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Whilst this is an incredibly complex topic and requires engagement and action from multiple stakeholders, in this blog, we discuss at a high-level the CO2 emissions linked to production, consumption, trade and how the greater (albeit justified) focus on emissions may be penal for developing countries, as much of the emissions produced in developing countries are linked to export flow to developed markets.



Who has contributed most to emissions?

Since 1751 the world has emitted over 1.5 trillion tonnes of CO2. To reach our climate goal of limiting average temperature rise to 2°C, the world needs to urgently reduce emissions. One common argument is that those countries which have added most to the CO2 in our atmosphere – contributing most to the problem today – should take on the greatest responsibility in tackling it.

There are some key points we can note from this perspective:

  • The United States has emitted more CO2 than any other country to date: at around 400 billion tonnes since 1751, it is responsible for 25% of historical emissions;

  • This is twice more than China – the world’s second largest national contributor;

  • The 28 countries of the European Union (EU-28) – which are grouped together here as they typically negotiate and set targets on a collaborative basis – is also a large historical contributor at 22%;

  • Many of the large annual emitters today – such as India and Brazil – are not large contributors in a historical context;

  • Africa’s regional contribution – relative to its population size – has been very small. This is the result of very low per capita emissions – both historically and currently.

Through the unchecked utilisation fossil fuels and industrial revolutions todays developed markets got to where they are today. These countries now have the technology and financial capabilities to help fast-track the energy transition in developing markets and share best practices learned over time and through R&D to optimise CO2 emissions as they go on their growth journeys as well as produce goods consumed in developed markets.


On a production basis, Asia is by far the largest emitter, accounting for 53% of global emissions. As it is home to 60% of the world’s population this means that per capita emissions in Asia are slightly lower than the world average – however this population has increasing wealth and demands on resources.


We have seen action being taken to help tackle this, for example, The Association of European Development Finance Institutions (EDFI), which has a combined US$50 billion under management in emerging and frontier markets, have been strong proponents of sustainable and responsible investing across sectors since their inception, however, to help further fast-track the change that is required to avoid the impending climate crisis, greater tempo and more stakeholders need to act, particularly private sector investors.


Whilst emissions can be optimised via such support, one of the key aspects that needs to be addressed is the inequality in emissions production and consumption, and a greater emphasis put on “reduce & replace” measures.


Global inequalities by production

There are two parameters that determine our collective CO2 emissions: the number of people, and quantity emitted per person. We either talk about total annual or per capita emissions. They tell very different stories, and this often results in confrontation over who can really make an impact: rich countries with high per capita emissions, or those with a large population.


Emissions by country’s income

  • When aggregated in terms of income, we can see that the richest half (high and upper-middle income countries) emit 86% of global CO2 emissions. The bottom half (low and lower-middle income) only 14%. The very poorest countries (home to 9% of the global population) are responsible for just 0.5%. This provides a strong indication of the relative sensitivity of global emissions to income versus population. Even several billion additional people in low-income countries — where fertility rates and population growth are already highest — would leave global emissions almost unchanged. 3 or 4 billion low-income individuals would only account for a few percent of global CO2. At the other end of the distribution however, adding only one billion high income individuals would increase global emissions by almost one-third.

Emissions by world region

  • When aggregated by region we see that North America, Oceania, Europe, and Latin America have disproportionately high emissions relative to their population. North America is home to only 5% of the world population but emits nearly 18% of CO2 (almost four times as much). Asia and Africa are underrepresented in emissions. Asia is home to 60% of the population but emits just 49%; Africa has 16% of the population but emits just 4% of CO2. This is reflected in per capita emissions; the average North American is more than 17 times higher than the average African.

This inequality in global emissions lies at the heart of why international agreement on climate change has (and continues to be) so contentious. The richest countries of the world are home to half of the world population and emit 86% of CO2 emissions. We want global incomes and living standards — especially of those in the poorest half — to rise. To do so whilst limiting climate change, it’s clear that we must shrink the emissions of high-income lifestyles. Finding the compatible pathway for levelling this inequality is one of the greatest challenges of this century.


