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How we achieve the energy future Africa needs

By , Managing Director of Africa, Siemens Energy.
01 Dec 2023
Nadja Haakansson, Managing Director of Africa at Siemens Energy.
Nadja Haakansson, Managing Director of Africa at Siemens Energy.

In 2022, global emissions reached a record high of 36.8 billion tons of CO2. During 2023 several months broke global warming records and scientists at the European Union’s climate change service are now forecasting that it could be the warmest year ever logged. With global energy demand expected to surge by approximately 25% by 2030 and emissions expected to continue to grow, we face energy poverty in combination with climate impact, for the most vulnerable population in the world. That 775 million people still lack access to the most basic means of electricity, of which 600 million in Africa, the population growth rate in combination with these challenges will have devastating outcomes. Unless we unite to resolve the most significant hurdles.

The continent, which accounts for just 3% of total emissions globally, loses USD 7–15 billion annually from climate change impacts and this is projected to climb to USD 50 billion by 2030. Africa also faces a climate finance gap of USD 213 billion between now and 2030, according to the African Development Bank Group (AfDB). Adding more urgency to the situation, Africa has the fastest-growing population in the world, which is expected to reach 2.5 billion by 2050, according to the United Nations.

We need to implement the solutions that deliver energy in the most sustainable, reliable, and affordable way.

In a couple of days, COP28 will convene the people that can make this a reality. What is required is that COP28 delivers, despite challenging global and geopolitical circumstances, the will and collective action that turns information sharing, marketing, and vague recommendations into tangible action plans. What matters is implementation towards the desired change.

Regional and global development finance institutions, global energy decision-makers, governments, and companies all need to commit to supporting Africa in building the energy future it needs.

Recognising today’s challenges

Although Africa accounts for a fifth of the global population, the region has attracted only 2-3% of global energy investment, according to the AfDB and the International Energy Agency (IEA) in their recent Financing Clean Energy in Africa report.

A major reason for this has been that, historically, the overall risk profile for projects in Africa made it significantly more expensive to finance than those in advanced economies. This was exacerbated by higher borrowing costs due to the Covid-19 pandemic and Russia’s war in Ukraine. Despite Africa’s immense green energy potential, developers often abandoned projects because they could not see their viability.

The AfDB and IEA propose the easing of financing costs to unlock a wave of clean energy spend in Africa. Currently, the cost of capital for energy projects in African countries is at least 2-3x higher than in advanced economies and China.

To deliver modern energy to all Africans by 2030, we will need to double the current energy investment in Africa. That means over USD 200 billion in spending per year, of which two-thirds will need to be directed to clean energy, according to the report.

Commercial case for an African just transition

Two important recent announcements may go a long way to help mitigate climate financing challenges, by drawing attention to the opportunities and stimulating the commercial prospects that sustainable energy projects in Africa can offer.

The first is the African Development Bank’s announcement in late September that it would provide USD 25 billion in climate finance by 2025. As part of this, USD 20 billion will go to the Desert to Power program to develop 10,000 MW of solar across eleven countries of the Sahel zone of Africa and provide electricity for 250 million people.

The second significant recent funding announcement for Africa is the #COP28 finance initiative between the United Arab Emirates (UAE) and Africa. In strategic partnership with Africa 50, an infrastructure investment platform with African governments as shareholders, the initiative brings together public, private, and development capital from various sources in the UAE.

Its intention is to support African energy transition strategies, including enhanced regulatory frameworks and a master plan for developing grid infrastructure, integrating both supply and demand. The plan is to kickstart a pipeline of bankable clean energy projects in Africa, starting with 15 GW of clean power by 2030, by deploying USD 4.5 billion to catalyse an additional USD 12.5 billion from multilateral, public and private sources.

In making the announcement, COP28 President-Designate Dr Sultan Al Jaber said climate change now contributed to a fifth of Africa’s people being hungry, and the displacement of African citizens tripling in the last three years - dragging Africa’s GDP growth down by at least 5% every year. Urgent intervention is therefore not just for the sake of the climate - it is a socioeconomic imperative too. He announced that support to address these issues would be available to any African government with “clear transition plans, robust regulatory frameworks and a real commitment to putting the necessary grid infrastructure in place”.

Next steps to build the energy future Africa needs

Africa’s need to achieve energy security and a just transition are clearly established. The funding side of the equation is gaining attention though not yet solved. Another piece that needs to fall into place is governance.

In a bid to mitigate high capital costs, amplify socioeconomic development, and ensure a just energy transition, African governments need to take more efforts to improve climate governance and policy frameworks, to address corruption, curb emissions, and enable investment in clean energy solutions and infrastructure.

To facilitate progress, regional governments must reassess how they operate and recognize that energy is not a commodity but the foundation for social development, economic growth, and prosperity. The absence of a resilient electricity supply hinders economic growth and slows down social development. The energy transition must be embraced as the most significant socio-economic and environmental transformation since the Industrial Revolution.

African countries have never stepped into a COP28 with more solid opportunities to accelerate energy transition. Our African governments now need to take the necessary concrete action to unlock the monumental support they finally have access to, while addressing the decarbonisation opportunity as a pivotal moment to establish a new market and an accelerated industrialization. This is the tipping point and time for action.

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