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Global Energy Transition Continues, despite of Geopolitical Interference

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The escalation of the conflict between Russia and Ukraine poses a major influence on the global energy market, bringing a profound and long-term impact on the future global energy transition.

Efforts for energy transition has been ongoing under the backdrop of global climate change. However, the Russia-Ukraine conflict has disrupted this process, and brought huge geopolitical risks in the global energy supply system, especially in Europe, in addition to aggravating the risk of regional energy security. For the global energy-consuming countries, in the short term, the question of the availability of energy is obviously more pressing than the question of environmental concerns. Germany and Belgium, for example, have postponed nuclear energy withdrawal dates set previously, while France has also announced a strategy to boost nuclear energy development. On the top of that, Germany and other countries have adjusted the timetable for the withdrawal of coal power, which gives the impression that the global energy transition is taking a few steps backwards.

As a matter of fact, even before the Russia-Ukraine conflict, Europe had already made certain preparations in case of the occurrence of an energy crisis. The EU’s energy strategy has undergone some subtle changes, tending towards a more pragmatic side. One of the signs is that both the United States and European countries are striving to find stable supply channels for traditional fossil energy such as oil and natural gas. For instance, Germany’s Federal Minister for Economic Affairs and Climate Action Robert Habeck visited the Gulf’s oil producers Qatar and the United Arab Emirates from March 19 to 20 to seek new gas orders. Earlier, he also visited Norway, another natural gas exporter, to seek cooperation. Britain, which once planned to phase out coal by 2024, has also held talks recently with French multinational electric utility company EDF over the West Burton A coal-fired power plant, exploring the possibility of continuing to generate electricity from coal after the plant shuts down at the end of September. Not long ago, the United States has also taken the initiative to dispatch a delegation negotiating with Venezuela, which was sanctioned by it, to discuss the possibility of ditching sanctions in exchange for Venezuela’s increased oil production. Another example is that the European Commission issued a policy document in January 2022, which clearly listed the investment and financing of natural gas and nuclear energy projects as “sustainable financing”, a move that annoyed international environment protection activists and political forces alike.

Is it possible that the global energy transition has been reversed as a result of all of these? Certainly not. Indeed, the outbreak of the Russia-Ukraine conflict will ultimately accelerate the pace of energy transition in Europe. For example, the German government has since planned to accelerate the expansion of renewable energy power generation. The new goal is to use renewable energy to meet all power generation needs by 2035, which is five years ahead of the previous timetable. The European Commission has proposed a renewable energy directive, the core of which is to accelerate the expansion of wind energy and other renewable energy sources.

In view of the contradiction between the adjustment of energy policy and the pursuit of energy transition in these countries, researchers at ANBOUND suggested that there are actually short-term and long-term needs in the energy-consuming countries. The impact of geopolitical events on energy demand can be divided into both short-term shocks and long-term shocks. The short-term impact is that there would be an increase in energy purchases, rising risk premiums, soaring energy prices and that oil and gas prices will remain high for a period of time, which will bring short-term booming in traditional fossil energy such as oil and even coal. However, in the medium and long term, the major energy-demanding countries will still consider the issue of energy security from a long-term perspective. For example, if Europe wishes to stabilize its energy market, it must diversify its imports of oil and natural gas in the short term and reduce its energy dependence on Russia. In the long run, it must take control of its own energy system the soonest it can, thereby eliminating its dependence on Russia’s oil and gas. With this, it can be more self-reliant in developing renewable energy like solar energy, wind energy, hydrogen energy, nuclear energy, etc., to accelerate its energy transition.

In the current global development trend, reverting to fossil fuels is not the ideal option. Any move to develop fossil fuel resources, which takes a long time from project conception to the first production, will neither solve energy security in the short term nor alleviate current price pressures. Furthermore, the pressure of global climate change will continue to emerge in the future, not forgetting that the issue of global warming has become critical. Several meteorologists have lately noticed abnormally high temperatures in both the North and South Pole regions. Some locations see temperatures that are 30 to 40 degrees Celsius higher than the average for the same period in prior years. The North and South poles are now in opposite seasons, but it is extremely unusual to see extreme heat at the same time. Climate change is approaching a tipping point in the scientific community’s debate, and this is bad news for the rest of the world.