Global inequalities by consumption

The initial comparison of emissions by income group and region was based on ‘territorial’ emissions (those emitted within a country’s borders) — these are termed ‘production-based’ and are the metrics by which emissions are commonly reported. However, these emissions do not account for traded goods (for which CO2 was emitted for their production). If a country is a large importer of goods, its production-based emissions would underestimate the emissions required to support its standard of living. Conversely, if a country is a large goods exporter, it includes emissions within its accounts which are ultimately exported for use or consumption elsewhere.


How do consumption-based emissions change the emission shares by income group and region?

On a production basis we had previously found that the richest (high and upper-middle income) countries in the world accounted for half of the population but 86% of emissions. On a consumption basis we find the same result but resulting from the fact that upper-middle income countries primarily export emissions to high income countries. High income countries’ collective emissions increase from 39 to 46% when adjusted for trade (with only 16% of the population); upper-middle income countries’ emissions decrease by the same amount (7% points) from 48 to 41%. Overall, this balances out in the top half of the world population: upper-middle income countries are net exporters whilst high income net importers.


In the bottom half, it appears that very little changes for the collective of lower-middle- and low-income countries: their production and consumption emissions shares are effectively the same.


By region we see that traded emissions tend to flow from Asia to North America and Europe (Asia’s share reduces when adjusted for trade whilst North America and Europe’s share increases).


Note here that consumption-based emissions are not available for all countries. Collectively, countries without consumption-based estimates due to poor data availability account for approximately 3% of global emissions. Many of the missing countries are at low and lower-middle incomes. With the addition of these countries, we would expect small percentage point shifts across the distribution. The challenges in accounting for carbon embedded in global trade mean these estimates are not perfect; nonetheless they should provide a good approximation of the global transfers across the world.


On a consumption basis, high-income countries (Europe and North America in particular) account for an even larger share of global emissions (46% — nearly three times their population share of 16%).


Which countries in the world are net importers of emissions and which are net exporters?


To give a perspective on the importance of trade these emissions are put in relation to the country’s domestic, production-based emissions.


Countries shown in red are net importers of emissions – they import more CO2 embedded in goods than they export. For example, the USA has a value of 7.7% meaning its net import of CO2 is equivalent to 7.7% of its domestic emissions. This means emissions calculated on the basis of ‘consumption’ are 7.7% higher than their emissions based on production.


Countries shown in blue are net exporters of emissions – they export more CO2 embedded in goods than they import. For example, China’s value of -14% means its net export of CO2 is equivalent to 14% of its domestic emissions. The consumption-based emissions of China are 14% lower than their production-based emissions.


We see quite a regional East-West split in net exporters and importers: most of Western Europe, the Americas, and many African countries are net importers of emissions whilst most of Eastern Europe and Asia are net exporters.


We see that the consumption-based emissions of the US are higher than production: In 2016 the two values were 5.7 billion versus 5.3 billion tonnes – a difference of 8%. This tells us that more CO2 is emitted in the production of the goods that Americans import than in those products Americans export.


The opposite is true for China: its consumption-based emissions are 14% lower than its production-based emissions. On a per capita basis, the respective measures are 6.9 and 6.2 tonnes per person in 2016. A difference, but smaller than what many expect.


Whilst China is a large CO2 emissions exporter, it is no longer a large emitter because it produces goods for the rest of the world. This was the case in the past, but today, even adjusted for trade, China now has a per capita footprint higher than the global average (which is 4.8 tonnes per capita in 2017).


These comparisons provide an answer to the question whether countries have only achieved emissions reductions by offshoring emissions intensive production to other countries. If only production-based emissions were falling whilst consumption-based emissions were rising, this would suggest it was ‘offshoring’ emissions elsewhere. There are some countries where this is the case. Examples where production-based emissions have stagnated whilst consumption-based CO2 steadily increased include Ireland in the early 2000s; Norway in the late 1990s and early 2000s; and Switzerland since 1990.


On the other hand, there are several very rich countries where both production- and consumption-based emissions have declined. This has been true, among others, for the UK, France, Germany, and the USA. These countries have achieved some genuine reductions without outsourcing the emissions to other countries. Emissions are still too high in all these countries, but it shows that genuine reductions are possible.


In most countries emissions increased when countries become richer, but this is also not necessarily the case: by comparing the change in consumption-based emissions and economic growth we see that many countries have become much richer while achieving a reduction of emissions.


Net Zero

Net zero emission means that all man-​made greenhouse gas emissions must be removed from the atmosphere through reduction measures, thus reducing the Earth's net climate balance, after removal via natural and artificial sink, to zero.


