Navigating the Green Transition in Non-Green Industries
The West’s commitment to net-zero has been clearly defined through numerous policies and headlines at an increasingly recurrent rate over the last few decades. Africa is no exception, undoubtedly making strides in the green sector, with countries such as Morocco and Kenya pioneering the continent’s sustainable energy landscape.
PROGRESS ACROSS THE CONTINENT
KENYA
- Almost 90% of Kenya’s electricity is derived from green sources, with a third of that solely from geothermal energy and by 2030, the country aims to have an entirely green national grid.
- The Lake Turkana Wind Power project (LTWP) is both Kenya’s most substantial private investment and Africa’s largest wind farm, spanning over 160 square kilometres and with over KSh 70 billion injected into it. The 310 MW facility will supply 14% of Kenya’s electricity.
- KenGen have also announced a plant that will be the second biggest wind farm in Kenya after LTWP, starting construction in 2026
MOROCCO
- Morocco has also envisioned a green future, setting a target of making 52% of its electricity renewable by 2030 and taking active steps in achieving this goal.
- Morocco’s dedication to renewable energy has been highlighted by their recent announcement to allocate 1 million hectares of land towards the development of green energy projects.
- There have already been various mega-projects completed, including the ‘Noor Quarzazate Solar Complex’, the world’s largest concentrated solar power plant, providing affordable energy to Morocco’s population.
- The country also houses the second-largest wind farm in Africa, with the capacity to provide power for 1.5 million households.
NAMIBIA
- Namibia is investing in green hydrogen projects to provide cleaner energy alternatives. The country’s ambitious green hydrogen strategy aims to produce hydrogen using renewable energy, positioning Namibia as a leader in this emerging sector.
- Namibia has also capitalised on its unique geography and climate, launching a $10 billion green hydrogen production project, that will have the potential to produce 2 million tonnes of green ammonia annually.
- Green hydrogen and its derivatives are considered key to decarbonising sectors that can’t be electrified directly, such as steel making, chemicals and aviation.
THE INVESTMENT HURDLE AND POTENTIAL SOLUTIONS
While progress is being made, the need for a substantial increase in energy investment seems to be the main obstacle between African countries and their sustainable initiatives. As per the International Energy Agency, investment must more than double from the current $90 billion by 2030 for most African countries to meet their energy targets. Moreover, over the past decade, 77% of investments have gone to just 10 countries, highlighting severe inequity. There are several other barriers deterring investment: The cost of capital for utility-scale energy projects in Africa can be up to triple as much as it would be in developed economies; many African nations are burdened with crippling debt, significantly driving up debt servicing costs; and there is a troubling lack of investment in grid infrastructure.
African countries can explore multiple avenues to remedy underinvestment.
DE-RISKING
- Due to rife economic and political instability, many private investors are reluctant to explore the possibility of offering up their capital when the risk of default is perceived to be so high.
- In the face of such circumstances, financial de-risking could prove essential in attracting private capital and it can be achieved in various different ways.
- For example, the formation of independent regulatory bodies that ensure proper governance and impose clear legal and regulatory framework, could steer a trustworthy, transparent and stable perception.
- An effective de-risking instrument is a form of political risk insurance. Thus, increasing the availability of such guarantee facilities covering risks against expropriation, could also attract more investors.
GREEN BONDS
- Despite having over a 300-fold increase in issuance over the last 15 years, capturing under 1% of the green bond market, African countries have left this avenue unexploited.
- African Development Bank Group’s (AfDB) has played an instrumental role in supporting growth in African green bonds and their engagement in the market has produced over $10 billion worth of green and social bonds across Africa.
- At the US-Africa Green and Sustainable Finance Conference earlier this year, director of AfDB, Ahmed Attout, described green bonds as “an open market with a promising future for greater sustainability.” This form of affordable low-cost debt could prove particularly impactful
IS THERE AN ARGUMENT AGAINST THE IMMEDIATE CESSATION OF FOSSIL FUELS?
Africa is the least industrialised continent, accounting for only about 3 per cent of the world’s carbon dioxide emissions. Despite this seemingly minor figure, the continent is highly vulnerable to the effects of global warming due to widespread poverty and lack of infrastructure. While it has been acknowledged that industrialisation is a major hinderance in Africa’s Green initiative, it is clear that it is needed on a large-scale.
The debate on whether to maximise fossil fuel usage or completely abandon them to adopt clean alternatives, has become a multi-faceted topic with varying thoughts on how to best tackle it. On the one hand, many including South Africa’s energy minister, Gwede Mantashe, believe oil-rich African countries should exploit these resources to their full capacity.
On the other hand, some argue that Africa should ‘leapfrog’ fossil fuels entirely and transition directly to clean energy to achieve its industrialisation goals. While this would be tremendously beneficial for the environment, it is unrealistic, unaffordable and disregards the large amounts of investment that are needed in renewable energy development. Lying in the middle of these two opposing ideas, NJ Ayuk, chair of the African Energy Chamber, takes a slightly more cushioned approach. He believes that fossil fuel production should continue in a balanced and sustainable way and the revenues accrued then be invested into green technology. Considering the lack of investment funds as previously highlighted, the benefits from this approach may very well outweigh the costs.
With over 600 million people on the continent lacking access to electricity, there is clearly a grave energy poverty crisis being experienced and perhaps this should be an immediate priority instead of a green transition. Therefore, the most ideal way forward would involve a form of sustainable industrialisation, along similar lines proposed by NJ Ayuk.
To illustrate Africa’s capability, an IFC (International Finance Corporation) study showed that Africa has the potential to generate 250 times more than the annual electricity demands, from wind energy alone. Thus, in the long term with more investment and development in renewable energy, Africa has the potential to become a green powerhouse.
