Africa Energy Yearbook 2023

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AFRICA ENERGY YEARBOOK 2023/2024 OFFICIAL PUBLICATION OF THE 25TH AFRICA ENERGY FORUM IPP’s. In one place. In partnership withYearbook Sponsor Forum Sponsor

MASDAR PIONEERING THE FUTURE OF SUSTAINABILITY

Since 2006, Masdar has been a pioneer in advancing the clean energy sector and a key enabler of the UAE’s vision as a global leader in sustainability and climate action. As one of the fastest-growing clean energy companies in the world, we are advancing the development and deployment of renewable energy and green hydrogen technologies to address global sustainability challenges. If you want to help create a more sustainable future for all, find out more at our website – www.masdar.ae.

Masdar is active in over 40 countries across the world

Our project portfolio has a combined capacity of over 20 GW

Our projects displace almost 30 million tonnes of CO2 annually

We are invested in projects worth more than US$30 billion

24 Communiqué SETTING AN EXAMPLE TO THE WORLD

It’s time to harness the world’s leading array of renewable natural energy resources to meet growing demands.

26 Kenya case study GEOTHERMAL RACE HEATS UP AFRICA

Kenya has led the way in developing its geothermal energy resources – with support from

Can its neighbours catch up?

32 Interview

H.E. HONOURABLE DAVIS CHIRCHIR

Cabinet Secretary for Energy and Petroleum, Kenya

34 Interview

JULIUS MIGOS OGAMBA Chairman, Kenya Electricity Generating Company.

36 Communiqué DRIVING AFRICA’S GREEN ENERGY TRANSITION

Fortescue Metals Group plans to decarbonise by 2030, and will evolve into an international green energy, technology and resources company.

40 Resources

THE GREEN CONTINENT Africa’s huge energy resources mean the continent is well placed to capitalise on gathering momentum behind clean energy technologies, if investment can be mobilised.

44 Energy overview

SOLAR LEADS THE WAY IN NEW RENEWABLES INVESTMENT

Some large renewable energy projects are coming to fruition, even if the investment climate for African renewables remains fragile.

Welcome from the Editor EnergyNet’s Sarah James 8 Photo Gallery aef photo of the year competition 14 The artist’s viewpoint THE TURKANA ARTISTS EXCHANGE PROJECT 16 The artist’s viewpoint ART AMBASSADORS FLYING THE KENYAN FLAG HIGH 18 Youth Energy Summit SAYING YES! TO A BRIGHT FUTURE FOR AFRICAN ENERGY
the next generation to create their own visions for a more sustainable world.
AN ALL-OF-ALLIANCE APPROACH TO ACCESS Collaboration is required to drive down the cost of muchneeded clean energy solutions. Africa Energy Yearbook 2023
CONTENTS 7
Guiding
22 Collaboration
3 Africa Energy Yearbook 2023 26 14

46 Climate policy AFRICA SEEKS POLICY SHIFT TO SCALE UP INVESTMENT

Africa needs more than targets and positive words to mobilise urgently needed investment in climate change impact measures and the energy transition. Are international policy forums providing the solutions?

48 Communiqué IMPORTANCE AND VALUE OF HYDROPOWER PROJECTS

As the demand for clean and sustainable energy sources continues to grow globally, hydropower is gaining

52 Natural gas STEPPING ON THE GAS

Once the preserve of giant producers, natural gas developments are now emerging across the continent – and playing a role in shoring up global energy security.

54 Country focus EGYPT’S GREEN TRANSITION

The Sovereign Fund of Egypt is seeking to mobilise private sector investment in green technologies. CEO Ayman Soliman explains the Fund’s mandate.

56 Hydrocarbons TO BOLDLY GO

Frontier exploration is still shaping investment in Africa’s upstream, as oil companies unleash capex budgets on exciting new prospects such as Namibia.

58 Green hydrogen CAN AFRICAN STATES TURN GREEN HYDROGEN AMBITIONS INTO REALITY?

African countries are in a race against time to establish themselves as renewables-driven hubs to supply escalating global demand for green hydrogen.

62 Country focus GREEN HYDROGEN AT HEART OF NAMIBIA’S VISION 2030 James Mnyupe, Economic Advisor to the President of Namibia, discusses the country’s plan to leapfrog its development using clean energy.

64 Minerals MISSION CRITICAL: HOW AFRICA CAN PROFIT FROM ITS MINERAL BOOM

world’s reserves in a dozen minerals that are critical for the energy transition. With China and the US desperate for supplies, how can the continent harness this extraordinary opportunity?

Africa Energy Yearbook 2023 4 Africa Energy Yearbook 2023 48 90

70 United Africa

A UNITED CONTINENT CAN DRIVE NATIONAL PROGRESS

As Nigeria seeks to solve its own, country calls upon Africa more broadly to strengthen the bonds that unite it.

72 Interview

RICHARD CHARLTON

Head of Infrastructure Equity (Africa & Pakistan), BII.

74 Interview

MARTIJN PROOS

Co-Head of SA & Africa Credit at Ninety One.

76 Hydropower DROUGHTS RAISE DOUBTS OVER HYDRO’S FUTURE ROLE IN AFRICA

Uncertainties surround the outlook for hydropower in Africa, but new projects of varying sizes continue to gain access to

80 Private sector innovation

UNLEASHING AFRICA’S POTENTIAL, IN ‘PRIVATE’

The private sector will play a crucial role in channelling innovation towards universal access ambitions.

82 Wind power AFRICAN WIND POWER STRUGGLES TO GAIN MOMENTUM

Few African countries are harnessing wind energy on a for the rest of the continent.

86 Bioenergy BIOENERGY OFFERS AFRICA

A SUSTAINABLE FUTURE

of scaling-up the commercial production of bioenergy in Africa? Does biofuel really have to displace food production?

90 Energy infrastructure AFRICA’S RACE FOR TRANSMISSION INVESTMENT

Private investment in power lines is needed if the continent’s wind and solar resources are to be harnessed.

94 Financing FINANCING THE TRANSITION

DFIs and multilateral institutions are busy derisking renewable energy schemes, heralding the prospect of increased funding – and more private sector participation.

96 Financing TRADITIONAL ENERGY PROJECTS FACE UP TO FUNDING CHALLENGES

How is Africa’s oil and gas sector dealing with ESG constraints?

available for gas-to-power and LNG, but some oil projects are struggling to tap commercial lending support.

98 Last Word SCALING UP OR SCALING BACK?

Achieving the best funding model for renewable energy schemes is proving a challenge, but patience will be key.

AFRICA ENERGY YEARBOOK –VOLUME 15, JUNE 2023

PUBLISHED BY:

EnergyNet Limited

Fulham Green

Bedford House

67-79 Fulham High Street

London

SW6 3JW EDITOR

Sarah James sarah@energynet.co.uk

+44 (0) 20 7384 8619

ASSOCIATE EDITOR

Jon Haynes

ART DIRECTOR

Steve Bell

PRODUCTION MANAGER

Stuart West EnergyNet Limited

ISBN 978-1-9996197-0-1

All rights reserved. No part of this publication may be reproduced, stored in aretrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of EnergyNet Limited.

www.energynet.co.uk

Copyright © 2023

Africa Energy Yearbook 2023 5
Sponsors SOLAR WIND HYDRO BIOMASS STORAGE Kenya Electricity Sector Association Lead Wind Energy Partner International Hydrogen Partner International Trade Partner Kenya Private Sector Alliance Forum Sponsor Exhibition SponsorGlobal Partners Africa IPP Partner Lead Sponsors Country Host Thank you to our sponsors

WELCOME

Welcome to the 2023 edition of the Africa Energy Yearbook, produced in partnership with African Business Magazine and the 25th annual Africa Energy Forum (aef), taking place in Nairobi.

reimagine its economic growth, which is, more than ever, vital for the welfare of the world.

Partnership and collaboration is key. In this Yearbook, we hear from personalities – government ministers, CEOs and investors – on what more needs to be done

We look at why Africa’s rising energy sector will be essential to the

to boost the skills, development empower and inspire – and to narrow digital platform, Beyond Privilege, to online learning and networking to across the continent. more people together. And facilitate

elcome to the 2023 edition of the Africa Energy Yearbook, African Business magazine and the 25th taking place in Nairobi.

Wgreen energy transition. In the vital year of Cop28, we look at whether Africa’s energy vision is compatible

we take a deep-dive into Kenya’s

CELEBRATING AND LOOKING TO THE FUTURE

As a report from McKinsey, Reimagining economic growth in Africa

BRINGING PEOPLE TOGETHER

aef brings together key stakeholders

the deals and partnerships that will drive investment and develop markets.

As Power Africa celebrates 10 years in 2013, we are delighted that aef is El-Sheikh, Egypt.

We look forward to welcoming

7
Ltd Africa Energy Yearbook Africa Energy Yearbook 2023

AEF PHOTO OF THE YEAR COMPETITION

We are thrilled that the prize-giving for this year’s competition takes place on 20-23 June, at the Kenyatta International Convention Centre, Nairobi, as part of aef.

Just as aef celebrates Africa’s outstanding achievements in energy projects, these photographs showcase the remarkable impact of these projects on the community, landscape, youth empowerment and sustainability.

The categories:

ENERGY AND SUSTAINABILITY – NEW FOR 2023

Exploring ways to use energy resources in a sustainable manner; reducing carbon footprint; promoting

ENERGY AND YOUTH

Energy connecting and empowering youth, entrepreneurs, and early career professionals.

ENERGY IN ACTION

Using energy for work; energy in motion; energy in the community.

ENERGY IN LANDSCAPE

Energy as a visible part of the landscape, including hills, rivers, buildings, trees, and plants.

We’d like to thank everyone who entered this year’s competition. With so many inspirational photos across all four categories, this is a testament to the transformational energy projects impacting Africa and its communities.

Sponsored by:

ENERGY AND SUSTAINABILITY

ABOVE: USAID/Power Africa

BELOW: USAID/Power Africa

Africa Energy Yearbook 2023 9
Karusa Wind Farm. RIGHT: Sagemcom Gorou Banda Thermal Power Plant. LEFT: AIIM Roggeveld Wind Farm. Karusa and Soetwater Wind Farms.

Photo of the year

ENERGY AND YOUTH

LEFT: Inspired Evolution Mubuga Solar PV Plant: The plant provided 398 jobs during construction and training for 203 employees.

Technician Bursary Programme.

ABOVE: USAID / Power Africa

Powering the Potential of Women in Energy: Clementine Uwineza and Beline Iradukunda, interns at Rwanda Energy Group.

RIGHT: USAID / Power Africa

Scaling up solar-powered productive uses of energy in Liberia.

Africa Energy Yearbook 2023 10
BELOW: AIIM Abasanda, Windfarm

ENERGY IN ACTION

Africa Energy Yearbook 2023 11
LEFT: A Red Rocket Project Kruisvallei Hydro. CENTRE LEFT: A Red Rocket Project Sunrise in Roggeveld Wind Farm, 4 ABOVE: A Red Rocket Project Starry Night: Roggeveld Wind Farm. LEFT: USAID/ Power Africa Jonathan Makubuya of Wasiko, Uganda.

Photo of the year

ENERGY IN LANDSCAPE

Africa Energy Yearbook 2023 12
LEFT: Copperbelt Energy Corporation Power Plant in Kitwe. BELOW: GPC GABON Project Hydroelectric of Kinguélé Aval. ABOVE LEFT: Globeleq Klipheuwel Wind Farm. LEFT: A Red Rocket Project Kathu Solar.

Transforming Africa’s Trade

THE TURKANA ARTISTS EXCHANGE PROJECT

Energy is not generated in a vacuum, and far too often the communities native to these epicentres are usually, if anything, the last to be brought into conversations about potential projects in their land or neighbourhoods.

Turkana County, a vast arid area in years of neglect due to historical political marginalisation, hence, it has remained underdeveloped, underserved and poor, causing communal

,

Due to their marginalisation, the Turkana have often been at the edges of important decisions concerning their region, and their futures as well.

Instagram: africanartmatters

In the last decade and more, however, the political and economic importance of Turkana changed with the discovery of oil in the Turkana Basin, with Tullow Oil winning a concession to explore the commercial viability of the oil deposits.

To the east in Marsabit County, the Turkana Wind Power Development Project was completed successfully.

With these two developments, Turkana gained new political and economic status, both nationally and internationally. This brought with it renewed interest and vitality in the region, with the local youth dreaming of dividends from the investments.

ing together artists from Nairobi and Turkana to create work inspired by the region, resulting in bold new visuals and a new way of thinking that is modern yet deeply rooted in tradition.

Film director Jackie Lebo had felt deeply drawn to the story of the region, founding the Turkana Art Exchange as

Historically, Turkana was so marginalised that the people did not identify as Kenyans. Postindependence policies had overlooked the north, home to nomadic cattle keepers, focusing all the resources in the agriculturally-rich south where it was believed the quickest path to economic growth lay. But following the discovery of oil in 2012, and the excitement it created among the Kenyan public and the political elite, Kenya laid claim to Turkana.

Lebo reached out to a childhood friend, Ikal Angelei, who had moved back home to Turkana and was now a Goldman Prize-winning activist working with communities in the region on environmental and economic rights.

Opposite: A few of the works created by the artists collaborating through the Turkana Artists Exchange. The artists have included those working in video art, art and photography.

The Turkana Artists Exchange initiative is one example of young creatives reimagining their futures and inviting us to their world-making project as they reframe old, demeaning narratives about place and people.

The Turkana Artists Exchange is a joyful, collaborative exploration bring-

Ikal provided insight on the area and to the villages and individuals most project believing that people wanted a fair share of oil revenues, which was true, but they wanted so much more. “They really challenged what we believed,” says Lebo. “They also wanted water and security to continue their pastoralist way of life because it was part of their culture and identity.”

Lebo’s film, Turkana: Race for Resources, depicts the complex legacy of the oil discovery and its regional impact.

Africa Energy Yearbook 2023 14 The artist’s viewpoint
As the AEF delegates gather in Nairobi for the 25th edition of the Forum, much will be on their minds as they deliberate on energy issues at the Kenyatta International Conference Centre, so far away from where the energy itself is generated. Peter Achayo
Founder/Publisher of the WhatsArtNBO Journal & on energy, culture and art.
Africa Energy Yearbook 2023 15

NAIROBI’S ART AMBASSADORS FLYING THE KENYAN FLAG HIGH IN GLOBAL ART CAPITALS

Nairobi’s carefully hidden secret is a buzzing creative scene and a ‘world-class tribe’ of contemporary artists that are well regarded in the global art capitals from New York to Miami, to London to Paris and Berlin.

In the last year alone, Kenyan artists have been participating in some of the most prestigious art events in the world, from the Venice Art Bienniale to Documenta Fifteen, to Frieze to Art Basel Miami Beach.

So where does a first-time visitor to Nairobi get to discover the artists who are

of the most noted and collectible artists in the world who either are natives to this city or work from it.

What follows is just a small taster of the exciting work being done by Kenyan artists.

Cyrus Kabiru, born 1984, whose ‘C-Stunners’ (a series utilising found eyewear) took the art world by storm. Cyrus is a multimedia artist and his work straddles art, sculpture, photography & fashion. His work has been shown at the Lagos Photo Festival, Guggenheim -Bilbao, Vitra Design Museum, Zeitz MOCCA, Studio Museum of Harlem and Milan Design Week amongst others.

Africa Energy Yearbook 2023 16 The artist’s
viewpoint

Nedia Were, born 1989, is a painter and sculptor well-known for his portraits. Some of his career highlights are exhibitions as follows; FNB Art Jo’burg, Musée de Wall, St. Bathelemy, Ross Sutton Gallery-New York, Art Basel Miami, FriezeLondon and Investec Cape Town Art Fair.

With thanks to Peter Achayo | Instagram: africanartmatters

Thandiwe Muriu, 31, is an art photographer focusing her lens on portraits of African women. She has become a global sensation in just under two years. During Covid she went from being a virtually unknown commercial photographer working on commissions in Kenya to a global name whose work has been appeared widely, including in some of the top galleries and art fairs.

Kaloki Nyamai, 36, is a mixed media artist and painter. His work now enjoys pride of place at Arthur Primus Museum and the Dallas Art Museum. He launched his own nonprofit, Kamene Art Residency, in Nairobi earlier this year, named after his mother, who he credits with teaching and encouraging him to draw at an early age.

Africa Energy Yearbook 2023 17
© Thandiwe Muriu

SAYING YES! TO A BRIGHT FUTURE FOR AFRICAN ENERGY

Guiding the next generation to create their own visions for a more sustainable world

The Youth Energy Summit (YES!) is returning for its second edition at this summer’s Africa Energy Forum in Nairobi, Kenya, as it looks to build on the platform established last year to boost skills, connections and the business readiness of future energy leaders.

The inaugural YES! gathering in Brussels in 2022 emphasised the significance of early career professionals, entrepreneurs, students and educators in accelerating access to reliable energy across Africa. This year, thanks to a growing list of key partnerships across corporates, foundations, NGOs, universities and sector initiatives, YES! will be showcasing its credentials on home soil.

BEYOND PRIVILEGE

Attendees at this year’s forum will join sessions that explore their perceptions of the future, how they can reach their ages in the energy sector, and what they’re looking for in terms of guidance from educators and professionals. In addition, the event has also set up a new, adjoining platform called YES! Beyond Privilege. The free-to-access digital platform will give thousands a central space to connect and access news during the four-day gathering. However, beyond that, the platform will also serve as a portal for yearround industry news, to discover job opportunities, to engage with regular courses and workshops, and to continue networking beyond the event itself. YES! Beyond Privilege will ensure a longerterm space for hundreds of students, entrepreneurs and young professionals to build on the visions put forward during the four-day gathering.

ABUNDANT POTENTIAL

The importance of networking and ongoing collaboration also extends to the partners involved with YES! Among an ever-growing list of partner organisations is the Global Energy Alliance for People and Planet (GEAPP), who dational partner.

GEAPP is an alliance of philanthropists, local entrepreneurs, governments, technology enablers, policymakers and

2023 Youth Energy Summit

ing countries’ shifts to a clean energy, pro-growth model that ensures universal energy access as well as economic development. Its aim to reduce four gigatons of future carbon emissions, expand clean energy access to one billion people, and enable 150 million new jobs aligns with the goals of the Africa Energy Forum and YES!

“GEAPP is thrilled to be joining as a foundational partner for the Youth Energy Summit,” says Joseph Ng’ang’a, GEAPP’s VP for Africa. “Young entrepreneurs are often excluded from all aspects of the energy transition value chain, and they face disproportionate barriers to educational opportunities,

He adds: “It is urgent that young people are trained and supported now to access opportunities and accelerate growth. It’s vital to unlock the abundant potential of young entrepreneurs who will lead the energy transition and realise a more equal and sustainable world.”

WORLD’S LARGEST NETWORK

YES! has a goal of reaching 100 million people across Africa over the next 10 years through its network-based approach to upskilling and industry progression.

YES! community present in Nairobi this summer can make vital long-term connections and breakthroughs: “It is no longer helpful to state that 600 million Africans lack access to energy as a statistic of relevance, without addressing the fact that this number is only getting larger as population growth continues its war against energy access.

“By building an all-of-sector alliance to establish the world’s largest network of potential African energy developers, entrepreneurs and MSMEs, YES! will speed up the pace of energy access for millions more people across the continent.”

SHAPING AFRICA’S ENERGY TRANSITION

“I believe the role that the next generation will play in solving Africa's energy challenges is both pivotal and transformative. As the continent stands at the crossroads of progress and sustainability, the continent’s youth hold the key to unlocking a future powered by competitively priced and reliable sustainable energy, innovation, and inclusive growth. There couldn’t be a more opportune time to hand over the baton to a generation that is characterised by boundless energy, a thirst for knowledge, and an eagerness to drive change. The onus is on us to challenge traditional practices and to advocate for sustainable solutions towards a resilient continent where energy is a catalyst for sustainable and inclusive growth.

Sectoral convergence forums such as YES! and the Africa Energy Forum play a crucial role in promoting skills and guiding individuals towards a shared vision for the energy sector. They have been transformative and career-de-

the skills required among those who will shape Africa's sustainable energy transition.”

Zeddy Bariti, Public Relations Communications Specialist Public Relations, Republic of Kenya Communications Specialist Ministry of East African Community, the ASALs & Regional Development – Kenya The Power Dialogue, Republic of Kenya

Africa Energy Yearbook 2023 19 -

Over 590 million people lack dependable access to electricity in sub-Saharan Africa. In 2013, President Obama launched Power Africa, an innovative U.S. Government-led partnership created to address this challenge. Power Africa now convenes the collective resources of more than 200 U.S. and global public and private sector partners to increase just and inclusive energy access, mitigate climate change, and end energy poverty in sub-Saharan Africa.

Power Africa’s early goals were to add 10,000 MW and 20 million connections by 2030 in six focus countries. In 2014, we tripled our goals and expanded our on-the-ground technical support to more than 40 countries. Today, through the power of partnership, Power Africa is creating connections to turn more Lights On!

PROGRESS TOWARDS OUR GOALS

172 MILLION

Over the last ten years, Power Africa and our partners have expanded access to electricity across progress in an ever-changing energy ecosystem. In addition, Africanled reform fosters investment and ensures that the energy sector contributes to African agendas for environmental sustainability, economic and social development, and women’s empowerment.

People with new or improved electricity 36 MILLION 60 MILLION Connect new homes and businesses 2013 2018 2023 14,000 MW* 30,000 MW Add more cleaner and reliable electricity generation capacity 2013 2018 2023 Through the power of partnership, we are making connections and powering potential.

POWER AFRICA PRIORITIES

To respond to our 2030 goals and seize new opportunities, Power Africa adapted our strategy to advance sub-Saharan African development through implementing gender-smart and socially responsible investments, expanding renewables, and providing universal access to clean energy.

Ending Energy Poverty

provide energy solutions to rural and peri-urban households, small businesses and industry – delivering clean, reliable electricity, strengthening distribution utilities and infrastructure, improving livelihoods, and providing essential power to healthcare facilities. A clean-energy future is critical

Accelerating a Carbon-Free Future

Bolstering U.S. and African Private Sector Innovation

role, Power Africa facilitates investments that connect U.S. and African companies and advance development outcomes. The U.S.-Africa Clean Tech Energy Network bridges new frontier markets where projectready technology can increase access to reliable electricity – ´to opportunities and promoting direct investment in cleantech enterprises. 79%

for sub-Saharan Africa, and Power Africa’s holistic approach promotes renewable and cleaner energy technologies to meet the needs of our partners and people across the continent. By encouraging the private sector to play a leading

#PoweringPotential

Follow our progress at usaid.gov/powerafrica

“A light where there is currently darkness; the energy needed to lift people out of poverty – that’s what opportunity looks like.”
– President Barack Obama, June 30, 2013

AN ALL-OF-ALLIANCE APPROACH TO ACCESS

Africa urgently needs

necting public and ensure universal access to electricity on the continent.

a collaborative approach is required

people in Africa who still live without

since its launch at COP26. Set up as thropic organisations including the and the private sector.

