Africa’s Energy Transition Plan Is Nonsense

• The International Energy Agency this week reminded the world that Africa is ripe for a wind and solar revolution.
• Africa currently accounts for a measly 4% of global carbon dioxide emissions.
• High levels of debt in African countries were recently noted as one of the obstacles to the continent's full utilization of low-carbon resources.

Africa is a treasure trove of metals and minerals and home to some of the world's best natural resources, including wind and solar.

Africa currently accounts for a measly 4% of global carbon dioxide emissions. A variety of organizations want it to stay that way.

From the International Energy Agency, the IMF, and the World Bank to private businesses and nonprofits, transition advocates want Africa to go straight from pre-industrial to net-zero, skipping the oil and gas era.

That would be quite a feat.

The reason Africa has the lowest emission footprint is that hundreds of millions of people on the continent has no access to electricity. The reason they don't have access to electricity is that there is no power generation capacity or transmission infrastructure and not enough cheap coal and gas to power it.

Of course, there is also the case of South Africa, where years of mismanagement left the country in the dark last year, or Nigeria, which can only generate enough electricity for not even half its population despite its significant oil wealth. On the whole, however, Africans are short on power because they don't have enough capacity to generate it. And nowhere near enough money to build it.

It is in this context that the International Energy Agency this week reminded the world that Africa is ripe for a wind and solar revolution, at least when it comes to resources. The IEA also noted, however, that Africa is only getting 2% of global investments in low-carbon energy, just as it gets a tiny sliver of overall energy investments. Related: Russia Set To Slash Diesel Exports In September

This, the IEA said, needs to change if Africa is to exploit these massive resources for low-carbon energy, as it should, according to the agency. Because, right now, "The cost of capital for utility-scale clean energy projects on the continent is at least two to three times higher than in advanced economies. This prevents developers from pursuing commercially viable projects that can deliver affordable energy solutions."

This much higher cost of capital has to do with real and perceived risks that are holding investors back. These risks have a lot to do with the uncertainty of returns on these hypothetical investments, given the high poverty levels across most of Africa.

Low-carbon energy may be good for the environment, but it also costs money. Building the infrastructure necessary to bring this energy to people also costs money. A lot of it. There are many in Africa who cannot afford such energy when the cost is calculated on a basis that is more realistic than the highly popular levelized cost of electricity.

On that more realistic basis, wind and solar require dispatchable backup generation capacity as well. Or massive batteries. Neither option comes free. And African governments are up to their necks in debt already.

Indeed, the high levels of debt in African countries were recently noted as one of the obstacles to the continent's full utilization of low-carbon resources. And it's a big one.

"At the moment, we've got developing countries paying way more in debt repayments back to richer countries than they ever hope to receive in climate finance or support," Tom Mitchell, director of sustainability think tank the International Institute for Environment and Development, said at an event in the UK, as quoted by Reuters.

Despite this state of affairs, those same richer countries, through their lending institutions, have essentially told African governments that they will not receive any financial support for developing their oil and gas resources. In other words, either invest in wind and solar—while repaying your debts—or sink because you can't finance oil and gas exploration.

Many African leaders have called out the hypocrisy: Europe and North America reaped the full range of benefits from hydrocarbons for decades, and now they want to deny Africa those same benefits.

There are now oil and gas activists in Africa who advocate for more, not less, hydrocarbons for African countries because of all the benefits they provide, from automation of many tasks that are now done manually to fertilizers, which would greatly improve crop yields like they do in Europe and North America.

There are also the international oil companies, which, despite their appearance as an industry in its own transition, somehow still manage to do some oil and gas exploration. Including in Africa.

TotalEnergies started drilling at the Tilenga oil project in Uganda in August, even though it is subjected to considerable pressure from environmentalists, including through a couple of lawsuits.

Namibia is shaping up as the next Guyana, with discoveries made by Shell and TotalEnergies suggesting reserves of at least 11 billion barrels of oil equivalent.

Earlier this year, an Australian company, Invictus Energy, drilled a wildcat in Zimbabwe that confirmed the presence of light oil and condensate.

Oil and gas exploration in Africa is progressing without much media noise but with what appears to be strong government support, even as some of these governments are also 100% pro-transition.

By Irina Slav for Oilprice.com

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