Energy supply has long been recognised as a crucial catalyst to advance economic and social development goals globally. Economic activities typically require the availability of sufficient, affordable, and reliable energy. Public institutions also need an adequate supply of electricity to efficiently provide public services. Health, education, and other social services rely on electricity to improve social wellbeing. Overall, the functioning of a country’s economy and its social development is intricately related to its ability to supply reliable, sustainable, and affordable energy. Increasingly, the supply of energy is sought from sustainable and renewable energy sources aligned with climate objectives, and the long-term pursuit of decoupling growth from emissions. It is the recognition of the crucial role that energy plays in socio-economic development that led to the global sustainable development goal articulation on energy, particularly SDG7 on sustainable energy for all. The UN High-Level Dialogue on Energy in 2021, through the theme report on Enabling SDGs through Inclusive Just Energy Transition stated that “energy is inextricably linked to virtually all the SDGs … [and] transforming the world’s energy systems will create new jobs, advance gender equality, and empower people, communities, and societies” (UN, 2021a). Whilst this is encouragingly aspirational, Africa’s infrastructure development gap remains a barrier and has presented a major obstacle to the potential achievement of numerous economic and social goals.
THE SUSTAINABLE ENERGYDEVELOPMENT NEXUS
Increasingly, the intricate links among people, planet, and prosperity are recognised in global policy circles as fundamental to securing sustainable development. Socio-economic development needs to be people-centred, and for it to be sustainable requires due balance with nature and protection of the planet, which in the long-term help secure a prosperous future. Within this broader framework, the positive links between economic development and investment in sustainable energy infrastructure at large are widely established (Akadiri et al., 2019; Anouri et al., 2014; Khobai and le Roux, 2017; Maji et al., 2019; Wolde-Rufael, 2005). Similarly, the effect of investment in sustainable energy on social development, including on reducing social inequality (Borowski, 2021) are well established. What is often not clear is the pathways through which sustainable energy provision impacts the socio-economic
development process. Development planning should consider the different pathways through which energy infrastructure development facilitates growth and broad development.
On social development, energy plays a key role in improving the quality of social services provided, such as in healthcare and education. Moreover, the effect of energy on social development could be subtler, such as by helping to narrow social inequalities through improved access to energy. For example, Sarkodie and Adams (2020) demonstrated that electricity access is associated with income inequality and human development. Similarly, greater use of clean energy technologies could have positive environmental benefits, by reducing the use of less sustainable sources or enabling cleaner energy transition. This could be in the area of clean cooking where biomass-based energy today accounts for notable negative environmental impacts in the continent, such as through deforestation. Growth prospects, social development, and environmental sustainability combined shape the overall
development trajectory. Figure 1.1 summarises the relationship between sustainable energy development and socio-economic impacts.
THE SOCIO-ECONOMIC IMPACTS OF SUSTAINABLE ENERGY DEVELOPMENT
Over the last 30 years, fundamental changes to the energy system of Africa have taken place. In the 1990s, coal accounted for nearly 52 per cent of power generation in the continent. The main renewable energy source was hydropower, accounting for 18 per cent of the energy mix. Other renewable energy sources were negligible. By 2017, the picture had changed dramatically. Coal was no longer a dominant generation fuel, dropping to about 30 per cent of power generation. It was largely replaced by natural gas, which accounted for 40 per cent of the generation. With a stable role of hydropower at 15 per cent, the accelerated development of electricity generation capacity was largely shaped by the role of natural gas. Renewable energy also saw a significant change in its importance in the energy mix. Though
much progress is still expected in the coming years, non-hydro renewable energy sources account for nearly 5 per cent of the African electricity generation mix. Considering the vast renewable energy resource potential of Africa and the affordability and accessibility of renewable energy technologies, the share is expected to rise over time.
