By Patrick Hirsch
Concerns that the COVID-19 pandemic could put clean energy on the backburner appear to be unfounded. Experts forecast that clean energy technologies will account for 40% of global energy generation in 2020 and that, far from slowing down the shift, the pandemic is boosting it by further exposing the shortcomings of fossil fuels.
This is according to research commissioned by Bowmans and conducted by Stellenbosch University’s Centre for Complex Centres in Transition.
The research clearly shows how the deep-seated structural vulnerabilities of fossil fuel-dependent economies the world over, have been revealed and amplified by the COVID-19 pandemic.
The declining performance of fossil fuels is evident in the ongoing declines in Energy Returns on Investment (EROI), which measures how much energy is required to extract the energy from any particular resource.
In the case of oil, EROI has deteriorated significantly over the decades. In the 1930s, it took one barrel of oil to extract 100 barrels, a ratio of 100:1. Recent estimates indicate that the EROI for fossil fuels such as oil, coal or gas, now sits at between 6:1 and 3:1.
By contrast, according to the research findings, investments in clean energy technologies are becoming increasingly attractive.
Investment in renewable energy has exceeded investment in fossil fuels every year since 2009. By 2019, investment in renewables was nearly USD 300 billion – twice total investment in fossil fuels and nuclear combined.
Across the range of energy sources, renewable energy is the lowest cost option for Africa, a continent well-endowed with the sources for natural energy generation such as wind, solar, hydro, biomass and geothermal power.
But cost is not the only factor which contributes to renewable energy infrastructure being a key element of post-COVID-19 economic recovery plans for African countries.
Given the magnitude of the investment required, national governments cannot be expected to be the only investors. The solution will inevitably involve funding from other sources, requiring blended finance, including prominently investment by DFIs and foreign donors.
It is clear that a high degree of collaboration across the funding sources will be required and energy, together with transport, is considered one of the key core infrastructures where public investment catalyses private investment, given its multiple social benefits and more stable employment opportunities.
Currently more than 640 million Africans (more than half of the population) have no access to electricity. As energy access enables the diversification of business and improves health and education, it is critical, not only to economic growth, but to all aspects of social welfare and inclusive development.
Furthermore, when infrastructure is designed, constructed and operated in accordance with globally accepted environmental and resource transformational goals, it becomes more investment-worthy and attractive to investors with mandates that require a focus on sustainability and climate change.
An essential part of infrastructure design today is the use of lifecycle management as a planning tool for reconciling the longevity and the adaptability of infrastructure to avoid it becoming a stranded asset. As the continent is still at an early stage of development it has the opportunity to build low-carbon and resource efficient energy infrastructure, and so maximise the opportunity to leapfrog more developed areas into a more sustainable and resilient development trajectory, while at the same time reducing the financial risks for investors.
The urgent requirement for energy infrastructure development as an integral part of economic recovery is reflected in the plans announced by South African Government, which include as a priority the development of sustainable energy infrastructure.
Among the 51 infrastructure projects that have been identified by the Sustainable Infrastructure Development Symposium of South Africa as strategically important and earmarked for fast-tracking is the Emergency/Risk Mitigation Power Purchase Procurement Programme, which is expected to deliver 2000MW in renewable energy power generated from renewable sources.
Similarly, the proposals published by Business for South Africa (established as business’ response to the COVIDd-19 pandemic and representing the vast majority of South African business) includes among its prioritised actionable initiatives, a focus on developing the gas economy and accelerating renewable energy deployment via further rounds of the successful IPP programme initiated in 2011 by the Department of Energy.
It furthermore identifies the need for government policy to address regulatory processes that are slowing down the transition to cleaner energy generation.
As the report published by the Stellenbosch Research Centre points out ‘The decisions that African countries make today on the configuration of physical infrastructure will determine the inclusivity, resource intensity and climate resilience of their development pathways for decades to come’.
Patrick Hirsch is Head of Project Finance, Bowmans