The Africa of renewable energy

Africa is growing and so is its need for energy. According to the UN, more than half of the world’s population growth between now and 2050 could occur in Africa. This, along with the continent’s rapid industrialisation, represents an unparalleled opportunity for the expansion of climate-friendly renewable energy solutions.

Renewable energy sources have considerable growth potential in Africa given the continent’s high solar and wind resources. However, the expansion of renewable energy depends on a variety of factors. Well-developed and reliable transmission networks play a vital role in fostering this sector at both country and regional levels: transnational backbones help interconnect countries, optimising the construction of generation assets and increasing the stability of the grids that is necessary to cope with the intermittency and variability of renewable sources. In addition to adequate network infrastructure, a key element is the consolidation of a stable industry regulatory framework that adopts international standards. These elements combine to create an enabling framework for investment. On all these aspects, the promotion and professionalisation of local and regional industry associations contributes to fostering a constructive and informed dialogue between companies and with decision-makers aimed at creating awareness of the opportunities created by renewables and the quality of sector policies. Dialogue, the building of public-private partnerships and engagement in international platforms are driving forces for international institutions (the World Bank, the African Development Bank, the European Union and the European Investment Bank) to invest in supporting the development of renewable energy projects through dedicated instruments such as technical assistance, capacity building and financial support programmes for specific projects aimed in particular at reducing their risk profiles. International institutions also play a key role in promoting synergies with local economies and community involvement to optimise the socio-economic impact of projects.

The number of people with access to electricity in Africa has doubled from 9 million per year between 2000 and 2013 to 20 million per year between 2014 and 2019, outpacing population growth. This is partly due to several technical and financial development initiatives promoted and sponsored by organisations such as the European Union and UN Agencies, but also to the role of the private sector and companies like Eni, which invest in the continent with the aim of providing access to energy and developing energy sources for the domestic market. While these numbers show progress, it is essential to remind ourselves that less than a decade remains to achieve the United Nation’s Sustainable Development Goals which include, in particular, universal access to secure, modern and sustainable energy at an affordable cost by 2030. Moreover, due to the Covid emergency, the number of people without access to electricity on the continent increased again between 2019 and 2021: 77% of the world’s people without access to electricity live in Africa today (up from 74% in 2019). Renewables are an essential tool for improving access to energy and contributing to solving the climate crisis. By creating awareness and skills, supporting the development of an appropriate regulatory framework for the sector, strengthening electricity transmission and distribution infrastructure and investing in storage systems, the public and private sector can help promote the growth of renewable energy in Africa.

Africa being the continent where Eni took its first steps outside Italy in 1954, an effective collaboration between the company and African governments and people has existed for a long time. When the need to upgrade power generation processes in order to reduce the carbon footprint became pressing and the enormous contribution that renewable energy could make became clear, launching new renewable energy projects on the continent was a natural step, as Eni was well aware of the factors and issues determining energy supply in Africa.

Eni believes that the right energy mix will enable African nations to develop quickly and sustainably. According to the International Renewable Energy Agency (IRENA), Africa could meet nearly a quarter of its energy needs through the use of indigenous, clean, renewable energy.

On a continent already feeling the effects of climate change, developing renewable energy resources takes on an even greater importance. For Eni, the prime objective is to achieve complete carbon neutrality by 2050. To this extent, the company’s mission has aligned to the United Nations’ Sustainable Development Goals (SDGs), including goal n. 7, which is to “ensure access to affordable, reliable, sustainable and modern energy for all,” and Goal 13 to “take urgent action to combat climate change and its impacts”.

Eni also encourages dialogue and the spread of best practices in the context of leading industry associations such as SolarPower Europe. For example, it promoted the creation of a working table, the SolarPower Europe Emerging Markets Workstream (recently renamed Global Markets Workstream), which promotes study activities B2B and B2G contacts for the identification of solar development opportunities in non-European markets with a focus on emerging markets such as the Africa's.

The focus of SolarPower Europe has historically been in Europe. However, Eni, as an active board member of SolarPower Europe, has contributed to extending its geographical scope by promoting the creation in 2018 of a specific working group, which to date sees the participation of 65 companies and in which Eni holds the role of Chair focusing on emerging markets (the so-called Emerging Markets Workstream) with the dual intent of supporting the development of renewable energy in these countries while creating business opportunities for European and local companies. The working group promoted collaboration and interacted with local partners, industry associations, regulators and policymakers, producing an extensive portfolio of market reports (12 as at December 2022) analysing the state of the solar industry and identifying the steps needed to promote its growth in countries in the Middle East and North Africa, Sub-Saharan Africa, Asia and South America.

The Global Markets Workstream also supports the creation and development of local associations and workshops aimed at establishing the necessary connections between key actors, including the business sector and policymakers, who are critical to the growth of the solar industry, as well as key international institutions that can offer mitigation tools for risks associated with renewable projects in emerging countries.

State-owned utility companies are often the single buyer of the energy produced by renewable energy plants and often they face their own financial challenges given their obligation to distribute electricity at subsidised prices. In this scenario, structured finance instruments that reduce the offtaker’s risk (the risk that the buyer will not collect or pay for the electricity) are of great relevance for investment prospects in renewable generation plants. The steps taken in this direction by the Development Finance Institutions (DFIs) and by the European Union with the EFSD (European Fund for Sustainable Development) guarantees and the other elements integrated in the EU’s external action to support investment (called Global Gateway) are positive, although much remains to be done in this regard to reduce the real or perceived risk profile of projects in emerging markets. Clearly, this new paradigm, which was introduced into the European Union in 2018, has helped substantiate the idea of changing the relationship between African countries and the European Union, moving from an aid model to a partnership model, based on common and complementary goals and interests.