“This unique coalition of partners

newables conversation and the role of technology.

The Global Energy Alliance for accelerate clean electricity access on

Lowering technology costs will be key

well positioned to reap the benefits lacks the subordinated capital and local currency financing to catalyse

“One issue is the inability to access

ABOVE: Joseph Ng’ang’a.

OPPOSITE TOP: Miriama Fortune selling drinks from her solar-powered freezer (photo: Masha Hamilton).

an to encourage the transition to clean sal energy access. All while enabling

DRIVING DOWN COSTS

subordinated debt vehicle facility: the Energy Transition & Access Facility unleash the full potential of DRE in

A UNIQUE COALITION

GEAPP also recently participated in vide reliable and renewable energy have access to electricity. in a strong portfolio built by GEAPP

OPPOSITE CENTRE: Abubaka Umar, a businessman in Shimankar Community, Plateau State, Nigeria who owns a commercial charging booth.

OPPOSITE CENTRE: Solar minigrid system in Shimankar Community.

OPPOSITE BOTTOM: Fabian Homi Nbuba, an engineer in Shimankar Community.

Africa Energy Yearbook 2023 22 Collaboration
Collaboration is required to drive down the cost of much-needed clean energy solutions

gation for Renewable Technologies ble irrigation.

“The initiative began with the launch

SHAPING AFRICA’S FUTURE, TODAY

groundbreaking solution relies on one key tenet – collaboration. The notion

approach to progress. And progress is right forces pull together.

ond and third highest electricity access “Despite clean energy and battery

Africa has a vital role to play in the new technologies and a willingness to question and change the status quo. renewable technologies are required. for decades.

Africa Energy Yearbook 2023 23

SETTING AN EXAMPLE TO THE WORLD

It’s time to harness the world’s leading array of renewable natural energy resources to meet growing demands

IAfrica Energy Yearbook 2023 24 Communiqué
left A NOVEL APPROACH

FOCAL POINTS

A SUSTAINABLE AND EQUITABLE FUTURE

Africa Energy Yearbook 2023 25

Iceland. Can its neighbours catch up?

GEOTHERMAL RACE HEATS UP AFRICA A

frica is breaking apart – literally. From the Gulf of Aden in the north, all the way to Mozambique in the south, the African continental plate is splitting along the East African Rift Valley. The two halves of the continent are moving apart by around half a centimetre a year. At this rate, withcontinent.

The good news is that the forces deep beneath the Earth’s surface that are responsible for this tectonic divorce provide Africa with a poten-

tially vast supply of renewable energy. At numerous points throughout

magma in the rift create underground reservoirs of superheated steam and water. Where geological conditions allow, these geothermal resources can be piped to the surface and used to generate electricity, or harnessed directly for heating, or to drive cooling systems.

Of all the countries in the region, Kenya has made by far the most progress in exploiting its geothermal potential. “Kenya has excellent geothermal resources,” says Jack Kiruja,

the International Renewable Energy Agency, who was previously an engineer at the Geothermal Development Company in Kenya. It has, however, taken decades to develop the sector in the country. “It’s been a really long journey that has led to the success that we see today,” says Kiruja.

plore its geothermal potential as far back as the 1950s. But the sector only

wards – as the country looked for a way to combat electricity supply problems stemming from an over-reliance on hydropower.

Kenya now has the eighth-largest

Africa Energy Yearbook 2023 26 Kenya case study
Kenya has led the way in developing its geothermal energy resources – with

geothermal production capacity in the world, at around 950 MW. This makes up almost half the country’s electricity generation.

Geothermal energy has the added er source – and the government is aiming to reach a capacity of just over 1,600 MW through its Vision 2030

KenGen, the national electricity utility, is developing the world’s largest geothermal power plant, Olkaria VI, in Hell’s Gate National Park.

The growth of geothermal energy in Kenya has depended on supportive

government policies, as well as the expertise of Kenyan engineers. But to fully understand the geothermal journey in Kenya and the rest of Africa, it is necessary to take a detour to a small island on the edge of the Arctic Circle.

NORTHERN LIGHTS

outskirts of Reykjavik, the capital of Iceland, doesn’t seem like an obvious place to look for the origin story of Africa’s geothermal industry. But within these walls, the Geothermal Training Programme (GTP) – an in-

largely funded by Iceland’s government – has been helping geothermal professionals from around the world develop their skills and connections for over 40 years.

Guðni Axelsson, the GTP’s director, says that the concept for the training centre came about in the late 1970s, when Iceland was looking for ways to develop a foreign assistance programme. “The idea was to use this pool of expertise that exists here in Iceland to try to support something that is quite unique that Iceland can really contribute in a meaningful and

Iceland, like East Africa, is sited on the junction of two tectonic plates that are moving apart. The country has a population of less than 400,000, but stands as a giant of the geothermal world. Although several other countries generate more megawatts of electricity from geothermal sources, there is nowhere else where geothermal energy plays such a vital role in society. Iceland derives around 30% of its electricity from geothermal sources, along with 90% of its heating.

The GTP began with just two students – but now accepts around 2025 people per year onto its six-month

of the programme, at least 140 Kenyans have been trained at the GTP. Many of the Kenyan students have in KenGen and the Geothermal Development Company, the parastatal othermal projects in Kenya.

Axelsson says that the GTP “can take a little bit of the credit” for the growth of geothermal power in Kenya. “They have taken great steps in their development, and we believe we have helped quite a lot with that.”

“One simple way to view that,” says Axelsson, “is that Kenya has by now surpassed Iceland in the installed ca-

Africa Energy Yearbook 2023 27
The growth of geothermal energy in Kenya has depended on supportive expertise of Kenyan engineers.

Kenya case study

pacity for electricity generation from geothermal – and they’ve done it quite rapidly in recent years.”

VIKINGS IN THE SUN

Iceland’s role in developing geothermal energy in Africa goes well beyond the GTP. Icelandic companies are developing geothermal projects in several parts of the continent. Technical consultancies also play a key role in delivering Icelandic expertise.

“We are not building a lot of new power plants here in Iceland,” says cal engineer at Mannvit, an Icelandic have to look abroad if we want to [expand].”

Mannvit is providing technical consulting services to the Geothermal Risk Mitigation Facility for Eastern Africa (GRMF), a donor-funded project that provides grants to early-stage geothermal projects. The company is also a drilling contractor at several projects in East Africa. But landscape for geothermal is challenging outside of Kenya.

“A lot of projects are just at the earliest stages. There’s a lot of potential – but not so much has happened altries haven’t done any geothermal projects yet, so in some cases there aren’t any real regulations, and it can be complicated to get all the licences and so on to be able to develop a geothermal project.”

Reykjavik Geothermal, another Icelandic company, is developing two major geothermal power projects in Ethiopia along with other investors. Gunnar Orn Gunnarsson, the compaReykjavik Geothermal chose to focus on Ethiopia more than a decade ago, after scouring the world for places to develop geothermal projects.

“It happens to be the best geo-

thermal resources in the world that are still available,” says Gunnarsson, who describes the geothermal resources along the Rift Valley as a “string of pearls”.

Developing the Corbetti and Tule Moye geothermal power projects in Ethiopia has been far from plain sailing for Reykjavik Geothermal and its fellow investors. “You cannot imagine all the obstacles that we have met,” says Gunnarsson. He lists problems with a drilling contractor, along with Covid-19, the war in Ethiopia’s Tigray province and political unrest as some of the factors that have delayed the projects.

Gunnarsson adds that developways well-positioned to support ge-

othermal projects. “I think that the world needs to take a grip on itself if they want to help these nations to develop as fast as they need,” he says. Development banks must “loosen up to geothermal, he says. “Their risk take any risks.”

RISK AND REWARD

This is problematic, since geothermal is an inherently risky investment. As when companies drill for oil and gas, there is always a sizeable chance that a geothermal drilling that can be developed commercially.

InfraCo Africa is part of the donor-funded Private Infrastructure

Africa Energy Yearbook 2023 28
One of the factors that has enabled Kenya to move faster than others is the willingness of publicly owned companies to develop geothermal resources.

Development Group, with a mandate to invest in projects that are perceived as risky for the private sector. It is one of the investors in the Corbetti geothermal project. Tim Jackson, senior business development manager at the company, says that InfraCo Africa decided to become involved in Corbetti partly because geothermal “is perhaps the toughest technology for the private sector to develop alone” due to the early-stage risk.

private sector projects in Kenya and Ethiopia has proven to be both slow and challenging,” he says. “There is a need for more high-risk capital to manage the risky exploratory phase – this could either come from governments or private-sector players, working with concessional facilities.”

Indeed, one of the factors that has

allowed Kenya to move faster than its neighbours is the willingness of publicly owned companies to develop geothermal resources. “They’re

nancing,” says Kiruja. Concessional loans, he says, “have gone a long way in making geothermal development

nancing was not available”.

Now, Kenya has become the regional geothermal powerhouse. Kenyan companies have progressed to the point where they are taking a leading role in the development of geothermal projects in neighbouring countries.

KenGen, for example, has secured contracts to drill wells in countries such as Djibouti and Ethiopia in recent years. Kiruja says that Kenyan companies began their overseas ac-

Africa Energy Yearbook 2023 29
Kenyan companies have progressed to the point where they are taking a leading role in the development of geothermal projects in neighbouring countries.

tivities largely by providing geosci-

a more prominent role over time. “They have moved to the next level, where they are now getting involved in drilling of geothermal wells,” he explains. “My projection is that in the coming years, this is something that we could see happening more.”

DIRECT USE

To generate electricity from the water and steam found beneath the surface, temperatures of at least 150 degrees

Celsius are needed. Below this level, however, geothermal resources can still be used in other ways.

“There are many more countries that host the geology of the East African Rift, which have the potential for heat applications from medium-temperature geothermal resources,” says Jackson. “These heat-led projects have huge development potential because of the applications for agri-

farms, seed drying, dairy processing, chilled storage and abattoirs.”

The growing interest in these “direct use” applications is one of the key trends in the geothermal sector worldwide. Within Africa, the GRMF began by delivering grants only to geothermal projects that aim to generate electricity. Last year, however, it launched a programme to provide grants to direct use projects as well.

In Kenya, meanwhile, the Geothermal Development Company has announced plans for a health spa at its geothermal site in Menengai. The project aims to create a Kenyan

Africa Energy Yearbook 2023 30 Kenya case study
Geothermal power has been instrumental in allowing Iceland to industrialise and ultimately achieve some of the highest standards of living in the world.

version of Iceland’s famous Blue Lagoon, a spa heated by geothermal energy that attracts more than 700,000 tourists each year.

DRILLING DOWN

The path ahead for geothermal projects will never be straightforward. Aside from the development risks, environmental issues need to be managed. Carbon dioxide can be released in the course of drilling –though emissions are 99% lower than from equivalent fossil fuel plants, tion Agency.

Kiruja notes that there are also risks of both underground and surface water being contaminated through geothermal activities, although with proper mitigation measures these risks are greatly reduced.

He adds that along the Rift Valley geothermal resources are often found in protected areas and therefore have to be managed with extra care.

geothermal power plants at Olkaria in Hell’s Gate National Park, with another in development. Kiruja says that Olkaria “is a good example of how they have been able to develop a geothermal resource in a national on the wildlife”. Various measures have been implemented to mitigate potential impacts, including designing pipeline routes to ensure that migrating wildlife are not obstructed.

Few would deny that the ecothat come with geothermal energy outweigh the potential risks. Africa can certainly draw inspiration from

Iceland’s experience. Iceland was among the poorest countries in Europe before it developed its geothermal resources. Geothermal power has been instrumental in allowing the country to industrialise and ultimately achieve some of the highest standards of living in the world.

One of the key steps now is to ensure that policymakers fully underdevelopments can bring. Axelsson says that training has played a vital role. But the factor that will be “most important”, he says, “is really to get politicians and governments aware of the possibilities”.

“The future at least could be bright,” says Axelsson. “But it needs a lot of support, both locally from governments, internationally from the international bodies, and in terms of training.”

Africa Energy Yearbook 2023 31

H.E. Honourable Davis Chirchir, Cabinet Secretary for Energy and Petroleum, Kenya

Cabinet Secretary

The Ruto administration have set an ambitious new agenda for what you want to achieve in energy. What are your priorities?

Davis Chirchir (r): The global market today is driven by competition and unless we have a price that is competitive, we will lose opportunities to our neighbours in the region. We all need to use more renewable and green energy because of climate change. We shouldn’t be talking about mitigation because we should have seen this coming, but I was reviewing the energy mix in our grid a few days ago and in Kenya, fortunately we are at about 94% in terms of renewable energy. We are very strong in geothermal, wind and also in hydro.

The challenge of mitigation doesn’t have as much of an impact on us as it does on some of the more developed economies, which were built largely on a fossil or coal-based energy mix. We have just come into government and we are very keen to achieve our target, as promised to the world, that on energy generation, Kenya will be carbon-neutral by 2030. We will ensure that we phase out all fossil-based energy generation. But we want to work on the cost of energy so we can attract the global funds to set up base in Kenya and help grow our economy, create employment opportunities and basically help increase access to power, which is currently at about 35%.

Does

leading on renewables go hand-in-hand with being able to reduce prices?

We have been doing geothermal for a while now and we dispatch our geothermal to the grid at between 6.5 and about 8 cents today, which constitutes about 50% of our generation mix.

What has been hurting us is the effects of climate change on our capacity to generate hydro power, which is dispatched to the grid at about 3 cents and accounts for about 33% of our energy. Unfortunately, it has gen-

years as a result of climate change pact on our ability to dispatch hydro, our best-priced energy source. So we have to rely more on geothermal sources, which are very expensive to develop.

It costs about $3m per MW but be-

development and generation, we are able to sign power purchasing agreements with independent power producers or with our generator company KenGen at between 6.5 and 7 cents. So we are focused on bringing down costs. The price of solar panels has

ward because of technological advances in terms of panels, our capacity for wind masts and solar panels is [good] and we are in the right place at the

Africa Energy Yearbook 2023 32 Interview
Kenya’s
for Energy and Petroleum, Davis Chirchir, tells David Thomas that the country is working on reducing the price of energy and reforming Kenya’s transmission networks to better serve East Africa’s biggest economy

right time. We will work closely with the regulator so we continue to dispatch the best price source to the grid.

What more do you think you can do to ensure that the transmission sector is operating to its full potential?

The Kenya energy sector is fairly decoupled. We have separated generation from transmission and from the distribution of power to our homes, we have a company called Rural ElecCorporation, which is basically a government body that is being funded to serve what is called the last mile. The last mile can be expensive – it was this corporation that we used to move energy access from 25 to 35%. With this decoupling, we are now able to focus on transmission, which is fully funded by the national exchequer to get the right price of power.

But the 2019 Energy Act provides a fairly good way forward in terms of development and regulations, which will be going to parliament shortly, and which, when fully developed and implemented, will bring in more private partnerships and private investors so we can develop our transmission lines, accelerate transmission and take the power to the load centres and therefore reduce the burden on the Kenya Electricity Transmission Company.

Even though we have a decoupled energy sector, there is a bit of transmission that is handled by Kenya Power, worth about Sh20bn, that we are removing from Kenya Power in a structured process so that all the transmission links will eventually be with Ketraco. We are keenly working on our PPP frameworks to support future development.

Power loss is another area of challenge. Kenya Power does the last mile and more of the distribution; they are

from the generators and distribute, metre, collect revenue and pay the generators. I have a position in cabinet which will seek to structure Kenya Power’s balance sheet. There are

Kenya Power is listed on the Nairobi securities exchange and 49% of its shareholders are private investors. We need to return value for these investors and therefore it imposes a task on us, as the 50.1% shareholder, to carry along our equal partner to ensure that we do have a return on investment for their money.

So you will be seeing Kenya Power bringing in some private sector governance through board restructuring that will be done to ensure that we work as an equal partner.

How are you working with the East African Community (EAC) and your neighbours?

We have done quite well in the framework for power trading. Today, we are inter-connected with Ethiopia on a 2,000 MW capacity line. Over this period where we had poor hydrology we have been able, from February, to pick up some 200 MW everyday from Ethiopia, which is 100% green because it is coming from the hydro dam there.

So that has been quite fruitful for ishing the link between Suswa Isinya to Tororo, which has currently reached a place called Lessos. We had a small challenge with the contractor which we are resolving so that we can interlink that transmission line, a 400kv line, to Tororo from Lessos.

Towards Tanzania, we have got to Isinya, there is a small section where there is a challenge but that will also be resolved, and so we will be able to link to Tanzania very soon, and all the way to Zambia from there. We will be able to push excess power to the region when they need that power and buy more power from a regional grid.

What does Kenya want from the Cop28 process?

The time is right for Africa to raise its voice on challenges of mitigation and adaptation.

We have to ask ourselves how can we work together to basically have equity in the way the energy systems work, so that those of us which have developed our economies do not take advantage of the African continent, which has vast resources and where [people] are trying to get to develop those resources today. For example we have about 500m tons of coal in Kitui in the eastern part of Kenya and which we may not be able to develop, even though coal power stations

is a good chance we may not be able to develop those resources today because of climate change, so how do we equity frameworks?

How do we improve the carbon credit system so that those of us in this

and ensure that apart from managing the environmental challenge, we are also able to improve access to energy for our people?

We will be hosting the Africa Energy Forum in June between 20th and 23rd. Let’s talk together about the solutions that we need to carry forward to support energy equity and rally support for climate action.

Africa Energy Yearbook 2023 33

Kenya Electricity Generating Company

geothermal resource development.

KenGen is at the forefront of greening the African continent through geothermal drilling consultancy services in countries like Ethiopia and Djibouti, in addition to capacity building and Comoros and Malawi.

Could you provide an overview of KenGen’s current role and significance in the energy sector in Kenya?

Ogamba: As the leading generator, with 1,904 MW of generation capacity, KenGen supplies up to 80% of the electricity consumed in Kenya, with over 86% of this coming from renewable sources. KenGen is a true champion of clean energy.

How is KenGen leveraging renewable energy sources, such as geothermal, wind, and solar, to meet Kenya’s energy demands?

Kenya has ambitious plans to achieve universal access to electricity. How is KenGen contributing to this goal, particularly in rural and remote areas?

As a company, we are committed to and continue to support the government of able, safe, and competitively-priced electric energy.

We are committed to the reduction of the cost of power and are in fact the cheapest supplier of power to the national grid, which has made electricity connectivity possible in Kenya.

Today, with an installed capacity of 1,904 MW, KenGen generates most of its electricity largely from renewable sources: Hydro (45%), geothermal (39%) and wind (2%), and some thermal which accounts for only 14%.

As the nation’s primary supplier of electricity, KenGen commands a market share of more than 60% in Kenya, with 32 power-plants across the country.

As one of the top 10 largest producers of geothermal energy in the world, the Nairobi Stock Exchange-listed company is also spearheading the global energy transition.

We asked KenGen’s chairman, Julius Migos Ogamba (top

and visionary strategies that are poised to transform the regional energy landscape.

We are on course to achieving 100% clean energy by 2030 in support of the Government of Kenya’s clean energy agenda and global commitment to sustainable development. KenGen’s business growth strategy is geothermal-led. As such, the projects in the company’s pipeline are anchored on green and renewable sources that include geothermal, wind and solar. The company is in the process of developing additional capacity in green energy in the medium and long term with a focus on geothermal, wind and solar.

What kind of role is KenGen playing in the global energy transition?

At the continental level, through our partnered with other African nations especially in the Horn of Africa in accelerating renewable energy access through

Today more than 78% of Kenyans are connected to or have access to electricin Africa. While we have other players who distribute the power we generate to the consumers.

Can you discuss KenGen’s current and future partnerships with local and international stakeholders, including other energy companies, investors, and government agencies?

We are currently piloting a green hydrogen project that will generate 100 MW in addition to hydrogen that will be used in the production of ammonia, a critical ingredient in fertiliser generation.

attract new revenue streams.

We continue to cement our regional geothermal footprint with drilling contracts in Ethiopia and Djibouti,

Africa Energy Yearbook 2023 34 Interview
In an exclusive interview the Chairman of Kenya Electricity Generating Company (KenGen), Julius Migos Ogamba, talks to Shoshana Kedem about East Africa’s largest electricity producer and its sustainable energy journey.

while exploring new opportunities in Congo, and Comoros.

We will continue to focus on the delivery of the ongoing projects in the Horn of Africa while exploring other geothermal opportunities in the African continent.

Nationally, KenGen is planning to build a Green Energy Park, targeting industries such as fertiliser, iron and steel, textiles, foods, and beverages, among others. The park will provide

steam for use and sit on KenGen’s 1,824 hectares at the Olkaria geothermal hub.

We are open to more strategic partnerships, especially on climate change, deployment of renewable energy technologies, building power plants and

What major challenges does KenGen face in terms of infrastructure development, project financing, and regulatory frameworks?

As a company, we remain alive to the emerging challenges in the operating environment, and we will continue to respond with agility.

One of the biggest limiting factors to green energy project development is funding, which therefore calls for us to close the gap. For example, we have been able to address this challenge through floating Initial Public Offers (IPOs), government loans and Development Financial Institutions among others.

Another challenge we sometimes face in infrastructure development is getting the social licence to operate when some community members feel they were not involved in the project, which can lead to protracted delays in implementation, especially with new

Land acquisition for power projects

community-owned land which may be a bit complicated to acquire.

How is KenGen embracing digital technologies and advanced analytics to enhance operational efficiency, optimise maintenance, and improve grid reliability?

We have embraced technology to the maintenance of our plants and in turn improve our grid reliability through a continuous supply of electricity.

Currently, we are running a supervisory control and data acquisition (SCADA) system that gathers data in real-time from remote locations to control equipment and conditions for all our plants. In addition, we are also implementing the Internet of Things (IoT) for our geothermal plants.

With the rising demand for electric vehicles and the transition towards electric mobility, how is KenGen planning to support the charging infrastructure?

Last year, KenGen rolled out an elaborate plan to lead Kenya’s transition from gasoline-powered vehicles to Electric Vehicles (EV), as another way of combating climate change while solving transportation challenges in the country. We believe that EVs will revolutionise the transport sector in Kenya as the country embraces the shift to them.

As part of our EV plan, KenGen launched an EV pilot project by unveil-

in the e-mobility sector.

The four vehicles, which include two SUVs and two double-cabin pickups, will primarily be used for data collection and policy development as the company prepares to install over 30 EV charging stations across the country in 2023.

The pilot EV units will give KenGen a comprehensive analysis of the feasi-

bility of the electric-vehicle transition while also providing insights on initial technology choices for electric charging infrastructure in the country.

We believe that the development of e-mobility is an area that will require a multi-sectoral approach. Under the leadership of the Ministry of Energy and Petroleum and working together with key partners, we have no doubt that this transition will pick up pace faster than envisaged.

And how long until we can expect to see electric vehicles on the streets of Nairobi?

Within around 5-10 years, as we already have hybrid vehicles powered by a combination of petrol and electricity in Kenya.

Looking ahead, what are KenGen’s key priorities and strategic objectives for the next few years?

