Africa’s Untapped Green Potential
A young investor's guide to greener financing
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Summer in Cape Town, South Africa brings longer days with toasting temperatures turning asphalt into a menace for unsuspecting bare feet. At an average temperature of 19℃, with the high easily reaching 29℃, the solar PV panels across South Africa have collected over 5000 MW (megawatts) of solar irradiance – a growth of 349% since last year June 2022, Eskom reported in November 2023. Amidst the rolling power cuts, South Africans are capitalising on the nation’s good weather and turning to alternative energy supplies as a way to keep the lights on at home.
Although South Africa is one of 54 countries on the African continent, its window of opportunity is indicative of the entire nation's potential to transition into green energy, the 2023 KPMG report suggests.
It's a Green Investor's Game
Africa stands at the brink of exponential growth, driven by a burgeoning population, vast untapped mineral resources, solar and wind capacities exceeding current levels by 1000 and 100 times respectively, and a production surplus of hydrogen energy large enough to supply industrial hubs of the Global North by 2050. Africa is ready to, and will, “play a pivotal role in the transition to decarbonise”, KPMG opens in its Climate Investing Report of 2023. With some of the best solar, wind and green hydrogen potential climate-aligned investors are turning their gaze towards the continent, seeking superior returns while advancing their global climate action goals.
Surging Solar Energy Opportunities
In Sub-Saharan African countries, the installed electricity capacity remains low, with a global horizontal irradiance (GHI) ranging between 5.20 and 6.57 kWh/㎡. Interestingly, this GHI surpasses that of Spain, which measures between 1.48 and 3.56 kWh/㎡. Despite this, Spain boasts an installed electricity capacity more than double that of nations like Mozambique, Nigeria, and Kenya, as highlighted in the KPMG report. This gap between ample solar resources and the lack of sufficient installed capacity has not gone unnoticed by foreign investors.
Mega solar energy projects are underway in countries like Mauritania and Morocco which are capitalising on the ample solar resources of the Sahara in North Africa, Ian Lewis reported in African Business. Further down the continent, South Africa, which holds most of the solar projects in Africa, has provided over 907 MW (megawatts) to over 564,000 homes among the nine largest solar power plants on the continent. This illustrates a promising foundation that has spurred companies like French-based Rgreen Invest and Echosys Invest to take significant action.
Advancing Africa's Mega-Watt Wind Potential
Infrastructure, cost, environment, and conflict are major challenges barring access to Africa’s wind energy potential. The kind of potential that could “satisfy electricity demand 250 times over”, could “close the energy access gap in Africa within twelve months” and could allow 27 African countries to supply the entire continent’s energy demand. Yet, the Global Wind Council estimates that Africa is only using 0.01% of its potential, the 2023 KPMG report stated.
However, several countries in Africa are actively expanding their wind energy potential. Wind power plants like Acwa Power in Egypt, Red Sea Power wind farm in Djibouti and Boujdour wind farm in Morocco aim to significantly reduce their annual carbon emissions by 9%, 250,000 tonnes, and 1.15 million tonnes respectively, as stated in the 2023 KPMG report.
Turning to Africa's Green Hydrogen Potential
Green hydrogen is dependent on already existing renewable energy sources, which Africa has in abundance. Compared to other countries Africa has positioned itself comfortably as a major player in green hydrogen production and exportation, particularly to countries that will need to supplement their green hydrogen demand to meet their climate goals, the KPMG 2023 report states.
In their 2022 study, the European Investment Bank estimated that Africa could see a “production capacity exceeding 50 million tonnes per annum by 2035”. However, they warned of local challenges that investors should be aware of for successful investment returns.
Green Investors Facing Renewable Energy
Political instability, environmental impacts, community engagement and power transmissions are some of the mitigable risks investors should address before reaping the benefits of Africa’s renewable potential. For instance, a major success of the Lake Turkana Wind Power Project in Kenya was due to key points of community engagement.
Even more so, many African governments are realising the necessity of foreign investment and are opening their doors to accommodate it. A case in point is South Africa’s governing party the African National Congress (ANC) which is turning to foreign investment and independent power producers to help drive South Africa’s energy generation capacity. Africa’s booming population growth, untapped resources and readiness position itself as a pivotal player in the world’s plan to decarbonise.
