COVID-19 and Renewable Energy Transition In Africa: Challenges and Opportunities

Since the inception of COVID-19, mankind have witnessed the unleashing of an unprecedented global economic dilemma, resulting in a terra incognita for countries and most sectors, but few more so than the rapidly transitioning energy sector. Africa’s energy transition is faced with the challenges of disruption in the renewable supply chain, down-fall in oil price, and the economic impact of COVID-19. The next couple of months, post-COVID-19 will determine the failure or success of a renewable energy transition in Africa.

Until recently, Opec+ was successful in managing oil production levels and price stability during this pandemic. However, market share problems between Russia and the United States prompt the Russians to withdraw from the agreement and open up their pumps (Produce as they want). West Texas Intermediate (WTI) on April 21st 2020 announced for the first time in history oil prices plunged into negative territory as demand evaporated resulting in a barrel to cost – $37.63 (BBC, 2020). As economies are on a standstill, the demand for oil reduced as many countries initiated lockdowns, which resulted in so much unused oil in storage and shortage in storage systems as nobody wants it (BNEF, 2020). All this is happening when the energy transition is gathering momentum on the continent, many energy experts are of the belief that the renewable energy and environment sectors have so far been able to fare slightly better than other resource base sectors, however, the pressure on energy systems from lockdowns and demand makes the emergence of cracks within the sector. This article will explore if Covid-19 and the plummeting oil price will be more of a challenge or an opportunity for Africa’s energy transition.

Renewable financing 

We have lost count of what days of quarantine States on the continent are on, and bad news just keeps on coming, and many expect the worrisome recession that is floating around to be the nail on the coffin for Africa’s renewable energy investment and the transition process. The uncertainty of a potential global recession is a major challenge Covid-19 poses to the African renewable energy transition momentum. A global recession will result in discretionary access to capital to fund renewable operations on the continent. It has been projected for energy transition in Africa to experience a knock-on-effect in financing renewable energy projects post-covid-19, there was already a dip in renewable investment over the last two years (BNEF, 2019). Projects that are supposed to be implemented by smaller companies or governments that relied on donors or countries that are classified as Lower Income Countries (LIC) will find it difficult to finance renewable energy projects. The lack of finance for renewables may result in slowing down the transition process and may result in African countries investing in fossil fuels and we may experience high carbon emissions as they try to get their economies back on track.

Disruption in renewable supply chain

The most significant short-term impacts of COVID-19 on renewable energy development on the continent will come from the disruption in renewable supply chains. The partial or total lockdown initiated in many industrialized countries, particularly China were most large scale renewable parts come from will result in a shortage of parts for projects under development and projects that to be implemented. Renewable energy production has been slowed down in recent months as production in most countries has been put on hold, which will result in a slowdown in supply chain and project execution. Experts predict a slowdown in renewable energy growth around the continent post COVID-19 (Macola, 2020). In assessing the extent at which COVID-19 will impact renewable energy projects due to import dependency, Verdict conducted a poll among 358 energy experts and in analysing the obtained results, COVID-19 will have a major impact on renewable supply chain due to subdued instritrial activities in China and other manufacturing powerhouses.

Defaulting to dirty fuels

According to data from the International Energy Association (IEA), Africa is home to six-hundred (600) million people who lack access to reliable electricity supply (IEA, 2020). The energy sector on the continent is already faced with many challenges before the pandemic. African states have been battling on how to decrease the cost of electricity production while increasing their electricity generation capacity at the same time. According to the African Development Bank, the average electricity traffic in Africa is $0.14 per kWh against US $0.18 per kWh on average cost of production (ADB, 2019). These figures place countries like Djibouti and Gabon among countries with the highest electricity tariffs globally (ADB, 2016). The continent has one of the lowest electrification rates world-wide, which has placed many governments in finding ways to produce more energy to meet demand. There are few electricity generators and suppliers on the continent (Most of which are state owned), the cost of production makes electricity highly subsidized. However, this high subsidies from governments has not been able to make electricity affordable. The World Bank defines affordable electricity as less than 5% of a household income that can buy 30 kWh of electricity (World Bank, 2016). Over the last couple of years, African states have seen Foreign Direct Investment (FDI) in renewable energy development skyrocket before the dip and 2017. The inception of COVID-9 will make things worse for the renewable energy transition in Africa, the writing on the wall clearly shows the sector will be hit hard by the global recession and the disruption in the renewable supply chain. Many countries on the continent don’t have policies that prioritize renewables over the more cheaper fossil fuel options. The energy transition may not look as attractive now that oil cost next to nothing as it did a year or two ago. The shortage of capital, and the overwhelming imperative of producing more energy as cheaply as possible, may result in governments defaulting to fossil fuels to meet the high demand when they start opening their economies.

