The greater Horn of Africa – defined in this report as Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda – represents nearly a quarter of sub-Saharan Africa’s GDP, and is home to some of the fastest growing economies, but also many areas that face ongoing conflict and instability.
Energy consumption has grown at 3% per year over the last decade, but the region remains energy-deprived. Half the region’s population lacks access to electricity and only one in six people have access to modern cooking fuels. However, averages mask large disparities in the region – Kenya has one of the highest access rates in sub-Saharan Africa, while other countries lack centralised grid infrastructure altogether. Total energy demand in the region was 120 Mtoe in 2020 – less than the combined energy consumption of Belgium and the Netherlands but with ten times the number of people. Bioenergy – often in the form of gathered firewood and agricultural waste – meets around 80% of demand.
Most modern energy demand is met through oil products, largely for transport, and electricity, largely in households and industry. The region’s power sector has doubled its output over the past decade, and is one of the world’s most renewable systems today, with over 85% of generation coming from renewables. Large hydropower projects in Ethiopia, Sudan, and Kenya dominate the power mix today; the region has massive, under-utilised potential for solar, wind, and geothermal as well. Many of the region’s smaller countries, historically dependent on imports, are installing their first large-scale solar PV projects, such as the Juba PV farm in South Sudan.
Energy infrastructure has struggled to keep pace with the region’s growth – grids remain unreliable, many countries remain dependent on costly fuel imports, and utilities are in financial duress. Adequate energy planning has been undermined by a lack of data – a challenge addressed in part by IEA training programmes in the region, and this report’s unprecedented detail and analysis on the region’s energy system.
Faster progress on electrification vital to achieve universal access by 2030
Today, 140 million people in the greater Horn lack access to electricity – more than the population of Mexico. Strong improvements have been made since 2010, with 8 million people gaining access annually in average. Kenya and Ethiopia lead the way, and connected close to 35 million people each since 2000 – roughly 80% of those gaining access in the region in that same timespan.
However, this progress has stagnated with utilities facing climbing debt burdens, as they took on losses to keep bills affordable through the Covid-19 pandemic and now are confronted by high energy prices caused by Russia’s invasion of Ukraine. Consumers as well are facing decreasing purchasing power, slowing the adoption of off-grid solutions. We estimate that around 5 million more people live without access as of 2021 than did before the pandemic.
However, there is cause for hope. The greater Horn is a world-leader in off-grid access companies. Ethiopia and Kenya together accounted for 30% of global solar home systems and solar appliance sales in 2021. These countries, along with Uganda, are front-runners in Africa for mini-grid expansion. Somalia, a country without a national grid, has developed an active off-grid market, and Eritrea has reached nearly universal access in cities.
Improving efficiency can play a key role in tempering energy demand growth
Energy efficiency can be a key lever to reduce strains on a growing energy system, relieving pressures on consumer bills, managing fuel import burdens, limiting the scale of expensive new infrastructure, and lessening the risk of dumping inefficient appliances and vehicles. The Africa Case envisions far greater focus on efficiency between now and 2030, with 30% less demand than in Stated Policies Scenario (STEPS). To achieve this goal, the region’s energy intensity needs to improve annually by about 6%. This pace is challenging but achievable and comparable to that of the People’s Republic of China over the period 1990-2000.
The greatest gains are in the buildings sector. Improving the efficiency of cooking, cooling, and appliances saves the most energy to 2030. Key initiatives are contributing to these efforts today, such as the Uganda Building Act, the Energy Efficiency Lighting and Appliance project in East Africa, or plans to harmonise Minimum Energy Performance Standards within Eastern and Southern Africa.
Transport efficiency offers the next largest opportunity. Energy demand for mobility doubles in the Africa Case and the number of cars more than triples. Stricter standards on vehicles and adoption of electric two- and three-wheelers save nearly 4 Mtoe by 2030 compared with in STEPS, also reducing the region’s oil import burden. In the Africa Case, increasing transportation use are largely met by oil, but restrictions on the sale of inefficient vehicles, new and used, help to improve efficiency. Electric vehicles meet only a small share of growth due to high costs and limited grid reliability. However, electric two- and three-wheelers take off and increase electricity demand by 10 TWh in 2030 in the Africa Case.
Stepping up clean energy deployment will require new models of project financing
In sub-Saharan Africa, total energy investment has been declining since 2014. To achieve universal energy access, support economic development and adhere to countries’ climate targets, total energy investment more than doubles by 2030 in Africa, with clean energy accounting for roughly 70% of spending. Achieving full access to modern energy across the continent by 2030 would require investment of USD 25 billion per year – comparable to the cost of just one large LNG terminal investment. Current investments fall far short of these levels. In 2019, they amounted to just 13% of the average needs for 2022-2030 in the case of electricity and 6% for clean cooking.
Achieving the Africa Case in the greater Horn relies on improving the investment environment and creating a pipeline of bankable projects. Cumbersome and inefficient bureaucracy, a lack of clear energy sector planning, and limited technical expertise all contribute to significant cross-cutting risks for investors, although the severity of these risks varies drastically across region. Attracting more energy investment requires better leveraging of limited sources of concessional public financing to attract more private capital. New sources of finance specific to clean energy can help: climate finance, carbon credits, renewable energy certificates, and sustainable or diaspora bonds. These sources can also help cultivate stronger local capital markets, and play a growing role in financing the region’s energy sector.
Excerpt of: Clean Energy Transitions in the Greater Horn of Africa, International Energy Agency (IEA) 2022