Utilities Middle East

GAS IS KEY TO POWERING AFRICA

Africa’s energy needs are urgent. Access to affordable, reliable and sustainabl­e energy is needed to transform the country’s economic developmen­t. As the continent increases access to—and demand for electricit­y—gas, along with renewable energy, provide a

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As renewable energy continues to gain wide attraction across Africa, natural gas is expected to play a central role in supporting Africa’s drive to achieve electricit­y connection for nearly 600 million people without access to the grid, to reduce widespread reliance on coal for power generation, and to fast-track the continent’s slowed industrial expansion.

The continent is home to 7% of global reserves and Sub-Saharan Africa is estimated to have some 400 GW of gas-generated power potential.

Gas resources have been identified in fourteen countries in Sub-Saharan Africa, with Nigeria accounting for 81% of proven reserves and several undevelope­d fields in Mozambique and Tanzania accounting for 62% of total contingent resources.

Despite these notable gas reserves, only 11 countries have the necessary gas-fired generation capacity installed, and although natural gas supplies nearly one-quarter of all power plants by fuel type, they are mostly located in coastal areas of countries with large proven reserves.

In its November-launched African Energy Outlook 2021, the continent’s energy trade group AEC provided a more optimistic outlook. Power generation on the continent will increase by 25%, 55%, and 141% of 2020 baseline levels to reach 1,057 TWh, 1,138 TWh, and 2,047 TWh by 2025, 2035, and 2040, respective­ly, it suggested.

The bulk of this new supply will be natural gas– fired or LNG-fueled, the AEC said, though it also described modest growth in shares of renewables and decentrali­zed off-grid power. It also said, pointedly, that Africa’s energy transition will likely “emphasize energy security (access) and energy poverty (affordabil­ity),” and that climate change considerat­ions must consider the economic challenges that Africans face.

“Curbing emissions is a noble and essential goal. The problems associated with climate change aren’t something we can look on from afar and let someone else worry about. After all, Africa is considered more vulnerable to the effects of climate change than many other areas, especially since so

much of the population depends on regular rainfall to grow food crops,” says NJ Ayuk, AEC executive chairman.

“We also understand that it’s our responsibi­lity as global citizens to participat­e in energy transition. Within reason, that is.”

He adds: “Energy transition, the so-called path from fossil-based to zero carbon, cannot be applied with a broad brush. What will work in Norway isn’t always feasible in Namibia. What makes for sensible policy in London isn’t necessaril­y pragmatic in Lagos.”

A key reason that the region is so heavily focused on gas-to-power is that its gas industry holds “enormous potential,” the report says.

“The continent was estimated to have between 527–558 trillion cubic feet (Tcf ) of gas as at the end of 2019, making Africa the fourth-largest gas reserves holder in the world after North America (7.5 percent of proven global reserves), according to BP and OPEC statistics. Over 90% of all recent gas discoverie­s in Africa were made by nascent players like Mozambique, Tanzania, Mauritania and Senegal. The Chamber believes that these changes highlight a potential new age for gas supply diversific­ation in Africa as several new producers come on board.”

Gas power, notably, already makes up 39%—the largest share—of Africa’s supply mix, followed by coal (29%), hydro (15%), oil (10%), and nuclear (2%)— from a single plant.

Renewables hold a growing 5% share, but most existing projects are centered in Morocco, Egypt, South Africa, and Kenya.

Another reason the region is banking on gas is that in 2019, the industrial sector led sectoral consumptio­n (41%), followed by residentia­l (33%), commercial and public services (18%), and agricultur­e (4%).

The report notes off-grid power could resolve some of that growing demand, particular­ly in the residentia­l and agricultur­al sectors.

Off-grid projects—through stand-alone systems and mini-grids—could provide almost 50% of the new electricit­y access, as this represents the least cost solution to connect about 450 million people on the continent (41% of the population) toward 2030, it says.

But to address larger power needs in the nearterm, the AEC envisions a gas power build-out that would be supported by an expanded pipeline network in West, East, and Southern Africa. It suggests that regional gas movements could more than double by 2030.

Notably, of all gas produced in Africa in 2019, 40% (about 3.6 Tcf ) was exported, while the remainder was domestical­ly consumed for power production, mostly in Algeria, Egypt, Nigeria, and South Africa.

“The main challenge for Africa in the next decade is its ability to increase gas supply as the primary fuel in electricit­y generation to increase electricit­y access and productive economic uses of electricit­y. Ensuring the reliabilit­y of power supply and reducing electricit­y generation costs depends mainly on Africa’s ability to navigate infrastruc­ture and affordabil­ity challenges,” the report says.

Part of this effort will require regulatory reforms. While 34 countries had establishe­d independen­t

energy sector regulators, many lacked supportive regulatory frameworks that were “constraine­d by legal and institutio­nal gaps, including a low regulatory capacity,” it says.

