Just energy transition for productive transformation in Africa.pptx

A presentation on the topic "Just energy transition for productive transformation in Africa".

I shared my thoughts on what "Just Energy Transition" should mean for African countries with researchers of the African Research and Impact Network (ARIN). In my presentation, I highlighted the complex interactions that the energy sector has with other aspects of society including the economy, politics, geopolitics, productive capacity, and the environment. I noted that every country pursues an energy policy that aligns with its level of development and local realities.



Given the level of development of most African countries, just energy transition arguments in Africa must be framed in a manner that results in

(a) Economic Benefits (Stimulating economic growth, reducing dependency on imports, diversifying energy sources);
(b) Social Benefits (job creation, improved public health, enhanced quality of life); and
(c) Environmental benefits.

The economic and social benefits of any energy development pathway have to preceed the environmental benefits. Moreover, energy transition in Africa has to be tied to the improvement in the productive capacity of countries (i.e. the capacity of countries to produce goods and services that are internationally competitive).

1. Just energy transition for productive transformation in Africa By Uduak Akpan, PhD. Director of Research, SPIDER Solutions Nigeria Postdoctoral Researcher, SOAS University of London Presented on 2 nd September 2024 at the Africa Research and Impact Network (ARIN ) meeting

2. Table of Contents

3. Point 1 : Different elements of the energy system have complex interactions and create reinforcing loops with different variables in the wider society

4. Complex energy-society interactions : loops, stocks and flows, time delays Economics (micro and macro, investments) Politics Geopolitics Productive capacity Technological evolution Environmental sustainability Production Traditional biomass Coal Hydrocarbons Hydro REs Transformation Consumption Transportation Residential Industrial Services Agriculture Energy sector Society

5. Electricity generation by source in selected non-regional countries ( TWh )

6. Point 2 : The energy sectors of 54 African countries differ significantly. Some countries are performing better than others

7. Electricity generation mix in Africa, 2000 and 2022

8. Point 3 : There are key challenges: electricity access; infrastructure limitations; economic constraints; low Fiscal space; high investment risk profiles; Climate change; among others

9. Electricity Access Rate by country. Source: IEA, Tracking SDG 7 Database 760 million people without access to electricity. 80 % are in sub-Saharan Africa

10. Productive capacity index by region (2001 – 2022) NB: UNCTAD defines productive capacities as “the productive resources, entrepreneurial capabilities and production linkages, which together determine the capacity of a country to produce goods and services and enable it to grow and develop .” The categories include: Human capital ; Natural capital; Energy; Transport; Information and Communication Technology (ICT); Institutions; Private sector; and Structural Change Source of data: UNCTAD

11. Source of data =: https ://media.afreximbank.com/afrexim/State-of-Play-of-Debt-Burden-in-Africa-2024-Debt-Dynamics-and-Mounting-Vulnerability.pdf Rising debts pressures affects the capacity of countries to make strategic investments

12. Point 4 : Climate change is a risk and an opportunity. This is even more critical given the demographic and urbanization prospects of the continent . Just energy transition in Africa must be framed in a manner that results in: Economic Benefits ( Stimulating economic growth, Reducing dependency on imports, Diversifying energy sources) Social Benefits ( Job creation, Improved public health, Enhanced quality of life) Environmental Benefits ( Lowering carbon footprint, Preserving natural resources)

13. Human Development Index, 2022

14. Climate change will affect countries that rely on hydropower.

15. Source of data: UN DESA. World population by regions (1950 – 2050, millions) Urban settlements in Africa (1960, 1980, 2000, 2020, 2035) Shares of world population by region (1950, 2020, 2050)

16. Possible climate change impacts, when combined with high population growth and urbanization, will place even more pressure on existing infrastructure. Countries will need to: Increase the capacities to meet the needs of more people Building capacities to manage societal challenges that accompany rising population levels and urbanization. This implies that the countries urgently need to build productive capacities for structural transformation, economic growth, export diversification, among others.