One of our largest resources is geothergoing forward will be directed to the untapped 9,000 MW geothermal poten-

As a company, we envisage putting up 3,000 MW of renewable energy in the country over the next 10 years.

This new plan will be driven largely by deploying up to 2,000 MW drawn from geothermal sources and 1,000 MW from hydroelectricity as baseload power to stabilise the country’s energy mix, thereby diversifying away from thermal sources and shifting focus to more reliable and cleaner geothermal energy, and is exactly what government envisions.

Africa Energy Yearbook 2023 35
“We are committed to the reduction of the cost of power and are in fact the cheapest supplier of power to the national grid.”

AFRICA’S GREEN HYDROGEN OPPORTUNITY

Fortescue Future Industries (FFI), the Fortescue Future Industries the green energy arm of industrial giant green energy arm industrial Fortescue Metals Group (FMG), one of Fortescue Metals Group (FMG), one the world’s largest producers of iron the world’s iron ore, is leading the company ’ s plan to ore, is the company’s to decarbonise by 2030. In this interview, decarbonise 2030. In this FFI’s President discusses how Africa can capitalise on discusses how can on its huge renewable resources to create a its renewable resources to create a green energy industry, including green green energy green

jobs and the economy and the economy

There is a lot of talk about how big the green hydrogen opportunity is for Africa, but what does it actually mean?

The green energy transition is a huge opportunity for the world, not just Africa. It is a chance for countries to take control of their future, create their own energy, and not be beholden to others lucky enough to have fossil fuels readily available.

Africa does have a distinct advantage though. The continent’s vast renewable resources – sun, wind, geothermal and hydro – make it an obvious choice to lead the transition to a green energy and green hydrogen future.

Africa Energy Yearbook 2023 36 Communiqué

mover in this space. Fortescue can see that potential, that is why it has already built a strong presence in the quarters in Kenya.

What does it take to become a world leader in green hydrogen, and who is currently the biggest first-mover?

Having great natural resources like Africa is a big help, but that’s just the United States has opened the world to green energy opportunities.

Europe, Asia, Australia and the rest of the world have now been playing

the green hydrogen market globally and a brilliant outcome for our sector, and others like it.

Other countries must now look very closely at what the US has done to supercharge green energy or they will be left behind.

Green hydrogen is the best option we have for stepping beyond fossil fuels, and as we scale up production, it will only continue to get cheaper.

Why does Africa have to help decarbonise the rest of the world?

We are in a climate emergency. It is a race against time, and this is everyone’s problem. Although Africa is not to blame for some of the biggest contributions to global warming, it

of the worst ways.

ing pollution and removing carbon from industry and supply chains. Green hydrogen and green ammonia abate sectors.

Africa should not see this as a problem opportunity to create a new industry, a green industry for the future that helps ing a stronger, more resilient economy.

Is Africa only seen as an export opportunity for green hydrogen, or is there also a local use?

It can and needs to do both. Africa certainly has the opportunity to create gen, there is the demand for it globally, and it has the resources, space and incentive to sell that to parts of the world that need it more.

But there is also the opportunity to use what is made locally, in places like the fertiliser industry.

This is a chance for Africa to produce its own fertiliser, made from green ammonia, eliminating the need for

Kenya is looking to do just that, and FFI is working with the government there to develop a 300 MW capacity green ammonia and green fertiliser

green fertiliser to the domestic market and address food security, while also alent amounts of fertiliser and instead localising industry and creating jobs Switching to renewable energy

and green hydrogen gives countries additional energy security that puts them beyond the use of fossil fuels, fuels and fertiliser.

How do you make sure the green energy transition is a just one?

Green hydrogen is not only a smart economic decision, but it will also empower local communities through ness, which will see returns go back into the local community.

ing with communities by respecting cultural heritage, creating economic opportunities, investing in community ing a strong residential workforce. For programme in Australia has provided over $AUD4.5bn in contracts to First Nations businesses there.

It’s important the local community

local participation in the form of jobs, training, and business opportunities will drive the acceleration of the global renewables industry.

What needs to happen for the green hydrogen industry to continue to scale up?

We need this industry to scale up and for the climate to get worse, that is why Fortescue is racing to real zero by 2030, and we want others to join us.

Green energy will create jobs, lower power prices, create energy security and lower emissions.

As projects are built at scale, they become more economic, unlike fossil fuels, which will continue to get more this climate mess, and it is what will get us out. It is no longer acceptable for heavy industry to say that it can’t go green.

Africa Energy Yearbook 2023 37
Having great natural resources like Africa is a big help, but that’s just the start.
OPPOSITE: Bruh Ayele Terfie, President, Fortescue Future Industries.

DRIVING AFRICA’S GREEN ENERGY TRANSITION

As well as steering Fortescue Metals Group’s plan to decarbonise by 2030, Fortescue Future Industries (FFI) is managing the company’s evolution into an international green energy, technology and resources company. FFI’s President, , describes how the company is building a global portfolio of renewable energy projects to meet the growing demand for green energy, and its work in Africa as it helps to further the green energy revolution

The world right now is fronts. On the one hand we are in the middle of a climate emergency, and on the other, countries are on the brink of an energy supply and security crisis.

But, solving one problem does not need to come at the cost of the other, we have the solutions for both.

In fact, these problems should be a catalyst for change and opportunity, a chance for all countries, particularly those across Africa, to take control of their future, by creating their own energy industries and jobs.

Decarbonisation is the path to a stronger, more resilient economy. It means construction jobs for decades.

energy right where you need it. It

Africa’s vast renewable resources give it a distinct advantage in the move towards a green hydrogen future.

What Fortescue is doing is creating the solutions, the technology, the supply chain, and the infrastructure to power this green energy transition and make the switch for a better future.

Fortescue is one of the world’s most successful iron ore companies and has been at the forefront of innovation in the mining industry, becoming one of with more than 1.7bn tonnes of iron ore delivered to our customers in the last 15 years.

Fortescue emits more than 2.2m tonnes of Scope 1 & 2 CO2 emissions

Africa Energy Yearbook 2023 38 Communiqué
Africa’s vast renewable resources give it a distinct advantage in the move towards a green hydrogen future.

each year, that’s 60% more than Fiji. We are a big carbon emitter, and we are doing something about it.

industry company to have a fully sions and get to real zero by 2030.

Fortescue has a roadmap to do this and, more importantly, it is a very sound investment decision.

Our plan is to invest US$6.2bn to fully decarbonise the company and, in the process, save $3bn before 2030.

What we are doing is showing the tion plan will move us beyond fossil

It allows Fortescue to avoid an ongoing fossil fuel price risk, as well as avoid any future carbon pricing and

ally for an industrial company and we for other heavy industry companies to do the same.

We want all investors, banks and customers to ask other companies the question: “If they can do it, why can’t you?”

ing down. The iron ore we produce will of green energy projects.

So, in Gabon, we’re investing in the development of the Belinga iron ore deposit. This emerging iron region is ment, opportunity, and ownership, all while keeping our decarbonisation commitments.

Fortescue is leading the world in sition, and we want to work alongside countries that have a similar vision.

Key to that is the green energy arm of tries (FFI), which is not only enabling

ing the evolution of Fortescue into an international green energy, technology, and resources company.

FFI is building a global portfolio of hydropower, geothermal, wind and

and rapidly growing global demand for green hydrogen and green energy.

We are working rapidly to meet the needs of our partners around the world, including E.ON in Germany, which is seeking the supply of five million tonnes of green hydrogen per

In order to deliver on that demand,

FFI is looking at projects to produce green hydrogen and renewable energy across Africa, the Middle East, Europe, the US, South America and of course Australia. This year alone, FFI plans to take

Decision.

In Kenya the need to replace fertiliser, with fertiliser made from green energy is enormous. That is why we are working with the government to develop nia and green fertiliser facility. ble green fertiliser to the domestic market and address food security, while also negating the need for importing equivalent amounts of fertiliser.

This will not only provide iser for the agricultural sector but also a chance to localise industry and create jobs.

KENYA IS JUST THE START

FFI is also working on similar nent, with projects and scopes of tries. Technology will be key to scaling up the green hydrogen economy and making it cheaper

Where the technology doesn’t it happen faster. Where we think the supply chain might not keep turing capacity.

We are moving fast because the planet needs us to. It’s time to speed up the world’s energy transition and move on from fossil fuels.

The green industrial revolution is underway. Join us, let’s step beyond fossil fuels and reach real zero together.

Africa Energy Yearbook 2023 39
Fortescue is leading the world in responding to the green energy transition, and we want to work alongside countries that have a similar vision.

THE GREEN CONTINENT

Africa’s huge energy resources mean the energy resources mean the continent is well placed to capitalise on gathering continent is well to on momentum behind clean energy technologies, if momentum behind clean energy investment can be mobilised, reports investment can be mobilised, reports

Africa Energy Yearbook 2023 40 Resources

Africa’s energy sector is emerging blinking into the light after a tumultuous three years in which the impact of a global pandemic and an energy security crisis sparked by Russia’s invasion of Ukraine hit the incomes of the poorest people, sent energy costs spiralling upwards and staunched investment

The good news is that a continent blessed with copious renewable energy resources – especially solar power –

the global build-up of a new wave of

“Clean energy is moving fast – faster in the investment trends, where clean technologies are pulling away from fossil fuels,” International Energy Agency Executive Director Fatih Birol said on launching the IEA’s World

“For every dollar invested in fossil

tion of sub-Saharan Africa still has no

GROWING TRACK RECORD

There is optimism that Africa’s huge renewable energy resources can make real inroads into overcoming the continent’s energy shortfall, as industrial supply chains recover after the

Crucially, parts of Africa are no longer pioneering territory for renew-

Egypt, Morocco, South Africa, Senegal

records are helping to de-risk more of

Support from multilateral development banks (MDBs) and developunderpins investment in many types of energy projects across much of Africa, is more evident in some parts of Africa

This is partly driven by the increasing sophistication of African-grown clean nesses, which provide ever-improving investment opportunities, as well as a growing network of African-based lenders, specialist funds and other

to the momentum provided by DFIs, while consumers are too poor to pay

The hope is that falling costs will make

PLATFORM FOR GROWTH

In the past, some governments regarded renewable energy development as an impediment to economic

suspicious of what they regarded as efforts by developed countries to foist costly green technologies onto

Costs are now on a par with fossil fuels in many parts of Africa and it is becoming clearer how countries can leverage renewables potential to stimulate the wider economy, moving beyond just getting the lights, heating,

The International Renewable Energy Agency (IRENA) estimates that if Africa pursues an ambitious energy transition pathway, more than 12m transition-related new jobs could

example is investment in solar, which is set to overtake the amount of investment going into oil production for the

As ever, Africa’s need to win a share of this global investment is pressing, given the urgent need to speed up

considerable progress over the last two decades, there is still a long way

Another driver is the use of innovative international lending mechanisms, such as blended finance initiatives,

from MDBs and DFIs are designed to provide a more secure platform for

Not everyone thinks that DFI fundstimulating private investment, especially in some poorer African countries, where solar power is struggling to scale

ciency, electricity grids and energy

of further jobs would then be created by the boost to the wider economy –the energy transition has the potential

ment to large-scale solar and wind projects is to provide commercial

surplus intermittent renewable power when it is not needed elsewhere, or to build renewable energy projects dedi-

Africa Energy Yearbook 2023 41
IRENA estimates that if Africa pursues an ambitious energy transition pathway, more than 12m transition-related new jobs could be created for 2019-2030.

leader in this, building some of the continent’s largest solar farms to power hydrogen production fertiliser plants and other infrastructure in its industrial zones close to the Suez

At the other end of Africa, South Africa is plotting a similar course, but has the added task of completely revamping its power infrastructure as it seeks to reduce its over-depend-

slower than renewable energy develslowing the roll-out of solar projects and that this is contributing to power shortages triggered by failures in the

The energy transition also presents wider opportunities for jobs and the

the key minerals, such as cobalt, on

which the manufacture of batteries for electric vehicles (EVs), phones

The attractions of developing EV and battery production on home soil, rather than just exporting raw materials without any added value, are obvi-

will be forthcoming outside of Africa’s more developed economies remains

In one attempt to kick-start manufacturing, DRC and Zambia are hoping to develop EV and battery manufacture in special economic zones under an agreement with the African Export-Import Bank (Afreximbank) and the United Nations

UPSTREAM BOOST

African countries with upstream resources are also on the other side

struggled to foot spiralling fuel bills during the hydrocarbons price hike triggered by the Ukraine war, African oil and gas exporters could sell their products for more and found potential investors eyeing their hydrocarbon

Namibia, so long an upstream backwater struggling to drum up interest in its upstream, has become an investment magnet for the majors, following

and Senegal are set to join the hydrocarbon producers’ club in the coming

However, it is far from plain sailing for African oil and gas producers, as

ment backers carefully review lending to the sector in light of green energy

Africa Energy Yearbook 2023 42 Resources

example, the future of Mozambican line from Uganda to the Tanzanian coast currently hang in the balance

Those countries with gas reserves now face the choice of how to maximthat means a focus on exports, while also using some of the gas for muchneeded domestic power generation

Here, sustainable development is the mantra, which means a measured approach to developing domestic gas usage to help economic growth alongside spending on renewable set to become a gas exporter from its offshore resources this year, while pushing to develop gas-feedstock based industries, such as ammonia production, as well as a green hydro-

gen industry, powered by its abundant

TRADITIONAL PRODUCERS REMAIN TOP EXPORTERS

inces, such as Angola, are also beneto Russian oil and gas, though here the focus is more on getting the most out of developments close to existing

Nigeria is still vying with Angola and Algeria to be the continent’s lead-

In deepwater, Shell and TotalEnergies continue to develop their Bonga

Meanwhile, local companies are trying to rejuvenate production in the shallow waters around the Niger

Delta, now the majors have moved

The inauguration of Bola Tinubu as Nigeria’s president in May has raised hopes that the country’s foreign Tinubu is credited with facilitating said he will scrap fuel subsidies, which a revamp of the country’s energy

The challenges of the energy transition are substantial wherever you are in the world, and they are made all the more complex in Africa by poverty, lack of infrastructure and

in this yearbook, there is no shortage of determination to make the clean energy revolution happen on the continent in a way that enhances economic

Africa Energy Yearbook 2023 43
Crucially, parts of Africa are no longer pioneering territory for renewables developers. Countries such as Egypt, Morocco, South Africa, Senegal developments. Their track records are helping to de-risk more of the continent for investors.

SOLAR LEADS THE WAY AS AFRICA ATTRACTS FRESH RENEWABLES INVESTMENT

By 2022, Africa was host to 62 GW of all forms of renewable energy capacity, including solar, wind, hydropower and geothermal, according to the International Renewable Energy Agency (IRENA). That’s more than double the capacity a decade earlier. Solar and wind, whose share was negligible in 2012, now account for a third of total capacity.

There is no doubt the investment potential is huge. Under the International Energy Agency (IEA) Sustainable Africa Scenario, Africa’s electricity demand could increase 75% by 2030, with renewables, mainly solar photovoltaic, accounting for most new capacity additions aimed at meeting it. By 2030, solar and wind together could contribute 27% of power generation, eight times more than in 2020, according to the IEA’s African Energy Outlook 2022

Where investment conditions have been right, funding has continued to particularly solar.

The case for developing Africa’s copious renewable energy resources to overcome the continent’s

always been strong. It’s a case that has become all the more compelling given the intensifying struggle to drive down global greenhouse gas emissions and combat soaring fossil fuel prices.

But the task is immense. As an UNCTAD report published in March highlighted, while access to energy has increased in recent years, more than 50% of sub-Saharan Africa’s population still lacks access to electricity.

UNCTAD warns that without extra

access to clean fuels could increase to over 1.1bn in 2030 from 923m in 2020.

Africa has long exploited one energy

power. Countries like Egypt, Ghana, Zambia, Zimbabwe and the Democratic Republic of Congo have relied on hydropower for much of their power

supply for decades.

But it won’t be hydropower attracting the bulk of investment in future, given the unreliability of Africa’s water resources, which is unlikely to improve as climate change continues to disrupt weather patterns. Solar, wind and, given the right conditions, geothermal and marine energy are where the money needs to go, as investors that shied away from the continent during the Covid

Persuading risk-averse investors to back Africa’s green energy sector is being made easier because some parts of the continent have established track records

countries are no longer pioneering territory for investors, who have pumped money into projects of all sizes over the support that has the backing of interna-

investment guarantees, is also helping to mobilise private capital.

As the African Energy Chamber’s The State of African Energy: 2023 Outlook reports, a number of international renewables investors and developers are now well established on the continent, such as investor CWP Global, Norwegian-based developer Scatec, Middle Eastern players such as the UAE’s Masdar and Egypt’s Hassan Allam, as well as renewables divisions of energy giants, such as TotalEren.

NORTH AFRICAN MEGA-PROJECTS

North Africa is leading the way in terms of the solar mega-project pipeline lined up for the next few years, capitalising on the ample solar resources of the Sahara, and the region’s potential to develop renewables-powered green hydrogen production and related industries to supply European and other markets.

Among the largest in train, are projects in Mauritania and Morocco. These include the Aman Project in Mauritania, being developed by CWP Global, which is

Africa Energy Yearbook 2023 44 Energy overview
Some large renewable energy projects are coming to fruition, even if the investment climate for African renewables remains fragile, reports Ian Lewis

slated to have a total capacity of 12 GW, to be brought online in stages up to 2036. This will underpin a multi-billion-dollar green hydrogen development being championed by the government.

In Morocco, the Amun project, also being developed by CWP Global, is a 7.5 GW initiative that will supply the grid, with surplus power going to green hydrogen production, which is scheduled to be at full capacity by 2032. Egypt

out of solar projects, which will take it up the league table of African solar energy generation capacity.

SUB-SAHARAN SOLAR SUCCESSES

In sub-Saharan Africa, Botswana and Namibia are jointly developing solar projects providing a total of 4 GW of capacity split between the two countries, backed by various multilaterals, including the African Development Bank and World Bank Group institutions. On completion, scheduled for 2030, the project should enable the two countries to meet most of their electricity demand with green energy.

South Africa has been a solar and wind

a degree of government support, and one of Africa’s largest domestic power markets. The underlying driver is the

of blackouts, which have hit the country hard over recent months.

Kenya is supplementing its long-standing and expanding use of geothermal power generated in the Rift Valley (see p. 26) by using solar power in innovative ways to support everything from horticulture to water pumping, besides rapid scaling up of grid-scale solar farms and building on pioneering

household level. Senegal and Ghana are also among states building out renewables capacity. Nigeria, the continent’s

most populous nation, while developing various solar projects, continues to lag in terms of the pace of the roll-out.

In contrast to solar, the uptake for wind energy across Africa has generally been slower, in part because the best wind resources are restricted to fewer areas, and also because solar is cheaper and easier to develop. As we discuss on p. 82, only three African countries have installed more than 1 GW of wind energy capacity.

CONNECTIVITY STILL THE MAIN PROBLEM

The biggest challenge for the grid-scale

limitation of transmission networks. Developers are not going to build projects unless there is a guaranteed way to get their power to market and that’s often not the case at the moment.

IEA Executive Director Fatih Birol said in May 2023 that although clean energy investment was moving fast, the largest barrier to the expansion of renewable energy in Europe, the US, Asia and Africa remained connection to electricity grids.

In Africa, the situation is particularly acute given the limited reach and capacity of transmission networks. As Moritz Breickmann, investment director at African Infrastructure Investment Managers (AIIM), tells us, South Africa’s current power crisis has been exacerbated by the lack of grid availability in areas with the best renewable energy resources.

OFF-GRID SHOWS ITS WORTH

Problems with grid connection reliability and expansion help explain the contincovering mini-grids and household solar, which was thriving before the Covid pandemic curtailed customers’ ability to pay for it and hampered supply logistics.

In February, Kenya said it would build 136 solar-powered mini-grids in remote areas not connected to the national grid, as part of a $150m programme funded by the World Bank.

Over 3,000 solar mini-grids have been installed in sub-Saharan Africa, compared to 500 by 2010, according to the Bank. It also estimates that another 9,000 mini-grids could be built across sub-Saharan Africa in the next few

“Solar mini-grids can reach populations today that would otherwise wait years to be reached by the grid. They have the potential to transform the power sector in sub-Saharan Africa,” Gabriela Elizondo Azuela, Manager of the World Bank’s Energy Sector Management Assistance Program (ESMAP) said on announcing the Kenyan project.

Meanwhile, Madagascar’s WeLight won €19m of funding from investors to build and develop small solar mini-grids in over 120 villages in rural areas that will serve some 250,000 people in more than 45 000 households.

WeLight is owned by Madagascar’s Axian Group, Norwegian develop-

France’s Sagemcom. The company currently operates 40 mini-grids bringing electricity to 9,000 households. The investor group includes the European Investment Bank, EIB, Triodos Investment Management and EDFI ElectriFI,

initiative.

Africa Energy Yearbook 2023 45
By 2030, solar and wind together could contribute 27% of Africa’s power generation, according to the International Energy Agency.

AFRICA SEEKS POLICY SHIFT TO SCALE UP INVESTMENT

FINANCING SHORTFALL

Despite the encouraging words, African nations seeking to facilitate more investment to increase electricity access, clean energy production and other green ambitions may not be overly optimistic that COP28 will deliver what they are looking for.

The last edition of the talks, COP27, may have been held on African soil, in Egypt, at the end of 2022, but it has been evident for some time that some leaders on the continent were losing patience waiting for an adequate multilateral response to the climate crisis and were seeking to make their own way on sustainable development, signing up for bespoke arrangements.

Akinwumi Adesina, President of the African Development Bank (AfDB) pulled no punches at the Bank’s annual meeting in May.

“Africa is being short-changed in climate finance. Africa is choking,” he told journalists. “Anywhere you look in Africa today, climate change is causing havoc,” Adesina said. “In the Sahel, hotter temperatures are drying up limited water, causing water stress for crops and livestock and worsening food insecurity.”

Combating the climate change impacts that are ravaging the continent, along with developing the energy and green infrastructure to make sure that African economies are part of the solution rather than adding to the problem, would require private sector climate he said. According to AfDB estimates,

ees at the Bank’s annual meeting was Sultan Ahmed Al Jaber (opposite), President-designate of the UN-backed COP28 climate talks which start in his home country, the United Arab Emirates (UAE), at the end of November. He is also CEO of the Abu Dhabi National Oil Company (ADNOC) and Chairman of the government-owned renewables company Masdar.

According to Al Jaber, the limited

achieve the UN Sustainable Development Goals.

“This is a clear threat...and responding to this challenge is one of the priorities of the COP28 presidency. I look forward to working with all partners to make tangible progress towards ensuring that such funds are provided for the areas where they need to be available,

There was no shortage of pledges to COP27, along with the creation of a “loss for vulnerable countries hit hard by climate disasters. But African leaders know from experience that ambitious international pledges to ramp up public funding or “mobilise” private investment for sustainable development have not been met in the past.

