PwC forecasts net-zero setback in Africa, due to unaffordability of investment cost of energy transition
African countries are likely to face setback in their commitments to net-zero emission as they may not be able to afford an estimated $2.8 trillion required investment to transit from current fossil fuels energy level to renewable energy target by 2050. This was the position of PriceWaterHouseCoopers (PwC) in its Africa Energy Review 2021 released during a virtual meeting monitored by EnergyDay on Thursday.
The review which was the 11th edition was renamed PwC’s Africa Energy Review 2021, from Africa Oil and Gas Review due to development around other energy sources.
African leaders at the ongoing United Nation Climate Change Conference, COP26 in Glasgow, United Kingdom, UK, have made case for funding of energy transition through calls for increased international financial support from developed nations.
Thirty-five out of fifty-four African countries made that commitment towards net-zero emissions at COP26, but PwC’s review showed that majority of countries in Africa are constrained with lack of capacity to balance decarbonisation economies and at the same time end energy poverty by keeping the lights on.
President Muhammadu Buhari, told the participants at COP26 that Nigeria requires financing of projects using transition gas which it has in abundance than oil.
According to PwC’s 2021 review, the $2.8 trillion estimated investment levels are considered largely unaffordable to most African countries.
PwC said, with an acceleration of the global net-zero journey, there is an increasing focus on developing countries and their lack of affordability to meet such net-zero targets. The review said with lack of fund to support their energy needs, the continent may be a stranded asset and may not be able to achieve a just transition.
As global investment rapidly shifts away from fossil fuels which forms the bulk of investment and foreign income for many African countries, PwC revealed that the continent is now dealing with the double challenge of addressing energy poverty as well as energy transition.
The review said, “Africa’s energy mix has been relatively constant for the last 30 years and despite successful renewable energy projects, the overall scale of renewables in Africa remains very small.
“Africa’s current energy generation mix is dominated by fossil fuel generation with hydropower making the only meaningful renewable energy contribution.
“There has been a more recent shift within the renewable energy mix to accelerate solar and wind technologies but they remain small at 1.6%.
PwC’s African Energy review further established that in a country-by-country basis, continued exploitation of existing fossil fuel reserves, along with recent natural gas discoveries, could tempt some countries to disregard the benefits of a more diversified energy generation mix and remain entrenched in fossil fuels.
James Mackay, Energy and Infrastructure Strategy Lead, PwC South Africa, in his presentation on the subject matter, disclosed that Africa is home to 17 percent of the global population, producing less than 5 percent of global annual emissions and accounting for only 3 percent of global cumulative emissions.
He said, “It is evident that although fossil fuels still make up the bulk of Africa’s energy inventories, growth in energy is dominated by renewable.
“With an annual growth rate of 21% between 2010 and 2020 and 53GW of renewable energy is currently committed or under construction, this is positive news for Africa.
“Most African countries are still committed to processing more Liquefied natural gas (LNG) projects, but are not getting adequate finance for any fossil fuel embedded project from international financial institutions.
“In effort to decarbonise with about $15.2 trillion fossil fuel reserve, the continent may be faced with challenge of being realised. There is a growing risk of stranded asset and lost revenue estimated to be around $2.8trillion cost by 2050.
“Cost of addressing energy poverty is much higher. There is a downturn in energy production, consumption and export of petroleum products from Africa due to underinvestment.
“The continent risks about 56.7trillion reserve of fuel product being stranded.
“Energy industry employment in the continent has continued to decline from 2020 to about 1.3 million. The continent is likely to witness about 24 percent decline in oil revenue by 2050. While the renewable energy industry has the capacity to create around 372,000 jobs by 2030.
“As the fault line continue to grow between African countries and the developed economies on energy transition, the continent requires financial, technical, partnership and reform assistance from the developed economy.
“Develop nations must fulfil annual commitment of $100 billion per year must be fulfilled
“Africa energy transition may be collaborative and reassured, the continent is committed to achieving global emission target. It only requires international support.
“Private sector will also play significant role in driving the energy transition as the continent stumbles toward net-zero .
The PwC’s Energy and Infrastructure Strategy Lead, however disclosed that 42 percent of the 1.4 billion Africa’s population have no access to electricity. Adding that they are faced with double challenge of energy transition and energy poverty.
Pedro Omontuemhen, PwC Africa Oil & Gas Industry leader,in his remark said achieving global transition to net-zero by 2030, will come with severe implication on natural resources in the continent.
He said, African leaders must give right leadership, to prevent the continent from drafting from one energy challenge to the other.