Africa has the potential to generate 400 gigawatts of gas-generated power with Tanzania, Mozambique and Nigeria accounting for 60 percent of the capacity, indicating limited penetration of gas in non-gas producing African countries.
The share of gas in electricity generation was 14 percent in 1990, growing to 21 percent by 2000. By 2010, nearly a third of electricity generation was sourced from gas, which increased to nearly 40 percent by 2018.
Presenting a paper on Energy Transition, Regulation, Finance and the Private Sector at a side event of the ongoing seventh Africa Regional Forum on Sustainable Development, Yohannes G. Hailu, an Economic Affairs Officer with the Economic Commission for Africa (ECA), said Africa should tape into gas which has become more attractive, and could replace more expensive fuel sources, and in the process reduce the cost of energy on the continent.
He said the international electricity sector was revolving towards a low carbon economy resulting in a transition and new pathways for the energy system.
Mr. Hailu said the traditional electricity business models and value chains that were dependent on a vertically integrated utility power system were phasing out.
“Rapidly changing technologies and declining production costs of renewable energies have increased the complexity of managing the supply side or decentralization,” he said.
“There is therefore need to put capacity as we transition… access versus sustainable change. The transition itself must be just; creating new relationships of power. If the process of transition is not just, the outcome will never be. We need to get this right.”
While energy transition through natural gas has occurred, renewable uptake is still very minimal, despite wind and solar technology having decreased by more than 65% and 80% respectively between 2010 and 2017.
Mr. Hailu mentioned regulation, investment and finance, as the main drivers of the low uptake. Most of wind and solar power development – above 60% – is being undertaken by the private sector.
While the power generation segment is increasingly opening up, private sector role in transmission, distribution and specially off-grid systems development is still limited.
“Regulation is not catching up with developments in the sector – such as the need for energy access and transition. Economic regulation is largely problematic to investment in sustainable energy even in the absence of any incentive schemes,” said Mr. Hailu.
The market structure was still rigid and not nimble and competition curtailed, and complex relationships, such as private-to-private PPAs, were often not permitted. As a result, private sector participation models were limited.
“To compound the matter, off-grid regulation is yet to be fully developed, and the macroeconomic environment for investment is not supportive,” the Economic Affairs Officer said.
Participants recommended that there was need for ensuring inclusivity in the sector; and the need to address justness of transition for sustainability.
“There is need for inclusive stakeholder engagement, reskilling, and support to affected communities and industries,” Mr. Hailu said.
“Development of competitive energy markets to steer transition in an inclusive manner is important, and this is the role of regulation. There is need for the development of sound national or regional energy transition plans to drive long-run energy mix.”
He said mobilizing private sector investment through regulatory reform can address Africa’s energy problems.