Rich countries pledged to provide £100bn a year in all types of climate support to developing countries at a 2009 COP summit in Copenhagen, but were still around $17bn down on that annual total in 2022, albeit with a hope that the target may be hit imminently.

POLICY RETHINK

In terms of the energy transition, many African countries are now choosing a course that prioritises their own imperatives, allying job creation and economic growth to sustainable development.

As Christopher Vandome, a senior research fellow with the Chatham House Africa Programme, put it in a note on the outcome of COP27: “The reality of under-disbursement and delivery of promised funds is causing many African

Africa Energy Yearbook 2023 46 Climate policy
Africa needs more than targets and positive words to mobilise urgently needed investment in climate change impact measures and the energy transition. Are international policy forums providing the solutions? Reports Ian Lewis

leaders to rethink their engagement with multilateral climate initiatives.”

He said South Africa’s policy of developing its own plan to work with partners on shifting away from coal for energy supply while protecting the incomes of those reliant on coalrelated industries, showed a willingness to adopt a more bilateral approach to green financing than could be emulated by other African countries.

South Africa developed a Just Energy Transition Partnership (JETP) with its international partners, which unlocked commitments of $8.5bn from the US, the UK, France, Germany and the European Union at the 2021

in late 2022. Senegal could be the next African country to follow South Africa, having been in JETP negotiations for some time, though a concrete announcement has yet to materialise.

The West African country is distinct from other nations involved in the JETP so far in that it is not a major coal consumer but must instead balance the use of its newly-exploited gas reserves with renewable energy to realise its aim of providing universal electricity access in the next few years. Various other sub-Saharan African countries that

Sultan Al Jaber, the COP28 President-designate, has been making all the right noises over the need for the summit to be a success. However, doubts have been expressed over whether a climate summit held in the UAE, one of the world’s largest hydrocarbons producers, is the ideal setting to achieve the sort of major climate policy breakthroughs that have proved challenging at the best of times. The fact that increased use of fossil fuels has been seen by some as a short-term rity crisis triggered by the Russian invasion of Ukraine won’t help the mood either, analysts say.

primarily to help emerging economies shift from coal to a greener energy mix

tions. The JETP with South Africa is expected to prevent up to 1-1.5 gigatonnes of emissions over two decades, according to the EU.

Indonesia and Vietnam have followed suit, announcing JETPs

gas players, such as fellow gas producer Mozambique, face similar quandaries over how to balance the economic opportunities provided by exploitation of fossil fuels, while embarking on the energy transition.

COP28 CHALLENGES

How to build successfully on blended finance initiatives such as JETP is likely to be a key concern at COP28. The $8.5bn pledged to South Africa is a start, but it needs to stimulate a lot more funding to meet the huge upfront capital requirements needed for its energy transitions.

In November, South African Presithe task. He said the country would need more than $80bn over the next five years to realise its plans to cut from the energy transition and support

But there are rays of light, a notable players to get an agreement at COP28 energy capacity expansion. The hope is will send a signal to markets that investors should be serious about funding the sector, allowing renewable energy production to scale up and lowering the cost of upfront capital.

tial targets yet, but If they are to match the scale of the climate change problem, they would need to be spectacular. Francesco La Camera, Director-General of the UN-backed International Renewable Energy Agency said earlier this year that annual renewable energy capacity growth of 1 TW globally would be needed to meet climate goals.

Given that Africa has some of the world’s best climatic conditions for renewable energy production, such already in the process of embracing solar and wind power. However, African leaders would probably prefer to have concrete arrangements in place to mobilise funding for the energy transition, rather than relying on setting build-out targets and hoping for a market response.

Africa Energy Yearbook 2023 47
In terms of the energy transition, many African countries are now choosing a course that prioritises their own imperatives, allying job creation and economic growth to sustainable development.

IMPORTANCE AND VALUE OF HYDROPOWER PROJECTS

Hydro is the most widely used renewable energy source in the world, contributing approximately 17% of the world’s energy production. The market is projected as growing at 5.9% Compound Annual Growth Rate (CAGR) per year.

Facilities to house hydropower come in all sizes, from the well-known hydroelectric power plant to the small system called ‘micro hydropower’ which is suitable for a single home, farm, ranch, or village. For all hydropower projects, it is critical to complete a sustainability assessment which includes evaluating sites, and environmental and social impacts. Sustainability assessments are the key element enabling the creation of a solid action-plan prior to project development.

Hydropower at its heart is like a big battery, the ideal renewables partner providing stored power in the form of water when needed. This positions hydropower as the essential component in a renewable energy infrastructure promoting guaranteed energy, with price stability. Solar and wind power projects are seeing an increase in numbers, yet they are comparatively less reliable in meeting peak demands and maintaining system codes unless coupled with Battery Energy Storage Systems (BESS) to provide ancillary services. Hydropower projects can be implemented and used to make the grid

stable by generating a more reliable form of renewable energy.

Hydropower is flexible and can deliver power to the grid immediately, providing, for example, essential backup power during major electricity outages or disruptions. Hydropower has proven to be low-cost and durable over time compared to other renewable energy sources. The estimated installed capacity of hydropower projects across the world is about 1400 GW. Hydropower enables progress with stability and reliability across renewable energy systems.

Unlike other renewable energy sources which are completely dependent on weather and climatic conditions, hydropower, though dependent on hydrology, can generate electricity around the clock with limited seasonalstable source of energy. This is particularly important for regions that require a base-load energy source to meet minimum energy demand. Hydropower facilities are proven to be long-lasting, requiring minimal maintenance. Some of the standing operational facilities are more than 50 years old, making them

run, providing a predictable source of energy for years to come.

In addition to being reliable, hydroadjust energy output to meet changing demands, making them a good backup source. They are also scalable and can serve multiple purposes

Africa Energy Yearbook 2023 48 Communiqué
As the demand for clean and sustainable energy sources continues to grow globally, hydropower is gaining

beyond energy generation, for example, dams constructed for many hydropower projects also serve as ures, and irrigation systems.

ADVANCES IN TECHNOLOGY

While the use of traditional dams remains a popular method for generating hydropower, advances in technology have led to the development methods of generating hydropower, making it a more attractive and popu-

and lenders for bridging the demand and supply gaps.

One such advanced technology is run-of-river, which does not require a large dam or large reservoir. Instead, it

stream and may require a smaller dam to turn turbines and generate electricity. This can have a lesser environmental and social impact, due to the small reservoir. More advanced run-of-river hydropower technology incorporates features such as marine-life friendly turbines, along with other environmental and social considerations.

Another technology is pumped stor-

age projects, which involves pumping water uphill during periods of low energy demand and then releasing it to generate electricity during peak demand periods. This technology allows for the storage of excess energy generated during periods of low need, which can then be used to meet demand

ciency and reliability of the power grid. Other emerging technologies are also being tested across markets; however, the developers and lenders still remain focused on the proven and implemented technologies.

UNTAPPED OPPORTUNITIES

Although a well-established source of energy, many untapped opportunities still remain for hydropower development. According to the International Hydropower Association,

hydropower development globally, particularly in Africa, Asia, and Latin America. These regions account for around 75% of the technically feasible potential for hydropower.

Africa has an installed hydropower capacity of circa 38 GW, which is just a fraction of its estimated potential of

approximately 600 GW. Some African countries have already initiated large hydropower projects, tapping into their enormous promise. The Democratic Republic of Congo (DRC) and Ethiopia have the most hydropower potential, followed by Egypt, Zambia, Mozambique, Tanzania, and Sudan.

Some of the important upcoming hydropower projects in the sub-Saharan Africa region include the Mphanda Nkuwa Hydropower Project in Mozambique, which is a run-of-the-river initiative with expected capacity of 1,500 MW. The project recently concluded the tender process for the selection of a private sector strategic partner to co-develop the project along with the Government of Mozambique. Other upcoming projects include the 350 MW Mpatamanga initiative in Malawi, the Batoka Gorge scheme in Zimbabwe, Grand Inga projects in DRC, and many other small-scale hydro plans.

OVERCOMING THE CHALLENGES

While hydropower projects offer challenges. These can take many forms, including socio-economic, cultural, environmental, and technical, leading implementation and operation of the projects. Apart from these, the structuring, development, bankability assessment and construction of hydropower projects may be relatively more challenging compared to conventional or other renewable power initiatives. The key considerations faced by hydropower projects are socio-economic, cultural, environmental and hydrological.

Socio-economic and cultural considerations

Hydropower projects can have significant socio-economic and cultural considerations, such as the displace-

Africa Energy Yearbook 2023 49
The Gariep Dam near Colesberg on the Orange River, the largest dam in South Africa.

ment of homes and communities, which can occur due to the construction of large dams and reservoirs. Such displacement can cause social, economic, and cultural deracinations ally, the construction of such projects

resulting in the loss of cultural heritage, with undesirable social and emotional

Yet another negative impact could be ing and agriculture. While hydropower projects can create jobs and stimulate economic growth, it is important to address these problems by providing alternative livelihood options and compensated fairly for any losses.

To overcome such challenges and to limit such impact, most of the multilateral and bilateral Development Finance Institutions (DFIs) issue and follow strict guidelines. These guidelines are

also imposed on the developers and investors in such projects, whereby the

from the DFIs hinges upon compliance with the requirements.

Environmental consequences

Hydropower projects may have significant environmental consequences. These projects can disrupt the natural patterns. The construction of dams livelihoods of people who depend on and sediment transport can also cause erosion and sedimentation downstream, impacting the natural habito long-term environmental impacts, including the loss of biodiversity and ecosystem services.

Therefore, it is important to address these environmental considerations by

carefully examining the location and design of hydropower projects, implementing mitigation measures, and monitoring their impacts over time. To

DFIs, along with the social impact guidelines, DFIs also issue strict environmental guidelines and impose them on the developers and investors.

Hydrology

Hydrology needs to be thoroughly studied, analysed, and understood by all the stakeholders involved in project implementation. Hydrology risk refers to the potential impact of changes in Climatic patterns and seasonality can rivers and streams, which can directly can cause water levels to drop, reducing the amount of electricity that can be generated. Hydrology study is

and to evaluate the power generation potential at the project location.

FINANCING

cant investment in upfront capital and have a long gestation period before they

is a critical component of the hydropower project development cycle, as it enables project developers to secure the necessary funding to design, build and operate the facility.

Financing hydropower projects involves a complex mix of funding sources, including commercial banks, DFIs, export credit agencies, and multilateral organisations. The availability

in determining the economic viability, sustainability and affordability of a hydropower project.

In large-scale projects, usually, due to the size of the initiative, multiple lenders will form part of the lending group. For example, for a hydropower

Africa Energy Yearbook 2023 50 Communiqué
The impressive Katse Dam hydroelectric power plant and service roads in Lesotho, Africa.

plan in Africa, the lending group may consist of major commercial banks, DFIs such as the World Bank, International Finance Corporation, African Development Bank, European Investment Bank and the US International Development Finance Corporation, and may include export credit agencies depending on the source country supplying the equipment for the project. Apart from the general bankability and risk-allocation-related due diligence, the lenders also get closely involved in the environmental and social impact assessment and the hydrology studies.

Green Financing

The increasing demand for green

to prioritise the assurance of environmental and social sustainability, hence necessitating the implementation of environmental and social impact assessment (ESIA) protocols. ESIA guidelines are an essential component of sustainable hydropower development.

Overall, these guidelines emphasise the importance of sustainability, stakeholder engagement, and ESIAs in the development of hydropower projects in Africa. Meeting these criteria can help ensure that a hydropower project

is developed in an environmentally responsible manner and can increase

ing from organisations such as the European Investment Bank, the International Finance Corporation and the African Development Bank.

STRUCTURING OF PAYMENT MECHANISMS

Another important aspect of hydropower project development is the payment mechanism under the Power Purchase plays a critical role in determining the economic viability and sustainability of a hydropower project. They can vary

tion, and regulatory framework.

One approach is the availability-based tariff approach, under which the hydropower project is paid for being available to supply power, regardless of how much power is dispatched. On the plus side, an avail-

of capital. However, one downside is that it puts the burden of demand risk on the concession grantor, who may end up paying for capacity that may not be dispatched.

Another option is a generation-based tariff. In this system, the hydropower project is paid for each unit of energy that is generated and supplied to the grid. It is suggested that a model similar to those used for photovoltaic solar or wind projects be used. The generation-based payments model transfers demand risk from the grantor to the concessionaire, which can help align interests and reduce financing costs. However, this approach only works well if demand can be predicted with reasonable certainty, with probability models using hydrology. This structure must be coupled with a take or pay which is customised to reflect the availability of water to the plant to enhance the bankability of the projects.

structures can vary depending on the regulatory framework and agreement between the project developers and the

while others may employ competitive bidding processes or market-based

CONCLUSION

With its renewable nature, hydropower has the potential to play a vital role in achieving the goals of countries striving to become carbon-neutral. Despite the challenges faced by these projects, countries across the globe are implementing hydropower projects,

ing institutions. With the continuous advancements in technology and the increasing focus on sustainability, hydropower is set to remain and grow as an essential component of the world’s energy mix, providing a reliwhile minimising environmental impact, especially in countries in the African continent.

Africa Energy Yearbook 2023 51

STEPPING ON THE GAS

supply source. The Gas Exporting Countries Forum (GECF), a grouping of the world’s largest gas producing countries, expects Africa’s global gas market share to rise from 6% in 2021 to over 11% by 2050. That growth will in turn help cement the continent’s status as an anchor of global energy security.

Africa must have natural gas to complement its renewable energy,” African Development Bank President Akinwumi Adesina said on the sidelines of a UN conference earlier this year.

That message should resonate strongly in a continent which the International Gas Union reckons boasts natural gas reserves of at least 18tn cubic metres (tcm), about 8.8% of the world’s total.

With a host of major export-oriented projects underway, Africa has emerged as a global gas hotspot – and, potentially, a viable source of global energy security, especially with Russian gas subject to supply disruption in the past year.

Gas comes freighted with advantages for African resource holders. While upstream oil projects remain subject to tougher scrutiny, gas is comparatively less vulnerable to environmental, social and governance (ESG) related concerns. That matters. As Adesina pointed out, even if Africa were to triple its production of natural gas from current levels, its contribution to global emissions would only rise by 0.67%.

There are some exciting new gas markets developing across the con-

tinent, yet the biggest gas markets remain Algeria and Nigeria, which combined account for at least 55% of the continent’s gas reserves.

Algeria in particular is playing an important role in helping to ensure Europe’s supply security, ramping up exports to its main southern European customers over the past year.

But there are some important new kids on the block that attest to a much more advanced gas market developing in Africa. The likes of Mozambique, Tanzania, Mauritania and Senegal are just a few of the rapidly growing gas provinces, all with lique-

suggests African gas will be hitting markets well before that 2050 deadline. According to Westwood Global Energy, a consultancy, Africa will account for 56% (10.2m t/y) of addidue onstream over the 2023-27 periregion are currently under construcritania, due to start production in Q4 of 2023.

Analysts see the likes of Algeria as primed to shape much of the continent’s gas growth in the coming years. Algeria’s state-owned year plan (extending to 2027), of which three-quarters will be allocated

for new export schemes. Based on currently proposed projects, African gas producers have a proposed project pipeline totalling more than 55m tonnes a year (t/y).

Africa’s gas production has been rising annually. The International Gas Union (IGU) estimates this to have grown by a yearly average of 2.5% between 2011 and 2021, above the world average of 2.2%, reaching some 282 billion cubic metres (bcm).

This will ensure Africa emerges as a much more important global

Africa Energy Yearbook 2023 52 Natural gas
Once the preserve of giant producers, natural gas developments are now emerging across the continent – and playing a role in shoring up global energy security, reports James Gavin

to exploration and production activities that have a particular focus on gas projects.

come on stream, while production

Hassi R’mel, has been hiked. Over the southwest and southeast are expected to be commissioned to meet additional domestic demand and for potential gas exports to Europe, according to the Oxford Institute of Energy Stud-

making available 10 to 15 bcm of incremental annual volumes for exports through the TransMed and Greenstream cross-border gas pipelines to

Corporation struck an $8bn agreement early in 2023 that will see the

overall gas exports from 7m tonnes in 2021 to 8m tonnes in 2022, is also sending more gas to Europe.

But while North Africa will be focused on keeping European customers well supplied, much of the activity in Africa will be focused on supplying

customers elsewhere in the world, and to meet domestic energy requirements.

Southern Africa is one emerging gas hub still in its infancy. In early 2023, France’s TotalEnergies revealed considerable reserves discovered in Block

it will invest $3bn in developing those

more than 13m t/y. In neighbouring Tanzania, where gas resources of at least 47 tcf are being developed, the

ergies and Norway’s Equinor will develop gas from deepwater resources, through a dual-train 10m t/y plant.

second phase. First gas is earmarked for 2026.

In West Africa, Gabon is another independent oil company Perenco will bring on stream a 700,000 t/y

Oil Terminal. In Equatorial Guinea, meanwhile, Marathon Oil is backing on Bioko Island.

Further up the coast, Mauritania and Senegal are playing host to ambitious projects sponsored by supermajor BP. The Greater Tortue Ahmeyim (GTA) phase 1 scheme will produce

vessel (FPSO) arrives this summer.

second phase of GTA, which will see up to 3m b/y added.

In the Republic of Congo, Eni’s in December 2023 at the Marine 2025. from East Africa, notably Mozambique and Tanzania. TotalEnergies’

schemes backed by international majors following soon after – notably ExxonMobil, where production may reach as high as 18m t/y when it starts

All this project activity underscores an active and much more graphically diverse gas slate in Africa. And while that helps meet global supply needs – whether in Asia or Europe – it will also help to catalyse domestic industries.

The International Energy Agency forecast that Africa’s undeveloped gas resources could provide an additional 90 bcm of gas annually by 2030 for the fertiliser, steel, cement, and water desalination industries.

The IGU has urged Nigeria and other gas-rich African countries to increase domestic gas to close energy access gaps, arguing it needs to adopt gas locally to promote industrialisation, create jobs and expand supply chains with the production of fertilizers and petrochemicals, and develop energy-intensive industries such as cement, steel and desalination.

Then there is the need to address the continent’s electricity gap. As the AFDB’s Adesina has noted, more gas is needed to balance out the electricity supply given the intermittent nature of renewables. Gas and renewables can work in tandem.

“Africa has the highest level of energy poverty in the world,” Adesina said. “My interest is how Africa uses natural gas as part of its energy mix to provide electricity for 600m people today that don’t have access to electricity.”

Given that about 900m Africans are also in need of clean cooking, gas is poised to play a vital role in curbing energy poverty in Africa, just as it helps to provide new supply sources to customers situated much further

Africa Energy Yearbook 2023 53

EGYPT’S GREEN TRANSITION

Last year, the International Monetary Fund (IMF) warned that Egypt is “highly vulnerable” to the

a changing climate. Water scarcity, droughts, and rising sea levels could put the prosperity of communities dependent on agriculture, tourism, and coastal resources at risk, the IMF argued.

Partly because of this, the Egyptian government has already brought forward several initiatives designed to support the transition to a greener economy. While Cairo is yet to declare a net zero target, the government launched a billion-dollar National Climate Change Strategy in May 2022. This is aimed at mobilising Egypt’s

help fund green projects.

A major part of this strategy involves using the power of the Sovereign Fund of Egypt to facilitate private sector investment in green technologies. Cairo sees green hydrogen in particular both as pivotal to North Africa’s green transition and as a lucrative economic opportunity.

Ayman Soliman (right), CEO of the Sovereign Fund of Egypt, explains

investing in green energies are enormous because “North Africa has the resources in the world.”

He also rejects the idea that Egypt is in direct competition with neighbouring countries in the North Africa and the Middle East (MENA) region that are similarly developing green hydrogen capacities – which includes countries such as Jordan, Morocco, and Saudi Arabia – because “the scale of the project and the volumes of green energy the world needs mean this is a regional opportunity”.

“Of course, there is a healthy level players in the region to try and attract resources,” Soliman says. “But we share common goals, including localising some of the industries involved in the green hydrogen supply chain, such as component technologies. The

to ensure that we can house this manufacturing within the region? Scaling

There have certainly already been initiatives designed to foster cross-border collaboration on green hydrogen within MENA. Soliman points to the recent co-investment the Sovereign Fund agreed with the Oma-

Africa Energy Yearbook 2023 54 Country focus
The Sovereign Fund of Egypt is seeking to mobilise private sector investment in green technologies. Harry Clynch spoke to its CEO, Ayman Soliman, about the Fund’s mandate, and the future of green energy in the MENA region

ni Investment Authority as an example. In May, the two authorities agreed to invest jointly in a green hydrogen project that could cost up to $5bn.

As projects such as this indicate, while the Sovereign Fund’s primary mandate is to make returns on investments made with public money, Soliman also sees the Fund as playing a

that the Fund’s role is to ease the way for private capital to come to Egypt.

“All of the ingredients are in place for developing industries such as green hydrogen – apart from capital. As in many emerging markets, Egypt has a scarcity of capital,” Soliman says.

He believes his role is therefore to reduce the risks for private enterprises wishing to invest in Egyptian markets and therefore incentivise greater levels of investment in strategic industries. “We are involved in discussions with the government to deliver a packto encourage companies to come and invest in renewable and clean energy, such as green hydrogen and green ammonia,” he says.

While the exact nature of these incentives is still to be announced, Soliman says that at last year’s COP27 in Sharm-el-Sheikh, the Sovereign Fund “signed nine framework agreements and 23 memorandums of understanding (MOUs) with the government and local authorities, such as the Suez Canal Economic Zone, to work on frameworks to encourage investors into these industries.”

The Sovereign Fund of Egypt clearly has a wide mandate and is motivated to drive broad change in Egypt – but it is also, in Soliman’s words, “a very young sovereign fund.” The organisation was only established in 2018 and

is dwarfed in terms of assets under management (AUM) by its regional partners, particularly in the Gulf. Total assets currently amount to a relatively modest EGP77.5bn ($2.42bn) – a stark contrast to the $620bn that Saudi Arabia’s Public Investment Fund is thought to have.

Soliman believes, however, that this gives the Fund an advantage when it comes to embracing green hydrogen and other sustainable technologies.

building our portfolio in a greener manner,” Soliman explains, which means that “while the current size of our AUM is not as big as others, we have the largest portfolio of green projects – this is where we are very funds.”

He is similarly optimistic when

turbulence in Egypt has had on the Sovereign Fund’s activities. In December last year, Egypt was forced to turn to the IMF for a $3bn bailout programme, which was presented as “a comprehensive policy package to preserve macroeconomic stability, restore

and private-sector-led growth.” In the aftermath of the package, which included liberalisation of the country’s foreign exchange markets, the Egyptian pound fell to record lows against the dollar, helping to contribute to

Sovereign Fund’s ability to invest in green hydrogen projects? Soliman says that “in every challenge there is a silver lining” and notes that “for infrastructure projects, a weaker currency can become a good advantage because Egypt becomes more competitive than other markets where the currency is stronger.”