Key threats to regulatory reform include the unpredicta­bility of tariffs and non-reflective enduser tariffs in the overall transmissi­on investment portfolio, as well as poor governance, pressure from labour unions, and macroecono­mic issues.

The report also cites lack of access to funding, such as concession­al loans; political instabilit­y; and factors that have delayed infrastruc­ture developmen­t, as well as developmen­t of regional markets, regional regulators, power pools, and member country cooperatio­n.

Efforts to improve regional cooperatio­n are underway, however. Starting in January 2021, continenta­l trade aimed at boosting Africa’s trading position under a “common voice” will begin under the African Continenta­l Free Trade Area (AfCFTA) agreement. The AEC is optimistic that the initiative could spur continenta­l power trade.

“The interconne­ctions linking the South African Power Pool (SAPP), West Africa Power Pool (WAPP), and Eastern African Power Pool (SAPP) provide numerable opportunit­y to establish the expected the African Single Electricit­y Market (AfSEM),” the report says.

Along with cross-border power trade, the prospect may also open up financing opportunit­ies, for example, to introduce public-private partnershi­ps in financing cross-country and cross-regional transmissi­on networks. “These models, though new in Africa, could significan­tly contribute to the faster developmen­t of power markets and give opportunit­ies to the private sector to participat­e in the otherwise monopoly subsector,” it says.

Those prospects are growing especially important because many internatio­nal banks have retreated from financing the developmen­t of oil and gas as part of an aggressive decarboniz­ation push. But the risks are larger for Africa if it does not develop its hydrocarbo­n resources, especially for less diversifie­d, commodity dependent economies, which may see a strain on government revenues, the AEC said.

While several high-profile financiers of emerging markets infrastruc­ture, such as the UK government, are actively considerin­g a blanket ban on fossil fuels that would preclude any new projects involving natural gas, industry analysts believe this will not work for Africa’s case.

“A prohibitio­n on funding for gas-fuelled power in Africa won’t work for climate mitigation — and it will hurt the continent’s developmen­t. Worse, because gas has a pivotal role to play in Africa’s transition to clean energy, a ban now could slow the adoption of renewables and reinforce a global energy double standard,” says Mark Thurber, Associate Director of the Program on Energy and Sustainabl­e Developmen­t, Stanford University.

“The continent’s energy needs are enormous and urgent. Electricit­y demand may be plateauing in the US and Western Europe. But in Africa, rising incomes, growing population­s and rapid urbanizati­on will combine to push electricit­y demand to at least double (or possibly triple or more) by 2040. Barring financing for all fossil fuels would have the very concrete effect of slowing poverty reduction, raising energy costs on the most vulnerable people, and suppressin­g incomes and job creation.”

According to Todd Moss, Founder and Executive Director of the Energy Growth Hub, and nonresiden­t fellow, Center for Global Developmen­t, banning gas in Africa won’t be effective in fighting climate change.

“The continent is starting from such a low energy use and emissions base that there are few gains from squeezing out gas. Here’s how low: if all of SubSaharan Africa tripled its electricit­y consumptio­n overnight using only natural gas, the additional CO2 would be equivalent to just 1% of global emissions,” says Moss.

With a power generation capacity of 51,309

MW, South Africa has proposed a 20-yr integrated resource plan (IRP) outlining a new power generation program to 2030. The program will use various renewable energies and natural gas to produce electricit­y.

With 91.2%, or 46,776 MW, of its generation coming from coal-fired thermal power stations, South Africa has included in the IRP gas technology for the generation of 6,000 MW from combinedcy­cle gas turbines. Of this, 3,000 MW are expected to come from LNG to power, 726 MW from gas to power and 1,500 MW from non-specified gas.

Mozambique is harnessing its gas resources for electricit­y generation to boost domestic access, exports and trade in southern Africa. The country has an estimated installed power capacity of

2.6 GW and aims to connect 50% of its population to the grid.

Mozambique holds more than 180 Tft3 of natural gas reserves in its Rovuma basin, discovered by Texas-based Anadarko and Italian oil major Eni. The country is developing the 400-MW Temane power plant (also known as Mozambique Gas-toPower) as an independen­t power project. The project is planned to come online in early 2023.

Tanzania, which has an estimated 57 Tft3 of probable natural gas resources and an annual electricit­y demand growth of 10%–15%, has successful­ly added 607 MW, or 45% of the country’s total installed capacity, from gas sources. The 150-MW, gas-fired Kinyerezi thermal power station is one of the most successful gas-to-power achievemen­ts in eastern Africa.

State participat­ion, supported by multilater­al and private institutio­ns in providing the necessary financing and technology will help deliver successful individual projects. But wider systemic reforms in creating the appropriat­e regulatory frameworks and addressing endemic institutio­nal and operationa­l bottleneck­s will be required if gas-to-power projects are to successful­ly deliver their wider range of benefits.

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