The continent is gearing up for a green transition: Positioned to harness a wealth of wind and sunshine, Africa’s renewable energy supply is set to pick up speed by 2030, aiming to account for nearly 65% of the continent’s energy capacity by 2035 and 95% by 2050, according to a McKinsey & Company report (pdf) published last month. The green transition offers a significant share of investments for the continent, including in Egypt — which accounts for 10.8% of Africa’s renewables market, according to a report (pdf) by Egypt Oil and Gas.

Demand for energy in Africa could double by 2050: The portion of the continent’s population without access to electricity is expected to double to 1.2 bn by 2050 from a current 600 mn, according to the McKinsey report. The continent’s energy needs will also be catalyzed by industrialization, with manufacturing output forecasted to rise by more than 6% every year until at least 2025.

This doesn’t mean energy consumption has to double, too:Africa can curb the increase in its final energy consumption — energy consumed by end-users to power homes, businesses, and transportation — to 50% by 2050 by adopting cleaner, more efficient technologies. One way to do so is electrification, replacing technologies that rely on fossil fuels with ones that are powered by electricity — such as heat pumps. This would require a sixfold increase in electricity consumption between 2019 and 2050.

And it will require tns in funding: Nearly USD 2.9 tn of investments are needed between 2022 and 2050 to help the continent move towards electrification and develop renewable-energy infrastructure. Annually, the required investments are projected to more than double to USD 160 bn from USD 70 bn in 2022. Solar power is expected to grow to around 70% of the continent’s installed capacity by 2050, while wind and hydropower will contribute 20% and 10%, respectively.

Investments are set to become significantly greener: It is forecasted that by 2050 some 43% of annual investments in the continent’s energy sector will be spent on hydrogen, 38% on renewables, and 17% on power transmission, distribution, and mini grids. This represents a dramatic shift from 2022, which saw 58% of annual investments channeled to the oil and gas sector.

Egypt holds the most promising investment areas: The largest openings for investment in electricity transmission and distribution are concentrated in Egypt, Morocco, Nigeria, and Senegal, the McKinsey report says, without quantifying the investment potential. Across the continent, cumulative investment in electricity transmission and distribution is expected to grow to nearly USD 400 bn by 2050.

We have a handful of electricity interconnectors with Europe in the works: There are five proposed projects to link our power grids to Europe, and plans to roll out these link-ups have picked up pace in recent months following the EU’s efforts to wean itself off Russian oil and gas. While not all investment values have been disclosed, three of these interconnectors are worth a combined 11 bn. These include the USD 4 bn 2 GW EuroAfrica interconnector, a USD 3.5 bn 3 GW Egypt-Italy interconnector, and the EUR 4 bn 3 GW Greece-Egypt interconnector (GREGY).

And plenty more across the region: Egypt’s grid is currently linked with Jordan, Palestine, Libya, and most recently Sudan, with plans to export around 15 GW of the excess capacity to neighbors in Europe, Africa, and the GCC. Another interconnector is being built between Egypt and Saudi Arabia, an upgrade with Jordan could be in the works, and Israel may be eyeing its own link-up with us, in addition to projects with Iraq and Africa.

SOUND SMART- Electricity interconnectors are subsea, underground, or overhead cables that carry surplus electricity from one territory to another, allowing countries to share and trade energy. Because they can draw from renewable energy sources such as wind and solar farms, they offer countries a means to integrate more renewables into their energy markets while achieving energy security.

We’re also a major player in transition fuels: Over 80% of Africa’s upstream oil and gas production in 2022 were concentrated in Egypt, Libya, Algeria, Nigeria, Angola, and Mozambique. While gas is not a renewable source of energy, it has long been touted by some as a transition fuel because it emits less carbon. The report argues that natural gas is “likely to play an important supporting role over the short to medium term” while countries ramp up their renewables capacity. Demand for African gas is expected to peak in 2023 before it gradually declines, according to the report.

Substantial growth is in the cards for Omm El Donia: Egypt’s renewable energy capacity is poised to grow to 10.4 GW by 2027, thanks primarily to new onshore wind projects. That’s up 65% from the 6.3 GW currently installed, according to the most recent data (pdf) from the New and Renewable Energy Authority (NREA).

A quick guide to getting in on the game: The McKinsey report puts forth a set of strategies to help investors navigate Africa’s burgeoning green energy market:

#1- Early bird catches the worm: Even though it’s at least another six years before the renewables game gets into full gear, financial institutions should consider investing in the sector as early as possible to facilitate the green energy transition and “earn a seat at the table in the long term,” the report reads.

#2- Eyes on the ball: Identify and avoid “strict no-go areas” that do not assist the green energy transition, such as investments involving fracking or coal.

#3- Look before you leap: Draw up a set of investment criteria tailored to Africa’s energy market. For investments in projects that are in part nonrenewable, determine whether capital expenditure would enable a “just transition.”

Your top green economy stories for the week:

  • We’re in the final countdown to COP28: The event, which kicks off in Dubai on Thursday, will focus on fast-tracking the world’s transition to green energy, slashing emissions before 2030, and transforming climate finance.
  • Another step towards our green hydrogen strategy: The government’s green hydrogen body approved the green hydrogen strategy last week.
  • Cabinet earmarks land for renewable energy stations: Ministers approved allocating a 10k sq km land plot in the New Valley governorate and a 46.7 sq km plot in Benban to the New and Renewable Energy Authority to build renewable energy stations.
Tags: