Gas is still needed to underpin Africa’s energy transition

By Marc Howard

High inflation and a global energy crisis are forcing a rethink on how the world might make the transition from hydrocarbons to renewable energy (RE).

Until recently, rich-world policy-makers and think tanks had been pushing to electrify global energy demand as quickly as possible and in many parts of the world a de facto moratorium on new hydrocarbon projects had taken hold. Some argued African countries could even ‘leapfrog' the use of gas in their energy mixes and focus on RE instead.

But reports of the demise of gas have been greatly exaggerated.

Participants at CbI Meetings’ 17-18 April Africa Investment Exchange: Energy in Transition said it was increasingly apparent that renewable energy will not displace Africa’s need for hydrocarbons in the short-to-medium term. One speaker said that, over the past few months, “we have seen additional recognition from the political leadership that gas needs to be supported along with renewables”.

In part this is because of financial constraints. Investment by rich countries to support Africa’s energy transition, promised for years, has not materialised (AE 459/4). Funding for transmission and distribution network upgrades and additions, let alone utility-scale storage, has not been deployed at anywhere near the scale required for African grids to be able to rely on RE. There also remains the question of whether it is even yet technically and economically feasible, with many analysts doubting it will be possible for decades.

This has left governments and utilities with a difficult choice. Energy is essential for development but universal access can’t be achieved by an RE-only path. Governments must look to other fuels too, even if that does not always go down well with international partners.

One energy finance provider at AIX said they continued to fund gas-to-power (GTP) schemes. “Gas will continue to be the backbone of energy supply in Africa. We are not shy to say that,” the financier said. “We are keen to convert African gas into African power for African usage”. A few agencies, like the Africa Finance Corporation, remain involved in upstream developments.

But others were less optimistic: one panellist feared western financial support for any kind of gas project would evaporate within five years.

However, there are signs that some multilateral funding for GTP projects may continue. The World Bank Group (WBG) said in 2017 it would no longer support upstream projects, but it has told African Energy it “may support natural gas for projects selectively”, while gas “may be useful in accelerating a transition away from coal” and for increasing electricity access in countries where RE alternatives are not available.

In effect, GTP is now seen by many as the least-worst option, not least because it emits less carbon than the coal-fired plants it frequently replaces – an important issue, given installed coal capacity is predicted to peak in Africa only in 2024 (AE 472/8).

GTP’s cost competitiveness is particularly strong for countries with their own gas resources. For those with the ability to export gas, it offers a route to accruing sorely-needed hard currency. WBG modelling suggests that Mozambique’s liquefied natural gas (LNG) projects should drive its fiscal revenues to a level 1.4-times higher in 2040 than they would be without those exports (AE 478/18).

Advocates for developing GTP in Africa also point out the ‘hypocrisy’ of richer countries on energy matters – which has been highlighted by European and other responses in the wake of President Vladimir Putin’s February 2022 invasion of Ukraine.

Wealthy industrialised nations still operate significant amounts of coal-fired capacity: Japan had 48GW in 2020 and commissioned a new 1GW plant in 2021; Germany had 37.9GW in 2022, including 18.9GW of lignite-fuelled capacity, which emits one- third more than hard coal.

It is indefensible for the 600m Africans without access to electricity to continue waiting while rich countries act in this way. Africa comprises 16.7% of the world’s population, but accounts for just 4% of global emissions. Leaders in Nigeria, South Africa and elsewhere have made this argument (AE 445/7).

This is not to ignore the existential threat posed by climate change. Many of the countries suffering the most from global warming are in Africa. Over the past year Mozambique, Malawi and Madagascar have suffered devastating cyclones thought by scientists to have been exacerbated by global warming.

On 27 April, the World Weather Attribution (WWA) initiative published research showing a drought in the Horn of Africa, which has left 4m needing assistance, had been made 100-times more likely by climate change.

RE is an essential tool in reducing global carbon emissions and keeping world-wide temperature rises down, but (while certainly far from perfect) gas can also be an enabler for that process. By providing the baseload and peaking capacity to assure grid stability, vast amounts of RE capacity can be added to grids.

GTP will likely be displaced by RE over time, as technology improves and other alternatives come into play. Investors are making big bets on the potential for green hydrogen (GH2) and improved batteries to compensate for the intermittency of solar and wind. In the future, tidal power might also play a role.

While a necessity for the short-to-medium term, gas projects can also be ‘greened’, to some extent at least. AIX participants talked about the potential of abating emissions where possible, such as electrifying gas liquefaction plants.

Infrastructure could also be converted to use hydrogen in the future. One speaker said it was increasingly asked whether projects will be capable of shifting over to GH2 “if and when it becomes available at scale”.

However, some innovations to justify hydrocarbon investment seem less credible. Bold claims have been made for the potential for carbon capture and storage (CCS) for years, but the technology is still unproven at scale.

For now, GTP is often the least-worst option for African policymakers seeking to square the circle of increasing energy access while reducing emissions and keeping tariffs affordable. While renewable energy might represent the long-term future, blocking investment in gas projects in the short-term could delay the rollout of renewable energy.

Also see:

Natural gas expected to remain the dominant fuel for African power in 2027

Map: Africa’s gas-fired power infrastructure

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