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Energy Transitions and Renewables: The Investments Being Made in Africa and Mozambique

Energy Transitions and Renewables: The Investments Being Made in Africa and Mozambique

  • Priscila Macamo • Absa CIB Coverage

One of the most debated topics in the world today is the climate crisis and the process of change towards clean and sustainable energies in the long term. Africa, in general, is not out of this debate and has invested what it can in order to reduce its CO2 emissions.

While access to energy tends to expand, the continent’s population is expected to double from 1 billion in 2018 to over 2 billion people by 2050. A group of researchers from the International Monetary Fund (IMF) estimates that the need for energy will increase by 3% annually by then, with the main sources of energy having been coal, oil and traditional biomass (wood, charcoal, dry dung).

 The transition to renewable energy sources in Africa has been progressing impressively this past decade, with many countries working to increase their capacity in renewable energy production. The International Renewable Energy Agency (IRENA) states that with the right policies, governance and access to financial markets, sub-Saharan Africa can achieve 67% of its energy needs by 2030. For Africa, the transition to renewable energy is not only a way to preserve the environment but also a way to boost economic growth.

In the current scenario, over 600 million households do not have access to basic energy services and with the growing population, if there is no innovation and creation of sustainable energy sources, this problem will only get worse in the long term. Lack of access to energy restricts the availability of light, industrial innovation and the development of social institutions that improve the quality of education and increase the pace of economic development.

 Public funds, in the case of Africa, have been the primary source of funding for energy projects. The reduction in the cost of implementing renewable energy projects will enable Africa to make a faster transition to renewable energy. Although solar and wind energy are increasingly competitive in terms of implementation cost, Africa still lags far behind the rest of the world in terms of cost per MWh. The high cost of renewable energy needs higher upfront investment but is more efficient in the long run. African countries need to mobilise public, private, multilateral and bilateral funds to raise the necessary funds for the transition to a low CO2 emitting economy.

Reducing the cost of implementing renewable energy projects will allow Africa to make a faster transition from fossil to renewable energy

 The IMF is leading a programme with Ethiopia, Senegal and Madagascar called “Scaling Solar” to create a one stop shop where they together with the World Bank prepare a single package that includes everything from project identification and definition, preparation of legal documents, to private financing and political risk insurance. The GetFIT programme, which was initially piloted in Uganda, is being expanded to Zambia and the South African government is committing 17GW of power through renewables over the next few years.

There is another debate about the effect of the transition to renewable energy globally and the effect it will have on the African economy. According to the World Bank, at least 50% of sub-Saharan Africa’s exports are fossil fuels. Exports of natural resources such as natural gas, crude oil, metals and, in the case of Mozambique, coal, generate substantial revenues for governments in sub-Saharan Africa and contribute approximately 25% of their revenue.

Although the continent has increased exports of other minerals, global changes in energy consumption may affect countries that are dependent on the export of natural resources in the long term. The reduction in the cost of renewable energy and the growth in demand for minerals associated with its implementation may allow sub-Saharan African economies to adapt to the possible economic disruption associated with a global drop in fossil fuel consumption. Mozambique is a country rich in natural resources and has the capacity and excellent characteristics for small and medium scale geothermal and biomass energy generation, and medium and large scale hydro, solar and wind energy.

Due to its geographical location, Mozambique has been directly impacted by climate change. The events that have recently befallen the country create a greater need to address the effect of climate change on its development and prosperity.

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The country is on the right track, taking clear steps to reduce CO2 emissions as part of the Paris agreement and creating thermal power plants to provide clean energy. Mozambique cannot afford to be a simple spectator in this discussion and has to take the reins with a concrete plan and with actions that will help reverse the current scenario as a priority.

With the “energy for all” project that the country has (a plan whose goal is universal energy access by 2030), an opportunity has been created to ensure that this energy comes from renewable, sustainable and environmentally beneficial sources in the medium and long term. Currently, Mozambique is mostly dependent on hydropower and additional sources of energy based on gas and fuels such as diesel, but has a potential of 23,000 GW in renewable energy, the most abundant being solar followed by hydropower, wind, biomass energy and geothermal.

There are several projects in the pipeline, from solar, wind and hydro, totalling approximately 3000 MW, which will increase the contribution of renewable energies to the country’s energy supply mix. 

Mozambique, along with much of sub-Saharan Africa, is ready to make the transition to renewable energy that is sustainable and good for the environment. For this transition to happen, there is a lack of government commitment through promotion and regulation policies for the technologies. Financing (public and private) directed to renewable energy projects, supply of services for renewable systems projects and technologies for energy conversion, especially geothermal, wind and biomass.

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