So should we let COVID-19 go to waste? Have we thought about:

Market potential

The potential impact of COVID-19 on Africa’s renewable energy transition has been highlighted above, however, the pandemic has presented some emerging opportunities for less panic from the consequences of the crisis. African states have been experiencing huge economic growth since the dawn of the 21st century, this pandemic presents the continent to scale up this development through prioritising investment in renewable energy development in their recovery stimulus packages. Covid-19 may have threatened to reset the clock, however, the growing demand for electricity and economic potential makes the continent the next home for large investment if African states start rebranding themselves. According to the International Renewable Energy Agency (IRENA), the global economy will gain $100 trillion post COVID-19 if renewable energy development is prioritized (The Guardian, 2020).  This huge gain is expected to quadruple the number of renewable energy related jobs to forty-two  (42) million during the next thirty (30) years (Jillian Ambrose, 2020). The Director-General of the International Renewable Energy Agency, Francesco La Camera, in a recent interview said “ By accelerating renewables and making the energy transition an integral part of the wider recovery, governments can achieve multiple economic and social objectives in the pursuit of a resilient future that leaves nobody behind ” (Renewable Energy World, 2020). The continent can be a rising phoenix post COVID-19, as investment in renewables may be attractive in the long term. This is the time Africa has to step up and grab this opportunity to transform its economics through renewable energy development.

Climate Action 

Over the last couple of months, we have seen a drastic reduction in greenhouse gas emissions around Africa and the globe. The massive reduction in factory activities, and the demand of electricity as the need drops due to measures to manage the spread of the virus, have seen us achieve the lowest pollution levels in decades. Countries have been finding it difficult to manage their carbon emissions, the continent accounted for 1 – 1.5 billion tonnes of CO2 gas emission in 2018. Even Though the continent accounts for one of the lowest emissions by region, the continent has been very vulnerable to climate change issues due to its low adaptation and response capacity. Countries have experienced a huge percentage in their carbon emission rate, the crisis has given the planet the chance to breathe and in presenting Africa with a new opportunity of cutting down its emission rate and in developing new and improved energy systems. The potential of the renewable energy sector as the continent develops a green economy cannot be over emphasized.  It is the responsibility from governments and the private sector to make this crisis the cornerstone that will facilitate the cutting down of carbon emissions. The continent has the choice to continue using high pollutants (fossil fuels) or pursue the development of clean energy systems.. The 2019 energy progress report stated that accelerating investment in renewable energy and clean energy development would tackle the current climate crisis by 70% before 2050, and would only require a one time investment that would pay for itself in the long run (Ambrose, 2020). As it emerge from COVID-19, it is essential for the continent to come out with a green recovery plan. This will benefit the continent environmentally, socially, and economically. Africa has to do everything possible to navigate towards the right direction to lead the 1.3 billion people who call it home to a better future while giving mother nature a well deserved break. This is an historic turning point, Africa should not allow this pandemic to compromise its energy transition process. 

Innovation

It is a widely held belief among non-profit organisations that “tough times sparks innovation”. A shift in the thinking patterns on the continent would facilitate the development of new and improved energy systems and processes. We have mostly been sourcing for the cheapest fossil fuel available, but new technology will make it easier for energy to be affordable and efficient on the continent. Energy demand will rise post COVID-19, new technology development will speed-up the transition process, which will inform how we generate, distribute and consume energy. The development of Energy Storage Facilities,  Artificial Intelligence in Microgrids, Blockchain and IoT in distribution and Grid Parity will speed up the transition process.  This period presents the continent towards a more competitive electricity market, with innovation we will manage the potential COVID19 technical and economic issues. In handling distributed generation within the continent’s energy markets, its high-time the concept of virtual power plants (VPP) to be explored. Most energy systems on the continent have been relying on the traditional centralised power plant system, however, the Virtual power plant (VPP) system functions remotely in combining independent power stations/production sites into a network that facilitates reliability on the grid (Cohn, L., 2020).  Virtual power plants in Africa will see the rise of “Prosumers”, which will impact future energy needs.In the early 1980s, Futurist Alvin Toffler coined the term ‘prosumer’ to describe people who both consume and produce a product (TBB, 2020). Energy transition in Africa should no longer be an idea, but a fact that calls for a shift from consumer base to a large prosumer population. The LEAFS project, that was carried out by the Austrian Institute of Technology, aimed to make citizen involvement the cornerstone in the energy transition process through the establishment of new technologies that will enhance their interaction with the grid (Leafs, 2020). This will be worth exploring as we innovate procedures and systems that will keep the energy transition on track post covid-19. Utilities on the continent should recognise the need to develop their systems to keep up to demand and in staying relevant in the transition process. 

Way forward: 

At the end of the day, it shouldn’t take this pandemic or subsequent pandemics for Africa to reconsider the development of renewables. COVID-19 present the continent with a golden opportunity to reset the clock on how it wants to go, and the choices it leaders have to make in developing a sustainable energy sector. The Economic response packages will provide a once in a generation opportunity for the acceleration and development of a  more reliable and sustainable energy system. Africa has the chance to make change right now – it will be returning to “normal life” very soon, but foundations for what will influence its development drive starts now. This pandemic should serve as the catalyst that should accelerate governments and energy utility companies’ effort in diversifying energy sources on the continent.

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