Indeed, the Egyptian government has established a committee to develop a $40bn national hydrogen strategy, much of which involves exporting green hydrogen to foreign markets. “Export-orientated businesses are resilient to drops in the currency and we envisage green hydrogen projects as being export-orientated […] this strengthens our business case rather than weakens it,” Soliman says.

More widely, Soliman also notes that “the natural defence mechanism of emerging markets is above average, double-digit returns on that the fundamental business case for green hydrogen remains strong despite shorter-term volatility in Egyptian markets.

The volatility on international energy markets last year proves his point, Soliman believes. Oil and gas prices soared in the aftermath of Russia’s invasion of Ukraine and the sanctioning of Russian exports by the US and other Western countries. “The rise in gas prices was a good opportunity for the green hydrogen business case,” Soliman says.

While natural gas and oil prices have now come down, Soliman believes that green hydrogen will only grow more competitive as the technology continues to develop and grow in sophistication. “Mainstream prices of the technology will evolve, and the technology will get cheaper,” he says. “As we’ve seen in all other industries as they mature, the unit production costs come down. At that point growth will be accelerated.”

Should this “acceleration” transpire, as Soliman expects, the Sovereign Fund of Egypt would be rewards.

Africa Energy Yearbook 2023 55

Hydrocarbons

TO BOLDLY GO

The overarching narrative for Africa’s oil and gas sector in recent years has been retreat and retrenchment. As international oil companies slim down their portfolios, they have generally sought to divest assets across Africa.

– BP, Exxon, Shell and many others – have not generally been in the business of seeking out new opportunities, but rather in downsizing. For example, Shell is pursuing divestments averaging $4bn annually as it pursues net zero targets. That means selling assets such as its 30% interest in the SPDC joint venture onshore Nigeria.

In the case of the Eni-BP Azule Energy joint venture, this has seen them doubling up to secure economies of scale in one of Africa’s largest producers, Angola.

This trend has coincided with Africa’s share of global oil output declining from 12.3% in 2010, down to just 8.1% in 2021, according to BP’s Statistical Review of World Energy

But talk to any international oil executive about the most exciting exploration prospects worldwide and many

will identify one new hydrocarbons province above all others: Namibia. In this new oil and gas province, TotalEnergies and Shell are pushing forward with ambitious drilling camwhere resources are measured in the multiple billions of barrels.

In the words of Africa Oil CEO Keith Hill, whose company is partnered with TotalEnergies, the Orange Basin is “probably the most soughtafter new petroleum region globally”. Meanwhile, the indications are that

pressive and have more than matched expectations, pointing towards very advantaged resources.

And as the consultancy Westwood Energy notes, TotalEnergies’ Venus discovery and opening of the Orange Basin coincides with a short-term revival in frontier exploration. It said frontier exploration commercial success rates were at record highs in 2022, reaching 25%.

Shell started 2023 with a third light oil discovery on PEL 39 at the Jonker-1X well, following on from drilling

which led other operators to farm into neighbouring blocks, including Chevron and Woodside Energy.

Among the most acquisitive oil companies has been state-owned Gulf oil company QatarEnergy (QE), which has been expanding its overseas footprint with M&A forays in the past year. According to Wood Mackenzie, QE has accrued 2.5bn of barrels in Namibia on account of its non-operating partnerships with Shell and TotalEnergies across four blocks, providing further vindication of its strategy to partner with the majors in high-impact frontier exploration acreage.

“There is certainly increased interest in the Orange basin area in Namibia, however, this is linked to incredibly large forecast STOIIP (stock tank oil initially in place) which is a key driver for the interest,” said George Maxwell, CEO of US-headquartered Vaalco Energy, which has producing assets in Africa. “The impact of this on other established resource holders

our perspective near-term production opportunities that can then self-fund exploration prospects remain the key opportunities, both for the host counand for investors.”

Such frontier acreage opportunities indicate how IOCs retain a strong interest in Africa, even if they are continuing to sell their mature assets – which is in turn providing opportunities for smaller, nimbler independents to come in. That means more majors entering the basin, albeit with higher entry costs.

The potential scale of Namibia’s resource is found in the fact that whereas Guyana, another recent frontier province, saw 15 discoveries before it reached 7bn bbl of reserves, Namibia took just three discoveries to get to that level.

Exploration success is continuing with major deep water oil discoveries

Africa Energy Yearbook 2023 56
Frontier exploration is still shaping investment in Africa’s upstream, as oil companies unleash capex budgets on exciting new prospects such as Namibia, reports James Gavin

was Côte d’Ivoire’s largest-ever discovery and is already under develop-

the type of low-cost, low carbon-intensive barrels that the world needs, notes WoodMac.

One clear theme that has emerged from recent E&P activity in Africa is that oil company capex is no longer dominated by the established giants such as Angola and Nigeria, but that investment will be spread across a variety of plays – among them Senegal, Namibia and even Uganda, where plans envisage the building of a major new export pipeline to Tanzania.

According to S&P Commodity Insights, new licensing in Africa remains certain international oil companies and foreign national oil companies nancial advantages. Although political volatility may constrain E&P progress, some governments are improving

Timing is of the essence, said S&P. Mindful that the window to capture foreign upstream investment may soon close, host governments have enacted or are considering how to terms. In the coming year Angola, Nigeria, and Tanzania may try to bolster attractive terms.

This is not a foregone conclusion. Although current elevated crude prices are likely to be sustained, attracting IOC capital remains challenging owing to the region’s high above-ground risks and operational challenges.

Following in neighbouring Namibia’s slipstream, South Africa is another emergent new hydrocarbons province catching IOC attention. Africa Oil Corp, operator of Block 3B/4B, is partnering with Eco Atlantic Oil & 3D seismic data and preparing for a

two-well drilling campaign this year. And in Zimbabwe, the Australian independent Invictus Energy has identizones, with drilling planned for later this year.

Liberia is another promising prospect. In April, ExxonMobil applied to before negotiating a petroleum sharing agreement for Blocks 15, 16, 22 and 24 in the Liberia Basin. The US supermajor is pursuing a direct negotiation policy that was put in place after the Liberian government withdrew a bid round focused on the Harper ba-

territories where there are existing export facilities, such as export pipelines and production platforms – as enabling companies to tie in and monetise discoveries quickly. This lower development.

“To be able to tie back and utilise key infrastructure such as pipeline and LNG facilities is becoming increasingly attractive in the sector, allowing trapped reserves to be utilised or commercialised,” said Maxwell. “Being able to bring production into existing systems provides for faster cycle times and potentially lower cap-

sin, in Liberia’s eastern waters.

Interest in Liberia has been triggered in part by Guyana’s exploration success, with a coastline that can be with the Guyana basin, said TGS, a geophysical data company.

Sierra Leone is another exciting new play where the geology is similar to that of Guyana. London-listed independent oil company Wildcat Petroleum recently completed its own assessment of the potential of Sierra Leone’s

TGS, which is working on the licensing round, suggests that “studies of the extensive seismic coverage in the area indicate potential multibillion-barrel prospects, presenting an exceptional exploration opportunity”.

That said, there remains a focus on infrastructure-led investments in Africa. Analysts see infrastructure-led exploration – which is focused on

more economic. Blue water or greenproduction.”

But that doesn’t mean that fronplans looking ahead.

Large-scale frontier exploration will continue to attract IOC interest,

best, most advantaged barrels, to improve their reserves positions.

As Italy’s Eni proved with its multi-

Egypt in the last decade, it is frontier pect of adding to resources. With billion-barrel reserves still showing up in previously undeveloped regions such as Namibia, the focus on newer oil and gas provinces will continue to drive companies towards Africa.

Africa Energy Yearbook 2023 57
To be able to tie back and utilise key infrastructure such as pipeline and LNG facilities is becoming increasingly attractive in the sector, allowing trapped reserves to be utilised or commercialised.

CAN AFRICAN STATES TURN GREEN HYDROGEN AMBITIONS INTO REALITY?

African countries are in a race countries are in a race against time to establish themselves time to establish themselves as renewables-driven hubs to supply as renewables-driven hubs to escalating global demand for green demand green hydrogen, reports reports Ian Lewis Ian

Green hydrogen production is becoming established as one of those new industries with a seemingly assured future in which African countries and their copious renewable energy resources are well positioned to play a

More than 50 projects have been proposed across the continent to supply an expected surge in global demand for green hydrogen and products that

Africa are Egypt, Morocco and Mauritania, all well located to serve European

Africa can count on local demand, as well as looking to export markets, with

Kenya and Djibouti also looking to put

the industry and the interest develop-

Hydrogen is a feedstock suitable for everything from decarbonising energy-intensive industries such as steel and ammonia production to power generation, fuelling some forms of transport and

concerns mean that its future is limited if traditional production processes, which usually require natural gas and produce

However, when produced using electrolysis powered by renewable energy, hydrogen becomes a low-emissions

a versatile, green feedstock has prompted forecasts of rapid growth green hydrogen could grow sevenfold to 607m tonnes by 2050, according to by the Africa Green Hydrogen Alliance

COMPETITIVE RENEWABLES

African countries think they have a of the pie, because they have access to able energy, at a time when the cost around 60% of hydrogen production

Africa Energy Yearbook 2023 58 Green hydrogen

costs come from energy inputs, Africa has a competitive edge in that regard

provided us with the cheapest elecseveral African countries by 2030, much lower than the current mass to the $60-70 paid for an oil barrel,” said Ajay Mathur, Director General

to Africa and that the continent could be producing 50m tonnes of green

As with talk of future investment in most African economic sectors, there are a lot of “what ifs” in the various

regarding the potential of green hydrogen – investment in plants and the renewable energy to power them, and the availability of enough electrolyser capacity and other specialised tech-

investment will materialise across the green hydrogen project pipeline, and way to countries that have tradition-

EGYPT AND MOROCCO DRAW EARLY INVESTMENT

The report, commissioned by the and the African Union, is boldly titled

may be high, but the industry is only at an early stage – according to research

gen electrolysis capacity on its African

where investment is already starting tegically placed at the meeting point of three continents and has already proved an attractive investment target for companies seeking to supply natu-

that a country that has also invested heavily in renewable energy resources

Africa Energy Yearbook 2023 59

Green hydrogen

and has a track record in energy distribution is also leading the way in green hydrogen-related projects lined up

to establish itself as a global hub is a to supply existing local fertiliser plants the project, describes the facility as gen plant, which when fully developed

to build a green ammonia plant in the

Another project lined up for the

oped by Masdar and Hassan Allam Holding Group, which will produce

tonnes of green hydrogen as feedstock for production of up to 90,000 t/year

Morocco is also capitalising on its link with European markets to The largest is the Amun facility, being which will be able to output 900,000

ergies-owned Total Eren is develop-

MAURITANIA AIMS HIGH

both export and domestic markets are also signed a memorandum of understanding with Egypt for a $5bn project

A more surprising regional rival to well-established investment magnets like Egypt and Morocco is Mauritania, which sees green hydrogen produc-

tion as a way to take advantage of its copious solar resources and support industrial development, which is currently being underpinned by devel-

largest green hydrogen project, the

electrolyser capacity will be powered

Other big hydrogen projects in

Africa Energy Yearbook 2023 60
Mauritania is set to play host to Africa’s largest green hydrogen project, the $40bn Aman initiative.

plan, which could reach electrolyser

SOUTH AFRICA TAPS DOMESTIC EXPERTISE

ing expertise in using hydrogen –albeit the relatively high emissions, non-green variety – in industrial processes, such as synthetic aviation

sition from “grey” to green hydrogen production, if it can tap sufficient quantities of its renewable energy resources, which are much in demand

green hydrogen projects, prospects for a sector that could provide Africa with a much-needed economic boost look promising – if the investment keeps

Ensuring that happens was a major preoccupation at the Africa Green Hydrogen Finance Accelerator Forum, a meeting of African governments, renewable energy and green hydrogen green hydrogen in Africa, before the

Another project is being developed

and Masdar – and German devel-

lyser capacity, with Germany a likely

Activity in the rest of Africa is mainly

accelerated development under the

“African governments in their economy, are competing with regions

These include the Tsau Khaeb initiHyphen Hydrogen Energy, which is hoping to attract investment of more than $9bn to produce 300,000 t/y of in 2025 if permits and investment are

added reason for the sector to succeed, because it accounts for about 75% of world production of platinum, a key ingredient for making polymer elec-

INVESTMENT DRIVE RAMPS UP

Djibouti and Kenya hoping to line up

“The energy transition will not succeed unless public institutions crowd in private capital for investments in the green energy sector in the developing countries and emerging economies,” the communiqué

Africa Energy Yearbook 2023 61

GREEN HYDROGEN AT HEART OF NAMIBIA’S VISION 2030

Around the world, industrialised economies are looking to undergo green transitions. Countries across Europe and North America particularly are seeking to reduce their dependence on carbon and fossil fuels by investing in new technologies and sources of renewable energy, such as green hydrogen. Namibia is also looking to develop its green hydro-

circumstances, as James Mnyupe, Economic Advisor to the President of Namibia, explains.

“People think about green hydrogen from an energy transition perspective,” Mnyupe says, “but it’s the exact opposite for us. Lots of highly industrialised countries are consuming huge amounts of carbon and are trying to go towards a low-carbon environment. Whereas with Namibia, we’re going from very little industrialisation to a lot of industrialisation, potentially on the back of a zero-

carbon source of fuel.”

“At least in theory, we have the opportunity to leapfrog the carbon-heavy part of industrialisation and go straight to low-carbon industry,” Mnyupe adds.

The Namibian government sees green hydrogen as “a spark”, Mnyupe says. The fuel is perceived not only as a way to drive industrialisation in Namibia, but also promote wider economic prosperity. For one, green hydrogen could allow Namibia to develop as an international energy player and establish lucrative foreign markets. Mnyupe explains that “the project is so large and so significant, that it actually enables other binger of prosperity for the rest of the country.”

In this sense, green hydrogen is also integral to Namibia’s “Vision 2030” project. This was launched by former President Sam Nujoma in 2004 and outlines the country’s ambitions “to improve the quality of life of our peo-

ple to the level of their counterparts in the developed world by the year 2030.” The importance the government is attaching to the commodity could hardly be higher.

Because of this, Mnyupe says the government is taking “every step imaginable” to attract foreign direct investment (FDI) into Namibia to provide the capital to develop the required infrastructure. Inter-governmental diplomacy and private sector engagement have both played a role.

“We have shared our vision with

world, on various platforms, from the United Nations General Assembly to the World Economic Forum, and beyond.”

“We have signed memorandums of understanding (MOUs) with the Netherlands, the European Union, Germany, and Japan as well. On the back of all that, we’ve also exchanged at a private sector level. Namibian entities and Belgian, Dutch, German, and Japanese enti-

Africa Energy Yearbook 2023 62 Country Focus
Harry Clynch spoke to James Mnyupe, Economic Advisor to the President of Namibia, about the key role of green hydrogen in the country’s development plan

ties have exchanged ideas on how to partner and deploy capital.”

Namibia has already seen the formation of consortiums and joint ventures of June, the Namibian government agreed a $10bn deal with German company Hyphen that will facilitate the production of two million tonnes of green ammonia per year by 2030. Last year, Namibia’s O&L Group and Belgian company CMB.Tech agreed to collaborate on building a green hydrogen project in the country.

Mnyupe recognises, of course,

should be”. He points to Kenya, Morocco, Mauritania, Egypt, and South Africa as competitors similarly looking to build sophisticated renewable energy industries. However, he does believe that Namibia has several qualities that could help the country emerge as an attractive option for international investors.

“We have a united government, enabling policy legislation, and very attractive solar and wind resources,” Mnyupe says. “We’re not landlocked so we have access to a harbour. I also think that something very interesting in Namibia is that we have a relatively sophisticated capital market that allows for the construction of various

“That can help lower the cost of capital required for the construction things make Namibia an attractive place to consider building green hydrogen assets.”

The quality of Namibia’s capital markets is certainly something that the government is trying to lean into as it attempts to promote the growth of its green hydrogen industry. In 2021, the government announced plans to

Stock Exchange, although Mnyupe says they encountered several issues with this project.

“We realised that the green bond would be trading at the Namibian sovereign credit rating, or at least with yields relative to the credit rating, maybe with a few basis points’ discount,” Mnyupe says, “and so we decided the government would have to get a bit more inventive.” This is because Namibia’s credit rating is currently “BB-”, according to Fitch, potentially making raising cash for the green hydrogen prohibitively expensive.

“So, we started engaging with the European Investment Bank (EIB) to put together a bespoke facility for Namibia that it could tap into to develop complementary infrastructure for the green project.”

not a project funded by the Namibian government, this is a privately funded initiative. But the Namibian government might have to invest in ancillary infrastructure around it to unlock the full socio-economic potential of the project. For this, we’ve approached the EIB and they’re putting together a package that would be more conexisting credit rating.”

infrastructure in Namibia, the idea is to “de-risk the project and encourage other private investors to come in”.

“The heavy lifting has to be done early on by multilateral development banks and governments, which is what we’ve been looking to do,” Mnyupe notes. “Private sector banks come in later, and then pension funds can come in once the asset reaches operating level.”

Of course, the government is confronting several challenges as it at-

tempts to develop Namibia’s green hydrogen industry. The sheer scale of the project is enormous. The latest estimate shows the cost to be around

tion of its complexity. “End-to-end,” Mnyupe outlines, “we need renewable energy transmission pipelines, port infrastructure, roads, housing, and more: quite a hefty undertaking for any government.”

However, if such challenges can be overcome, the rewards could be across whole swathes of Namibian social and political life. For one, Namibia is a net importer from one of the most energy-insecure countries

import 60-70% of our electricity from South Africa, but with a project like this, we could become a net exporter of electricity.”

“That has massive implications from an energy security perspective, importantly, could allow us to attract energy-heavy industries to Namibia,” Mnyupe says.

This independence would bring

“The amount of foreign reserves we could attract into the country would be huge, and that would have very interesting consequences for our currency. At the moment, the Namibian dollar is tied to the South African rand so whatever exogenous shocks are experienced in South Africa, we absorb 100% of that,” Mnyupe explains. The positive changes that green hydrogen could bring to Namibia are numerous and profound.

“If we capture even half of the

mibian economy will change fundamentally.”

Africa Energy Yearbook 2023 63

MISSION CRITICAL: HOW AFRICA CAN PROFIT FROM ITS MINERAL BOOM

In the tree-topped southern hills of Mozambique’s Cabo Delgado province, the sprawling Balama mining complex looms out of the crimson earth. Here, employees of Australia’s Syrah Resources work a graphite reserve which will help to power electric vehicles manufactured by Elon Musk’s Tesla, the most valuable car maker in the world.

Surface explosions at the site throw up clouds of red-grey dust and stones, part of a process of open-pit mining to dislodge the valuable material before it is hauled away for crushing, grinding,

bagging. On leaving a giant warehouse at Balama, the concentrate of graphite – a crystalline form of carbon – is transported to the Indian Ocean port of Nacala for its onward journey to the global market.

From the third quarter of this year,

Balama produce will make its way to a new Syrah facility in Vidalia, Louisiana – funded with a loan of up to $107m from the US Department of Energy –where the concentrate will be processed into natural graphite active anode material for electric vehicle batteries.

In December 2021, Syrah signed a four-year deal with Tesla to supply graphite anode from the plant – a relief for a carmaker which has struggled to secure supplies in the US at the speci-

the Balama mine having an expected life of over 50 years, the deal could be the start of a lucrative relationship.

The sophisticated supply chain linking the mines of Mozambique with a processing plant in Louisiana and the high-tech automaker of California is a potent illustration of the global reach and growing importance of the critical minerals industry – a sector that will

Africa Energy Yearbook 2023 64
of the world’s reserves in a dozen minerals that are critical for the energy transition. With China and the US desperate for supplies, how can the continent harness this extraordinary opportunity?
Writes
David Thomas

play a key role in this century’s geopolitical trends – including the shift from a fossil-fuel to a renewables economy and the US-China contest for global hegemony.

Nowhere will this be played out more intensely than in Africa, which once again

GEOLOGICAL BOUNTY

Dozens of critical minerals are found on the African continent. The Australian

lic or non-metallic elements that are essential for modern technologies, economies or national security and have supply chains at risk of disruption.

Many are valuable “transition metals” – a group of elements including cobalt, nickel, manganese and chromium, which will play a key role in the shift from fossil fuels to low-carbon energy sources. Decarbonisation is driving demand for a range of minerals including these, graphite, lithium and “rare earth” elements such as neodymium, samarium and yttrium. They will underpin technologies crucial to the energy transition, including wind turbines, solar panels and electric vehicles.

From north to south, Africa’s reserves of such metals are prodigious. Morocco has 70% of the world’s phosphate reserves; DRC has 50% of the world’s cobalt; Gabon has up to 15% of the world’s manganese; South Africa has 91% of the world’s platinum, 46% of its yttrium, 22% of its manganese, 35% of its chromium and 16% of its vanadium. The wider southern African region is home to substantial untapped lithium resources, used primarily in the construction of lithium-ion batteries for electric vehicles and grid-scale storage.

Overall, the continent has at least a minerals that are critical for the energy transition, according to the Natural Resource Governance Institute (NRGI)

essential in the just energy transition,” says David Manley, NRGI lead economic analyst for the energy transition. Furthermore, the continent is relatively unexplored and has the lowest concentration of known mineral wealth in the world, the organisation says.

The global scramble for such minerhas studied the clean energy production needed to keep global heating below 2°C by mid-century. It concludes that production of graphite, lithium, and cobalt will need to be ramped up to 3.1bn tons by 2050, up more than 450% from 2019 levels, to meet demand from energy and energy storage technologies.

How Africa responds to the insatiable demand for its critical minerals could determine the continent’s growth trajectory in the decades to come. But having vast reserves is not the same as exploiting them successfully. The “resource curse” that has defined Africa’s relationship with the extrac-

tive industries in the post-colonial era has ensured that value is more often shipped abroad than retained at home. Half a century of institutional failure mineral wealth.

Critical minerals exploitation will raise many challenges: some new and many familiar. Africa’s policymakers cal competition for their resources, drive a hard bargain with miners over investment and royalties, and support domestic industries to ensure that value is captured on the continent. They will also need to manage environmental risks, develop regulation, and ensure that projects commence in time for the crucial phase of the energy transition.

THE DRAGON AND THE EAGLE

As Africa assesses how it can best exploit its critical minerals resources in a short space of time, the two global superpowers – China and the US – are already

Africa Energy Yearbook 2022 65

Minerals

making plans to access global supply.

A report from the China Research Group of Conservative UK MPs concludes that China has a “huge head start” and controls up to 90% of the “midstream” of the supply chain for critical minerals, in which, for example, minerals are translevels to make them suitable for use in battery-grade products.

China accounts for two-thirds of the ing capacity, 80% of global lithium

80% of global graphite production and mining, according to US Geological Survey (USGS) figures quoted by Cullen Hendrix in a report for the

“China currently controls most upstream control of raw commodities is also increasing. Crucially, it controls much of the world’s EV [electric vehicle] battery manufacturing, as well as the manufacturing of wind turbines, solar panels, energy storage, and electric transmission, among other applications. As things stand, the world is highly dependent on sourcing from China to advance the energy transition and meet decarbonisation goals,” according to a report from the Brookings Institution.

