With the solar energy boom, Africa is facing an unprecedented opportunity
By Yariv Chen, Ignite Investments Partner; Published on The New Times
This week Joe Biden will be inaugurated as the 46th president of the United States, after what was probably one of the most controversial elections in history. As in every US election, global stock markets shift and turn according to the elected candidate’s main objectives and proclaimed initiatives, and one of the leading agendas of the new government is Renewable Energy.
Biden has already announced his plan for Climate Change and Environmental Justice, pledging the U.S. will achieve a 100% clean energy economy and net-zero emissions no later than 2050. The four-year climate plan will cost ~$2 trillion, focusing on infrastructure and clean energy investments to rebuild the economy that was badly hit by the Covid pandemic.
The new Biden administration is yet another reason for a trend we have been witnessing in recent months, with cleantech and renewable energy stocks soaring, and becoming the hottest investment around the globe. With billions of dollars pouring into the field, long-awaited changes in the energy sector are taking form and their impact will be noticeable throughout the world, even in the farthest villages of Africa.
A green boom
2020 had some substantial reasons for the boost in renewable energy investments. Oil prices reached an all time low, the EU announced a Green Deal, striving to be the first climate-neutral continent with zero GHG net emissions by 2025, global opinion and activism continued driving investors to clean tech, and renewable power was found to be a cheaper, more viable option than building new coal plants.
Global predictions of energy use also catapulted. According to the International Energy Agency (IEA), renewables reached 30 per cent of global electricity generation capacity in 2020. The agency predicts that renewables will overtake coal to become the largest source of electricity generation worldwide by 2025, and that solar technology will be responsible for most of this growth.
These are only some of the reasons that led many renewable companies to more than double their share price in 2020. After about a decade of somewhat poor performances, big money is now rushing into the sector, which could be noticed by the soaring number of SPACs merging with clean-tech ventures, and public companies that have seen growth of hundreds of percent in their share price.
The stock surge is hitting across clean tech, from solar installers to wind companies to electric cars. Tesla Inc., Elon Musk’s electric car maker has grabbed much of the attention with a 695% jump during 2020. Plug Power, a renewable energy company that develops hydrogen fuel cell systems, saw its shares go up by over a staggering 600% year-to-date. The WilderHill New Energy Global Innovation Index of 87 companies has soared 31% this year, eclipsing the Nasdaq’s 21 per cent gain.
Looking ahead, the National Renewable Energy Laboratory (NREL), a national laboratory of the U.S. Department of Energy estimated that investments in energy storage, or batteries, would increase at least seven-fold from 2019 to 2024, with demand shooting up another 22 times by 2050.
The jump in share prices and stocks reflects a growing confidence in what was not so long ago considered a risky industry. This shift has tremendous potential for the planet, and for communities everywhere. And while in the western hemisphere it entails big solar power plants, giant fields of wind turbines, and electric cars, in developing countries, and especially Africa, renewable energy is a far more basic solution for everyday needs.
In terms of energy consumption, Africa has some interesting statistics. The continent boasts 16% of the global population, yet accounts for only 6% of the global energy demand and under 3% of electricity demand. These numbers have much to do with the fact that out of the 940 million people living without electricity access globally, 70% reside in Africa. In the past decade, countries across the continent have turned to renewable, mostly solar-based off-grid energy solutions, and with hundreds of millions of potential customers, the possibilities for the renewable sector are pretty much endless.
All renewable, all good
Unlike other countries, where 100 per cent of the population has access to electricity, and energy consumption is an obvious concept, Africa, and more specifically the Sub Saharan region is in dire need of energy solutions. 600 million people do not have electricity in their homes, with entire communities and extensive rural regions remaining completely off-grid. This presents an opportunity for vast deployment of renewable solutions that are scalable and affordable, while also adhering to the desired sustainability act that most of Africa’s countries have pledged to under the Paris Agreement.
As Africa steps into a new year that has sustainability written all over it, the continent has an incredible potential to situate itself as the global leader of the sustainability era. Hundreds of millions can leapfrog classic energy solutions and go straight to solar, wind or hydro. Entire villages could go from energyless to 100 per cent green in weeks, with fast action and the right investments. On the other side of the business equation, this presents a fertile ground for innovators and investors to deploy their pioneering solutions, with millions of potential clients and local governments searching for the right people to help them reach their electrification, sanitation, irrigation, transportation, or healthcare goals.
As billions pour in the cleantech and renewable energy sphere, Africa is the best deployment location for new, innovative technologies. The continent’s great needs can and should be translated to a leapfrogging reality, where Africa becomes the world leader of renewable technologies, the place where everyone looks to for inspiration. It is a mutual task for the private sector and for governments alike to make this happen.