17. Levelized cost of RE is reducing Source of data: IRENA (2023)

18. Case studies

19. Case study 1: South Africa South Africa is the most industrialized country in Africa South Africa’s electricity generation mix is dominated by coal Inadequate investment in capacity expansion has resulted in rolling blackouts Just energy transition in South Africa requires managing the legacy of coal plants alongside issues of employment to ensure new jobs, better jobs, social justice, and poverty eradication. Additional capacities in renewable energy is leveraging on existing industrial capabilities

20. Case study 2: Nigeria

21. Coverage of transmission lines in Nigeria Electricity access by states Population density by states

22. Nigeria is an oil-rich country with abundance of natural gas The energy mix is dominated by natural gas and hydropower The electricity sector is grossly inefficient and sporadic outages are common Just energy transition in Nigeria requires leveraging on natural gas to productive transformation . Decentralized renewable energy may be appropriate for off-grid areas. Case study 4: Nigeria

23. Case study 3: Morocco Abundance of solar and wind resources Relies on import to meet electricity generations needs from fossil fuels Good economic growth and improving productive capacities (e.g. automotive, aeronautics) RETs are very critical to promote energy security and just energy transition requires more investments in RETs

24. Ouarzazate’s Noor Complex solar power station Ouarzazate’s Noor Complex solar power station is a concentrated solar power (CSP) station with an auxiliary diesel fuel system which is used to support the CSP plant at night. Phase 1: Noor I – 160MW Phase 2: Noor II and III – 350MW Funding: PPP with blended financing

25. Case study 4: Ethiopia Grand Ethiopian Renaissance Dam Project: is a 6,450 MW hydropower project nearing completion on the Blue Nile in Ethiopia

26. Electricity generation is dominated by hydropower Hydropower development was done in phases, start from smaller capacities to development technical competence Hydropower development is done by the utility which underscores the importance of developing technical capacity. Government supported by managing the geopolitical risks with Nile River countries. Funding is by the government – through budgets The development of hydropower has greater economy-wide value addition as it stimulates the construction industry Electricity supply and low tariff is used as a part of the offer to investors Universities are actively involved in the process

27. Private sector investments may serve specific demand but are designed to minimize cost and maximize profits. Consequently, private sector projects may not be linked to productive transformation Contrasting cases Some public sector projects to promote energy access, including those supported by credit from MDBs, have limited impact on building local productive capacity. In some cases, all equipment is imported PPP arrangements may be fine in some cases. The primary objective is to integrate local manufacturing with investments in electricity generation.

28. Point 5 : The central challenge that needs to be addressed is how to attract long term finance suitable for the peculiarities of the energy sector and appropriate for the local context of each country.

29. Technology Country Number of projects Capacity of projects (MW) Solar PV Egypt, Arab Rep. 28 1920   Kenya 7 268.5   Senegal 6 630   South Africa 42 2412.08   Others 63 4374.6   Subtotal 146 9605.18 Solar CSP Morocco 4 1310   South Africa 8 650   Subtotal 12 1960 Wind Egypt, Arab Rep. 4 742.5   Morocco 6 653.21   South Africa 40 3996.24   Others 12 1021.9   Subtotal 62 6413.85 Large hydro (> 50MW) Zambia 1 120   Cameroon 1 420   Subtotal 2 540 Small hydro (< 50MW) Gabon 4 70   Uganda 8 142.95   Others 5 59.8   Subtotal 17 272.75 Others Others 13 442.5 TOTAL   252 19234.28 Private sector investments in electricity generation in Africa, 2011 to 2023 Uniqueness of energy sector investments High capital intensity Long lead time Technological Evolution Economic and financial risks Subject to political economy Heavily regulated

30. Investment in hydropower resources Financing landscape is changing (e.g. African Energy Bank) Domestic and public sector financing is the most critical source of finance Source: Korkovelos et al 2018

31. Conclusion : Just energy transition is important, but must be just for the country! For this to happen, energy transition must be linked to productive transformation