By contrast, of the 35 minerals or “critical minerals” in a USGS report published in the Federal Register, the US was 100% reliant on imports for 14 in 2021. An additional 15 had a net import reliance greater than 50% of apparent consumption, according to the USGS. The International Energy Agency says the high concentration of production and processing operations in China is a growing concern for the energy transition.

Yet China’s dominance is based as much on processing as on its reserves of

minerals, many of which are imported from Africa and elsewhere. For example, China has just over 80,000 tonnes of cobalt reserves, and only six times the cobalt mining output of the United States, but controls 72% of the capac-

are mined each year, much of it in the Democratic Republic of Congo, home to more than 50% of global reserves –84% of the DRC’s 2019 cobalt exports went to China.

CHINA STRIKES NEW DEALS; US SEEKS SECURE SUPPLY

Chinese companies are striking new deals for minerals globally to secure raw

manufacturing, according to Brookings, including direct investments in mining projects and companies, part-equity-stake deals, and extended supply sales agreements with mining companies. That has got the US concerned.

“China’s strong supply chain position stems, in large part, from state investment in processing and manufacturing rather than an inherent advantage in reserves for most materials,” according to a June 2021 Biden administration

strategy document.

The review recommends that the US build up processing and recycling capacity at home – the Department of Energy’s $104m loan for Syrah’s recommends that the US Development Finance Corporation increase capacity for investments in overseas projects production capability and enable stronger and more resilient critical minerals supply chains by boosting

relations with “allies and partners”. Demand from both superpowers for Africa’s resources is thus expected to remain strong, and resource-rich

But that will require African governments to work together rather than pursuing one-on-one deals with superpowers which undermine Africa’s collective bargaining position, according to a report from the African Climate Foundation (ACF). The report says that conditions attached to foreign companies work best when coordinated across regions rather than struck on a country-by-country basis.

“Agreements between African governments and international compa-

Africa Energy Yearbook 2023 66

nies will often be mediated by global superpowers, their geopolitical interests and national security priorities. The lack of coordination and fragmentation among African countries has played in favour of superpowers so far,” the ACF concludes. “By locating domestic strategies as part of regional industrial development plans, African countries can exert more bargaining power and realise greater cluster and scale economies.”

TIMING IS EVERYTHING

Yet despite the US-China superpower competition for resources, the highrisk, capital-intensive nature of critical minerals extraction paradoxically means that miners are not investing with the urgency that the energy transition demands. “Time is of the essence. There are only 28 years remaining until countries representing two-thirds of the global economy aim to have ‘net zero’ emissions, yet it takes on average 17 for the mining industry to develop a mineral discovery and start production,” says the NRGI.

“The investment isn’t happening to the degree that’s needed across the world,” explains NRGI’s David Manley. “From what we understand, that’s because the investors behind the mining industry are worried about the timing problem. There is the theoretical demand for all these metals, but they don’t know if it’s actually going to be realised. They worry that if they start investing a lot, supply will go up and the price will crash…

“Therefore we need an international coordination and particular signs from governments in China, Japan, North America, Europe to say: the energy transition in our countries is happening at this pace, therefore expect this sort of demand. And then you can start investing.”

Manley says that “blunt” policies are already being formulated around

strong signal to the mining community that future demand is ironclad. In June 2022, the European Parliament backed the European Commission’s proposal of zero emissions from new cars and vans by 2035 – a key sign that the electric vehicle market is primed for a permanent role in the 27-nation bloc. The UK is similarly poised, having banned the sale of all internal combustion engines by 2030.

Such clear signalling, says Manley, “means that projects that aren’t yet economically viable in Africa will become so”.

Meanwhile, African nations can move quickly to attract the investment needed, the NRGI says, by working with multilateral development agencies to fund geological surveys to provide companies with an initial indication of where reserves might be located. The African Union’s African Mineral Development Centre suggests that neighbouring countries should work together on such surveys, given the fact that reserves do not respect international boundaries and may span several countries.

The Extractive Industries Transparency Initiative (EITI) recommends that countries build up an understanding of the revenue potential of critical minerals to support long-term economic planning, for example by considering “sliding royalties” in which rates change alongside changes in commodity prices. But planning is not just about giving miners what they want.

The African Climate Foundation says that national and regional plans must

that countries can direct investment to suit their own priorities: “Governments need to set both ‘ex-ante’ and ‘ex-post’ conditionalities which direct, incentivise and regulate the use of natural resources… [this is] particularly important and urgently needed before market forces, incumbents and rent positions are further consolidated.”

VALUE ADDED?

Nowhere is this more crucial than in African states’ plans for the capture of mid- and downstream value. As the example of Syrah Resources’ US-funded Louisiana plant shows, the default position remains that processlimiting resource-rich countries to mining operations.

“These countries could increase the als by building downstream capacity in processing… processed materials

Peterson Institute.

to building processing capacity. The push to develop downstream capacity comes at a time of global interest rate rises, which have reduced lending and investment. Bulk shipping allows sands of miles from site, as at Syrah’s Vidalia facility – an attractive option when countries where the minerals are located lack the infrastructure to expand processing.

Institutional problems also abound. In a survey of four critical mineral-rich African countries – the DRC (cobalt), Mozambique (graphite), Madagascar (graphite and nickel), and Guinea (bauxite) – the Peterson Institute found that none of them has the energy infracapacity.

tial for all four nations, the infrastructure is currently undeveloped and will ing. All four countries were also in the Political Stability / Absence of Violence

nies that wish to invest in processing.

Given the challenges, what can countries do to boost the mid- and downstream? The Peterson Institute recommends that countries should

Africa Energy Yearbook 2023 67

massively expand renewable power, and industrial inputs from tariffs, locate downstream capacity in areas of domestic stability, and commit to external policy agreements such as international arbitration to reassure investors that their projects are protected.

A BATTERY OF OPPORTUNITIES

But going beyond limited processing to create integrated Africa-wide value chains is hugely complex, as even the US has discovered. The UN Industrial Development Organisation (UNIDO) says that battery manufacturing and ready for scale-up, with cell manufacturing and recycling having medium-term potential. But here too, there are enormous challenges.

No single African country has all the minerals required to produce batteries, meaning that countries will need to pool mineral supplies to achieve the minimum scale and reliability, according to NRGI, as well as make sure that they are not committing too large a share of their minerals for export.

Value chains will be more viable if there is a market for battery-powered vehicles close by; unfortunately, charging infrastructure mean that the Africa-wide market for four-wheeled electric vehicles is expected to be small for decades. The value chain for batteries made from nickel, manganese and producing battery precursor material.

But with larger potential in the African market for two and three-wheeled electric vehicles, which use lithium, iron and phosphate (LFP) batteries – also useful for stationary power storage –industries based on battery chemistry could be viable, NRGI suggests. That will require investment in cell manufacturing plants, which could be eased along by support for domestic two and

three-wheeled EV manufacturers, more lithium discoveries and regional coordi-

In time, and backed with the right policies, much of this could be viable. But for some countries, more modest goals might include the development of suppliers providing products and services to mining companies, from pick-up trucks and replacement part manufacturers to caterers, surveyors and human resources services, supported by local content requirements to lower the barriers of entry to the status or economic potential of local supply chains and add useful value to Africa’s exploitation of critical minerals.

TRADE-OFFS

critical mineral exploitation will prove crucial to the planet’s fight against climate change, the reality is that badly-managed mining operations are already damaging the environments in which they operate, according to the African Climate Foundation.

minerals development have not delivered their transformative potential yet, in most African countries the ‘dark side of the energy transition’ has become increasingly visible: local pollution of soil, air and water, the disposal of toxic residues; intensive use of water and energy; work and environmental risks; child labour and sexual abuse; governments across Africa are therefore challenged from multiple directions.”

According to the EITI, that could lead to a “decarbonisation divide” between consumer and producer countries. The NRGI recommends that African governments establish “no-go” environmental zones where mining is strictly prohibited.

“In terms of land use, it means iden-

tifying areas that are allowed for exploration of these minerals and protecting areas that have a high value ecosystem,” says Silas Olan’g, Africa energy transition advisor at NRGI. “That should be done in a strategic way: before issuing a licence for exploration of minerals, governments should do what they call a strategic environmental assessment, which would identify risk areas.”

No-go areas are challenging to implement, says NRGI’s David Manley, given that governments sometimes go back on their decisions and unscrupulous miners continue regardless. Manley says the most successful no-go zones are those that have the backing of local communities and a strong legal appacould help to secure such zones in Africa, he says.

“The international community promised in the last Cop26 to pay the DRC to reduce deforestation. There could be similar sorts of agreements areas… and much more geological studies on less risky areas.”

He admits, however, that the transition will throw up complex questions:

transition and there are some really interesting dilemmas that the world will have to deal with here.”

Indeed, Africa’s successful exploitation of critical minerals may depend

ronmental costs of exploitation versus the costs of climate change; the hope for more processing capacity against the reality of complex international supply chains; the need to prepare for sustainable long-term growth while accepting that the world needs these materials immediately; and the need to get the best deal out of mining companies without scaring away investment.

The stakes are high, but one fundamental fact remains: the world wants what Africa has, and it is in the continent’s power to make the most of it.

Africa Energy Yearbook 2023 68
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A UNITED CONTINENT CAN DRIVE NATIONAL PROGRESS

As Nigeria seeks to solve its own,

The aforementioned diversity of resources has the potential to generate 12,522 MW of electric power from existing plants alone, but on average is only able to dispatch as much as 4,000 MW. According to Dr Oluwatoyin Akinlade ( left ), Permanent Secretary, Ministry of Mines and Steel Development, Federal Republic of Nigeria, this is insufficient for a population the size of Nigeria’s.

“Reform and the actions that underpin it are squarely aimed at addressing the structural challenges of poor service, low availability and intermittent reliability.”

Key components of the country’s process of igniting private participation include creating an investor-friendly environment, reducing political interference, and establishing strong central regulation.

Dr Akinlade adds: “The Energy Commission of Nigeria (ECN) guides the strategic planning and coordination of national policies. It enjoys wide representation from the Ministries of Power, Trade, Science and Technology, Foreign Affairs and Finance, among others.

“This gives it a strategic position in ensuring cooperation across Ministries with a direct mandate and other governance of the energy industry.”

A PATHWAY TO ECONOMIC AND SOCIAL LIBERATION

As the largest economy in sub-Saharan Africa, Nigeria is blessed with large oil, gas, hydro and mineral resources. The key now is to extract the full potential from these resources to ensure 200m people.

“The country therefore plans to generate 30,000 MW by 2030, with 3,000 MW coming from renewables and 27,000 MW from its power plants, to serve all of our population,” she confirms. “Nigeria’s energy sector has, in recent years, undergone a paradigm shift towards increased private sector involvement, by targeting policies that govern the electricity market and its regulation. Even non-state stakeholders are encouraged to participate in the policy-making process.

Dr Akinlade has been a pivotal figure in driving this change in mindset and strategy in Nigeria, in recent years. As one of the 12 Permanent Secretaries charged with the responsibility of championing the Change Agenda of the Federal Government in August 2020, she then took on the role of Permanent Secretary, Ministry of Mines and Steel Development in September of that year; as well as being appointed a Member of the 5th National Stakeholders Working Group (NSWG) of the Nigerian Extractive Industry Transparency Initiative (NEITI) Board, by President Muhammadu Buhari.

“My mandate was to reposition the extractive industries in line with international best practices. In my tenure I have brought about the improvement of the Ministry’s rating

Africa Energy Yearbook 2023 70 United Africa

in the Anti-corruption and Transparency Compliance Index from 25.5% in 2020, to 76.6% in 2021,” she explains. “I have also vigorously propelled reforms in the Minerals and Metals Sector through the implementation of a Mineral Value-Chain Initiative in each of the six GeoPolitical Zones of the country.”

Dr Akinlade’s approach and mission isn’t just based on the Nigerian context, however. It stems from a continental analysis where the role of mining and industry is perceived as critical to achieving universal, reliable energy access across Africa.

“There is an integrated relationship here. Economic development is stimulated by industrial and business activities, which in turn would help to provide jobs and good wages for citizens. Availability of affordable and reliable energy is considered part of good living standards. Thus, the continent needs to imagine an energy growth and provision that looks at economic and social development as inseparable.

“Both have to be treated as equal in energy policy thinking. Energy economy can and should not be an end in itself, but a pathway to economic and social liberation for the continent.”

DE-RISKING AND ACCELERATING GENERATION

On this continental scale, there is the consensus that Africa needs all of the energy it can generate at present. With international financing institutions and governments de-risking investments in the mining sector, this must include the utilisation of all the renewable energy resources it is “richly endowed with”.

“We must continue to de-risk the green energy mix through the formulation of effective policies to attract investments and climate

change support funds,” Dr Akinlade says. “Again, entry barriers to the sector must be lowered to serve as incentives to investors to partake in developing the emerging renewable energy sector. We must continue to support efforts for the evolution of homegrown strategies towards mobilising local financing, in the face of waning interest, to support investments in fossil fuels.”

In Nigeria specifically, this effort of diversification has already led to the development of solar farm projects and wind energy mills. Funding for these projects has largely come from the Central Government and multi-lateral agencies, with individual contributions gradually increasing.

“Recent efforts to privatise the state-owned power utilities have not reached our desired outcome, however,” continues Dr Akinlade. “We are still working towards this goal, by diversifying the energy mix and build-

these areas have been largely progressive from as early as 2001 with the National Electric Power Policy.

“Additionally, the NREEEP proposes Free Customs Duty for two years on the importation of equipment and materials used in RenewProjects, and the National Renewable Energy Action Plans (2015–2030) also propose incentives to encourage participation in the renewable energy sector. These have all contributed to the recent increase in the pace of renewable energy power generation

space in Nigeria.”

STRENGTHENING BONDS

Nigerian company, Mosra Enerji Limited, in alignment with the current governmental “Coal to Power Program”,

plans to generate 30 per cent of the electricity needed in the country, from coal; demonstrating a future that the country is now striving towards. “Abundant proven already, to this end, pointing towards power potential of at least 50 years.

Dr Akinlade cites such projects as an example of where Nigeria is targeting progress moving forward, but also where Africa more broadly could look to overcome its most pressing challenge – “the continued and unabating exploitation of its natural resources by developed countries”.

She explains further: “Their wellplanned programmes exploit and plunder the natural resources of African countries to feed their industries. For all it takes, African nations must rise in a unified action, within the tenets of the African Mining Vision (AMV), to protect the frontiers of safe practices, and ensure local mining ies of the natural resource activities within their jurisdiction. This includes compliance with ESG concepts.”

The vision for a well-structured and properly managed African mining sector is encapsulated in the African Union’s African Mining Vision (AMV), which calls for the “transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”.

Dr Akinlade adds to this rallying cry: “Together, we must accelerate the drive to make African natural resources work for Africa. Let Africa have prospective investors build value-addition facilities within the domains they are found, to ignite employment growth, improve the economy of the host communities, and to develop the skills of locals.

“In this respect, it is time for African countries to strengthen the bonds that unite them.”

Africa Energy Yearbook 2023 71

BRITISH INTERNATIONAL INVESTMENT

Richard Charlton, Head of Infrastructure Equity (Africa & Pakistan), BII

A lack of adequate financing for tackling climate change in Africa has become dire and is “choking” the continent, African Development Bank President Akinwumi Adesina said recently. How can investors like BII bridge the gap?

ment is the UK government’s primary strategy prioritises investments that lay the foundations for net zero emissions an ideal partner for African businesses that will be the driving force for lifting

Are there enough risk mitigation instruments in place in Africa to ensure that investors have the confidence to enter the market?

Investing and operating in Africa comes risk mitigation tools developed by institutions, including the Multilateral Investment Guarantee Agency and the African Development Bank, are some of many instruments within our

products as standalone tools cannot substitute for sustainable underlying

We see some encouraging trends of of procuring power projects, such as the commercial and industrial sector growth in South Africa, which can also

Viability gap funding for new technologies is also often required alongside risk mitigation products to create an environment where

We committed $7bn and mobilised strategy period, and as part of our current strategy, we have set a target

making us one of the largest climate the gap and provide more productive, sustainable and inclusive solutions that

assistance facility, we supported the age unit and share learnings within the

As the opportunities of green finance become clearer to countries in the

Africa Energy Yearbook 2023 72 Interview

wake of the COP process, is it becoming easier to invest in renewables?

and encouraging theme is that more and more countries in the continent are procuring or have plans to procure solar step change compared to 10 years ago and has been a growing trend alongside

in renewables – which BII is committed to developing solutions to overcome –

several countries’ electricity sectors, grids requiring strengthening to absorb more intermittent power and the need to match new supply to associated economic growth so that power systems

in Africa are evolving, and in South ZAR600m commitment with Norfund owned and managed renewables renewable capacity in South Africa over

To what extent has the difficult global economic environment hit green project financing?

and construction of new renewables

rates, currency devaluation, debt availability, some electricity sectors are undergoing periods of stress, which has delayed the process of projects

winds, the fundamental need for power and further investment in mistic that today’s challenges will be What are the most promising untapped priority energy sectors that Africa can address immediately? Beyond our growing portfolio of solar and wind projects, BII has also been at nent, which must be developed as part

In hydroelectricity, we backed with plant, which will add 30% to the grid’s

to concentrated solar power in South

project supports the continent’s largest

How has creating different platforms – such as Globeleq, Gridworks etc – helped BII to diversify its investments and support green growth?

After 75 years of successfully investing tify gaps and establish companies that

have reversed the trend up to that decreases in renewables capital costs: this has created a backlog of projects in Africa (as in other markets where

We have a joint venture with the Aga power in East Africa and committed few years in a joint venture with Scatec and Norfund, the largest investment to construct a pipeline of new projects, largest power plant (Mpatamanga

In geothermal, Globeleq has recently the pioneering Menengai geothermal projects in Kenya, while we are lenders

Globeleq has doubled its capacity tion since it took over control of the company in 2015 alongside Norfund, It has the necessary ability to bring new projects to market and innovate plant in Benban solar park in Egypt and recently signed a green hydrogen developed and is constructing the the transition to renewables over

At the same time, transmission and distribution are key to improving energy access but are one of the main tion of new energy generation capacity

Africa Energy Yearbook 2023 73

GROWING PLANS

resilience, and facilitate greater

Martijn

Proos

, Co-Head of SA & Africa Credit at Ninety

One,

the Fund

Manager of the Emerging Africa Infrastructure Fund (EAIF), a Private Infrastructure Development Group company, discusses the EAIF’s work

Last year, it was announced that EAIF plans to raise as much as $500m over the next three years to invest in infrastructure projects on the continent. How is that going?

EAIF has raised more capital amidst a

What are the most exciting projects that this ambitious raise will allow you to support?

EAIF’s strategic partnerships elevate Africa’s energy markets and have helped reform economic activity in Development Goals.

participation from Allianz Global Investors, KfW Development Bank, tered Bank.

sions over its lifetime.

ing on the transformation happening

The Fund is banking on increased interest in Africa from investors looking for bigger returns than they can get in Europe and the US. Is this a narrative that has convinced investors?

With international markets at an ing strategies, EAIF targets emerging development impact.

and beyond.

Africa Energy Yearbook 2023 74
Interview

March 2022. In the last decade, private

Domestic capital markets are still relatively undeveloped in Africa. What needs to happen to unlock this potentially transformative source of finance?

over DM against a marginally greater

As the opportunities of green finance become clearer, is it becoming easier to crowd in investment for projects?

has been an anchor investor in many Africa. These innovative models can be replicated in many frontier territories.

How important is EAIF’s credit rating by Moody’s with investors, and how do you ensure you continue to maintain a strong rating?

ble investments and prioritise health, performance. Impact investors have MW in generation capacity. Together, EAIF operates in some markets that do not usually get the attention of major investors. What are some of the challenges you have faced in “frontier” Africa?

fold increase in the preceding decade,

achieving net zero. We are optimistic matched by innovation and policies to

approach, based on learnings from

Africa Energy Yearbook 2023 75

DROUGHTS RAISE DOUBTS OVER HYDRO’S FUTURE ROLE IN AFRICA

In Zambia and Zimbabwe, electricity has become a precious commodity in recent months. The two countries endured severe power cuts from late last year. In Zambia, a regime of “load-shedding” was announced in December; for several weeks in January, ZESCO, the national energy utility, could supply power to its customers for only 12 hours a day.

Africa Energy Yearbook 2023 76
Hydropower
Uncertainties surround the outlook for hydropower in Africa, but new projects of varying sizes continue to across the continent, reports Ben Payton

The crisis stemmed from the drought that caused water levels at the Kariba Dam hydroelectric facility to fall to critically low levels. The dam’s reservoir, located on the Zambezi River along the border between the two countries, shrivelled on 30 December to just 10 centimetres above its minimum level for electricity generation. The power station on the Zambian side of the dam was able to supply less than 40% of its 1,080 MW capacity, forcing the authorities to ration power.

The situation has now eased, thanks to the onset of the rainy season. ZESCO declared an end to load-shedding in Zambia in early February. But what does the crisis mean for the future of hydropower in Africa in an era when rainfall is becoming less reliable across large parts of the continent?

“Hopefully, Kariba is a bit of a wake-up call,” says Harry Verhoeven, senior research scholar at Columbia University’s Center on Global Energy Policy. “The future is more likely to look like this, rather than less likely,

and therefore we really ought to do what we can within the limited set of resources we have to address these problems.”

DROUGHT DISRUPTION

Much of Africa relies on hydropower. The electricity grids of Lesotho, the Central African Republic, DR Congo, Ethiopia, Uganda, Zambia, Sierra Leone and Mozambique all generate at least 80% of their power through hydroelectric sources.

Some of Africa’s largest dams – including Kariba – date from the late colonial period. Another wave of dam building began in the early 2000s. But Verhoeven says that, in most cases, planners have continued to treat the impacts of climate change on electricity generation as an “afterthought”.

“The amount of contingency planning that actually happens is, in my experience, usually rather limited,” he warns. “I’m sure if you see the project documents, that climate comes up 20, 30, 50 times – but it doesn’t necessarily mean, of course, that

it’s actually built into the operation of the infrastructure.”

Kariba is far from the only hydropower plant to have run into trouble over the past year. Drought in Europe resulted in hydropower generation falling to its lowest levels in more than two decades in 2022. Meanwhile, factories in the Sichuan province of China had to shut last August, after a severe drought left hydro facilities on the Yangtze River unable to supply power.

The latest assessment from the Intergovernmental Panel on Climate rainfall is expected across most parts of Africa by mid-century. At the same time, rain will typically fall in more intense bursts across much of the continent.

This creates a basic problem for hydropower facilities, since these changing rainfall patterns will make river

intense rainfall events over a shorter are concentrated in a shorter period of time and your dry periods are longer,”

Africa Energy Yearbook 2023 77

Hydropower says Simon Trace, principal consultant at consulting group Oxford Policy Management.

