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Securing Africa’s Energy Future in the Wake of Covid-19

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African ministers from countries making up 70% of Africa’s total primary energy supply, nearly 70% of its GDP and more than half of the continent’s entire population met with global energy leaders via videoconference on 24 November 2020.

A revitalised energy sector is key to Africa’s economic transformation. Participants agreed on the urgent need to enhance actions to ensure sustainable economic recovery and significantly scale up energy investments in Africa over the next three years in the wake of Covid-19.

Discussions highlighted implementation priorities and innovations key to enabling Africa’s energy sector to power regional economic growth over the three-year period (2020-2023) that coincides with end of the first 10-year Action Plan of the AU Agenda 2063. Africa’s pace of progress towards the realisation of the transformative Agenda 2063 continental vision will be determined by the degree to which it successfully recovers from the evolving impacts of the 2020 global health and socioeconomic crisis. African countries must engage in robust, innovative actions to strengthen energy security, scale up infrastructure investment, and promote the growth of the green economy, making use of all available opportunities to continually accelerate Africa’s clean energy transitions. These interventions can be bolstered by enhanced rates of internal trade in Africa, including in the energy sector, through a speedy implementation of the African Continental Free Trade Area.

Ensuring Sustainable Recovery – Participants noted that achievement of full access to modern energy by 2030 is achievable but will require stable, consistent policies and strong political will. They stressed the need for all global stakeholders to maintain focus on collective action, and also update plans to step up the pace of universal access to electricity and modern cooking in Africa. African governments and other partners must continue to work together to ensure progress towards achievement of SDG7. It was acknowledged that the momentum behind existing policy and investment plans was insufficient to meet the modern energy needs of Africa’s population. It was noted with concern that the initial Covid-19 crisis impact in 2020 had already severely affected recent progress on universal energy access.

Financing and Investment – Participants underscored that Africa is facing major challenges in obtaining the required finance and new investments to meet its immense structural transformation needs. Challenges include reduced financing flows, a lack of fiscal space, a slowdown in new investments in the energy sector and significant increases in the cost of borrowing. Oil and gas producers in Africa have been hit very hard throughout 2020, and many new ones have seen their hope for energy sector transformation dashed by the global economic slowdown this year. Local currencies have weakened against hard currencies and this is translating to higher debt burden. The already weak financial position of many African power utilities has been worsened by declining demand due to the pandemic and a high default rate. This situation is further exacerbated by weakened currencies.

Key conclusions – Participants stressed the following top recommendations going forward:

Partnership for a green and just transition is an essential priority to boost sustainable economic recovery in Africa and ensure progress towards universal access to clean energy, whilst ensuring that no one is left behind. In that context, the need to involve more women and youth throughout the value chain of energy projects was also emphasised.

Support for energy sector institutions and particularly power utilities, which are the fulcrum of the sector, is critical against the financial shocks imposed by the Covid-19 pandemic. Predictable policy environments with innovative market regulations help to attract new investment.

An integrated approach embracing grid, mini-grid and off-grid solutions is required to sustain the momentum for increasing access. In light of the Covid-19 crisis, supportive policies to ensure the sustainability of mini-grid providers need to be replicated across the continent.

Despite the challenges imposed by Covid-19, governments must avoid the temptation to slow down the pace of energy access and provide the right incentives for the private sector to play a part in the recovery process, leveraging on the productive sector and innovative business models and digitalisation.

Enhanced multilateral, regional and international cooperation can play an important role in addressing financing and investmentchallenges in the post Covid-19 era.

Stronger regional integration of electricity markets and infrastructure is a crucial factor in achieving a just energy transition as well as building secure, flexible and reliable power supply in Africa.

The African Continental Free Trade Area (AfCFTA) opens the door to a new era of increased interconnectedness. Continental energy infrastructure programs like PIDA should play significant role to support AfCFTA.

A strong focus on improving power infrastructure, within and across borders, building up regulation and capacity to support Africa’s power pools and further enable regional electricity markets could all play an instrumental role in improving the financing and investment climate on the continent.

