Energy is a key enabler of sustainable and inclusive growth. However, according to the United Nations Economic Commission for Africa, 600 million people on our continent do not have access to electricity, which corresponds to an electricity access rate for African countries of just over 40% – the lowest in the world.
Another challenge to overcome is that Africa’s energy is mainly generated by burning carbon-based fuels, making this sector the highest contributor to the continent’s carbon emissions. The development of renewable energy infrastructure is critical to overcome both challenges – to decarbonise the sector and generate much needed energy for millions of Africa’s people.
It must be recognised, however, that a sudden switch away from carbon-based forms of energy poses huge transition risks for Africa’s people. Countries such as Nigeria, Angola, Ghana and Mozambique depend on the foreign currency and tax revenues generated from the production of oil and gas for global markets to develop their respective economies and support social development. In South Africa, the coal value chain accounts for 5% of GDP, and provides employment for about 200 000 workers.
To ensure a just transition away from carbon-based forms of energy, we must find ways to counterbalance the negative impacts on livelihoods and income. We must ensure that no-one is left behind. This requires a holistic and inclusive approach, which considers both environmental and socio-economic issues specific to each country or region.
Financing a just transition
According to the African Development Bank, the estimated cumulative financing needs for Africa to respond adequately to climate change range from about US$1.3 trillion to US$1.6 trillion, or about US$127.8 billion per year. If developing countries are to move away from carbon-based fuels, they will require massive foreign investment flows to support the development of renewable energy infrastructure. To date, this investment has been woefully small. In 2021, for example, only 0.6% of global investment in renewable energy was invested in Africa.
Policy approaches and financing solutions need to include provision for not just the development of renewable energy infrastructure capacity, but also support for the communities and workers negatively impacted by the transition, including skills development and support to transition into new economic activities.
Adaptation finance will also be critical, to enable communities and countries to adapt to changes and challenges that are already taking place. In November, governments, leading corporates, academics, and other industry leaders gathered in Egypt for the 27th Conference of the Parties of the UNFCCC, or COP27. For emerging markets in particular, the priority this year was for a commitment from developed nations to loss and damage funding agreement, to assist developing countries that are already suffering from the impacts of climate change. Such funding is crucial to enable these countries to access the significant amounts of capital needed to manage climate adaptation and strengthen their resilience to the physical risks of climate change. While an agreement has been reached, a huge step in the right direction, the details are still to be developed.
Two important initiatives were launched at COP27. One is the Africa Adaptation Acceleration Programme, which aims to mobilise US$25 billion over the next five years for climate adaption. Another is the Africa Carbon Markets Initiative, which seeks to dramatically expand Africa’s participation in voluntary carbon markets, raising hundreds of millions of US dollars for credible carbon offsets across the continent.
While both programmes are potentially game-changing, effective implementation remains a challenge. In a global context characterised by high levels of geopolitical tension, macroeconomic uncertainty and the looming threat of recession, the risk of weak and inadequate follow-through on COP commitments is high.
Banks strategically positioned to drive sustainable finance
Financial services providers, particularly those on the ground in Africa and with a strong understanding of African markets, have a crucial role to play. These institutions understand the risks and opportunities at national and regional level, they have strong relationships with diverse stakeholders across the public and private sectors, and they understand the energy needs, economic dependencies and climate commitments of different countries. They are well positioned to work with governments and multilateral agencies to model appropriate solutions for infrastructure development finance, adaptation finance, and solutions to support the just transition.
Africa’s financial services providers are also working closely with their clients, from corporates to farmers to small businesses, to help them manage the transition to a low carbon economy in ways that support sustainability, increase climate resilience, and enhance socio-economic development. Many of us have made our own net zero commitments and are partnering with our clients to achieve these commitments, in a manner that supports a just transition and sustainable economic growth.
Investor confidence
Africa’s just energy transition must maximise the social and economic opportunities associated with the transition, including the development of new sectors, skills and local manufacturing and technological capacity, while supporting every effort to reduce emissions and develop new, cleaner sources of energy.
Solutions need to be contextualised and tailored to the environmental, socio-economic, and political priorities of each country. National governments need to provide clear leadership and policy certainty, to secure investor confidence, attract foreign funding, and ensure projects are designed and implemented with a strong focus on good governance and the realisation of both social and environmental benefits. Africa has the natural resources, in the form of sun, wind, waves and biodiversity, to lead the world in renewable energy and carbon offset mechanisms. But it will need all of us, the public and private sectors and civil society, working together to achieve this potential.
Standard Bank Group is the largest African bank by assets, operating in 20 African countries and 5 global financial centres. Headquartered in Johannesburg, South Africa, it is listed on the Johannesburg Stock Exchange, with share code SBK, and the Namibian Stock Exchange, share code SNB.
