It’s a known fact that sub-Saharan Africa has an abundance of natural energy resources yet most countries on the continent face an energy crisis. With over 635 million people living without electricity, access to electricity is still a great challenge. One of the main reasons for this is poor (or a lack of) infrastructure.
But, significant foreign investments, specifically from Asia, continue to highlight the extreme potential on this continent. During August, Chinese businesses pledged to invest US$80 billion on oil and gas infrastructure projects in Nigeria alone. The West African country, ranked as the sixth-largest oil producer globally, has recently run into serious trouble because none of its four refineries are reaching peak production due to poor maintenance. Currently, natural gas accounts for more than 80% of Nigeria’s generating fuel needs and about 30% increase in available generation is possible if the gas constraints are resolved.[Powering Africa - Much ado about Nigeria.] [The Future of Sub Sahara Power Sector - Nigeria Focus].
Added to this is the threat of militant attacks on infrastructure by the so-called Niger Delta Avengers. But, this doesn’t seem to have put China’s private investors off.
The announcement of the Memorandum of Understanding follows a roadshow in China by Nigeria’s Oil Minister and chief of the Nigerian National Petroleum Corporation (NNPC), Emmanuel Ibe Kachikwu. The deals, NNPC said in a statement, involve everything from pipelines to refineries to power generation. NNPC says that the much needed finance will be spent on pipelines, refineries, power, facility refurbishments and upstream.
China’s interest in Africa‘s energy
According to the International Energy Agency (IEA), China now accounts for 30% of Africa’s energy growth, with over 200 power projects contracted to Chinese companies in the last five years.
IEA, in its July 2016 publication, titled “Boosting the Power Sector in Sub-Saharan Africa: China’s Involvement” stated that project investments are estimated at about $13 billion between 2010 and 2015 from China, which were financed largely through public lending from China.
Chinese contractors have built or are contracted to build 17GW of generation capacity in sub-Saharan Africa from 2010 to 2020, equivalent to 10% of the existing installed capacity, or to Finland’s total installed capacity.
In West Africa, most Chinese-built capacity is in gas-fired power plants, especially in Nigeria which has enormous natural gas resources. In Nigeria alone, Chinese companies have completed three projects totalling 1.5GW, with some advanced technologies provided by Western original equipment manufacturers, OEMs, such as General Electric, GE. [The Revolution of Nigeria’s Power Industry Needs Funding].
Global cooperation to create a sustainable solution
Various global initiatives promote increased prosperity and economic development in Africa by improving electricity security. These include The Power Africa initiative by the United States, the Africa-EU Millennium Development Goals initiative, the Tokyo International Conference on African Development, TICAD, process by Japan, the Sustainable Energy for All initiative (SE4ALL) by the United Nations, and the India-Africa Forum Summit ( IAFS).
Executive Director International Energy Agency, Dr. Fatih Birol says that the active role of Chinese companies in Africa’s power sector is ‘notable’, both in terms of magnitude and impact on new electricity capacity additions, mostly coming from renewable energy, including large hydroelectric plants. Birol also said that enhancing energy access in Africa was also one of the G20 initiatives under the Turkish presidency in 2015, and it is currently being discussed as an important topic under China’s 2016 G20 presidency.
“Given Africa’s rich energy resources, the potential is huge. Greater global cooperation can deliver benefits for all, ultimately promoting increased energy access and economic growth. In the end, this can only succeed if addressed in a positive way by leaders of African countries.
African energy, in particular access to clean energy, has been a key topic of analysis for the IEA for nearly two decades now. Birol says the Agency will continue to support expanded energy access and clean energy technology development in Africa.
The Deputy Executive Director of the IEA, Paul Simons, said that African countries have relied heavily on the support of China for expansion of their electricity systems, to enable growth and improve living standards. Greenfield power projects contracted to Chinese companies have become widespread in the region, with more than half of all projects based on renewable energy, mainly hydropower. There is also a major focus on training local technicians in order to maintain the efficiency and performance of newly built plants, says Simons.
Of course, this can only lead to a sustainable solution as locals become skilled and employment is generated in a country where jobs can be hard to come by.
Watch our webinar, The Future of Sub Sahara Power Sector - Nigeria Focus, which took place on 18 April at 13:00 UTC, to gain a deeper understanding of Nigeria’s energy plans. The webinar forms part of our In Focus track Power In Africa: A Future Investment Outlook which covers the African energy investment outlook with a particular focus on southern, eastern and west Africa.