This concept has grown in popularity, with many developed market firms setting net zero targets, with netting achieved primarily via the purchase of carbon offsets. Whilst this goes a long way in supporting emissions targets, this is only part of what is required. Greater emphasis needs to be placed on the reduction and replacement of emissions.


How can developed markets help to balance carbon inequality?

Consumption-based emissions reflect the consumption and lifestyle choices of a country’s citizens, this is what drives a significant portion of emissions generated in developing markets as we have seen above. Accordingly, these countries citizens have great influence to help address the emissions output globally. Some of the many practical ways this can be achieved is via:

  • Calculating one’s personal footprint – you may be surprised with the results!

  • Conscious consumption choices – for example, there is considerable evidence that reducing the consumption of meat has significant environmental benefits

  • Focusing on reusing or recycling goods rather than discarding

  • Replacing high emissions activities with lower – e.g. can one walk or cycle to work vs. drive?

  • Championing reduction and replacement activities with their employers

  • Actively lobbying investment firms who manage their capital (e.g. savings, pensions etc.) to adapt their investment strategies to directing capital to “greener” investments (in both developed and emerging markets) and provider greater transparency of their activities

  • Whilst individually, our savings might be small, collectively we can make a change.


For example, at Qbera Capital, we so far this year, we have conducted a detailed review of our emissions footprint, as well as identified reduction and replacement actions that are now being implemented. To learn more about what we are doing, feel free to contact us.


Source:

1. https://ourworldindata.org/CO2-emissions

2. https://www.carbonbrief.org/in-depth-will-countries-finally-agree-climate-deal-for-shipping

3. https://www.carbonbrief.org/mapped-worlds-largest-co2-importers-exporters

4. https://www.myclimate.org/information/faq/faq-detail/what-does-net-zero-emissions-mean/



Key highlights:

  • Currently over 70% of all greenhouse gas emissions originate from urban communities

  • Forecasts indicate that 68% of the world’s population is projected to live in urban communities by 2050

  • Sustainable infrastructure investments are one the rise – but challenges remain to mobilise capital at scale

  • Emerging Markets hold the largest potential for sustainable infrastructure improvements to decarbonise cities and communities – nonetheless investment shortfall of $2.1 tn annually

According to the UNs Sustainable Development Goals (SDG), goal number 11 targets Sustainable Cities and Communities. It aims to reduce the risk of natural disaster, implement national sustainable development strategies (NSDS) as well as promote decarbonisation in city design and transport . One of the most prominent challenges society currently faces relates to inequality and the levels of urban energy consumption emissions. UN backed research has highlighted that over 70% of all greenhouse gas emissions originate from urban areas, indicating the need for drastic change.


By 2025-2030, estimates predict over 630 million people will be living in close to 40 megacities around the globe. Emerging economies will remain the key protagonist of this transformation, with over 95% of urban expansion taking place in developing countries. The future everyone desires includes cities that offer clean energy, access to basic services, a larger degree of equality, affordable housing, green transportation and much more. Alongside economic growth, sustainability is necessary to ensuring a decent quality of life for everyone. Consequently, as our interaction with the planet becomes a critical issue to consider, the question poised is:


How can we make cities sustainable, resilient, inclusive and safe as we promote economic growth?


Balancing Impacts for Society & Planet

With the climate crisis intensifying, we must aim at balancing the social consequences that society will face as well as the environmental consequences our planet earth encounters. If unsuccessful, one will soon find the neglected impact on the planet seriously limiting societies wellbeing all across the globe. The graphic below summarizes this ambition by presenting all Sustainable Development Goals.


The SDGs are not strictly focused on environmental concerns; however, many goals very much rely on an equal balance. One of the greatest challenges since the turn of the century has been the conflict between urbanisation and costly environmentally friendly development. Over 60% of land close to major cities is predicted to be urbanised in the short to medium future, indicating a great opportunity for positive change.


The Role of Sustainable Infrastructure

The concept originally arose following growing demand to make infrastructure and services designed to meet the population's essential service needs (and with a clean carbon neutral footprint). Sustainable infrastructure describes all appliances, equipment and systems that are designed to service societies needs but at the same time have minimal negative impact on the environment. From a wider perspective, sustainable urban infrastructure investment is capable to serve as a source of social wellbeing and financial returns. Likely to promote greater productivity, fuelling economic growth and the size of the job market, sustainable infrastructure is also about promoting decarbonisation in cities – not surprising that investors are now seeking to understand its role in decarbonisation and sustainability when looking at this asset class.


