Renewable Energy Market Analysis: Africa and its Regions
In this joint report by the International Renewable Energy Agency (IRENA) and the African Development Bank (AfDB), the road to structural economic transformation on the African continent is paved by the role played by renewable energy investment in energy and economic diversification. The “Renewable Energy Market Analysis” report is contextualised within multiple areas of regional socio-economic development, which examines how each region is heavily commodity-dependent for its export portfolios (reaching 60% of total merchandise exports in 10 out of Africa’s 54 countries) and thus susceptible to market price volatility. In terms of its own consumption, 77% of African electricity in 2019 was generated by coal, gas, and oil, while African solar, wind, geothermal, and bioenergy contributes less than 3% of the world’s installed renewable technology.
Renewable energy investment has the potential to generate three times the amount of jobs the fossil fuel industry provides to the continent and is calculated to catalyse steady intra-regional trade patterns, the report argues. It also highlights key areas of uninvested potential, such as:
Solar power projects, both large-scale and decentralised, given the continent receives an annual average of 2119 kilowatt hours of solar irradiation per square meter (kWh/m2).
Large-scale hydropower, being the largest source of African renewables currently, in countries like the Democratic Republic of the Congo, Ethiopia, Madagascar, Mozambique and Zambia.
Wind power projects, in countries like South Africa, Ethiopia, Namibia, Kenya and Mauritania, have a technical power estimate of 461 GW (assuming a 1% land-utilisation).
Advanced biofuels, with estimates that West Africa alone could produce over 100 megatonnes per year of agricultural residue to be converted into ethanol, biobutanol, or electricity.
Renewable energy investment in Africa has the fastest growth rate globally, sitting at an average growth rate of 96% per year, compared to 15% in Asia-Oceania (excluding China and India). Similarly, investment opportunities have skyrocketed since the early 2000s, however, investment is not evenly distributed and is concentrated in both Southern and Northern Africa. This is predominantly due to high variances in investment returns and lower risks owing to policy/institutional environments, regulations, access to finance, and market characteristics between other countries. As such, decentralised renewable energy solutions, such as standalone solar systems and mini/micro-grids, have become cost-effective ways of improving clean energy access while mitigating some of the aforementioned challenges. In fact, Africa accounted for 70% of global investments in the off-grid sector between 2010 and 2020, amounting to US$1.7 billion.
For exporters and investors looking to understand the largest market gaps in renewable energy and industry demands according to region, this report provides a clear and comprehensive analysis of recent investment trends, project case studies, and policy developments that indicate public and private preferences for future energy ventures. Additionally, the report also offers insights into ‘de-risking’ investment solutions and other risk-mitigation tools which often affect foreign appetites for African-based projects. Ultimately, unlike Europe, North America, or a vast amount of Asia, African countries do not have the equivalent embedded fossil fuel infrastructure and are thus in a better position to make the swiftest transition to renewable energy. All that’s left to ask is how soon do investors and exporters want to wait for this market demand? To read more, the report can be accessed here.