Although wars and pandemics remain the focus of the world today, climate change will eventually become a vital issue of concern. Driven by the carbon reduction agenda, returning to the development of fossils is something that should be avoided.

It should be emphasized that in the process of realizing energy transition, vigorously developing and strengthening the utilization of hydrogen energy are becoming more widely recognized as a viable source of low-carbon energy. European Commission President Ursula von der Leyen made it clear in her speech to the European Parliament that hydrogen energy will play an important role in replacing dependence on Russian natural gas and ensuring energy security. In the long run, the EU will need to switch to renewables and hydrogen to be truly energy independent. Juxtaposing renewable energy with hydrogen, she highlighted the importance of hydrogen in the future energy transition. This is very similar to the concept of building a “hydrogen energy society” advocated by ANBOUND in the past. In our opinion, building a hydrogen energy society is not just an industrial concept, but a huge system that includes technology, industrial production, market application and social support. Its economic and strategic importance will be huge once it matures into a complete socioeconomic system. The ability of a “hegemonic” country with a developed non-hydrogen energy society to impose effective sanctions on a hydrogen energy society would be difficult, and energy-consuming countries would be spared the energy supply problem. Achieving this goal, the development of hydrogen energy will go beyond the meaning and value of the energy transition itself.

Graduated from Beijing Normal University in 2013 with a PhD degree of Natural Resources and Harbin Institute of Technology with a bachelor degree of Transportation, is an assistant researcher in macroeconomics at Anbound Consulting which is an independent think tank headquartered in Beijing.

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Europe Cooperating in the Energy Sector with Africa

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South African based African Energy Chamber (AEC) has been leading steadily transformation of the energy sector in Africa. Since its historic African Energy Week, considered to be one of the world’s largest and continental energy gathering, the AEC has moved with its search for external partnership and cooperation to the United States and Europe. 

The Invest in African Energy Paris edition aims to build on existing Africa-Europe relations to usher in a new era of energy-related growth and prosperity. By showcasing projects, investment prospects and collaboration opportunities, the event positioned Africa as the destination of choice for both French and European investment. 

At the latest Westin Paris Vendome, the groundbreaking forum served as a catalyst for amplifying European investments in African energy projects, while simultaneously forging new bilateral connections to fortify a thriving partnership between the two regions – Africa and Europe. 

France has become a prominent financial ally to Africa at a national level, offering funding for numerous energy projects in partnership with other European investors. Europe has contributed to the continent significantly, including a €6-million grant to the African Development Bank for the Africa Renewable Energy Initiative in 2016.

It granted €300 million in concessional financing to South Africa through loan agreements in 2022, and an investment fund of $92.63 million established in the same year to support solar power generation throughout Africa, among other financial packages. 

Participated were energy stalwarts, high-profiled speakers including Tom Alweendo, Minister of Mines and Energy of the Republic of Namibia; Bruno Jean-Richard Itoua, Minister of Hydrocarbons of the Republic of Congo; Didier Budimbu Ntubuanga, Minister of Hydrocarbons of the Democratic Republic of Congo; NJ Ayuk, Executive Chairman of the AEC; Per Magnus Nysveen, Senior Partner & Chief Analyst, Rystad Energy; Benoît de la Fouchardière, CEO, Perenco and Eric Melet, CEO Rail & Logistics Solutions, Africa Global Logistics.

These leading efforts primarily aimed at reviewing and discussing aspects of exploration, collaboration and utilization of Africa’s energy resources in scaling up energy security, and secondly to drastically reduce energy imports and its role in driving socioeconomic growth across Africa.

In the United States and Europe, it has created the platform for energy ministers, energy policymakers and leading renewable energy companies and potential investors interested in shaping discussions to find pragmatic approach around the key role the continent’s massive yet largely unexplored hydrocarbon resources that could trigger socioeconomic growth in the continent. 

