Africa: The Role of Gas-To-Power on the Continent

It is of no surprise that Africa presents one of the greatest challenges in the provision of reliable energy to their continental population. Such a challenge must consider the reality of deprivation, both among governments and individuals, and what this means for the energy transition – does Africa accept continued deprivation

While the IEA has called on a halt to “all new fossil fuel developments”, this position is in direct conflict with the needs (not wants or desires) of African states to experience rapid fossil fuel funded development. At the current rate of electricity provision, according to the IEA, Africa will have 600 million people without affordable and reliable electricity by 2050. This is unsustainable in and of itself, and so within these competing positions there needs to be compromise.

Offshore the African coast, the continent has been flagbearer for new natural gas reserve discoveries. Senegal, Namibia, South Africa, Mozambique, Tanzania and Egypt (among others) are primed to shift their focus toward an even greater mix of gas-to-power and renewables. Pipelines connecting these natural gas hubs will provide faster and more efficient imports and/or exports to neighbouring states, lowering the cost of internationally sourced fuel imports – a major operational cost for power generation and barrier to affordable electricity. By developing a diverse energy mix that replaces oil and coal with renewables and natural gas, that compromise can be found.

African energy mix

Gas-to-Power is the popular choice among African states looking to diversify their energy mix away from coal, with gas power generation accounting for two-thirds of new capacity. Natural gas and LNG have been enjoying a renaissance in their broad utility throughout the energy transition, spurned onwards in popularity with the successive gas discoveries all along the African coast.

Such bountiful finds have pushed natural gas-powered electricity to become a primary focus of new energy supply, together with a renewed interest in renewable energy generation, which together can provide the consistency and affordability of supply that has long eluded the continent.

Gas-to-Power plants can therefore provide a dual role; firstly, as a ‘combined cycle’ plant that delivers electricity over longer periods (Levelised Costs of Electricity, LCoE of $56), or secondly, as ‘peaker’ plants that supply electricity at peak demand (LCoE of $175). Utilising both processes will create efficiencies between alternate supplies and ready the systems for a growing share of renewables.

Moreover, gas or LNG produced energy is both cheaper, more efficient and more sustainable than coal-thermal power which accounts for 29% of the continent’s energy generation capacity. Already occupying the largest share of the continental energy mix at 39%, the gas-to-power market will grow, while the restraints on coal finance and investment have deepened. In turn, natural gas is increasingly seen as the bridge to a low-carbon future. Replacing coal-thermal with gas-cycle powered turbines could immediately reduce the carbon footprint, as has been seen across the US and EU.

Natural Gas production

The global market for natural gas is set to boom in the coming years, unlike any other period in history. Demand for gas from the EU and Asia is set to double, the US is set to entrench their market position and African states have the opportunity to ease the economic constraints of costly fuel imports.

At the end of 2019, Africa has proven reserves of 527 trillion cubic feet (tcf) of gas across 22 nations present a promising case for energy self-sufficiency, access affordable energy for most consumers remains unreliable. The growing case for increased restrictions on coal finance and investment, has led to a reconsideration of energy priorities. The global LCoE for solar ($50/MWh) and onshore wind ($44/MWh) is increasingly comparable to hydrocarbons for some African states – yet the structural and cost barriers for renewable storage (LCoE $150/MWh), transmission compatible lines and generation consistency remain a hurdle to overcome.

Over the last 20 years African gas production has doubled from 124 bcf to 250 bcf – and this is before some of the recent large gas discoveries enter their production cycles. The sector is maturing rapidly, especially along the West and Southern African coastlines with governments seeking to maximise their ownership of these resources by expanding their gas-to-power generation capacity.

Gas-to-Power Market

The argument for allowing African states continued use of oil and gas while developed states reduce their use, has only grown with the impact of Covid. PwC’s ‘Africa Oil and Gas Review 2020’ estimates that the decline in oil revenue could be reduced by $1 trillion, and the direct GDP impact is valued at $243 billion. And while the oil market is more mature, the gas market is seen as equally necessary for future supply, 60% of production used for gas-to-power generation.

Setbacks caused by the pandemic, where exports declined 6% and production delays have created blockages in project pipelines, will no doubt have an inverse effect on the sector. Yet an optimism shines through as demand from Asian markets and domestic demand for gas-to-power generation will bring about as growth rebounds and the markets mature.

Key to ensuring the strength of continental and regional markets, is the capacity to maximise trade between neighbours and international exports through pipeline and port infrastructure respectively. Importantly, ageing coal-thermal plants can be re-purposed to fit closed-cycle gas turbines, as has been seen in the US with 103 coal plants being converted to gas-powered – enjoying the dual benefit of greater cost efficiencies and lower carbon emissions.  

A more mature Gas-to-Power market on the African continent seems an inevitability with the resources at their disposal, with a growing hope it may be the key to unlocking rapid energy access to those many million without.

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