Energy investment key to Africa’s economic growth
The area needs $3 trillion investment in infrastructure by 2030, says the IEA
Sub-Saharan Africa will need $3 trillion of investment in new energy infrastructure by 2030 if the region is to raise hundreds of millions out of poverty and sustain economic growth, a new report by the
International Energy Agency (IEA) said. In the IEA’s Africa Energy Outlook published on 13 October, the agency said spending on energy and infrastructure in sub-Saharan Africa would need to be doubled to $110 billion per year to give millions of Africans access to affordable electricity. Most of the new spending would need to be spent on domestic power generation rather than export-orientated oil and gas projects that have soaked up the lion’s share of Africa energy spending so far.
Sub-Saharan Africa could generate an extra 30% of economic growth by 2040 through $450bn of investment in electricity and infrastructure over the next 25 years, cutting power outages by half and providing universal electricity access in urban areas, the IEA said. More than 620m people in sub-Saharan Africa - around two-thirds of the population - live without electricity. That number is rising as population growth outpaces the rate at which countries can build new projects and supply power. The IEA expects Africa’s economy to quadruple by 2040 as the population nearly doubles to over 1.75bn, while regional energy demand will grow by around 80% in that time period.
Improving the region’s access to energy will be essential to support expanding economies and their fast-growing populations, the IEA said. Sub-Saharan Africa’s oil and gas resources are more than sufficient to meet the population’s energy needs at present, but they are unevenly distributed and largely under-developed. The region holds crude oil reserves of 62.6bn barrels and produces around 6 million barrels of oil per day (b/d), according to the US Energy Information Administration - around 7% of total, global oil production. Almost 30% of oil and gas discoveries made over the last five years were in sub-Saharan Africa and it is already home to several major energy producing countries, including Nigeria, South Africa and Angola. Africa also has strong potential for renewable energy resources, including solar and hydro power as well as wind and geothermal. However the region’s grid-based power generation capacity continues to fall short of what is needed, and half of it is located in just one country - South Africa. “This (oil and gas resources) shows us there’s still huge potential there,” Birol said. “In Nigeria, one of the largest energy producers in the world, 90m Nigerians - 55% of the population - don’t have access to electricity. This is a major issue.” The IEA said that in a ‘African century scenario’ - whereby the continent achieves growth rates on a par with some Asian and Latin American economies seen in recent decades - grid-based power generation capability would quadruple to 385 gigawatts (GW) by 2040, with renewable energy accounting for nearly 45% of the region’s total capacity. To help unlock investment in electricity and a roll out of access to almost a billion people in the region, governments will need to do much more to dismantle regulatory and political barriers that have held back investment, the IEA said. And even then, population growth would mean more than half a billion people, mainly in rural areas, would still remain without access to electricity in 2040. Two-thirds of investment in sub-Saharan Africa, or $40bn, has been directed to projects aimed at exporting energy – such as oil and liquefied natural gas (LNG) rather than developing power supply for domestic use. Energy exports would only have a much greater benefit for ordinary Africans if countries were to plough foreign earnings from the sale of oil and gas into domestic power generation and transmission infrastructure, the report said. But appropriate regulation, prices and infrastructure would need to be in place to funnel the proceeds of energy back into economies, while greater regional co-operation will be essential. The IEA expects the share of natural gas in the region’s energy mix to almost triple, to 11% by 2040 with output reaching 230bn cubic metres (cm). Nigeria will remain the largest gas producer, followed by Mozambique, Tanzania and Angola. Sub-Saharan Africa’s LNG exports are also expected to rise threefold to around 95bn cm. Revenues from oil will also continue to make big contribution to state coffers in producing countries, but regulatory uncertainty, militant activity and oil theft in the Niger Delta would likely deter investment and curb output.
The IEA expects the region’s oil production to exceed 6m b/d in 2020 before falling back to 5.3m b/d in 2040, with Nigeria and Angola maintaining their position as the largest producers in the region.
Improving the region’s access to electricity would also have major health benefits as well as economic ones. Many rural Africans are exposed to harmful indoor pollution caused by the use of wood and charcoal for fuel.
The use of traditional biomass in stoves is estimated to cause around 600,000 premature deaths a year, the second biggest killer in the region after AIDS, Birol said. “For those who have it, modern energy unlocks access to better health care, better education, better economic opportunities and even to longer life. For those who don’t have it, it is a major constraint on their social and economic development,” said the IEA’s executive director Maria van der Hoeven.
Key points from the IEA report
• Grid-based power generation capacity will quadruple by 2040, although this is from a very low base of 90GW today (half of which is in South Africa);
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