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REPORTS

08 Nov 2019

Africa Economic Outlook 2019

Tags
Energy Access
Regulatory and Governance
Renewable Energy
Rural Electrification
AEO 2019

How Africa meets the energy needs of a young, fast growing and increasingly urban population is crucial for the continent’s – and the world’s – economic and energy future.

One-in-two people added to the global population between today and 2040 is set to be African, and by 2025, Africa’s population exceeds that of both India and China. The continent’s urban population is set to grow by more than half a billion over that period, much higher than the growth seen in China’s urban population during the country’s two-decade economic and energy boom. These profound demographic changes are set to drive economic growth, infrastructure development and, in turn, energy demand.

Five years since its first special report on Africa, the International Energy Agency (IEA) has updated and upgraded its work in this new World Energy Outlook Special Focus. This reflects not only Africa’s increasing importance in global energy affairs but also the deepening relationships between African energy decision makers and the IEA. This report, the most comprehensive to date, contains a unique richness of data and analysis. The centrepiece is a set of detailed, comprehensive outlooks covering 11 sub-Saharan countries1 that were developed in consultation with our African partners.

Thanks to natural resource endowments and technology improvements, Africa could pursue a much less carbon-intensive development model than many other parts of the world have. The challenges and opportunities differ widely across a diverse continent. But renewables, together with natural gas in many areas, are poised to lead Africa’s energy consumption growth as the continent moves away from the traditional use of biomass that currently accounts for almost half of final energy consumption.

Africa’s energy prospects depend on the way that government policies shape investment flows and the availability and affordability of modern energy sources. Our analysis is based on two scenarios:

  • The Stated Policies Scenario reflects our measured assessment of today’s policy frameworks and plans, taking into account the regulatory, institutional, infrastructure and financial circumstances that shape the prospects for their implementation.
  • The Africa Case is built on the premise of Agenda 2063, the continent’s inclusive and sustainable vision for accelerated economic and industrial development. Faster economic expansion is accompanied by the full achievement of key Sustainable Development Goals by 2030. These include full access to electricity and clean cooking and a significant reduction in premature deaths related to pollution.

Africa drives global trends, but a lack of access persists

Whichever pathway Africa follows, the continent becomes increasingly influential in shaping global energy trends. Growing urban populations mean rapid growth in energy demand for industrial production, cooling and mobility. Energy demand in Africa grows twice as fast as the global average, and Africa’s vast renewables resources and falling technology costs drive double-digit growth in deployment of utility-scale and distributed solar photovoltaics (PV), and other renewables, across the continent. With the growing appetite for modern and efficient energy sources, Africa emerges as a major force in global oil and gas markets. As the size of the car fleet more than doubles (the bulk of which have low fuel efficiency) and liquefied petroleum gas (LPG) is increasingly used for clean cooking, oil demand grows by 3.1 million barrels per day between today and 2040, higher than the projected growth in China and second only to that of India. Africa’s growing weight is also felt in natural gas markets and the continent becomes the third-largest source of global gas demand growth over the same period.

A critical task for policy makers is to address the persistent lack of access to electricity and clean cooking – and the unreliability of electricity supply. These have acted as brakes on the continent’s development. Nearly half of Africans (600 million people) did not have access to electricity in 2018, while around 80% of sub-Saharan African companies suffered frequent electricity disruptions leading to economic losses. In addition, more than 70% of the population, around 900 million people, lack access to clean cooking. The resulting household air pollution from traditional uses of biomass is causing 500 000 premature deaths a year. It also contributes to forest depletion resulting from unsustainable harvesting of fuelwood, as well as imposing a considerable burden and loss of productive time, mostly on women.

The momentum behind today’s policy and investment plans is not yet enough to meet the energy needs of Africa’s population in full. In the Stated Policies Scenario, 530 million people still lack access to electricity and nearly one billion have no access to clean cooking in 2030. The continent’s ambition to accelerate an industrial expansion continues to be hampered in many countries by unreliable energy supply. Only a handful of countries – including South Africa, Ethiopia, Ghana, Kenya, Rwanda and Senegal – are successful in reaching full access to electricity by 2030. Solid biomass remains a mainstay of the energy mix as a primary fuel for cooking as clean cooking policies lag population growth and premature deaths related to inhaling fumes from cooking end up only 2% below today’s level by 2040.

The Africa Case points the way to a brighter future

The Africa Case outlines a way to lift these constraints, starting with the achievement of full access to modern energy by 2030. In the case of electricity, this would require tripling the average number of people gaining access per year from around 20 million today to over 60 million people. Grid expansion and densification is the least cost option for nearly 45% of the currently deprived, mini-grids for 30% and stand-alone systems for around a quarter.

LPG is used by more than half of those gaining access to clean cooking in urban areas across sub-Saharan Africa, while in the rural areas, home to the majority of those without access, improved cookstoves are by far the preferred solution. Electrification, biogas, ethanol and other solutions also play important roles.

A focus on energy efficiency can support economic growth while curbing the increase in energy demand. In the Africa Case, although the size of the continent’s economy in 2040 is four times larger than today, efficiency improvements help limit the rise in total primary energy demand to just 50%. As a result, even though economic growth in the Africa Case is significantly stronger than in the Stated Policies Scenario, energy use is actually lower. This is linked to an accelerated move away from solid biomass as a fuel and the increased efficiency of charcoal production and use – and to the wide application of electrification and energy efficiency policies. These include fuel economy standards for cars and two/three-wheelers, more efficient industrial processes, building codes and efficiency standards for appliances and cooling systems.

Renewables push ahead to power Africa’s brighter future

Rising electricity needs, especially in sub-Saharan Africa, require a major expansion of the power system. Electricity demand today in Africa is 700 terawatt-hours (TWh), with the North African economies and South Africa accounting for over 70% of the total. Yet it is the other sub-Saharan African countries that see the fastest growth to 2040. Electricity demand more than doubles in the Stated Policies Scenario to over 1 600 TWh, and reaches 2 300 TWh in the Africa Case as electricity supports an increasing range of residential, service and industrial uses. Most of the additional electricity demand stems from productive uses and middle- and higher-income households.

Renewables account for three-quarters of new generation, with a key question being how fast solar will grow. Africa has the richest solar resources in the world, but has installed only 5 gigawatts (GW) of solar PV, less than 1% of the global installed capacity. In the Africa Case, solar PV overtakes hydropower and natural gas to become the largest electricity source in Africa in terms of installed capacity (and the second largest in terms of generation output). With additions across the entire region, solar PV deployment between today and 2040 averages almost 15 GW a year, matching the average annual deployment in the United States over the same period. Wind also expands rapidly in several countries that benefit from high quality wind resources, most notably Ethiopia, Kenya, Senegal and South Africa while Kenya is also at the forefront of geothermal deployment.

Download the report below.

AEO 20197.64 MB