Economic impacts of sustainable energy development
Globally, employment in the renewable energy sector in 2020 was estimated at 12 million, which grew by 500,000 from the level in 2019. Under IRENA’s 1.5° climate target global pathway, the renewable energy sector is estimated to generate 38 million jobs by 2030, and 43 million by 2050 (IRENA and ILO, 2021). At the macro level in Africa, the effect of energy supply on economic growth and development was partly observed when African countries faced power cuts and outages over an extended period, such as in drought conditions. For example, in the case of Uganda, power shortages are demonstrated to have led to a 3 per cent decline in GDP growth under emergency drought conditions. In Tanzania, such conditions are associated with major budgetary challenges with the emergency supply of
nearly double the energy in 2011. These incidents offer direct evidence of the impact of withdrawing existing power capacity on overall economic performance.
Recognising the social development implications of sustainable energy development, the High-Level Dialogue on Energy was called in September 2021 at the UN General Assembly. The meeting adopted global milestones to be achieved by 2030, which are aligned with SDG targets. Among the primary priorities, a target is set to connect all schools and healthcare facilities to electricity services by 2030. Accelerating the achievement of this goal would open immense opportunities to drive social development-oriented clean energy investments with implications for educational attainment and health outcomes. This is particularly essential considering the COVID-19 pandemic, the strain it put on health systems, and the importance of health centres accessing energy to deliver quality healthcare services.
MAXIMISING SOCIO-ECONOMIC AND ENVIRONMENTAL BENEFITS FROM THE ENERGY TRANSITION
There are already tangible examples demonstrating the benefits of the energy transition, in the context of the people, planet, and prosperity framework. South Africa’s renewable energy program and its evolution lend a vivid case in point. In a constrained and coaldependent energy system and economy, with an entangled sector political economy, South Africa adopted a renewable energy procurement program. The program saw the successful introduction of solar and wind energy capacity in the energy mix, with plans to further expand such capacities. The socio-economic and environmental benefits of the program associated with a clean energy transition have so far been notable.
Furthermore, the REI4P has led to employment creation. About 59,591 job years have been created for the South African population, of which 79 per cent were during construction and 21 per cent in the operation phase. Socio-economic and enterprise development initiatives were created. They were worth approximately R1.5 billion and R465.5 million, respectively. Previously disadvantaged communities have also benefitted through ownership structures that imposed targets. The program has led to the participation of 34 per cent of the Black Economic Empowerment enterprises. Local communities (through Community Trusts) have a total of 8 per cent equity in the total projects developed up to 31 March 2021. Further procurement rounds and the development of renewable projects will increase such participation.
To maximise the benefits of sustainable energy development, it is essential to address the missing links indicated in Figure 1.4. Africa will need to see a growing share of private sector investment in sustainable energy development to complement public resources. This would require reforming, or improving, energy market regulation and creating a conducive market environment. It would also require organising energy markets towards greater efficiency and participation of diverse market players. Planning is crucial to leverage benefits within and across sectors. Regional opportunities are also key, particularly within the context of the launch of the African Common Free Trade Area (AfCFTA), and efforts towards continental harmonisation of electricity regulations are expanding the scope of regional energy integration. Addressing these and other gaps will improve the sustained flow of infrastructure investment in Africa, and create a conducive business environment for energy investments. Harmonious and long-term plans communicate the direction of the sector, creating certainty, and fostering a better investment climate. Regional energy infrastructure integration and
trade in services would expand the scope of impact. These improvements will strengthen the effect sustainable energy development would have on economic and social development, as well as on environmental wellbeing within the framework of sustainable development.
THE 1.5°C SCENARIO AND THE CLIMATE POLICY BASKET
Holding the line at 1.5°C implies achieving net zero emissions by 2050 while also ensuring a fast reduction in emissions. In line with the IPCC recommendations on reducing global warming to 1.5°C by 2050 (IPCC, 2018), IRENA has mapped a path to a 45 per cent reduction in carbon dioxide (CO2 ) emissions by 2030, and a net-zero roadmap by 2050. The energy sector is responsible for over 80 per cent of anthropogenic CO2 emissions; therefore, it plays a critical role in achieving the needed decarbonisation (IRENA, 2021a). However, the pace of the energy transition falls far short of what is required to meet the Paris Agreement. Policies that are currently in place01 – referred to here as the Planned Energy Scenario (PES) – would barely stabilise world emissions, leading only to a minor reduction by 2050 To remain below 1.5°C, existing global fossil fuel investments must be cut in half in the coming decades, and possibly even more. Planning needs to start in earnest to mitigate the effects of a much lower fossil fuel demand on sectors and services (IRENA, 2021a).
