Powering Africa with Solar Energy – IMF F&D
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- Authors: GREGOR SCHWERHOFF, MOUHAMADOU SY
- Published: March 2, 2020
Energy access, costs, and economic impacts
- About half of sub-Saharan Africa’s population today does not have access to electricity.
- Those who do have electricity pay on average nearly twice as much as consumers elsewhere in the world.
- Power shortages cost the continent about 2 to 4 percent of GDP a year.
Demand projections and development challenge
- Population in sub-Saharan Africa is expected to grow from 1 billion in 2018 to more than 2 billion in 2050.
- Electricity demand is projected to expand 3 percent a year, taking into account a steady increase in access to electricity as well as greater energy efficiency.
- Meeting growing demand with current energy sources would have severe health and environmental consequences and would not meet the emission limits in the 2015 Paris Agreement (commitment to limiting global warming to 2°C above preindustrial levels).
Current energy mix and emissions
- Africa’s current energy mix is based mostly on burning coal, oil, and traditional biomass (wood, charcoal, dry dung fuel).
- Electricity supply in Africa (2018): fossil fuels 79 percent, hydropower 16 percent, solar and wind 3 percent.
- Africa contributed about 4 percent of global-energy-related carbon dioxide emissions in 2018.
Renewable-energy potential and technology options
- Technological advances allow designing an energy mix built largely on renewable sources that supports strong growth and low emissions.
- Chart-based 2013 projections (discussed in the text) suggest mixes using:
- modern biomass, cultivation of high-energy plants, crop residue to produce synthetic fuels;
- carbon capture and storage (CCS) for storing CO2 underground.
- Risks and constraints:
- Biomass production competes with food cultivation and nature conservation.
- CCS has not yet been tested at an industrial scale and can face local resistance.
- Geothermal is location-constrained (example: Kenya).
- Hydropower has environmental, social, and economic trade-offs, requires inundation of large areas, and is vulnerable to drought (examples: Zambia and Zimbabwe curtailed generation due to low dam levels).
Falling costs and deployment experience
- Prices for renewable energy have fallen substantially; solar power cost decreased 77 percent between 2010 and 2018 (International Renewable Energy Agency).
- Biomass, geothermal, and hydropower cost the least but have limited potential.
- Solar and wind prices are now in the same range as fossil fuels.
- Successful projects and policy tools:
- Renewable-energy auctions in South Africa, Uganda, and Zambia achieved competitive prices and attracted private investors.
- South Africa has several solar plants with capacity >100 megawatts.
- Lake Turkana Wind Power project in Kenya cited as a success.
Variability, grid stability, and storage solutions
- Historically, variability in supply was the main problem for high shares of renewables.
- Technological advances to stabilize supply include:
- using hydropower as a buffer during peak demand;
- pooling electricity production via an interconnected grid across regions;
- demand-side adjustments to match supply;
- energy storage with flow batteries and hydrogen electrolysis.
- Current share of variable renewable energy is low; as it increases, these options can be rolled out to support higher renewable penetration.
- With these advances, updates of the referenced chart show Africa could rely 100 percent on renewable energy by 2050 without slowing development.
Financing challenges and policy recommendations
- Financing is the biggest challenge: fossil fuel plants are cheap to build but expensive to run; renewable sources are cheap to operate but have high up-front installation costs.
- Comprehensive financing approach needed, mobilizing public, private, multilateral, and bilateral donor financing.
- Public finance measures:
- Reducing inefficiency caused by fossil fuel subsidies, estimated at 5.6 percent of sub-Saharan African GDP.
- Progressively phasing out subsidies while protecting the vulnerable could raise financing for renewable projects.
- Mobilizing more domestic resources: average tax-to-GDP ratio about 14 percent in 2017, indicating room to increase tax revenues.
- Use of carbon taxation could boost tax revenue while reducing fossil fuel CO2 emissions.
- Private sector measures:
- Address governance-related risks identified by surveys—complex bureaucracy and changing regulation—as greatest threats to private investment.
- Improve governance to reduce political risk.
- Reform the financial sector to boost the incipient green bond market.
- Reduce financial risk by transferring part of it to public actors to attract private investment.
- International and multilateral roles:
- Multilateral financial institutions facilitate long-term financing and provide tailored advice on effective deployment of climate financing.
- The 2015 Paris Agreement included advanced economies’ commitment to mobilizing the equivalent of 0.12 percent of the world’s GDP a year through 2025 to address needs of developing economies; honoring this commitment would smooth Africa’s transition to a low-carbon-energy economy.
Equity and global context
- Africa is the continent with the lowest contribution to global warming yet is the region most affected by climate change—justifying increased international support.
- Only about 4 percent of global-energy-related carbon dioxide emissions in 2018 originated in Africa (IEA 2019).
Authors and affiliations
- GREGOR SCHWERHOFF — economist, World Bank’s Macroeconomics, Trade and Investment Department.
- MOUHAMADOU SY — senior economist, IMF’s Monetary and Capital Markets Department.
Powering Africa with Solar Energy — F&D Magazine (March 2020), Gregor Schwerhoff and Mouhamadou Sy
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- Powering Africa with Solar Energy – IMF F&D
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