Africa is, currently, the world’s most crucial hotspot for renewable energy. Its potential is immense: according to RES4Africa’s Connecting the Dots : Why only 2% of global RE in Africa?, the continent's solar energy sector could generate up to 11,000 GW of power, with the hydro and wind markets able to add, respectively, 1,750 and 1,300 GW to its energy mix. Overall, Africa could generate up to 24 000 TWh of electricity each year, a quantity which amounts to almost 90% of the global generation, and which would satisfy the internal energy demand by more than 26 times.
Such a potential is matched by noticeable advancements in the renewable energy technologies, which are making sustainable solutions every day more practical, efficient and cost-effective. The levelised cost of energy (LCOE) for wind power has decreased by 35% since 2010 (Connecting the Dots), whereas for solar energy the reduction amounts to 77%. Moreover, renewables are every day safer in terms of reliability of the power supply.
Nevertheless, the majority of Africa’s renewable energy sources remain widely unexploited, highlighting a mismatch between natural endowments, technological advancements, and the actual deployment of sustainable power. For instance, despite being home to 60% of the global solar potential, Africa has installed only 1% of the correspondent power capacity (IEA’s Africa Energy Outlook 2022), which equals to 2% of the worldwide added capacity in the last 15 years.
This gap has unavoidable repercussions on Africa’s economic and social development. More than 43% of the population (600 million people in 2022, according to UN’s Africa Renewal Magazine) don’t benefit from access to electricity, mostly in the Sub-Saharan States. Such a challenge poses serious questions about the feasibility of the renewable energy targets established by African governments: as a matter of fact, just a handful of countries (Ghana, Kenya, Rwanda, etc.) are on track to achieve full access to energy by 2030; in order to meet the current electrification targets, around 90 million Africans should be granted access to electricity every year (Africa Energy Outlook 2022).
This complex situation is a human and economic emergency, which affects various productive sectors and represents an obstacle to the development of a healthy and sustainable African energy market. For instance, 80% of Sub-Saharan African firms report frequent power disruptions, fluctuating between 15 and 60 hours per month, in comparison to 30 average monthly minutes experienced by companies from OECD countries. Such an unstable provision of electricity results in severe economic losses, which can reach as far as 2% of the GDP (Connecting the Dots).
Such a situation sinks its roots in a wide set of different issues, calling for radical political and economic reforms.
The first major problem consists in unsustainable business models adopted by African utilities: out of 39 countries, only Uganda and Seychelles are able to cover their capital cost of service, with under-collection of bills, overstaffing and underpricing appearing to be the main causes. Another factor of « unsustainability » are non-reflective tariffs which, in Sub-Saharan Africa, float around $0.08 per kWh : this average is not sufficient to guarantee the profitability of the local energy utilities, and it causes an annual loss of about 0.4 % of the GDP (Connecting the Dots).
A further set of criticalities regards the availability and operational state of the African energy infrastructures: only 3.3 metres of line are available per square km (about 10 times less than India), while national and regional poor power integration of infrastructures prevents the full access to new markets and sources of supplies. Furthermore, Africa experiences around 16% of transmission and distribution losses (Connecting the Dots), which do seriously affect the economic efficiency of Sub-Saharan electricity providers, as well uncountable businesses relying on the supply.
The regulatory frameworks are the last factor to consider. National energy policies and regulations are assessed through a set of indicators called RISE score, which evaluates energy access, efficiency and the availability of renewables in a given country. Out of 54 African states, just 6 are located in the top tier, with the majority of them still dwelling in the lowest one or not having undergone the evaluation. This classification equals to unattractive market regulations, high risk perceived by the investors, lack of de-risking tools covering all the investments phases and, last but not least, mismatches between planned and actual dates of bidding and awarding phases.
This stagnation will be unlocked just with a welcoming and safe environment for private investments, which can bring relevant added value to the African renewable energy market: higher availability of capital, more qualified personnel, a sound management of finances and availability of top-notch technologies. Some countries (South Africa, Morocco, Tunisia, Uganda) already pioneered successful measures, establishing realistic energy targets, favouring commercial PPAs, stimulating transparent auctions and implementing comprehensive de-risking mechanisms. Extending these best practices to other countries, as well as developing new ones, is Africa’s master path towards the full development of its staggering REs potential.