“It is really important that we move to drive deals, approve projects, create opportunities and drive investment. We have got to move big on the fiscal and getting deals done,” NJ Ayuk, Executive Chairman of the AEC, said during the opening ceremony. “At the chamber, we are committed to supporting these partnerships, and initiatives recognizing that energy will be a springboard for economic growth and expansion.”

Talking about Congo’s progress regarding gas monetization, Bruno Jean-Richard Itoua emphasized the huge amount of gas in Africa, specifically in Congo. “We want to produce gas and use the gas we have. In Q4 2023, we could have the first exportation of liquefied natural gas – 600,000 tons per year – and that will reach 3 million tons per year by 2025.”

He noted that an institutional framework to give incentives to oil companies was on the cards. “We will have a gas code which will be implemented at the end of the year with the help of the World Bank, we will launch a promotion campaign for gas soon. Gas is the best transition energy.”

Congolese Minister Didier Budimbu Ntubuanga pointed to the great potential for hydrocarbons in the Democratic Republic of Congo (DRC). DRC called for tenders for the three gas blocks in Lake Kivu. The potential in the DRC is approximately 22 billion barrels of oil, and there is ongoing work relating to legal incentives to attract foreign investment.

As the continent moves to unlock the full potential of its oil and gas resources, European players with their expertise and resources, have an increasingly important role to play in financing and developing Africa’s hydrocarbons.

According to Minister of Mines and Energy of the Republic of Namibia, Tom Alweendo, the forthcoming 16-20 October energy conference would offer an insight into investing in Africa. Despite external shocks, Africa’s energy landscape is still on the path towards rapid transformation, with continental players pursuing an energy transition.

The energy transition in Africa involves everything including foreign investment in oil and gas sector. As Africa’s energy sector expands, the role the logistics industry plays has become increasingly important. On this note, Eric Melet, CEO Rail & Logistics Solutions, Africa Global Logistics, explained that logistics has a role to play to support the change of energy availability in Africa. 

Africa Global Logistics supports the continent by providing tailor-made logistics across the industry, improving connectivity between Africa and the rest of the world, and contributing to create a virtual logistics ecosystem.

With these introductory speeches, the forum officially kicked off, serving as a bridge to connecting European players with African counterparts. That however, Congo’s Ministry of Hydrocarbons finally signed a cooperation agreement with French energy services provider Technip Energies during the Invest in African Energy Forum in Paris. 

As per the terms of the agreement, Technip Energies will provide its expertise to strengthen both the Ministry’s and the national oil company’s capacities regarding energy transition principles, including liquefied natural gas (LNG), zero carbon energy solutions, and decarbonization.

More specifically, the deal covers areas such as process engineering (including oil and water treatment facilities and gas processing facilities); offshore and onshore platforms and installations (including semi-submersible rigs, LNG trains, fertilizer plants and refineries) and conception development for an offshore oil and gas field (including technical studies, cost estimation and economic analysis, engineering, execution and management of an floating production, storage and offloading unit and floating LNG).

Namibia’s Ministry of Mines and Energy together with French tertiary institution Sciences Po, on the sidelines of the Invest in African Energy Forum in Paris,  held discussions on efforts to advance academic cooperation across the energy sector. Both signed agreement to bolster capacity building in the energy sphere.

It also aims at scaling up the workforce on the back of partnerships, emphasis on the training of energy sector-related personnel. The agreement covers opportunities for establishing a formal partnership to enable student exchange as well as high level workforce training and on-the-ground experience.

During the concluding session, the forum summary was focused on financing African energy projects; developing Liquefied Natural Gas (LNG) for both African and European markets; and the role renewable energy and green hydrogen will continue to play in industrializing and electrifying Africa.

The Paris forum was the latest this June. Similar energy platform was organized in London, Oslo, Frankfurt and Dubai. AEW 2023 is the African Energy Chamber’s annual energy event. This year’s edition takes place in Cape Town from October 16-20 under the theme, ‘The African Energy Renaissance: Prioritizing energy poverty, people, the planet, industrialization and free market.’

