Guillaume Estager: energy production in Africa hampered by weak transmission and distribution networks

A few months before the 27th United Nations Conference on Climate Change (COP27), which will be held from November 7 to 18 in Sharm el-Sheikh in Egypt, the French consulting firm specializing in the energy and infrastructure sectors in Africa Philae Advisory and Jeune Afrique Media publish a report entitled “ Climate finance: six key recommendations for African growth “. The result of a series of interviews with key decision makers in the sector and analyzes of reference case studies, the report offers a roadmap towards the continent’s energy transition.

In an interview with CommodAfrica, Guillaume Estager points out, first of all, that too few projects arrive on the market with an acceptable level of maturity and balance of risks; it is therefore necessary to work on a better structuring of the projects. Investors must also be encouraged to take an interest in energy storage and to develop alternative sources such as hydrogen intended, initially, for export to Europe, where demand will grow.

As for the role that agriculture can play in energy production in Africa, Guillaume Estager perceives it more under an opportunistic approach within the framework of the integration of a value chain and in the recycling of its agricultural waste, agriculture being intended above all in Africa to meet its food needs.

CommodAfrica: We have been talking a lot about climate and finance for quite some time now with regard to Africa, and this is gaining momentum. So what new does your study bring?

Guillaume Estager : I already think that there is an awareness that has evolved with COP 26 and COP 27 which will be held in Egypt and which will put Africa back at the center of the equation.

This report sheds both an updated and more general light on the issues. We can see that the subject of financing remains an important topic, but that the low number of projects that can be financed by the private sector remains one of the main blocking factors. There is no doubt that the needs are there, but access to electricity has changed relatively little in recent years. To give you an example, there are more people who do not have access to electricity on the African continent in 2022 compared to the year 2000. This is a fundamental question.

So it is important to ask questions about this. What more can we do than provide new funding?

CommodAfrica: The need for greater funding, the need for recourse to the private sector are objectives that have been heard for several years now. Wouldn’t the very innovative side of your study be based on identifying the blocking points in the chain, such as, for example, the weakness of electricity storage? In reality, does your statement want to focus more on who and how much we finance or what we finance?

Guillaume Estager : It’s a bit of both. Our point is to say that if we want to solve this problem of access to electricity, we have to work on a better structuring of projects, that is to say be able to bring to the market projects whose allocation risk is balanced, and which will therefore be attractive to private investors, the projects must be more derisked. Currently, we see too few projects arriving on the market with an acceptable level of maturity and balance of risks. International financial institutions have an important role to play in financing technical assistance to governments to support the rise of new private actors, which are still too few today.

Then, on the “how”, there are several elements. There is the “off-grid” part with two sub-parts, the mini-grids on one side (production and distribution of decentralized electricity from mainly renewable energies), and, second element of this off-grid, is what is called “domestic solar kits”.

We note that the improvement of access to electricity relies very heavily on this off-grid. However, this subject is still poorly addressed from a regulatory point of view and also from a financial point of view in the sense that these are modes of production which have not yet found a natural economic balance and which therefore rely on grants. There is a need to increase public subsidies, mainly from international organizations.

Then there is the subject of the network. We have seen an increase in production capacity on the African continent. This is not yet sufficient, but we are now seeing bottlenecks emerging in many countries – in Kenya, Ghana or even Senegal – where this electricity production is no longer able to progress due to the weakness transmission and distribution networks. So there is a need to address this bottleneck through investments in transmission and distribution networks but also in electricity storage, with the aim of rebalancing these networks and being able to increase the penetration of renewable energies.

CommodAfrica: When it comes to storage, are there miracle solutions?

Guillaume Estager : The problem is not so much technological. The subject is more about the establishment of an adequate regulatory context to allow private investors to position themselves on energy storage.

Concretely, on the regulations, it is already necessary to recognize the relevance of this technology: the storage will make it possible to increase the quality of the supply of electricity and will allow the penetration of renewable but will not directly increase the production of electricity. So it is essential to consider that this qualitative aspect is important and that it has a price. Hence the importance of providing fair remuneration for these storage capacities on the market, which is very rarely the case today, apart from a few projects in South Africa. But in sub-Saharan Africa, the authorities are still struggling to put a price on this qualitative aspect provided by storage.

CommodAfrica: So you think that the problem has shifted in recent years, that we have made a big effort on production and that now we are more on downstream problems?

Guillaume Estager : Yes, downstream when it comes to transmission and distribution. Storage is an answer – more generally transport and distribution. But it is also a question of concentrating on everything that is off-grid and that will make it possible to address the problem of access to electricity.

CommodAfrica: In the report, you mention hydrogen. Do you recommend a ramp-up in this segment?

Guillaume Estager : There are two topics around hydrogen: production and use. We say that Africa, because of its land availability, its extremely high sunshine in certain regions, its wind potential, but also because of its proximity to Europe, especially with regard to North Africa, Africa has the possibility of being an extremely competitive player in the production of hydrogen in order to meet a demand which will be exponential in Europe.

CommodAfrica: So it would be a production intended for export?

Guillaume Estager : Yes, we are mainly on an export subject but which will have a positive impact in African countries in terms of income and also in terms of capacity to accelerate a transition to hydrogen. But the subject today is not so much the direct use of hydrogen on the African continent. We can imagine it for some industries that consume a lot of electricity, but the main goal will remain export.

CommodAfrica: Why couldn’t Africa consume its hydrogen? Why would it reposition itself again on an export scheme?

Guillaume Estager : It’s not about “getting back” into an export scheme: it’s about capitalizing on competitive advantages. There is an interest in the African continent. But when you look at the potential uses of hydrogen, they are for heavy industry, heavy transport by ship or very large trucks. These are the main uses.

So, in terms of needs, the African continent today has few needs that are potential consumers of hydrogen. This does not mean that it should be neglected, but it does mean that the market opportunity today is above all export.

CommodAfrica: What contributions could agriculture and agro-industry have -waste, by-products, etc- for the production but also the distribution of energy?

Guillaume Estager : Agriculture can play an important role, particularly in the waste segment to produce biomethane, for example, and there are projects on the continent. When you look at the different electricity production scenarios, how important will biomethane be as a source of energy and electricity? I doubt it will become important. Afterwards, it is important to have an opportunistic approach that can make sense in the context of the integration of a value chain and in the recycling of agricultural waste.

So you have to look at these opportunities. But is it something major? No, I do not think so.

CommodAfrica: But when you look at countries like Brazil for a long time and more recently India and other countries, you see the importance of agricultural by-products in making energy… Why not design this for Africa ?

Guillaume Estager : As you know, the essential problem of the African continent is food self-sufficiency. Agricultural production must go, as a priority, to the satisfaction of the primary needs of the continent. Is there the possibility of industrializing the use of agricultural products for the purpose of large-scale energy production like in Brazil, I doubt it.

Leave a Comment

Your email address will not be published.