Amongst some of the thematic areas within sustainable infrastructure, those highlighted below are crucial in unlocking long-term sustainable AND carbon free growth:

  • Public transport infrastructure carbon emissions shouldn’t go unnoticed, especially in metropolitan communities. As a prime example, Copenhagen is currently making large investments into developing their public transport system. The city is transforming into one of the most innovative capitals world-wide. The goal is to achieve the carbon neutral balance by 2025. Local projects encourage walking and cycling with 400km of cycling paths, however if needs be, the new metro ring can serve up to 85% of residents per day, whilst running the most efficient electric tube technology that is currently available. This should serve as a good example for other cities, to promote cycling, walking and the use of public transportation, in order to come closer to carbon neutrality.

  • Telecommunications and smart infrastructure are a vital contribution to the digitalisation and inclusion for many communities in both developed and emerging markets. As we live in an ever connected world, the prominence of telecoms, data centre and fibre optic applications will continue to rise as it represents the main backbone for any successful rollout of 4G and 5G infrastructure. Many governments of the Global North are already making or facilitating sector specific investments to improve telecommunications and internet connectivity. As put out in our piece, solving the last mile problem across emerging markets is the also an undisputed goal in enhancing connectivity, increase productivity and innovation, and ultimately reduce economic and data poverty.

  • Mobility has dominated personal freedom for many generations. A key challenge will be to make environmentally friendly automobiles for personal ownership or ride sharing projects. Electric or hydrogen cars are the pinnacle of modern age research in the industry. Which of the two technological strategies is able to dominate in the long-term is still uncertain. As green as electric vehicles might appear at first, an often-overlooked hitch are the toxic contents of the lithium batteries. On a similar note, hydrogen is inefficient and not much cleaner in production than gasoline would be. Current trends indicate a general acceptance of shared mobility and increased use of public transport, which is a step in the right direction.

  • Renewable energy is another key component within sustainable infrastructure. In order to lower the carbon footprint, striving towards a net-zero world, we must make green energy the norm and more affordable. The IEA suggest that energy use in over three thousand major cities accounts for 60% of global energy demand. Hence, the opportunity to integrate renewable energy generation within cities itself becomes a promising project. Solar, Wind and biomass energy are universally applicable methods, whereas Hydro, Tidal and Geothermal energy are location specific. The challenge is not only to focus on energy creation, but also a sustainable distribution network and efficient energy storage mechanisms. A net zero carbon balance being the target across most sectors, with Carbon Capture technologies to acts as deterring and re-emerged as a key decarbonisation method.

  • Carbon Free Heating (and cooling) holds significant potential for cutting urban greenhouse gas emissions. District energy systems have been a backbone in the energy transition potential. Heating and cooling accounts for almost half of global energy consumption. Current systems remain largely reliant on fossil fuels and thus contribute heavily to greenhouse gas emissions and air pollution. Establishing carbon free heating and cooling infrastructure can contribute to green economic growth through, for example, cost savings, reduced GHG emission, higher efficiency, reduced fossil fuel expenditure, local tax revenue; and employment. As one example, City of Berlin aims to decarbonise district heating with new energy transition law.

  • Affordable housing: Urbanization is driving construction. By 2050 the world’s population will require new housing and built environment for over 3.5 billion. Supporting affordable and social housing initiatives, particularly in emerging markets where the affordability gap is the highest, is likely to have a significant impact, including increases in local purchasing power, job creation and new tax revenues. Other themes such as landscape infrastructure, commonly referred to as green areas in cities to absorb CO2, have proven to significantly improve quality of life, minimise air pollution and serve as internal temperature regulators. Government incentives have also promoted green public and private buildings, as well as overwhelming interest by international investors. A pioneer example is Masdar, a planned city south of Abu Dhabi. A one-of-a-kind project, that promises to deliver a net zero-carbon footprint.