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Nuclear Energy & Pakistan’s Economic Development 

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Pakistan is going through a tumultuous time. Its economic condition is deteriorating every day, and there are even concerns about Pakistan going towards default. However, the Pakistani finance minister vehemently denies Pakistan’s possibility of defaulting. However, to keep Pakistan out of economic turmoil and ensure economic security in the long term, a sustainable, cheap, and clean source of energy is required. Nuclear energy is a great source of clean and green energy. 

In the book, “The Quest: Energy, Security, and the Remaking of the Modern World,” Daniel Yergin argues that nuclear energy creates an unbreakable link between energy and the economy. It empowers nations to achieve economic security by increasing industrial competitiveness, increasing jobs, and reducing dependence on costly imports. Pakistan can also utilize nuclear energy to ensure long-term economic security. 

Nuclear Power Plants (NPPs) are already contributing to Pakistan’s economy. NPPs generated 2350 megawatts of energy from July 2020 to March 2021. There was a significant increase in the capacity of these power plants from July 2021 to March 2022. These plants increased their capacity from 2350 megawatts to 3550. Furthermore, during this period, NPPs produced 12 percent of countries’ electricity needs. Pakistan Atomic energy commission has targeted producing 8000-megawatt electricity by 2030. 

According to the International Atomic Energy Commission, electricity through NPPs has shown positive results in Pakistan’s economy. Pakistan lacks money and energy, which hampers economic growth.

According to Bloomberg, factories in Pakistan were warned that they might be unable to sustain production due to high energy costs. It became impossible for 40000 factories in Karachi to keep working due to a power shortage. Poor energy supply worsens the firm’s productivity and profitability. 

According to the study published in Energy Strategy Review, poor energy significantly impacts profitability and productivity. This study analyzed the impact of energy on the profitability and productivity of 424 non-financial listed companies in Pakistan from 2001-2017. Seven measures, in which four measures of electricity shortfall (i.e., neutral period (NP), increasing shortfall (IS), worst shortfall (WS), decreasing shortfall (DS), energy consumption (EC), energy price (EP), and access to electricity (ATE)) were used to examine the impact of energy on the profitability of these companies. During increasing shortfall, worst shortfall, and decreasing shortfall, companies’ profitability was reduced by 39 %, 36 %, and 33 %. Furthermore, this study also showed an increase in companies’ profit by 33 percent during the stable energy supply period. 

This study highlights that a stable energy supply is important for economic security. Lack of energy leads to economic insecurity because when firms are not profitable, they will not fire people and incline to shut down their businesses. It will create unemployment as well as people’s purchasing power will decline. Furthermore, when domestic production declines, Pakistan will import the products to meet the need. It creates a balance of payment issue. 

Furthermore, the energy shortage also reduces foreign direct investment in Pakistan. In 2019, according to the World Bank Ease of Doing Business Index, Pakistan was ranked 108th out of 190 countries due to the energy crisis. When foreign direct investment is not coming due to the energy crisis, domestic factories’ profitability declines due to the energy crisis, and factories are also shifting their problems for Pakistan’s economy, which is already facing many challenges. This year, Pakistan also decided to close malls and businesses at 8: 30 pm because Pakistan wanted to save 60 billion rupees in terms of the cost of importing fuel to run electricity plants.  

Therefore, Pakistan must start incorporating nuclear energy in its energy planning. The government has introduced different energy policies in the past, for instance, the power generation policy 2015 and the Alternative Renewable energy policy. Both of these energy policies talk about affordable and sustainable sources of energy. Nuclear energy is the cleanest source of energy as well as the most affordable form of energy after hydro. However, unlike hydro, whose production depends on the water and seasons, nuclear power is a stable energy source.

 According to the achieve net zero targets, 100 billion dollars should be invested annually. Pakistan’s energy policy also wants to achieve sustainability. Therefore, Pakistan must invest in nuclear power plants to ensure economic security. Furthermore, according to the World Nuclear Association, the cost of building nuclear power is less competitive as compared to other forms of electricity generation. In addition, small modular nuclear reactors will completely transform the landscape of nuclear energy. Hence, Pakistan must invest in nuclear energy to ensure economic security. It will reduce the cost of electricity, make businesses competitive and ensure economic security. 

