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June 8th, 2015 at 2:40 pm

The leapfrogging continent

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In the dusty khaki scrubland of South Africa’s inhospitable Northern Cape province, brightly polished mirrors flash light across the landscape as they rotate slowly to follow the sun, producing electricity for 80,000 homes.  

The inauguration in March of this concentrated solar power (CSP) plant costing 7.8 billion rand ($640m) is but the crest of a wave of renewable energy projects sweeping across Africa.

Projects such as these cannot come quickly enough for a continent starved of energy. In South Africa, where four more CSP plants are already being set up, the economy has staggered to a crawl in the first quarter of 2015 because of crippling power shortages. Across sub-Saharan Africa shortages of electricity are holding back economic growth by as much as 4% a year, reckons the World Bank. Businesses are forced to buy generators, paying 50 cents or more per kilowatt-hour, which is many times the cost of grid power.

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It is not just energy-intensive industries that are stunted. So too are dairy farms in Nigeria (see article) or even businesses that sell mainly brainpower. Ozioma Obiaka, the founder of TalentBase, a firm based in Lagos that provides payroll and other software to companies, says he often has to send employees home early because the power conks out.

Poor families are even harder hit. A new report by the Africa Progress Panel, a group of experts led by Kofi Annan, a Ghanaian who once headed the UN, reckons that more than 600m poor people do not have access to grid electricity. They may spend as much as 16% of their income on energy and pay up to $10 per kWh for fuels such as kerosene or disposable batteries for cooking and lighting: about 100 times more per unit than people in the richer world.

Reducing the number of people and companies without access to reliable grid electricity may require investment of as much as $55 billion a year, compared with current investment of about $8 billion, the panel reckons. Yet it is starting to increase. McKinsey, a consulting firm, reckons that generation capacity installed by independent power producers has increased at the rate of more than 14% a year since 1992.

Much of the investment into new power is going into fossil fuels, such as coal or gas-fired generation. But an ever-growing share is going into renewable sources. In 2010-12 Nigeria’s renewable power production posted the world’s fastest growth, at more than 15% a year, according the World Bank’s latest assessment.

Across Africa a relatively simple technology is reviving: CSP, which uses the heat of the sun to make steam and in turn electricity. Although it is chunkier than photovoltaics, which makes electricity directly from sunlight, it can store some of the heat and keep producing power for a couple of hours after the sun sets. Africa is leading the embrace of this idea: it hosts six of the ten biggest CSP plants being built around the world.

Big dams and hydropower offer even greater potential. McKinsey reckons they could provide about 15% of Africa’s power by 2040 compared with a little under 10% from solar power. Ethiopia will increase its electricity production more than four-fold from 4 gigawatts in 2011 to 17GW by 2020. A large chunk of this will come from the Grand Ethiopian Renaissance Dam.

Although renewable energy in Africa will not overtake all fossil fuels, it will overshadow the dirtiest of them, coal, which now produces more than half the continent’s power. That figure will probably shrink to 23% by 2040, says McKinsey.

What accounts for this sudden rise in renewable energy? One big reason is that Africa has some of the world’s best untapped resources, such as huge rivers that are not yet dammed, sunny deserts and windy uplands. For years engineers have looked longingly at the Congo river where it plunges down the Inga falls, between Kinshasa, the Congolese capital, and the Atlantic ocean. This could be by far the world’s biggest hydropower station, generating almost 40,000MW, 20 times what the vast Hoover dam in the United States produces. Now the World Bank is funding studies of how to dam it.

A second reason is that many renewable energy sources can be built quickly to meet immediate shortages. South Africa has added more than 4,000MW of renewable power to its grid in just four years, producing about 10% of the country’s total energy. Many big coal-fired power stations have taken decades to plan and build and are still not producing power. Costs per unit of electricity from renewable sources have fallen almost 70% in South Africa as it has run successive auctions, offering to buy power from the cheapest supplier.

Another reason is the high cost of existing supplies in much of Africa. Though solar and wind power may not yet be cheaper than coal or gas, they are much cheaper than running a generator in the back yard. Netcare, a South African private-hospital group, is putting solar heating and electricity into 35 of its hospitals in the coming years to offset an increase of 160% in its energy costs since 2009. Renewable energy can also supply villages that are not connected to the main grid much more cheaply than extending power lines to remote areas, where connection costs run to several thousand dollars per customer.

This dash for renewables could speed up even faster. Prices for solar panels have dropped by more than half in recent years and should keep falling. Given the right regulatory environment and access to finance, Africa should leap ahead as one of the world’s leading producers of clean energy—making the continent richer as well as greener.

Image and article via The Economist

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