ENVIRONMENTAL CHALLENGES

New hydropower projects are still being developed in several parts of the continent. The Grand Inga scheme on the Congo River, for example, would be the largest hydropower facility in the world. South Africa plans to procure 5,000 MW from the project, involving a new transmission line more than 2,000km long. For the time being though, Grand Inga remains amid unanswered questions over serious concerns over its environmental and social impacts.

Opponents of hydropower projects have often highlighted the inevitable impacts on people and habitats when

form behind dam walls. Now, they say, the changing climate severely undermines the case for new hydro projects.

Siziwe Mota, Africa campaigner at International Rivers, an NGO that seeks to protect rivers, says that large-scale hydropower projects “should not be considered an energy solution”.

“Large hydropower is even less reliable in the face of climate change and more extreme weather patterns across the continent,” she says, arguing that alternative renewable technologies such as wind and solar are better alternatives. “It is now possible to expand energy generation while drastically reducing greenhouse gas emissions and preserving

“Relatively speaking, wind and solar will be cheaper in the long run,” agrees Trace. However, he notes that policymakers in some African countries are often more comforta-

ble with hydropower, a technology that has provided electricity to the region for decades. “There are still misunderstandings of the costs of solar and wind and a lack of familiarity with those technologies compared to hydro, which is a mature technology.”

Altogether, some 43,000 MW of new hydropower capacity is planned by 2045 across the 12 countries that

dropower plant at Singrobo in Côte d’Ivoire. Other investors in the project include the Emerging Africa Infrastructure Fund (EAIF), a Private Infrastructure Development Group (PIDG) company.

Paromita Chatterjee, investment director at EAIF, insists that there is still a role for hydropower in Africa. “Climate patterns are changing, weather is changing, and it’s a lot

make up the Southern Africa Power Pool. Yet analysis published last year by researchers taking part in the Climate Compatible Growth programme found that almost half of this new capacity would be “uneconomic” across all the scenarios they considered.

NEW PROJECTS

Despite the uncertainties around the outlook for hydropower, new projects of varying sizes continue to gain ac-

multilateral development banks.

In December, the African Develop-

Africa Energy Yearbook 2023 78
The electricity grids of Lesotho, the Central African Republic, DR Congo, Ethiopia, Uganda, Zambia, Sierra Leone and Mozambique all generate at least 80% of their power through hydroelectric sources.

more unpredictable than it was several years ago,” she acknowledges. “Having said that, hydropower is still a very important part of the puzzle and it will continue being a very important part of baseload supply for most African countries.”

Indeed, hydropower facilities are generally designed to provide a stable supply of power, much as coal or nuclear power stations are used to meet the “baseload” – the steady core of electricity demand. Providing that rameters, this makes hydropower an important complement to wind and solar, which are inherently more intermittent.

But hydropower plants can also be designed to rapidly release more water and thus increase electricity output at times of swiftly-rising demand. Chatterjee says that the Singrobo project will thus help displace demand for diesel generators at peak times in Côte d’Ivoire.

to pay increased attention to climate data, including long-term rainfall trends, prior to making investments in hydropower, Chatterjee says. She cites the example of the proposed Bambuna II facility in Sierra Leone, scaled back in light of modelling that

Chatterjee adds that in countries like Uganda, where EAIF has funded several hydroelectric projects, hydropower facilities can expect to see more seasonal and year-on-year variation in their generating capacity. However, she believes, “in the long-term, they should still prove to be very useful assets,” noting that Ugandan facilities have been able to cover operating costs and service debts despite sometimes erratic rainfall in recent years.

Rainfall patterns will not change in a uniform way – changes may

dro. Indeed, the IPCC does not project that West Africa, South-eastern Africa and the Sahara-Sahel region will see a decrease in overall rainfall, though it does expect more bursts three sub-regions.

SIZE MATTERS

Part of the reason that the crisis at the Kariba Dam proved so devastating for Zambia and Zimbabwe is that both countries have relied excessively on this single asset. Having failed to develop alternative sources of supply, their governments found themselves unable to keep the lights on when the facility could no longer generate at full capacity.

This reality suggests that the policymakers will need to be cautious in developing very large hydropow-

er projects on which they become highly dependent.

“It would really take a very heroic degree of optimism to argue the case for big dams at a general level,” says Verhoeven. “There are always gigantic cost overruns; it always comes much later than you think; the opportunities for corruption are too good to miss out on; the environmental and social damages are always underplayed, and always come back to bite you later.”

Smaller hydropower projects, Verhoeven says, are typically “somewhat more attractive”. Chatterjee agrees that smaller plants have important advantages, although she still sees a role for large projects that can be “transformational” for power-hungry economies.

The key, she suggests, is for countries to ensure they have access to a “diverse mix” of energy sources as the climate changes. Hydropower will certainly remain important for decades to come; the key will be to ensure energy planners do not put all their eggs in the hydro basket.

Africa Energy Yearbook 2023 79
Hydropower is still an important part of the energy supply puzzle.

UNLEASHING AFRICA’S POTENTIAL, IN ‘PRIVATE’

that can mobilise investment, drive economic growth, and promote environmental and social sustainability,” explains Sarvesh Suri (left), Regional Industry Director with the organisation.

Suri calls upon a multi-pronged approach to ignite this much-needed interest, innovation and expenditure.

fiscal constraints of governments, PPPs that can crowd-in private sector solutions, innovation, and finance are becoming a key tool to meeting the Paris Agreement goals. PPPs also enable consistency across value chains and provide a platform from which both public and private sector stakeholders tion pathways.”

ADVANCING ECONOMIC DEVELOPMENT

“Although much progress has been made to increase access to energy across the continent, in sub-Saharan Africa today there are almost 600m people who still do not have access to electricity and 970m people who do not have access to clean cooking options,” Suri states.

Tin sub-Saharan Africa needs to triple in order to achieve universal access by 2030, and the private sector will be absolutely pivotal in helping to realise that aim.

This is due to the simultaneous need to decarbonise the continent’s energy makeup. Simply, heightened access needs to be conducted in a climate-responsible manner. For this to happen, innovative projects are required, and – vitally – so is much-needed funding from private operators.

“Our role as the International Finance Corporation (IFC) is to work with the private sector to make this a reality, through projects and programmes

First comes regulatory action and support to governments, to develop clear policies that would help to uplift underperforming utilities, and to strengthen overall planning levels. remove distortive subsidies, and tackle country and current infrastructure.

“Then comes technological, commercial and financial innovation from within the private sector,” adds Suri. “By leveraging its instruments, the private sector can catalyse investments at scale in clean energy, in hydrobattery storage. All of which are critical resources to unleash sub-Saharan African countries’ renewable potential while maintaining security of supply.”

Third, comes the importance of public-private partnerships (PPPs).

Suri continues: “Given the increased

As a member of the World Bank Group and the leading global development institution focused on private sectors in developing countries, the IFC is primely placed to tackle this situation en route to a more attractive and productive energy sector in Africa.

The aim first and foremost is to advance economic development through this lens of energy, which also incorporates consideration around market creation, mobilising investors, sharing expertise, generating jobs, raising living standards and ultimately, ending poverty. As such, over the past 25 years, IFC has invested more than $67bn into Africa, with its portfolio (as of June 2022) exceeding $13.4bn.

Initiatives that have been championed to this point span three innovative and enabling solutions, in the form of mini-grids, distributed access through renewable energy scale-up (DARES), and on-grid renewable energy generation.

The former “is a new IFC programme that is focused on increasing private investment in mini-grid services in

sory support as well as investment and

Africa Energy Yearbook 2023 80 Private sector innovation
The private sector will play a crucial role in channelling innovation towards universal access ambitions.

risk mitigation instruments for governments and the private sector,” Suri explains. “This programme will bene-

frameworks and fragmented markets. For example, in 2022, IFC launched its programme in the DRC where it is working with the government to bring 180 MW of clean power to 1.5m people across two cities.”

This project in the DRC also features kind minimum revenue guarantee that de-risks and unlocks further private investments in the space.

Additional innovation can be seen through its DARES platform launched at COP27 alongside the World Bank Group, which aims to accelerate the pace of electrification in Africa to achieve universal access by 2030.

mini-grids, off-grid solar markets, systems for schools and health facilities, solar irrigation and cold chain for farmers, and innovative business models to displace diesel generation and improve access reliability,” Suri continues.

Meanwhile, regarding on-grid generation, “IFC continues to lead the financing of renewable and clean energy generation, transmission, and distribution services by private sector developers.”

TRULY TRANSFORMATIONAL

IFC’s work is underpinned by clear strategy and multi-pronged objec-

KPIs. Suri notes that the overall work approach laid out is epitomised by

he says. “An example of this approach includes the $1.3 bn, 420 MW Nachtigal hydropower project in Cameroon. InfraVentures, an upstream unit of IFC developing bankable projects, helped develop and structure the project in its early stages, in collaboration with the government of Cameroon, spending $13m of IFC’s own development capital. This project is now IFC’s largest power investment in Africa.

to address Africa’s infrastructure gap by providing and mobilising vast

truly transformational projects across the continent.”

In addition to investments, IFC’s value addition lies in its ability to provide advisory support to governments and private sector entities in Africa, as they develop projects and attract investments. IFC’s advisory has been critical in helping African governments attract private sector investment in infrastructure projects, which is essential for addressing the continent’s significant infrastructure gap. Services cover a wide range of areas, including project preparation, regulatory frameworks, and identifying, structuring, and implementing PPPs.

Finally comes the ability to not just innovate, but create markets. Suri

cial structures for the development of nascent and non-existent infrastructure markets in Africa. Our projects aim to

that can mobilise private sector investment and drive economic growth while also promoting environmental and social sustainability.”

hydropower. This includes transformational projects like the Bujagali and Nachtigal hydropower plants in Uganda

solar power plants in Zambia, Mozambique and Burkina Faso; as well as the in South Africa. In 2022 alone, IFC committed $2.1bn to advance Africa’s green transition, from increasing access, energy projects.

Suri adds: “We are now piloting the deployment of more emerging transformative technologies such as initiatives that proved that renewable energy is a commercially viable option in emerging markets. We work with our promote early adoption of these newer ing the increased risks of these emerging solutions.”

Regarding innovative financing, financing instrument to incentivise companies to achieve sustainability impact by tying pricing to measurable goals, such as a reduction in corporate GHG emissions, through interest rate step-ups or step-downs.

“Finally, we are exploring the creation of hydrogen hubs, combining renewable energy generation with green hydrogen production, transport, storage, and local or international use,” Suri concludes. “Such and technical insights for hydrogen development in Africa, helping to de-risk new projects.

“We want to oversee infrastructure development that provides capital, but that also builds the requisite government capacity to identify and prepare projects and attract private sector investment in a sustainable manner,”

LOOKING TO THE FUTURE

multiple renewable energy projects across Africa, spanning solar, wind and

“As we build relationships with clients and industry leaders, IFC is looking to the future, identifying new opportunities to scale up the use of hydrogen as a power source in line with public policies and private sector interests.”

Africa Energy Yearbook 2023 81

AFRICAN WIND POWER STRUGGLES TO GAIN MOMENTUM

Few African countries are harnessing writes Ben Payton

Africa has a gaping hole in its energy supply. Six hundred million people, around half of the continent’s population, lack access to electricity. Without much faster progress, the continent will miss the UN Sustainable Development Goal (SDG) of achieving universal access to electricity by 2030.

There are obvious advantages to renewable energy, including from wind. On top of the climate beneare increasingly able to deliver lower-cost power than fossil fuels.

According to the International Renewable Energy Agency, almost two-thirds of new renewable energy capacity installed in 2020 generated

cheaper electricity than would have been available from the lowest-cost fossil fuel alternative. The cost ben-

owing to the massive increase in gas costs over the past year.

Africa is blessed with abundant wind resources. Research commissioned for the IFC in 2020 found that the continent’s wind resources could supply its electricity demand 250 times over. “It is only recently that we have realised what a good wind resource there is in sub-Saharan Africa,” says Linda Munyengeterwa, the IFC’s regional industry director for infrastructure in Africa.

“In many areas of the continent the wind tends to blow strongest at night and in the early morning,” she adds.

“It is very complementary to solar which only generates during the day.”

Yet progress in harnessing power from winds has been limited. The Global Wind Energy Council notes that Africa is only using 0.01% of the 59,000 GW that the IFC says is available on the continent. And according to data published by the International Renewable Energy Agency (IRENA) in April, only three African countries – Egypt, Morocco and South Africa – have installed more than 1 GW of wind energy capacity.

LOGISTICAL HEADWINDS

“The development of a windfarm is much more complicated and costly than that for a solar plant,” says Vuyo Ntoi, joint MD at African Infrastructure Investment Managers.

“Before developers can begin putting turbines in the ground, they need to

Africa Energy Yearbook 2023 82 Wind power

collect data on the wind resources available at a possible site. This can be an expensive and lengthy process.

“For solar, short-term irradiation data can be readily purchased (at low cost) and used, while for a windfarm a longer programme of wind monitoring on-site at the proposed hubheight is required to underpin the project’s bankability.”

Ntoi adds that wind is generally less suited to smaller projects, sometricity, compared to solar. Wind, he says, “does not easily lend itself to implementation outside of government led programmes,” owing to the “nature of its permitting and procurement complexity, lack of colocation ability and hence reliance on national grids, plus the need for scale”.

The result is that wind developments are unlikely to proceed with-

hard to come by in Africa. “There -

utilities across the continent,” says Ntoi. “Wind developers as with other energy developers are loath to develop projects into an ecosystem with poor credit quality where generators will not get the contractual payments they are entitled to.”

LACK OF CREDITWORTHINESS IS ‘CORE BOTTLENECK’

Chris Chijiutomi, managing director and head of Africa at British International Investment, agrees that the lack of creditworthiness among African utilities is a “core bottleneck”. Another challenge, he adds, is “the general indebtedness of African countries, in terms of governments would then allow the private sector to know that they can come in and invest.”

of countries,” says Chijiutomi, “are now creating limited space for them letters of support needed to ensure contractual obligations are met.”

the ability of many African governments to provide security guarantees is also questionable. Patrick Edmond, senior consultant at strategic risk adnotes that several areas with good wind power potential are exposed to security risks.

“The interiors of Chad, Sudan, Niger and Mauritania are hard to access, and the state has very limited presence in these remote regions,” he says. “Northern Nigeria has some potential and huge demand, but major security challenges.”

OVERCOMING CONFLICT

Wind project developers in Africa, as throughout the world, also face

Africa Energy Yearbook 2023 83

Wind power

challenges in addressing community opposition to new facilities. Such issues have been particularly intense in Kenya. A man was shot dead by police during protests against a planned windfarm in Kinangop in 2015; the $144m project was cancelled the following year.

The Lake Turkana wind power project – the largest in Africa – has also faced sustained opposition. Last year, a Kenyan court ruled that title deeds for the project site were acquired in an irregular manner. The ruling did not cancel the deeds, but paves the way for the local community to receive compensation.

The fact that the turbines that make up a windfarm are likely to be dispersed over a wide area adds a layer of complexity. “When it comes to wind, the sites are not necessarily stanarea,” says Chijiutomi. “You’re then having to deal with a lot more community and a lot more environmental and social issues associated with that.”

Some countries have attempted developments. In Africa, however, the wind capacity appears a distant prospect.

Even South Africa, a leader in the development of onshore wind power, sources. Niveshen Govender, CEO of the South African Wind Energy Association, reports that the country is at least 2030.

“A lot of the deterrent around costs,” says Chijiutomi. He cites the heavy cost of “getting the installatantly, getting the connecting transmission lines to where the electricity is needed”.

PROBLEMS WITH GRID CONNECTION HOLD UP PROJECTS

In fact, the challenge of connecting turbines to transmission lines is also a major problem for onshore projects – especially for those located in remote areas, far from existing grid infrastructure. “The worst thing that can happen – and has happened in some instances – is to have the power plant ready but the grid connection infrastructure isn’t,” warns Chijiutomi. “Then the government for energy that they can’t use because there’s no grid connection.”

This is precisely the situation that

The windfarm itself was completed on schedule in 2017. But the Kenyan government fell behind in the construction of a new 272-mile transmission line, after the Italian company it had hired to build the line went bankrupt. Electricity from the project was not delivered to the grid until 15 months after the turbines were completed.

LESSONS FROM SOUTH AFRICA

The Lake Turkana project is hardly alone among complex infrastructure projects in facing delays. Indeed, despite its troubles, it now supplies 17% of Kenya’s electricity generation capacity and was cited by management

Africa Energy Yearbook 2023 84

consultants BCG as a “best practice” example of an energy project in Africa. Further insights in scaling a wind rollout come from South Africa. The development of wind power in the country was hamstrung for several years during the rule of its disgraced former president, Jacob Zuma. Since 2018, however, its independent power producer programme has regained momentum. A dozen wind projects were given the go-ahead that year, followed by another 12 in November 2021. A further bidding round kicked

The regular nature of bidding rounds has proven key to enabling developers to achieve scale and reduce costs. “With each project proenergy has reduced considerably,” Govender points out. “Policy shifts indicate a clear direction in terms

of plans to procure new generation capacity on an ongoing basis, in line with the energy roadmap, which sees 14.4 GW of new wind power over the next decade.”

Ntoi agrees that “regular, predictable and repeatable government backed procurement is probably the most important action that will enable large-scale wind power deployment in Africa.”

He notes that South Africa has been “programmatic, therefore predictable” in its approach to developing the sector. “Parties have developed windfarms, with all the associated

the renewable energy procurement process. Because it’s a programme, developers know that there is repeat business and that if you are not successful in one round, there will be another to follow.”

EXPORT OPPORTUNITIES FOR SMALLER AFRICAN COUNTRIES

The growing role of wind in South Africa highlights how the technology can ultimately contribute to closing the continent’s electricity gap. South Africa is, of course, an outlier in the way that its electricity market is considerably larger than in most African countries.

But, says Chijiutomi, the extension of cross-border electricity transmission infrastructure could allow smaller countries to play host to large-scale windfarms. “I think there’s also an opportunity where some of these countries that maybe have the wind resource, but their grid isn’t stable, could be a producer of the wind resource and be able to sell it to neighbouring countries.”

Africa Energy Yearbook 85

BIOENERGY OFFERS AFRICA A SUSTAINABLE FUTURE Ben Payton

Producing energy from bio-based materials,

means for Africa to take a huge leap towards net zero carbon emissions. It will, they say, also boost rural livelihoods and reduce the cost of importing fuel.

Others, however, insist that biofuels are a recipe for disaster – potentially resulting in deforestation, the eviction of rural smallholders and the loss of land that should be used for food production.

Bio-based materials can provide energy in multiple ways. Certain crops can be used to produce ethanol, which can then be blended with gasoline to produce fuel for vehicles. Ethanol can also be used in cooking stoves, providing a cleaner alternative to wood or charcoal. Alternatively, crops – or their waste products – can be burned to generate electricity.

Of course, Africa already relies on biomass for energy. The International Energy Agency estimates that over 80% of the continent’s population uses coal – for cooking.

But production of biofuels on a commercial scale in Africa has been very limited – the giant commercial biofuel plantations seen in Brazil and parts of Southeast Asia remain uncommon in Africa.

AN UNTAPPED OPPORTUNITY?

British entrepreneur Richard Bennett set up Sunbird Bioenergy in 2015, seeing an “untapped opportunity” to use biofuels to help provide Zambia with cheaper fuel. In the absence of domestic oil production, the country has long been forced to import petroleum through Tanzania.

Zambia is, like many African countries, at the mercy of volatile global oil

with the result, Bennett says, that fuel is

Africa Energy Yearbook 2023 86 Bioenergy

“really ridiculously expensive”.

Sunbird Bioenergy is now using in Luapula province that is designed to produce 120m litres of ethanol a year. The company says that this will be equivalent to 20% of Zambia’s petroleum use and will help the country reduce its import bill by $100m.

But countries like Zambia have a long way to go before they can replicate Brazil, where over 1.5m people are employed directly and indirectly in ethanol production. Brazil’s success in enabling a much greater role for ethanol has depended on its ability to require fuel vehicles” that can run on fuel with a very high ethanol content.

Petrol sold in Brazil has a standard ethanol content of 27% – and many vehicles can run purely on ethanol. Elsewhere, ethanol can make up no more than 10-15% of gasoline at the pump. In the absence of a domestic car manufacturing industry in most African countries, governments have fewer levers to stimulate the growth of a biofuels industry.

THE SKY’S THE LIMIT?

Another opportunity comes from sustainable aviation fuel (SAF). Yitatek Yitbarek, regional manager for Africa at the Roundtable for Sustainable Biomaterials, says that Ethiopian Airlines is one of many airlines to show interest in Africa’s SAF-producing potential.

“They are looking at opportunities for producing SAF and partnering with potential investors in that sector,” he says.

Production of SAF from biofuels is currently negligible, making up less than 0.1% of aviation fuel used worldwide. A huge ramping-up of production will be needed in the coming years. The EU is currently considering targets for

SAF to provide as much as 85% of aviation fuel by 2050.

A 2019 study by the International Institute for Applied Systems Analysis and the South African branch of the World Wildlife Fund found a “meaningful” potential to produce jet fuel

sustainability of biofuel production in Africa last year. He says that considproductive land to produce energy crops is at the heart of the challenge for Africa.

“Depending on the feedstock and its production,” he explains, “adverse environmental

using biomaterials in sub-Saharan Africa, particularly in central Africa, Democratic Republic of Congo and the Gulf of Guinea region. It warned, however, that the amount of land available to produce biofuels will substantially decline by 2050, due to the need to grow more food.

FOOD VERSUS FUEL

land to provide fuel or to grow food is perhaps the thorniest issue in the biofuels debate.

Stefan Schmidt, a microbiology professor at the University of KwaZulu-Natal, co-authored a study on the

Multiple NGOs have fiercely criticised European policymakers for allowing crops to be used as biofuels. T&E, an environmental NGO, describes the EU’s promotion of crop biofuels as “the dumbest thing the EU has done in the name of the climate”. It argues that Europe’s burning of wheat, rapeseed

surging food prices.

“Certainly, food production should have priority over energy crop production in case of food security challenges,” says Schmidt. But, he says, it allow for crops to be used for energy on land unsuitable for food production – providing the land is properly monitored and managed.

Bennett agrees that biofuel production should take place only on land that

Africa Energy Yearbook 2023 87

Bioenergy

is not needed for food. “You’ve got to make sure you’re operating in areas

production,” he says.

Sunbird Bioenergy is operating on a 100,000-hectare block of land in Zambia that the government had allocated to commercial production. Bennett says that the land could theoretically be used to grow a food crop such as maize, but doing so would not be commercially viable due to the high cost of transporting the produce to markets in urban areas.

ENERGY FROM WASTE

Producing energy from crop waste

“Bioenergy can be seen as a way for Africa to reduce not only its dependence on fossil fuel energy but also as a way to address the disposal of organic

out Chris Chijiutomi, head of Africa at British International Investment, the

“Entrepreneurs and corporates alike are working towards developing and implementing small scale as well as larger scale solutions.”

and other forms of organic waste, such as manure, to produce compressed biogas (CBG) could provide a model for Africa to learn from, says Chijiutomi. The country is especially seeking to use rice straw – which is otherwise pollution in northern India – to produce CBG.