Net Zero Carbon Footprint

Net zero is achieved when the amount of CO2 emitted is equal to the amount absorbed from the atmosphere. The UK became the world’s first major economy to set a target of becoming net zero by 2050, and recently the EU adopted a climate change law that legally obliges its 27 nations to collectively slash greenhouse emissions by 55% by 2030. In order to achieve net zero, significant investment efforts will need to be undertaken (yet again, most around infrastructure sustaining urban cities).


For example, in the EU five sectors emit the bulk of the European Union’s greenhouse gases: 28 percent comes from transportation, 26 percent from industry, 23 percent from power, 13 percent from buildings, and 13 percent from agriculture. Across sectors, fossil fuel combustion is the biggest source of GHGs, accounting for 80 percent of emissions.


Today, agriculture and industry represent the biggest challenges. The speed of decarbonisation in these sectors depend on the availability of mature technology and the ability to scale supply chains.


Agriculture is the hardest sector to achieve net zero because more than half of agriculture emissions come from livestock and corresponding emissions and today can't be reduced without technological breakthroughs or widespread societal changes in meat consumption both remain yet to take place. Furthermore, the industrial sector is labelled as the most expensive sector to decarbonise and some would continue to suggest some industries would continue to generate residual emissions.


The Chemicals, Steel and Cement Industries specifically, have repeatedly expressed their concerns about the net zero ambition. Internal industry commitments have indicated a reduction of up to 60% of total emissions by 2050, leaving much room for improvement. Companies in the sector claim current green technology is too costly, in relation to the small improvements they would guarantee.


Focus on Emerging Markets

Eight of the top ten megacities are located in emerging countries, clearly indicating that most potential for development in cities and communities is to be found in emerging markets (EM) . Currently, most megacities have poor and inefficient infrastructure as well as outdated, broken-down or even no means of public transport. All data indicates that sustainable infrastructure investments can make a very large impact in terms of social and economic benefits. However, access to funding remains the key challenge:


Annual Investment Shortfall in Emerging Markets to meet SDGs by 2030

As highlighted in our previous SDG 7 publication, due to the lack of foreign institutional investment in EM, it seems very likely that the UNs SDGs - including the goal of sustainable cities & communities will not be met in most developing economies. A study by the International Finance Cooperation (a subsidiary of the World Bank) has attempted to explain this rather dramatic shortfall of EM investment through unstable political systems that make risk calculations vague as well as the very limited amount of precise resources that are available for research.

Source: IEA, IMF Fiscal Policy & Dev Jan 2019, FactSet, Bain & Co, Global PE Report 2020


Experts often reiterate that emerging market investments show greater resilience to economic cycles and low correlation with other asset classes. Cash flow can therefore be made more predictable, making stable but risk adjusted returns for international investors possible. The message is a clear one: “Investment should be directed towards EM”, because around 5bn humans currently live-in developing economies and World Bank data suggests that more than 90% of all future urban population growth will occur in Africa, Asia and Latin America. The 2021 Energy Review report by the IEA states that “Emerging Markets account for 2/3 of all CO2 emissions world-wide”. As many of these economies still find themselves at basic levels of development, they subsequently bare the most potential with relatively small amounts of investment stimulus required.


Areas to watch for

  • Affordable and sustainable transport infrastructure continues to be of interest. Broad benefits include increasing mobility, employment opportunities and reducing the environmental impact of cities.

  • Provision and protection of access to safe and inclusive green and public spaces remains a public concern. Unplanned urban sprawl makes it difficult to protect spaces that are crucial to minimising air pollution and maximising quality of life for citizens.

  • Concern over air pollution is expected to grow as scientific research reveals more about adverse consequences on health.

  • An increasing number of regions will develop and implement integrated policies for inclusion, resource efficiency and disaster risk reduction.

  • Further research and development should be lead through an integrated approach that includes the perspective of the global South, rather than a neo-colonial externally imposed agenda.


Closing Remarks

We must acknowledge that in order to attain sustainable cities and communities, we must promote much more foreign direct and domestic investment. The drive towards goal 11 targets has resulted from the ambition to make cities and human settlements inclusive, safe, resilient and sustainable. However, major challenges have been posed by unplanned urban sprawl, excessive resource use and worsening pollution. We foresee huge potential for small investment stimuli to work towards solving these issues in emerging markets whilst delivering high returns. As the world becomes increasingly urbanised, investments in SDG 11 will become all the more crucial to communities and rewarding to investors.

