Accelerating renewable energy investment in West Africa
Realizing West Africa’s huge potential for renewable energy generation will require an investment of over $540 billion in the power sector by 2050, according to a study from PwC in collaboration with Masdar.
The need for investment in clean energy throughout the African continent is clear. For starters, a staggering 220 million people in the region grapple with a lack of access to electricity. In addition, a major boom in population growth is expected to see demand for power rise significantly.
The increasing need for energy services in Africa due to rising population levels represents an opportunity to fill the vacuum with innovative sustainable energy.
As it stands, only around 42% of Africa’s entire population and 8% of rural inhabitants have access to power, making it one of the regions with the lowest access to electricity in the world.
Currently, West Africa’s installed renewable capacity is about 7 GW, of which 31% is derived from hydropower and less than 2% from wind and solar combined. The potential for renewable energy is however enormous. Solar energy alone can in the longer term produce 1,956 GW, while wind energy can produce 106 GW and hydropower can produce 162 GW.
This unexploited capacity in renewables has the potential to enable West African countries to meet the basic energy needs of their populations, as well as make good on their climate commitments. West African countries like Nigeria, Benin, and Mauritania are among the countries with the highest GDP and least access to electricity in all of Africa.
The PwC and Masdar report highlights the importance of decentralized and off-grid solutions as vital options in the drive to increase access to electricity across the continent. In order for African nations to attain universal access to electricity by 2030, mini-grids and freestanding systems will be needed to facilitate more than half of the new connections established between 2022 and 2030.
Nations like Nigeria and Ghana are set to complement their formal grid connections with standalone systems, while Senegal and Guinea, will complement national grid expansion with mini-grids. Mali and Burkina Faso, for their part, are likely to rely heavily on both mini-grids and standalone systems for universal electricity access.
The end goal is regional grid integration, in which separate nations operate their energy market collectively as one entity. By July of this year, 12 countries had successfully joined their networks and are operating as a single grid. Nigeria and Niger, among others, are expected to be connected to the regional network by the end of 2023.
Finding the needed investments
Although the area bursts with potential for renewable energy and ought to be a top destination for investors, the reality is far different because of the way that regional and global market forces have rendered the renewable energy sector all but ‘unbankable’. Low payment collection rates of energy facilities, theft, rising costs (including high cost of capital) and operational issues seem to be the primary contributors.
The report estimates that $2.6 trillion, nearly equal to the GDP of the entire continent of Africa, is required to make the continent’s power sector carbon neutral and provide populations with universal access to electricity.
Network and storage require the greatest amount of investment, with an estimated $1.1 trillion in costs over the 2022 - 2050 period. An estimated $500 billion will need to be invested in West Africa, with 40% going towards networks and storage.
According to Sultan Al Jaber, president of COP28 and chairman of Masdar, Africa cannot fulfill its decarbonization and economic development objectives without expanding its use of renewable energy.