There are already several wasteto-energy projects in Africa, notably in Egypt and South Africa. Last year for example, South African Breweries arranged a power purchase deal with a biogas company that plans to use slurry from one of the country’s largest dairy farms to generate electricity.

Schmidt agrees that there is potential for biogas in Africa’s energy mix.

“It is crucial to select the right tech-

regions,” he says. “While for less-developed rural areas lacking infrastructure, simple biogas digesters could work to supply energy locally using available organic waste, more developed regions could qualify for larger systems.”

A GREENER FUTURE?

The potential for Africa to become a major producer of bioenergy is undoubtedly considerable. Bennett believes the continent can become a “green powerhouse”, with bioenergy helping the continent to become energy independent and ultimately an exporter of fuel to other markets.

But those who plan to produce biofuels commercially face major

hurdles. As well as its operations in Zambia, Sunbird Bioenergy acquired a bioenergy project in Sierra Leone in 2016 that had originally been established by the Addax and Oryx Group, an entity best known for producing oil.

“It looked like a very good opportunity,” says Bennett – but he acknowledges that multiple headaches with relations with the government, have disrupted the project.

Despite the challenges, Yitbarek describes biofuel as a “low-hanging fruit” for greater use of green technology in Africa. But, he adds, “adopting international experiences of biofuel production to be compatible with the African context is important.”

Indeed, few would argue that Africa should simply seek to replicate the experience that countries like Brazil have had with biofuels. Brazil’s status as a world leader in biofuels relies on a long history of mechanised agriculture on huge plantations. Similar conditions could not be created across most of Africa without evicting millions of rural smallholders or turning rainforests into commercial farms.

Instead, the key for Africa is to solutions for harnessing energy from bio-based materials in ways that prove sustainable over the long term.

Africa Energy Yearbook 2023 88
Thank you to our sponsors Foundational partner Associate Partners Media Partners Exhibitors Kenya Private Sector Alliance Partner Corporate Partner ENERGY COMMISSION’S SENIOR HIGH SCHOOLS RENEWABLE ENERGY CHALLENGE

AFRICA’S RACE FOR TRANSMISSION INVESTMENT

Private investment in power lines is needed if the continent’s wind and solar resources are to be harnessed. Ben Payton reports

Solar panels and wind turbines are becoming an increasingly common sight across Africa, as the continent’s green energy revolution gathers pace. But to reap

which renewable sources are dominant, investment is desperately needed in a type of infrastructure that can easily be forgotten – electricity transmission. Investment in long-distance power lines is rising around the world, given that wind and solar facilities are often located far from power consumers. But Africa is lagging behind.

“The existing transmission infrastructure in Africa is inadequate and the power systems in most countries incur substantial losses,” says Francesco La Camera, director-general of the International Renewable En-

hampers the ability of many African countries to tap into their abundant renewable energy resources and reach their true potential.”

This became painfully apparent in South Africa at the end of last year. The country is experiencing devastating blackouts. But in its latest bidding

round for independent power producers, the government announced that it would contract just 860 MW in new renewable energy capacity – less planned to procure.

– operated by Eskom, the troubled state-owned utility – becoming overloaded in parts of the country where wind and solar power is abundant.

“The most attractive sites with the eligible for procurement due to the lack of grid availability,” laments Moritz Breickmann, investment director at African Infrastructure Investment Managers. Strengthening grid connections to the resource-rich Northern Cape province, as well as improving north-south transmission capacity in the country, must be key priorities, he says.

harness wind and solar resources will stall without improved transmission infrastructure. Can Africa turn the corner before it is too late?

POWER STRUGGLE

Around 600m people in Africa lack access to electricity. Although “mi-

have a role to play in improving connections, there is no substitute for a well-functioning power grid that can provide reliable power to homes, businesses and industrial users. Put simply, such a grid can, for example, supply electricity to places where it is cloudy from solar sources in full sun elsewhere, or to windless places from turbines that have wind.

“Powering people’s houses with solar home systems is great and get-

ity is fantastic,” says Jennifer Baldwin, team lead for transmission and distribution at Power Africa, a US government funded initiative to improve electricity access. “But it’s not going to power the industrial revolution that is needed for job creation and economic growth in sub-Saharan Africa.”

At least until recently, however, grid investment has tended to be a low priority across most African countries. Occasionally, new renewables projects have been left dormant because of a lack of transmission. The Lake Turkana wind farm in Kenya –the largest in Africa – was completed in July 2017. But the accompanying

Africa Energy Yearbook 2023 90 Energy infrastructure
Africa Energy Yearbook 2023 91
‘Powering people’s houses with solar home systems is great... but it’s not going to power the industrial revolution that is needed.’

transmission line was delayed, and the turbines could not supply power to Kenya’s electricity grid until October 2018.

“Despite their crucial role in delivering power to homes and businesses, transmission and distribution networks in Africa have comparably received less attention from both public and private sector investors,” says Marcel Bruhwiler, infrastructure manager for Eastern and Southern Africa at the International Finance Corporation. He estimates that $4bn

pand and maintain the continent’s transmission network.

PRIVATE INVESTMENT

A large part of the challenge is that in most African countries electricity transmission and distribution remain the responsibility of power utilities, almost all of which are mired in vargovernments have been willing to encourage private sector investment in transmission.

“Transmission assets have historically been regarded as strategically sensitive,” says Chris Flavin, head of business development at Gridworks, grid power infrastructure in Africa. since transmission lines function as

part of a larger network, dividing roles and responsibilities between multiple

Other emerging-market regions have, however, enjoyed considerable success in encouraging private sector investment into transmission. A 2017 World Bank report noted that Brazil had attracted almost $16bn in private sector investment in its transmission network over the previous 20 years. The report said that Brazil’s experience demonstrates that multiple transmission companies can co-exist within a single power network.

“What we’ve seen in other parts of the world is that there comes a point in a lot of markets in a resource-constrained environment where it makes very good sense to use private sector capital for the transmission sector,” says Flavin.

There are some promising signs that attitudes towards private sector involvement are beginning to change in Africa. Alastair Herbertson, a director at the Emerging Africa Infrastructure Fund, which provides debt on the continent, says that some govapproaches to strengthening transmission networks.

openness to the concept of private sector operators developing the grid,” he says. He notes that in some cases, contracts have been awarded to power producers on the condition that they upgrade transmission lines.

“Most countries are realising that, with rising interest rates and hard currency shortages, they need to look

Africa Energy Yearbook 2023 92 Energy infrastructure
The African Union intends to go further. In 2021, it unveiled plans for an African Single Electricity Market, which it aims to make fully operational by 2040.
Above: Workers installing new power cables in a rural village near Dodoma, Tanzania.

bertson.

Zambia is one of the few African countries with a history of private sector involvement in transmission. Transmission lines operated by the Copperbelt Energy Corporation, which was privatised in the 1990s, supply electricity to mines in the Copperbelt region. In the rest of Zambia, however, the state power utility ZESCO operates the transmission network.

Albert Halwampa, director-general of the Zambia Development Agency, says the country is preparing for a rapid increase in electricity generated from private solar projects. The Zambian government is introducing reforms that would enable investors to “create their own transmission lines directly to the consumers”,

Halwampa tells us.

“Why should they depend on the transmission lines [owned] by ZESCO?” he asks. “We’re encouraging investment in generation, transmission, and we hope eventually, into marketing.”

Another country making major strides is Kenya. The government signed a deal in January 2022 with India’s state-owned Power Grid and Africa50, an infrastructure investment platform owned by the African Development Bank and African govern-

power transmission project in Africa. This will result in the construction of two new power lines.

Kaniaru Wacieni, senior investment ca50, says the new lines will improve ya, where power is constrained, and “unlock potential renewable investments” in the north of the country. He predicts that the project will also “catalyse greater sustainability of the power sector through an unbundled template for other projects”.

CROSSING BORDERS

To create a well-functioning power system in the age of renewables, transmission lines cannot stop at national boundaries. Cross-border transmission via grid interconnectors is vital to mitigating the problems caused by the fact that wind and solar are inherently intermittent. If power can be moved surplus of power in one country can bours.

Breickmann notes that in West Africa, for example, “hydropower resources are located in countries which border the Atlantic, while solar resources are primarily located in the Sahelian countries. An integrated transmission infrastructure would allow countries

both hydro and solar energy sources.”

The trading of power between countries is already well-established in parts of the continent. Africa is divided into several regional power pools, of which the Southern African Power Pool is the most developed. The African Union intends to go further. In 2021, it unveiled plans for an African Single Electricity Market, which it aims to make fully operational by 2040.

“There are a lot of large-scale projects being looked at that involve more regional integration,” says Flavin. “Especially if you’re looking at the capacity of the continent to absorb renewables, that could make a lot of sense.”

In practice, some of the more ambitious schemes for long-distance transcult to deliver. South Africa signed a deal in 2013 to purchase power from the latest stage of the Inga Dam in the Democratic Republic of Congo, which lies 3,500km north of Johannesburg. A decade later, construction on the megaproject is yet to begin.

“Long-distance transmission, particularly if you’re crossing borders, tends to take a very long time to develop,” says Flavin. “You’re dealing with

ent legal and regulatory systems, different market design. These projects and construct.”

While not every cross-border project will prove viable, there is no doubt that improved transmission links are needed if Africa’s immense potential for solar and wind power is to be realised. Pylons and power lines may be unglamorous, even ugly. But they will prove to be the backbone of the energy transition on the continent, enabling electricity access to become a reality for the hundreds of millions of Africans who lack power today.

Africa Energy Yearbook 2023 93

FINANCING THE TRANSITION

In June 2022, the African Union convened transport and energy ministers to adopt the African Common Position on Energy Access and Transition, which ment.

$90bn a year in Africa. This funding

barrier that deters investment.

hinder them from raising necessary resources on domestic markets.

ating the energy transition toward

partnership with the private sector, and

This is an ambitious target, not made easier by the fact that costs are Scaling

Up to Phase Down report, issued in

the country’s power sector transition is estimated at $2.6bn through 2030, continent.

such as pension funds and insurance

$22tn in outstanding debt issuances by

Africa Energy Yearbook 2023 94 Financing
DFIs and multilateral institutions are busy derisking renewable energy schemes, heralding the prospect of increased funding –and more private sector participation, writes
James Gavin

However, in some of the region’s environment impact. ca’s energy transition. In March 2023, in the Norwegian krone market. The funds raised through this transaction transition to green growth. providing support for governments and optimising risk mitigation to and Namibia.

ment environment. Through these

ments to Africa’s energy transition. In

ing capacity and avoid 3.6m tonnes of ambitions to oversee the aggregation of mitigate risks. for the private sector to increase its Arabia’s ACWA Power announced the in Egypt.

investment across South Africa.

Africa’s energy transition. With more mechanisms reaching the market, the chances of meeting ambitious targets set for the sector are getting higher by the minute.

Africa Energy Yearbook 2023 95

TRADITIONAL ENERGY PROJECTS FACE UP TO FUNDING CHALLENGES

There remain a small clutch of banks that are still committed to the EACOP financing, including South Africa’s Standard Bank, Sumitomo Mitsui Banking Corporation and Mitsubishi UFJ Financial Group (MUFG), both of Japan, and Industrial and Commercial Bank of China (ICBC).

adds to the reputational risk they face if

Financing for EACOP is now shifting towards China, given the role of

Chinese contractors involved in the construction. But even Chinese stateowned banks are not immune to reputational/environmental pressure, as evidenced by ICBC’s withdrawal from the Lamu coal power project in Kenya.

“Any banks that attach themselves to the EACOP project can expect to draw

TotalEnergies may also face a review of its $4.7bn loan agreement with the US Export-Import Bank (US project now that it is trying to get this restarted.

The French major acknowledged that will now face greater scrutiny over the loan secured for its development.

The news in early May of this year that Standard Chartered Bank would

African Crude Oil Pipeline (EACOP), a 1,443km insulated pipeline that will transport Ugandan crude from Kabaale to Tanga Port in Tanzania, came as a setback not just to the Kampala government but to putative oil and gas project sponsors across the continent.

The bank joined more than two dozen other lenders that have turned down participation in the TotalEnergieson a 60:40 debt:equity ratio, with the loan component estimated at $2-3bn.

Yet while the Petroleum Authority of Uganda has said funding for the pipeline remains on track and multisourced from different regions, the challenges it has experienced in pulling together commercial lending and insurance support for EACOP points to a wider challenge facing hydrocarbons developments in Africa.

It also raises broader questions

that is dominated by environmental, social and governance (ESG) related issues, whether large-scale CO2 emitting projects stand a realistic chance of

“Western banks are certainly feeling the pressure on new fossil fuel developments like EACOP and its associ-

for Energy Economics and Financial Analysis. “The fact that drilling will occur in a national park in Uganda only

If the project, halted by Islamist insurgents in 2021, is restarted, US Eximbank, which has committed the opment, said it will carefully review the

ative will assess potential risks and ensure that the project fully aligns with ESG standards.

This underscores that it is not just oil projects that are facing funding constraints; despite natural gas’s credentials as a transition fuel, and with gas-to-power (GTP) projects associated with lower emissions than coal or heavy

As France’s Société Générale has importance of ESG with an increasing ing markets could further shift capital

Africa Energy Yearbook 2023 96 Financing
How is Africa’s oil and gas sector dealing with ESG constraints? Development for gas-to-power and
writes James Gavin

towards those who will embrace such

been creative in project structuring. Equally, innovation and new technologies should provide it with greater insulation from ESG-related pressures.

Also, commercial banks now have more sophisticated means of managing lobby group of banks with commitments to ESG, noted in late 2022 that 53 of its members either have a policy

have set an emissions reduction target. Forty-two banks have measured their emissions footprint, and 31 banks have emissions reduction targets to be achieved by 2030.

Two banks have chosen to set separate targets for upstream and

tiate between the emissions reduction opportunities of upstream and downstream operations.

ive legal decisions. In January 2023, the UK Court of Appeal ruled against campaigning group Friends of the Earth’s legal challenge to a British government decision to approve $1.15bn of export credit financing from UK Export Finance (UKEF) for

That provides a measure of reassurance to ECAs and lenders that when ECA support is in place, it will be more challenges to these.

and gas-to-power projects. For example, the UK government has said it will

support for fossil fuels overseas other than in limited circumstances.

That leaves more onus on devel-

opment finance institutions (DFIs) and multilateral development banks (MDBs) to provide support. And here, there is scope for optimism for traditional energy project backers. In March 2023, Bloomberg reported that the World Bank will support the development of Mozambique’s giant natural gas resources – so long as it is the cheapest way to boost energy access.

That appears to mark a break with previous Bank policy. In 2017, the World support upstream oil and gas after 2019. in exceptional circumstances, “considergas in the poorest countries where there is a clear benefit in terms of energy

within the countries’ Paris Agreement

Circumstances since the Ukraine crisis have made conditions marginally easier for hydrocarbon schemes in Africa to raise lending support. As

Mozambique’s gas is being exported to Europe, so this gas could keep Europe from reverting to less clean energy sources.

tional energy projects have also led African institutions to evolve their own solutions. In May last year, in a bid to support energy transition strategies in Africa, the African Export-Import Bank (Afreximbank) and the African Petroleum Producers’ Organisation signed a memorandum of understanding (MoU)

to establish the African Energy Transifunding for oil and gas projects.

Similarly, there have been commitments from Afreximbank to support ventures such as EACOP, with $200m extended in late 2022, along with a $100m commitment from the Islamic Development Bank.

In 2022, the Fund for Export Development in Africa (FEDA), a development impact-oriented subsidiary of Afreximbank, announced that it has bution infrastructure platform in the West Africa region. FEDA’s investment would provide access to cheaper and cleaner fuels for underserved industrial customers across the region using

CO2 emission by replacing environment-polluting fuels currently in use.

Overseas ECAs and development finance groups have signalled their own willingness to continue support for traditional energy projects. In January of this year, Japan Bank for International Cooperation and MUFG announced they would provide a $71m

That leaves a lifeline for oil and gas project sponsors in Africa, especially for projects that can show a greater relevance to ESG considerations, and which also alleviate global requirements for dirtier fuels – such as coal and heavy fuel oil – while meeting demand for cleaner-burning alternatives.

Africa Energy Yearbook 2023 97
ESG, noted in late 2022 that 53 of its

SCALING UP OR SCALING BACK?

hen the World Bank’s Scaling Solar initiative was recently called “a victim of its own success,” the response from the Bank’s private sector arm, the International Finance Corporation (IFC) was suitably pithy. A letter from the IFC published on 22 May said that the comment was accurate on one count: it was a success.

The IFC was minded to hit back after former investment analyst Teal Emery, writing on the Energy for Growth Hub, accused Scaling Solar of sending inaccurate price signals and undermining market growth in Africa.

That criticism focused on Zambia, ing Solar programme, which aimed to ments seeking to build solar capacity.

ing Solar itself did not scale and that although thoughtfully designed, only

tion to Zambia, solar projects were built in Senegal and Uzbekistan).

More broadly, he said, the initiative viding a demonstration model that could be replicated widely. Nor did it scale the broader solar market it was intended to catalyse.

WDespite falling prices and rapid remains a laggard, in Teal’s words. In gion of over a billion people, only one rica (population 62m) has been built to date.

The criticism has found wider

opment has noted that the Zambia project – which involved $24.5m in private equity investment, $81.5m nance. That, it said, helped explain why the Zambian experience was proving so hard to replicate.

ting Africa to boost energy through sive process.

jects are still worth doing in terms of achieving the necessary hard yards. Scaling Solar is helping provide over ergy in eight of the world’s poorest countries, an achievement that was near inconceivable at the dawn of the project, said the IFC. It is a tool that has worked again and again, noted its head of media Adam Hodge.

The World Bank project’s defenders argue that it was developed precisely

ca, despite the region’s huge potential. Most utilities in Africa could not have nate in Africa, given the importance of evolving mechanisms that facilitate an ble energy schemes.

The challenge is particularly acute in a global context where investment

tional Energy Agency’s World Energy Investment report 2023, this year,

ment in electricity generation. Solar is the star performer and more than $1bn a day is expected to go into solar investments in 2023 ($380bn for the year as a whole), edging this spending time.

As the IFC argues, solar PV can now deliver power less expensively and

The question then is why schemes like Scaling Solar are not being taken up beyond the likes of Zambia and Senegal. The IFC’s view is simple. It available to any country that wants to pick it up and use it.

for renewable energy remains a work in progress. But the reality is the more

ments come into place, the more likely will eventually make headway and newable capacity.

Africa Energy Yearbook 2023 98 Last Word
Achieving the best funding model for renewable the best model renewable energy schemes is proving a challenge, but energy schemes is a but patience will be key, writes will be writes James Gavin James

Partnering with Africa’s Sun and Wind

The Largest African Renewable Energy Company

Infinity Power is a joint venture between Egypt’s Infinity and Masdar (Abu Dhabi Future Energy Company), developing utility-scale solar and wind projects in Africa. In 2023, Infinity Power acquired Lekela Power, becoming the biggest renewable energy company on the continent. With current projects located in Egypt, South Africa and Senegal, Infinity Power aims to expand its operations in markets across all 54 African countries, providing electricity where it is most needed across the continent. Today the company’s total capacity of operational projects is 1.3 GW, with another 13.8 GW of projects in the pipeline at different stages of development.

West Bakr, Egypt Capacity: 250 MW

AGRICULTURE IS THE LIFELINE OF AFRICAN ECONOMIES

In Kenya, Fortescue is constructing a 300MW green ammonia and green fertilizer facility which aims to provide affordable inputs to local farmers, ensuring food security, and reducing reliance on imports.

fortescue.com

Articles inside

Partnering with Africa’s Sun and Wind

1min
page 99

SCALING UP OR SCALING BACK?

1min
page 98

TRADITIONAL ENERGY PROJECTS FACE UP TO FUNDING CHALLENGES

4min
pages 96-97

FINANCING THE TRANSITION

1min
pages 94-95

AFRICA’S RACE FOR TRANSMISSION INVESTMENT

5min
pages 90-93

Bioenergy

2min
pages 88-89

BIOENERGY OFFERS AFRICA A SUSTAINABLE FUTURE Ben Payton

3min
pages 86-87

AFRICAN WIND POWER STRUGGLES TO GAIN MOMENTUM

5min
pages 82-85

UNLEASHING AFRICA’S POTENTIAL, IN ‘PRIVATE’

4min
pages 80-81

DROUGHTS RAISE DOUBTS OVER HYDRO’S FUTURE ROLE IN AFRICA

5min
pages 76-79

GROWING PLANS

1min
pages 74-75

BRITISH INTERNATIONAL INVESTMENT

2min
pages 72-73

A UNITED CONTINENT CAN DRIVE NATIONAL PROGRESS

4min
pages 70-71

MISSION CRITICAL: HOW AFRICA CAN PROFIT FROM ITS MINERAL BOOM

11min
pages 64-69

GREEN HYDROGEN AT HEART OF NAMIBIA’S VISION 2030

4min
pages 62-63

CAN AFRICAN STATES TURN GREEN HYDROGEN AMBITIONS INTO REALITY?

3min
pages 58-62

TO BOLDLY GO

4min
pages 56-57

EGYPT’S GREEN TRANSITION

4min
pages 54-56

STEPPING ON THE GAS

4min
pages 52-54

IMPORTANCE AND VALUE OF HYDROPOWER PROJECTS

7min
pages 48-51

AFRICA SEEKS POLICY SHIFT TO SCALE UP INVESTMENT

4min
pages 46-47

SOLAR LEADS THE WAY AS AFRICA ATTRACTS FRESH RENEWABLES INVESTMENT

5min
pages 44-45

THE GREEN CONTINENT

4min
pages 40-43

DRIVING AFRICA’S GREEN ENERGY TRANSITION

3min
pages 38-39

AFRICA’S GREEN HYDROGEN OPPORTUNITY

3min
pages 36-37

Kenya Electricity Generating Company

4min
pages 34-35

H.E. Honourable Davis Chirchir, Cabinet Secretary for Energy and Petroleum, Kenya

5min
pages 32-34

Kenya case study

4min
pages 28-31

GEOTHERMAL RACE HEATS UP AFRICA A

2min
pages 26-27

AN ALL-OF-ALLIANCE APPROACH TO ACCESS

1min
pages 22-23

SHAPING AFRICA’S ENERGY TRANSITION

2min
pages 19-21

SAYING YES! TO A BRIGHT FUTURE FOR AFRICAN ENERGY

2min
pages 18-19

NAIROBI’S ART AMBASSADORS FLYING THE KENYAN FLAG HIGH IN GLOBAL ART CAPITALS

1min
pages 16-17

THE TURKANA ARTISTS EXCHANGE PROJECT

2min
pages 14-15

AEF PHOTO OF THE YEAR COMPETITION

1min
pages 8-9

WELCOME

1min
page 7

MASDAR PIONEERING THE FUTURE OF SUSTAINABILITY

3min
pages 2-5, 7
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