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African Countries Embarking on Nuclear Technologies Must Adopt the IAEA Approach Framework

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With energy for both domestic and industrial use still in deep deficit, a number of African countries are looking to install nuclear plants as part of the energy mix. But the two principal setbacks encountered are (i) getting through the pre-installation technical stages or processes, (ii) identifying sources of finance for the construction and (iii) dealing with nuclear waste and employment of well-trained staff.

The International Atomic Energy Agency (IAEA) sets the principles and conditions for the facilities of a major nuclear power programme and for the choice of construction sites to att the technical aspects aimed at ensuring nuclear safety.

It sets requirements for controlling dangerous release of radioactive materials, in case of an unexpected catastrophic incident or crisis, for instance an attack of any kind from or against the plant, targeting the reactors, risky fuel storage and any other critical sabotage on the infrastructure. 

The Chernobyl disaster in Ukraine and Fukushima in Japan, remind the world of the human and environmental costs of nuclear power accidents. Millions of people are still suffering from radiation and radiation related diseases till today.

Records show many African countries opting for building nuclear plants in order to find long-shelf solutions to chronic power shortages. Several agreements with Russia has not materialised primarily due to lack of funds. With training our research shows that since 2010 hundreds of students from Algeria, Ghana, Egypt, Zambia, Kenya, Nigeria, Tanzania, Uganda, Ethiopia and South Africa have received nuclear and related education at leading Russian educational institutions.

Adopting nuclear energy is a long process. Here is an example from Ghana. Under Nana Addo Dankwa Akufo-Addo’s administration, the roadmap of the nuclear power programme was planned to commence construction by 2023 and inject nuclear energy into the grip by 2030. Last May, Ghana completed phase two of nuclear power infrastructure development. As part of efforts to become a climate-resilient and zero-carbon energy country, Ghana has completed Phase II of the Nuclear Power Project, which includes the approval of a site for a nuclear power facility.

Deputy Energy Minister, Andrew Kofi Egyapa Mercer, announced this during a symposium on nuclear power infrastructure development. “We have currently received approval for the acquisition of our preferred and backup nuclear to host Ghana’s first nuclear power plant. And meeting our energy demand is necessary to sustain our industrial and economic growth, which is required for a middle-income economy,” he stated.

Mercer noted that the world is shifting to greener energy sources, and nuclear power is expected to be a significant source of energy. As a result, Ghana cannot afford to be left out of the global drive for energy security. “The world is migrating to cleaner sources of energy and nuclear is envisaged to be a critical source of energy. Ghana can therefore not be left out in this global search for energy security,” he added.

In 2022, President Akufo-Addo integrated nuclear technology into the country’s power generation mix. The president explained that this was consistent with the global collective commitment to the long-term availability of power and the peaceful use of nuclear energy for the benefit of society, to accelerate industrialization, and to push economic progress.

The Director of the Nuclear Power Institute, Professor Seth Kofi Debrah, says developing an attitude of consistency will aid in the nuclear plant process to become successful. The long term plan was evident when Ghana began its nuclear energy journey in the 1960’s until it was truncated. Ghana is anticipated to completely switch to nuclear energy by the year 2070, however, this will cost $581 billion.

Ghana’s nuclear programme has justified the need for alternate baseload power for industrialisation, limited hydro sources, postulated decline of gas, tariff reduction for industries, desalination, employment creation and climate change commitments.

Prof. Debrah said four candidate sites were initially selected for the construction of the nuclear power plant and after further studies by Ghanaian researchers, the team ranked the sites to settle on the first and the second being a backup. “We need approval report from the regulator by the end of Phase II. We also want to have a site evaluation report for construction permit at the end of Phase II. Construction will start at the end of Phase II,” he said.

Prof. Debrah said the team was working on a report on the preferred vendors and was hopeful that the report would be completed and submitted for consideration by Cabinet. It was necessary for the country to add nuclear energy to its energy portfolio to become a baseload energy source to support massive industrialisation in the wake of the dwindling traditional energy sources.