AUC, IEA and partners should consider forming a Taskforce on climate financing solutions for the African energy community that could present its recommendations at the COP 26 in 2021.

The outcomes of this Ministerial Forum will be shared with African Union and IEA member state leaders, as well as the leaders of international financial institutions and other global decision-makers, business leaders and key stakeholders. In addition, these outcomes will help guide future activities linked to enhancing the strong AUC-IEA partnership and inform the IEA’s continued deepening of its engagement with key decision-makers from governments, the private sector, investors and other leading regional institutions across the continent. 

As the co-chairs of this event, we would like to thank all participants for their active engagement and constructive contributions.

Signed,

  • Amani Abou-Zeid, Commissioner for Infrastructure and Energy, African Union
  • Fatih Birol, Executive Director, IEA
  • Gwede Mantashe, Minister of Mineral Resources and Energy, South Africa 

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Hydrogen in North-Western Europe: A vision towards 2030

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North-West Europe has a well-developed hydrogen industry that could be at the edge of an unprecedented transformation should governments keep raising their ambitions for reducing greenhouse gas emissions, according to a new joint report by the International Energy Agency (IEA) and the Clingendael International Energy Programme (CIEP). 

The report, Hydrogen in North-Western Europe: A vision towards 2030, explores hydrogen developments, policies and potential for collaboration in the region. It was commissioned to inform discussions among governments from North-West Europe about the potential development of a regional hydrogen market. This intergovernmental dialogue was established at the Clean Energy Ministerial Hydrogen Initiative in 2020.

The report finds that the current policy landscape provides some momentum for the transformation of the hydrogen industry in North-West Europe towards 2030, but that it is insufficient to fully tap into the region’s potential to develop a large-scale low-carbon hydrogen value chain. More ambitious policies in line with the targets defined by the EU Green Deal or the UK Climate Change Act would drive a faster transformation.

If such a supportive policy framework were to be adopted, hydrogen demand in the region could grow by a third and low-carbon hydrogen could meet more than half of dedicated production, up from about 10% today, according to the report.

North-West European countries have already made significant progress developing their vision for the role hydrogen should play in their long-term energy strategies. These countries now face the challenge of moving beyond national discussions to establish a regional dialogue, an indispensable condition to develop the fully integrated hydrogen market the region needs. 

With the aim of informing this dialogue, the report identifies four priorities that should be addressed:

  • Build on the large unused potential to co-operate on hydrogen in the north-western European region.
  • Identify what is needed to develop an integrated regional market.
  • Develop supporting schemes with a holistic view of the hydrogen value chain.
  • Identify the best opportunities to simultaneously decarbonise current hydrogen production and deploy additional low-carbon supply.

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Seven Countries Account for Two-Thirds of Global Gas Flaring

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In an unprecedented year for the oil and gas industry, oil production declined by 8% in 2020, while global gas flaring reduced by 5%, according to satellite data compiled by the World Bank’s Global Gas Flaring Reduction Partnership (GGFR). Oil production dropped from 82 million barrels per day (b/d) in 2019 to 76 million b/d in 2020, as global gas flaring reduced from 150 billion cubic meters (bcm) in 2019 to 142 bcm in 2020. Nonetheless, the world still flared enough gas to power sub-Saharan Africa. The United States accounted for 70% of the global decline, with gas flaring falling by 32% from 2019 to 2020, due to an 8% drop in oil production, combined with new infrastructure to use gas that would otherwise be flared.

Gas flaring satellite data from 2020 reveals that Russia, Iraq, Iran, the United States, Algeria, Venezuela and Nigeria remain the top seven gas flaring countries for nine years running, since the first satellite was launched in 2012. These seven countries produce 40% of the world’s oil each year, but account for roughly two-thirds (65%) of global gas flaring. This trend is indicative of ongoing, though differing, challenges facing these countries. For example, the United States has thousands of individual flare sites, difficult to connect to a market, while a few high flaring oil fields in East Siberia in the Russian Federation are extremely remote, lacking the infrastructure to capture and transport the associated gas.