Sources:

https://www.un.org/sustainabledevelopment/cities/

https://sdg-tracker.org/cities

https://ec.europa.eu/eurostat/web/sdi/sustainable-cities-and-communities

https://www.blueorchard.com/investment-expertise/sustainable-infrastructure/

https://www.pwc.com/gx/en/industries/assets/pwc-increasing-private-sector-investment-into-sustainable-city-infrastructure.pdf

https://www.mckinsey.com/business-functions/sustainability/our-insights/how-the-european-union-could-achieve-net-zero-emissions-at-net-zero-cost

https://irena.org/publications/2016/Oct/Renewable-Energy-in-Cities



Sub-Saharan Africa is in the process of an energy revolution, with the rise of renewable energy spreading across the continent. This transition has been supported from a multitude of initiatives and mechanisms in an attempt to overcome the challenges present in this evolving market. Emerging markets witnessed 107GW of clean energy capacity additions in 2018, for which only 870MW (440MW of Solar PV excluding South Africa) commissioned in Sub-Saharan Africa, which is surprising given the energy potential of the continent.


Renewable Transition in Sub-Saharan Africa

The backing for renewable energy in Sub-Saharan Africa has been accelerated through a fall in the cost of technologies such a PV Solar & Wind. This supported by some successful utility scale tenders and progressive policies facilitating the sector to flourish. It has all come at a time where the world is witnessing an increased escalation with regards to climate change initiatives, investment support and demand on sustainability-linked instruments.


The cost and adaptability of Solar PV technology has been a large catalyst to this transition, lending itself well to a dislocated energy market seen across the African continent. The cost of Solar PV modules has fallen from c.$2.27/W (2009) to c.$0.27/W (2018). Some geographies in Sub-Saharan Africa still suffer from other inefficiencies (administrative, logistical and project risks) that ultimately drive Capex costs north of $1.5m/MW. Mechanisms have been increasingly developed to lower these costs and thereby de-risk parts of the supply chain, allowing for developers to deploy cost-effective solar solutions despite the risk associated to some markets. Domestic efforts to drive competition in the market has also started to take hold, driving costs lower in some countries such as Ivory Coast, Nigeria and Zimbabwe – to name a few.


International and domestic supported policy initiatives have furthered uptake of renewable energy in the continent. The emergence of blended finance initiatives, bringing together public and private sector financing, has begun for some exciting financing initiatives to become mainstream. Multilateral backed auction programs have also proved successful as the market becomes increasingly standardised. Feed-in tariffs (REFIT & GET FiT programs) have been scarce in Sub-Saharan Africa with only select “market-ready” countries launching such programs (Uganda & Zambia – to name some), although this has achieved some of the primary goals in driving down power generation costs, opening the renewables market and ultimately mobilising private and public investments through renewables capacity additions.


A review of local legislations and regulation, many of which are still outdated to support a renewable energy transition, has begun to allow for more standardised processes for licensing and construction of both small scale (captive, off grid etc) and large scale (utility) solutions. The transparency added through these changes gives more visibility on permits and construction, increasing bankability of projects for investors. Further, delivering power policies allowing for the periodic institutional reform of utilities will help tackle one of the long term challenges across most of the countries.


These changes in the dynamics of Sub-Saharan Africa’s renewables market have allowed investment flows totalling $620m in 2018. Renewable capacity amounting to 310GW could provide half the continents electricity generation capacity. A transformation of this scale by 2030 would require annual investment of $70bn into the African renewables sector. A gap that primarily has been backed by development banks over the past decade and a trend which is likely to be continued. Although more recently being increasingly backed by private and impact investors.


Rise of Commercial & Industrial Renewables Solutions

There has been a multitude of challenges facing C&I operators in Sub-Saharan Africa, one of which is access to reliable and consistent power pricing. Witnessed in many emerging markets and highly prevalent in Sub-Saharan Africa, grid reliability is often poor with load shedding becoming necessary to manage the demand for electricity. This is coupled with Sub-Saharan countries relying on either fossil fuels, which are exposed to varying commodity prices, or Hydroelectric power which can be swiftly disrupted by a lack of rainfall. The costs can be very severe if businesses cannot operate at full capacity, and punitive costs for backup generation often hampering the small and medium enterprises.