As of 2021, hydro accounted for 38 percent of the country’s energy generation portfolio whiles thermal accounted for 60 per cent (making it the baseload). Solar and biomass contributed 1 per cent each to the energy mix. Experts have raised concerns about the cost of power from thermal sources and there are fears that electricity prices may continue to go up if the country did not adopt cheaper energy sources. It is estimated that 40 per cent of the production cost of industries goes into electricity tariffs.

South Africa could not pursue its nuclear power simply because of the opacity in the deals signed by the former President Jacob Zuma with Russia. There is only one nuclear power plant on the entire African continent, namely, Koeberg nuclear power station in South Africa. Commissioned in 1984, Koeberg provides nearly 2,000 megawatts, which is about 5% of installed electricity generation in South Africa.

The South Africa $76 billion deal with the Russians to build a nuclear power plant collapsed along with the Government of Jacob Zuma that negotiated the deal in secrecy, in fact when such corporate projects have to be discussed by the parliament and necessarily have to pass through international tendering process. Russia and South Africa concluded an intergovernmental agreement on strategic partnership in the nuclear sphere in 2014. The agreement provided in particular for construction of up to eight NPP power units.

Rwanda’s annual budget stands at US$3 billion while the construction of the nuclear power plant would cost not less than US$9 billion which is equivalent to Rwanda’s entire gross domestic product. Talks are underway on the construction of a nuclear power plant in Burundi, Ethiopia, Ghana, Mozambique, Nigeria, Tanzania and Zambia. 

Shadreck Luwita, Zambian Ambassador to the Russian Federation, informed that the processes of design, feasibility study and approvals regarding the project have almost been concluded. The site of the project is yet to be designated as it is equally a process and it is envisaged that construction should commence, in earnest, not later than the second half of 2018.

In addition, he affirmed that the Russians envisaged technology transfer in the development of this massive project by way of manpower development capacity. For now, there are only a few Zambian nationals, who are studying nuclear science in one of the Russian universities in Moscow.

The Zambian Government hopes that upon commissioning of this project, excess power generated from this plant could be made available for export to neighbouring countries under the Southern African Development Community Power Pool framework arrangement.

In the case of Egypt, the agreement was signed in 2015, and it was only in 2022 that Russia granted a load of $25 billion for the four plants. The total cost of construction is fixed at $30 billion. El-Dabaa is the first nuclear power plant in Egypt and the first major project of Rosatom in Africa. After several years of delay, however, Rosatom began laying the concretes for the El Dabaa units. According to the project estimates by Rosatom, construction of all four NPP units is planned for completion by 2028-2029. 

Many other African countries are already working on joining the atomic club in one form or another, whether it be the construction of a Nuclear Power Plant or a research reactor or the development of nuclear infrastructure or the training of professional personnel. Russia has agreements with Algeria (2014), Ghana (2015), Egypt (2015), Ethiopia (2019), Republic of Congo (2019), Nigeria (2012, 2016), Rwanda (2018), South Africa (2004), Sudan (2017), Tunisia (2016), Uganda (2019) and Zambia (2016). Memoranda of Understanding (MOUs) were signed with Kenya in 2016 and Morocco in 2017. 

A nuclear power program is a complex undertaking that requires meticulous planning, preparation, and investment in time, institutions, and human resources. The development of such a program does not happen overnight and can take several years to implement. All countries, which embark on the path towards the peaceful use of nuclear technologies, do so by adopting the IAEA Milestone Approach framework.

In conclusion, African countries considering adding nuclear power to the energy mix to enhance economic development and provide a stable and affordable supply of electricity for the people must have the necessary funds and be ready to pass through step-by-step technical procedures. Alternatively, the renewable energy potential is enormous in Africa. Grand Inga are the world’s largest proposed hydropower scheme.

It is a grand vision to develop a continent-wide power system. Grand Inga 3, expected to have an electricity-generating capacity of about 40,000 megawatts – which is nearly twice as much as the 20 largest nuclear power stations. Another great resources is the Grand Ethiopian Renaissance Dam on the Blue Nile River in Ethiopia under construction since 2011. Researchers and Experts strongly believe and further estimate that the cost of building nuclear power does not make any sense, when compared to the cost of building renewables or other sources of energy, by pulling all those financial resources together in the continent, to solve energy shortages across Africa.

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