Gas flaring, the burning of natural gas associated with oil extraction, takes place due to a range of issues, from market and economic constraints, to a lack of appropriate regulation and political will. The practice results in a range of pollutants released into the atmosphere, including carbon dioxide, methane and black carbon (soot). The methane emissions from gas flaring contribute significantly to global warming in the short to medium term, because methane is over 80 times more powerful than carbon dioxide on a 20-year basis.

“In the wake of the COVID-19 pandemic, oil-dependent developing countries are feeling the pinch, with constrained revenues and budgets. But with gas flaring still releasing over 400 million tons of carbon dioxide equivalent emissions each year, now is the time for action. We must forge ahead with plans to dramatically reduce the direct emissions of the oil and gas sector, including from gas flaring,” said Demetrios Papathanasiou, Global Director for the Energy and Extractives Global Practice at the World Bank.

The World Bank’s GGFR is a trust fund and partnership of governments, oil companies, and multilateral organizations working to end routine gas flaring at oil production sites around the world. GGFR, in partnership with the U.S. National Oceanic and Atmospheric Administration (NOAA) and the Colorado School of Mines, has developed global gas flaring estimates based upon observations from two satellites, launched in 2012 and 2017. The advanced sensors of these satellites detect the heat emitted by gas flares as infrared emissions at global upstream oil and gas facilities.

“Awareness of gas flaring as a critical climate and resource management issue is greater than ever before. Almost 80 governments and oil companies have committed to Zero Routine Flaring within the next decade and some are also joining our global partnership, which is a very positive development. Gas flaring reduction projects require significant investment and take several years to produce results. In the lead-up to the next UN Climate Change conference in Glasgow, we continue to call upon oil-producing country governments and companies to place gas flaring reduction at the center of their climate action plans. To save the world from millions of tons of emissions a year, this 160-year-old industry practice must now come to an end.” said Zubin Bamji, Program Manager of the World Bank’s GGFR Partnership Trust Fund.

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IEA supports Indonesia’s plans for deploying renewable energy

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The IEA is carrying out a large work programme on power system enhancement with the Government of Indonesia to help it modernise the country’s electricity sector, including support for overcoming challenges inherent in integrating variable renewables like wind and solar PV.

As part of the work programme, the IEA hosted a series of webinars in early 2021 where Indonesia’s Ministry of Energy and Mineral Resources and national power utility PLN could learn from other countries’ experiences of integrating and setting targets for variable renewable energy.

An introductory session on the principles of integrating renewable energy was held ahead of the country specific sessions. In this session, the IEA presented its framework for renewable integration phases to the Ministry and PLN, highlighting the different challenges often faced during renewable integration as well as what flexibility options can be deployed to tackle these challenges.

In the first country session, IEA presented the main findings of the Thailand flexibility study that the Agency carried out in cooperation with EGAT, the Thai electricity utility. The study shows that Thailand has the technical capability to integrate larger shares of variable renewables, but that the lack of commercial flexibility is a major barrier for operating the power system in a more flexible way and thus is the main obstacle for integrating large amounts of renewables.

In the second country session, the Danish Energy Agency presented its work programme with the Government of Viet Nam. The sessions focused on important aspects for integration of renewables, such as the assessing the needs and implications of reserves and forecasting. The session also included a discussion on the main learning points from the boom in rooftop solar that Viet Nam has experienced in 2020. 

The third and last country session was on India. The IEA presented both national as well as state-level modelling in order to show some of the contextual differences between national models and models that focus on specific geographical regions. In India, the spot market accounts for only 10% of electricity generation, which shows that India, like Thailand, has some issues with commercial flexibility. The discussion also covered India’s level of dependency on physical power purchase agreements and its impacts on the flexibility of the power system.

All sessions were held behind closed doors to allow for an open discussion between the participating organisations on the issues of renewable integration and possible ways of addressing barriers. The IEA will continue the work with the Indonesian Ministry and PLN on this topic in order to facilitate a path towards a clean, affordable, secure and modern power sector in Indonesia.

This work in Indonesia is undertaken within the Clean Energy Transitions in Emerging Economies programme.

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