Africa is an interesting investment destination {writer: Piet Coetzer}

According to the latest data from the United Nations Environment Programme, global investments into renewable energy in 2010 reached a record level of $211 billion and for the first time ever, that investment grew more in developing economies than it did in the developed world.

Of the total $211bn, some $72bn went to the faster growing developing economies in the world (including China, which accounted for nearly $50bn of the new investment in renewable energy) while developed economies accounted for only $70bn.

Besides the substantial contribution of 28% of the growth in new investment in renewable energy from China, the contribution by South and Central America was up by 39% to over $13bn; India has showed 25% growth to $3.8bn; and the Middle East and Africa region was up to $5bn.

Africa’s special potential

Africa’s relative low levels of development on the energy front as well as its attractive environment for most known sources of renewable energy such as solar, wind and even hydro, could count in its favour as a destination for energy investors.

According to a recent edition of the American-based Energy and Capital electronic newsletter, Africa is an interesting investment proposition, in that there is very little electricity infrastructure already in place.

More than 80% of the continent’s citizens at present do not have access to electricity.

”Basically, many parts of Africa are starting from square one. And this means they can build an infrastructure that won’t have to rely exclusively on fossil fuels,” it writes.

“Of course, natural gas and coal will be a part of the mix – that’s a given. But because of Africa’s immense solar and wind resources, the demand for the long-term stability will dictate that those resources be utilised to their fullest extent.”

The newsletter assesses that while “Africa is still the poorest continent on the planet... its economy is picking up steam.

“And in order for growth to continue, energy demands will intensify.

“With an abundance of land that can be used for solar and wind farms – and with renewable actually being cheaper than conventional sources in many regions – this continent is ripe for renewable energy opportunities.”

Energy and Capital notes that some of the world’s largest corporations are paying attention and are spending billions to “lay early groundwork for renewable energy development in Africa.”

East Africa

The newsletter goes on to punt the investment opportunities in Africa’s oil and natural gas resources.

This was before the news about oil finds in Namibia broke, and Energy and Capital wrote at the time: “[I]f you’re looking for a way to play Africa’s vast energy bounty, check out some of the companies rushing to develop East Africa’s massive oil reserves.

“This region actually boasts the richest concentrations of oil on the entire continent – yet, until now, it has remained virtually untouched. But that’s all changing…

“With roughly $7.3 trillion worth of oil at stake, East Africa is quickly becoming a hotbed of action for exploration companies,” it added.

Other energy news out of Africa

Cameroon has opened its first landfill gas recovery plant, with the aim of reducing methane emissions from waste and earning the country emissions reduction credits under the Kyoto Protocol’s Clean Development Mechanism.

The plant will trap methane generated by decaying household waste at the Nkolfoulou waste disposal site, on the outskirts of the capital, Yaounde. The gas will be stored in wells and burnt off, releasing carbon dioxide – a gas that contributes substantially less to climate change per volume released than methane.

The Democratic Republic of Congo and India have signed a deal to build a hydroelectric plant in southern Congo.

Officials from both countries participated in a signing ceremony in the Congolese city of Kananga in July.

Congo’s Energy Minister Gilbert Tshiongo said the plant, when completed, will have a capacity of 65 megawatts.

The project is part of the DRC’s effort to address power shortages and develop the country’s infrastructure. Analysts say the country has huge hydroelectric potential because of its many rivers.

In a recent article for Pambazuka News (http://pambazuka.org), Lori Pottinger, who for 16 years has worked on the Africa campaigns for International Rivers, warns that “hydropower dams are well-suited for facilitation industrialisation and exploration of natural recourses, but not for reducing Africa’s energy poverty.

“And, given the water-security problems posed by climate change, the proposed frenzy of African dam-building could be literally disastrous.”

Under challenging conditions, many of Africa’s energy planners are pinning their hopes for African electrification on something as ephemeral as the rain, by pushing for a grid of hydro dams across the continent, with the World Bank joining the fray.

“This vision fails to take into account the unpredictable nature of Africa’s rivers, a situation that will be made worse by a changing climate. New African dams are being built with no examination of how climate change will impact on them,” Pottinger writes.

While many existing dams are already suffering from drought-caused power shortages, she argues that climate change is expected to dramatically alter the hydrology of African rivers, creating worse droughts and more dangerous floods, later causing safety concerns for poorly maintained or operated dams.

“The oft-repeated sound bite, that only 5% to 8% of the continent’s hydro potential has been tapped, is an incomplete message at best. The other side of the coin is that Africa is already dangerously hydro-dependent,” writes Pottinger.

“Africa has not developed even a tiny fraction of a percent of its available solar, wind, geothermal or biomass power.

“While large dams have done little to bridge the electricity divide that has left so many Africans in the dark, renewable energy projects can be scaled to meet the needs of the smallest African village to its biggest urban areas,” she writes in collaboration with Terri Hathaway.

Exporting solar power

DESERTEC is a multibillion-dollar energy initiative that hopes to meet Europe’s energy needs with solar power from the Sahara Desert.

Some experts argue that the so-called Arab Spring will actually help DESERTEC’s grand vision to become a reality.

DESERTEC is labelled by some as the energy mega-project of the 21st century, while others fear that the unrest in the Arab world will put an end to the dreams of desert solar energy.

But at a major conference on DESERTEC during May in Berlin, Germany, experts expressed optimism about the revolution’s impart on the project’s future.

Many saw the recent push for democracy as a step toward the stability necessary to establish such projects in the region.

The DESERTEC project dates back to 2009, when the plans were first announced. The grand – and some say grandiose – vision is to construct a network of concentrating solar-thermal power systems in North Africa’s desert region to produce green electricity that can be used at the local level and eventually exported to European countries.

The amount of solar energy coming down on the Sahara Desert is so enormous that plants covering 90 000 square kilometres – a fraction of the desert’s total of nine million square kilometres – could meet the energy needs of the entire world.

DESERTEC hopes that the project will cover a significant amount of the North African and Middle Eastern electricity demand by 2050, as well as providing at least 15% of Europe’s electricity.

South Africa’s energy future

South Africa, as the continent’s largest and most developed economy, is set to remain heavily dependent on fossil fuel – and coal, in particular – for some years to come.

The South African government has bucked the world trend of reticence about nuclear power by backing a shared African approach to electricity generation projects, including nuclear.

European countries such as Germany and Switzerland announced plans to sharply roll back their nuclear programmes in the wake of the recent nuclear disaster in Japan after it was hit by an earthquake and tsunami.

At a May conference on nuclear power in Africa, Energy Minister Dipuo Peters emphasised that it was “important to note that nuclear and renewable energy will have a significant contribution in (South Africa’s) anticipated generation mix.”

While nuclear was not a quick-fix solution, it was a long-term method to address the energy crisis and climate change challenges.

Peters described the country’s energy plan as “a balanced” one that sought to “responsibly” use energy sources available to the country, “including gas, biomass, nuclear, coal and imports.”

Security of supply of nuclear fuel as the continent is slowly becoming nuclear-energised, was of key importance while African countries are rich in uranium. This had an important political dimension: “This gives the African states the confidence that they can rely on Africa for their uranium supplies,” said Peters.

“This mineral must also benefit Africans through job creation.”