generation capacity that delivers stable power as affordably and cleanly as possible — at least until affordable, long-term, grid-scale storage becomes feasible.
Huge hydropower projects, such as the Grand Renaissance Dam or Grand Inga Dam, while very capital intensive, will be great sources of reliable and clean energy while assisting with water management concerns, which will become crucial in the coming decades. However, despite having some of the largest rivers and large swathes of land that could be used for the required reservoirs, this would still not satiate Africa’s energy needs. So Africa, for the time being, still needs to invest in fossil fuel-based generation facilities.
In so doing a number of factors need to be considered. Cost is one of the most obvious factors, but other important ones include the availability of fuel and what their economic future looks like (the ability to retrofit the facilities as technology improves and the best management of our available carbon budget).
The last point is particularly important as, while fossil fuels may still be a necessity for Africa, this does not mean their harmful impacts should not be considered. When considering all these factors and all fossil fuel-based options available, there is a clear winner: liquified natural gas (LNG).
LNG plants cost about the same as any other fossil fuel-based generation plants but, unlike coal, most finance institutions are still willing to fund their construction and operation at competitive rates.
LNG is becoming more readily available on the continent with the discovery and development of numerous gas fields, and while the cost/kwh of LNG is higher than coal, when taking into consideration the costs over the lifecycle of the facility (especially including decommissioning costs, maintenance costs and the likely ramp-up in coal prices while LNG will likely become comparatively cheaper) LNG is the long-term financial winner.
Beyond the practical reasons, there are additional, compelling, long-term reasons that Africa should invest in LNG.
When coupled with “greening” technologies such as carbon capture, LNG is the least harmful of the fossil-fuel generation technologies — but beyond that, LNG is seeing the most investment in being made greener. For example, Mitsubishi Power, one of the largest suppliers of LNG turbines, has recently revealed that its existing turbines can easily be retrofitted to burn a mixture of LNG and 30% hydrogen, thus reducing harmful greenhouse gas emissions.
Looking further into the future, as green hydrogen technology develops and becomes cost competitive, LNG facilities will be the most cost-effective to convert to 100% hydrogen, making them stepping stones to the renewable and clean energy supply Africa needs.
Africa needs more power, and to satiate that need we need to invest in technology that meets our present needs while being cognisant of their future consequences and requirements. Investing in LNG infrastructure, which can then be converted to hydrogen infrastructure down the line, is a necessary step towards helping Africa develop.
With more abundant and affordable energy our industry, and with it our economies, can expand and grow so we can bring our population not just out of energy poverty but out of socio-economic poverty too.
• Nott is head of Africa, and Marot candidate attorney, at Norton Rose Fulbright.
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