Fuelling the future: How Africa’s natural resources could transform the continent

Energy poverty is common across Africa. Some 600 million people lack access to electricity, while four-fifths of the population continue to rely on traditional fuels for cooking, resulting in chronic indoor air pollution and countless premature deaths each year.

This is not a resource issue. Africa is home to vast renewable power potential that could rapidly transform its perilously low per capita electricity consumption. It is also a major oil and gas producer with plentiful resources, and it sits on a wealth of minerals crucial to electrification.

Africa’s clean energy potential has yet to be realised, however. While its metals are built into green technologies worldwide, it too often fails to increase electricity access at home. Oil and gas projects are too often hamstrung by above-ground risks, underdeveloped local gas markets, limited access to finance and the Global North’s focus on its emissions – even as wealthier countries bolster their own energy security with more oil and gas production.

Emissions cannot and should not be dismissed, but Africa’s emissions are low. Unlocking its low-carbon energy potential and mineral resources while developing its untapped oil and gas reserves would give it a fighting chance at future energy prosperity.

What can Africa do?

Africa has the resources to achieve energy sufficiency. It is home to some of the world’s highest solar irradiation levels, boasts excellent wind resources and has significant undeveloped hydropower potential. Wood Mackenzie forecasts Africa’s total solar and wind capacity to grow almost 600% by 2035, albeit from a very low base. Moreover, as exploration continues, Africa can secure even more hydrocarbon resources. Increasing investment across the energy value chain is key.

Solar power should be a priority

Despite having around 40% of the world’s best solar potential, Africa is home to less than 2% of global solar capacity. Innovative solutions could accelerate capacity, enabling Africa to benefit from lower solar-panel costs and pair solar with battery storage.

Low-cost modular forms of power are increasingly attractive, with commercial and industrial customers now replacing diesel generators entirely or combining them with solar panels and batteries. Developing micro- and mini-grid projects, meanwhile, is a proven way to quickly connect rural areas.

Accelerating green investment

Accelerating investment in Africa’s low-carbon energy potential should be a priority. The continent currently attracts just over 2% of global energy investment. Its major clean energy bottleneck is capital formation. Though billions of dollars are pledged in annual climate finance for Africa, competing capital commitments make meeting these targets more challenging.

Lenders should also consider bolder finance initiatives to support investments in African renewables and electricity infrastructure. By expanding concessional and blended finance, for example, African clean energy projects would be better positioned to access affordable debt and reach scale.

Capitalising on home advantage

Africa is the dominant global source of cobalt, while its copper production makes up around one-fifth of total supply. African copper, lithium, cobalt, manganese and rare earth elements are increasingly found in clean technologies worldwide.

While these minerals provide valuable revenues, most production is exported to China for processing before end-use in renewable energy and battery manufacturing. China’s risk-tolerant investment in resource-rich countries could give Africa an opportunity to strike deals for investment in clean energy projects in return for access to critical minerals.

Maximising hydrocarbon riches

Africa also needs to maximise its oil and gas production. Only around one-third of discoveries have been commercialised to date. Many African producers have ambitious plans to boost oil and gas output but are increasingly frustrated by the challenges involved. Major barriers include poor governance, weak regulation and limited local gas markets, fuelling a lack of access to competitive finance for local firms. Maximising revenues from Africa’s oil and gas projects would support economic growth and increased energy access.

>> To find out more, see Wood Mackenzie’s November edition of Horizons.