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In the future, energy systems will look entirely different from those we have today. We are living in the times of a global energy transition, which some would even call a revolution, gaining momentum by the day. Greener, more sustainable practices have been in the spotlight for over a decade now, and the ongoing war in Ukraine is setting off some meaningful procedures in motion as nations try to find creative ways to stir away from Russian oil.
As the energy industry continues this challenging transition period, renewables are put on a global pedestal.
Long-term trends are increasingly green
The global energy sector has had three very turbulent years. The industry was hit hard during peak Covid times, and the war in Ukraine triggered significant price rises, as the market strongly depends on supply security and affordability. Now, it seems as if the desire to steer away from Russian oil and gas might catalyze a quicker, more significant sector revision.
McKinsey’s latest Global Energy Perspective offers insight into the longer-term trends reshaping the energy landscape. According to the publication, renewable energy sources (RES) are projected to lead the power generation mix, reaching 80 —90% in 2050. Most of the growth will come from solar and wind due to declining costs which have been a driving factor in the explosion of renewables. Since 2010, the cost of solar photovoltaic electricity has fallen 85%, becoming the most cost-effective energy source in the world.
Renewable energy sources (RES) are projected to lead the power generation mix, reaching 80 —90% in 2050.
And it is a positive feedback loop that keeps on giving; the more renewable energy technologies are deployed, the cheaper they become, leading to more deployment. The numbers are extremely positive — over the past decade, each time that the amount of solar capacity deployed worldwide has doubled, the price of installing solar capacity has declined by 34%. With falling costs and growing adoption, the sun-based marvel is projected to make up 43% of the global generation in 2050.
But we do not have to wait that long. According to a recent International Energy Agency (IEA) report, By 2026, global renewable electricity capacity is forecast to rise more than 60% from 2020 levels to over 4 800 GW – equivalent to the current global power capacity of fossil fuels and nuclear combined. The amount of renewable capacity added from 2021 to 2026 is expected to be 50% higher than from 2015 to 2020.
The world is going solar, but what about Africa?
Looking at the renewable revolution from a geographical point of view, growth is forecast to increase in all regions. China remains the global leader in the volume of capacity additions. India is set to come top in terms of the growth rate, while deployments in Europe and the United States are also on track to speed up significantly from the previous five years. These four markets are set to account for 80% of renewable capacity expansion worldwide by 2026. So, where does Africa stand?
The International Renewable Energy Agency (IRENA) forecasts that with the right policies, regulations, and investment, sub-Saharan Africa could meet up to 67 percent of its energy needs by 2030 through renewables. Across the continent, multiple countries are increasingly embracing renewables, set to leapfrog to a sustainable energy future. Big countries, including Egypt, Ethiopia, Kenya, Morocco, and South Africa, have shown a firm commitment to accelerating renewable adoption, while smaller countries, including Cape Verde, Swaziland, and Rwanda, have also set ambitious targets. With year-round sunshine, Africa has 40% of the world’s solar potential, yet the continent contains only 1% of the world’s solar panels. That seems like an unsuited gap considering the continent still boasts 700 million people living without electricity access that could benefit from affordable solar products.
Africa has 40% of the world’s solar potential, yet the continent contains only 1% of the world’s solar panels.
The solution? A combination of local regulations and subsidies and international investment. African governments lift barriers currently impeding global efforts by private stakeholders, both for large-scale solar plants and off-grid systems that could connect hundreds of millions quickly and in the most affordable way.
A continent full of opportunities for growth and prosperity
Alongside its substantial potential for a greener, renewable-based future, Africa boasts multiple business growth opportunities, encompassing some interesting sectors and industries.
Electric mobility is a global growth driver (mind the pun), and African countries are taking special note of the opportunities it presents to leapfrog current shaky infrastructure. According to McKinsey, transport currently makes up 10 percent of Africa’s total greenhouse gas (GHG) emissions, which is expected to increase in line with sub-Saharan Africa’s expanding population. The vehicle parc (vehicles within a defined geographical region) is expected to grow from 25 million vehicles today to an estimated 58 million by 2040, making sustainable mobility an absolute must. Thanks to growing regulations and government support, a thriving start-up ecosystem for EVs, focusing particularly on electric two-wheelers, is emerging across SSA, with more than 20 start-ups in the ecosystem, which raised over $25 million in funding in 2021.
Looking at Africa’s largest sector, employing more than 60% of the continent’s population, agriculture holds massive business potential. One especially intriguing opportunity is the banking of smallholder farmers. Today, most farmers do not have access to the most basic financial services, meaning they are not able to take advantage of business opportunities, invest and save for the future, and insure against risks. According to a recent World Bank report, increased digitization of agribusiness payments can help advance financial inclusion, as well as enhance efficiency and transparency for agribusiness firms and improve the broader digital financial services ecosystem on the continent. Local and global entrepreneurs have been quick to enter the growing sector, and fintech is the most funded industry in the continent, while agri-fintech is becoming a major sub-section.
Africa holds some incredible paths for impact and scale, and governments should be supporting these efforts by every means possible.
With endless opportunities for sustainable business growth, it is becoming increasingly clear to investors worldwide that Africa holds some incredible paths for impact and scale, and governments should be supporting these efforts by every means possible. A new, tech-based infrastructure is the clearest route to boosting economies, establishing inclusivity, and creating a brighter future for hundreds of millions. It is time that Africa realizes its sunny potential.
Founder, Sorenson Impact Group
September 22 - 12:00 PM EST
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