By Wendy Dobson, Head: Group Corporate Citizenship at Standard Bank Group.Source- Engineering News
New age of clean energy technology creating major market opportunities
Energy Technology Perspectives 2023, the latest instalment in one of the International Energy Agency’s flagship series, highlights major market and employment opportunities, as well as the emerging risks for countries racing to lead the clean energy industries of today and tomorrow.
The energy world is at the dawn of a new industrial age – the age of clean energy technology manufacturing – that is creating major new markets and millions of jobs. But, this is also raising new risks, prompting countries across the globe to devise industrial strategies to secure their place in the new global energy economy, according to a major new IEA report.
The report serves as the world’s first global guidebook for the clean technology industries of the future. It provides a comprehensive analysis of global manufacturing of clean energy technologies today – such as solar panels, wind turbines, EV batteries, electrolysers for hydrogen and heat pumps – and their supply chains around the world. It also maps out how these technologies are likely to evolve as the clean energy transition advances in the years ahead.
Clean energy manufacturing doubles employment opportunities
The analysis shows the global market for key mass-manufactured clean energy technologies will be worth around $650 billion a year by 2030. That is more than three times today’s level, if countries worldwide fully implement their announced energy and climate pledges.
The related clean energy manufacturing jobs would more than double from 6 million today to nearly 14 million by 2030 – and further rapid industrial and employment growth is expected in the following decades as transitions progress.
At the same time, the current supply chains of clean energy technologies present risks in the form of high geographic concentrations of resource mining and processing as well as technology manufacturing. For technologies like solar panels, wind, EV batteries, electrolysers and heat pumps, the three largest producer countries account for at least 70% of manufacturing capacity for each technology – with China dominant in all of them.
Meanwhile, a great deal of the mining for critical minerals is concentrated in a small number of countries. For example, the Democratic Republic of Congo produces over 70% of the world’s cobalt, and just three countries – Australia, Chile and China – account for more than 90% of global lithium production.
The world is already seeing the risks of tight supply chains, which have pushed up clean energy technology prices in recent years, making countries’ clean energy transitions more difficult and costly. Increasing prices for cobalt, lithium and nickel led to the first-ever rise in EV battery prices, which jumped by nearly 10% globally in 2022. The cost of wind turbines outside China has also been rising after years of decline and similar trends can be seen in solar PV.
A new global energy economy is emerging
“The IEA highlighted almost two years ago that a new global energy economy was emerging rapidly. Today, it has become a central pillar of economic strategy and every country needs to identify how it can benefit from the opportunities and navigate the challenges. We’re talking about new clean energy technology markets worth hundreds of billions of dollars as well as millions of new jobs,” said IEA Executive Director Dr Fatih Birol.
“The encouraging news is the global project pipeline for clean energy technology manufacturing is large and growing. If everything announced as of today gets built, the investment flowing into manufacturing clean energy technologies would provide two-thirds of what is needed in a pathway to net-zero emissions. The current momentum is moving us closer to meeting our international energy and climate goals – and there is almost certainly more to come,” said Birol.
“At the same time, the world would benefit from more diversified clean technology supply chains. As we have seen with Europe’s reliance on Russian gas, when you depend too much on one company, one country or one trade route – you risk paying a heavy price if there is disruption.
“So, I’m pleased to see many economies around the world competing today to be leaders in the new energy economy and drive an expansion of clean technology manufacturing in the race to net-zero. It’s important, though, that this competition is fair – and that there is a healthy degree of international collaboration since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”
Searching for policies with a competitive edge
The report notes that major economies are acting to combine their climate, energy security and industrial policies into broader strategies for their economies. The Inflation Reduction Act in the United States is a clear example of this, but there is also the Fit for 55 package and REPowerEU plan in the European Union, Japan’s Green Transformation programme, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries. Also, China is working to meet and even exceed the goals of its latest Five-Year Plan.
Meanwhile, clean energy project developers and investors are watching closely for policies that can give them a competitive edge. Relatively short lead times of around 1-3 years on average to bring manufacturing facilities online mean that the project pipeline can expand rapidly in an environment that is conducive to investment.
Only 25% of the announced manufacturing projects globally for solar PV are under construction or beginning construction imminently, according to the report. The number is around 35% for EV batteries and less than 10% for electrolysers. Government policies and market developments can have a significant effect on where the rest of these projects end up.
What next?
Amid the regional ambitions for scaling up manufacturing, ETP-2023
The report also highlights the specific challenges related to the critical minerals needed for many clean energy technologies, noting the long lead times for developing new mines and the need for strong environmental, social and governance standards. Given the uneven geographic distribution of critical mineral resources, international collaboration and strategic partnerships will be crucial for ensuring security of supply. Source: ESI Africa