A solution for C&I businesses that have high electricity consumption presents itself as on-site Solar PV, usually installed on rooftops and/or nearby land (and in rare cases on water reservoirs). This has become an increasingly adopted solution for many companies due to electricity supply being consistent and reliable at an agreed price through a Power Purchase Agreement (PPA). Various domestic (and regionally minded) groups have recently emerged with a view to capitalise on this fragmented market through scalable fully-financed business models primarily focused on “energy as a service”.


In 2018, the total installed C&I capacity stood at 74MW in Sub-Saharan Africa (excluding South Africa), with only 35MW of capacity additions being made in the year. Unfortunately, Covid-19 will also likely hamper the uptake of C&I Solar this year, however, if the C&I market continues to follow its early-stage trends, it could become an impressive growth story.


Challenges are Prevalent in the African Energy Transition Story

Challenges are still largely prevalent with poor infrastructure, project risk, currency risk, default risk and lack of access to local financing. These challenges continue to act as a bottleneck on the transition to a cleaner and reliable energy future for the continent, albeit now extrapolated through the difficulties caused through Covid-19.


Current infrastructure in many Sub-Saharan African countries has battled to integrate large volumes of variable solar and wind power into their grids. A lack of investment into the interconnection and transmission infrastructure, makes it difficult for generated power to be input into the grid. This has been coupled with a large reliance on hydro generated electricity, which has mostly been successful, but yet largely susceptible to droughts. Resulting in varied challenging effects on the countries that rely on such power, as prices increase and rolling black outs take their toll. With over 80% of African Hydro projects planned to be built on the Zambezi, the International Panel on Climate Change predict the Zambezi will most likely be the most negatively affected by climate change.


Development challenges are also noticeable. Long term fossil fuel PPAs hinder governments to review their energy capacity for long periods, making it difficult for the regulatory and policy environment necessary to allow for renewable energy to prosper. Investor confidence can be knocked by government renegotiations on PPA contracts and offtaker risk being prevalent (recent examples Ghana and Kenya). Utilities have been struggling to keep a strong financial track record and as seen in many other parts of the world, it is politically unpopular to raise retail rates, and often challenging to structurally improve the existing model for the utilities. Thus, making utilities even more vulnerable to unexpected shocks and not allowing a conducive environment for bankable renewables projects.


Impact of Covid-19

The reported spread of coronavirus is lower than in other continents. However, the pandemic has heavily affected the Sub-Saharan African economy, with expected African GDP growth cut in half from 3.2% to 1.8%. The electricity energy access movement in Africa was fundamental to the continent’s development, being the foothold for basic needs and services. The disruption caused by the virus in both social and commercial progression, has pushed back the progress made in recent years in increasing access to electricity, further affecting the already present challenges.


Project progression has already seen hinderance as logistics, financing and travel stagnated. Given how globalized the renewables market is, infrastructure projects have seen significant delays as panel manufacturers to solar project developers overcome the hurdles that continue to be present.


Closing Remarks

More than half of the Sub-Saharan African countries have set national renewable energy targets. The aims can vary from targeting a share of renewables capacity to targeting a specific amount of installed capacity. Historically energy policies and targets in the region have had varying success. Targets can create dazzling headlines for green credentials, but with absent policy and state support, the uptake required to transition these countries is rendered meaningless. These bottlenecks limit scaling of foreign investment in the region, aside from the infrequent, large scale projects in attempts to make good on objectives. There is hope in the off-grid energy solutions which have begun to tackle this issue, through solar home systems, C&I captive solutions and rural mini grids to open the market for further initiatives to prosper. Easing the burden on the grid and providing electricity to those in rural communities.


It is fundamental to Sub-Saharan Africa’s transition that assistance with top level policy through to investment is driven forward. Allowing expansion of renewable technologies to be the main source in powering the 600 million+ people in Sub-Saharan Africa currently without it.



Sources and Further Reading

1. http://global-climatescope.org/

2. https://www.irena.org/africa

3. https://www.reeep.org/

4. https://www.newyorker.com/magazine/2017/06/26/the-race-to-solar-power-africa

5. https://www.get-invest.eu/

6. https://www.responsability.com/en

7. https://www.res4africa.org/wp-content/uploads/2020/06/RES4Africa-Foundation-The-impact-of-Covid-19-on-Africas-energy-sector-web.pdf

8. Chart Sources: BNEF

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