Economic growth as measured by gross domestic product
Economic growth and governance are measures of development needed to achieve high levels of human wellbeing (Pritchett, 2021). Stable economic growth, even if it is small, creates functions for which new skills are needed (Piketty, 2014). On average, African countries experienced strong GDP growth until the mid-2010s, following which growth slowed due to high commodity dependence and falling global prices as outlined in the introduction. Under COVID-19, African countries initially weathered the crisis well in economic terms. Half of the 24 countries that saw GDP growth in 2020 were in Sub-Saharan
Africa. However, some institutions reckon that growth in Africa is going to stall in 2021 (AfDB, 2021a; IMF, 2021), although others expect a sound rebound (UNECA, 2020). Increased extreme poverty can also hit Africa the hardest. Over 23 million people can be pushed back into extreme poverty in Sub-Saharan Africa (IRENA, 2022; Gerszon Mahler et al., 2020).
The energy transition has the potential to help African countries recover and grow robustly. GDP sees higher growth under the 1.5°C Scenario compared with the PES. From 2021 to 2050, the level of GDP is on average 6.4 per cent higher in the 1.5°C Scenario. Figure 2.2 offers a detailed view of the drivers that cause the difference between the two scenarios. Government spending, supported by international cooperation, is the largest driver of the positive GDP effect over time in Africa.
Government spending impacts on GDP
The impact of government spending on public services under the two scenarios, shown in Figure 2.2, is significant and positive throughout the transition. Public spending plays a pivotal role in developing countries. Tight government budgets are often reflected in GDP. Countries in the bottom quintile of the GDP per capita distribution typically have only USD Purchasing Power Parity 322 per capita to commit annually to education, health, infrastructure (including power, but also roads, water and sanitation), law and order, justice, and regulation (Pritchett, 2021). Therefore, international support earmarked to alleviate constraints in government spending in Africa can help drive growth.
ENERGY TRANSITION WELFARE INDEX
Welfare can be analysed through different dimensions. IRENA’s Energy Transition Welfare Index captures five dimensions, namely economic, social, environmental, distributional, and energy access (Figure 2.9). The index allows for comparisons between scenarios both in overall terms and along each of the five dimensions (IRENA, 2021a). The performance on SDGs 12 and 13 (sustainable production and consumption as well as climate action) by African countries is satisfying (IRENA, 2022), while the performance on SDGs relating to human welfare (SDGs 1 to 7 and 11) leaves ample room for improvement (Sustainable Development Goals Centre for Africa, 2019). Nonetheless, the continent
has made progress in education, health, and other social outcomes. Progress in poverty reduction had been steady, but the pace is slow and growth has largely not been inclusive (UNECA, 2019). From this starting point, the energy transition improves African welfare significantly.
Relative welfare results of the 1.5°C Scenario and the PES03
Under the 1.5°C Scenario, the overall welfare index improves by 24 per cent by 2050,
compared to the case under the PES. The environmental, social, access and distributional
dimensions are the main contributors to this improvement (Figure 2.10).
The greenhouse gas emissions indicator drives the improvement of the 1.5°C Scenario over the PES in this dimension. The continent currently accounts for only around 4 per cent of the total CO2 emissions, and 8 per cent of the total greenhouse gas emissions (Our World in Data, 2019). Cumulatively and by 2020, Africa had been responsible for only 2.8 per cent of the CO2 emissions (Our World in Data, 2021). However, it is one of the most vulnerable to climate change. Biofuels and electrification of end uses, if based on renewables, can contribute to the improvement of the environmental welfare dimension. They also offer opportunities for local innovation and job creation along the value chain. Africa’s vehicle fleet, for example, is old and highly polluting, propelling negative impacts both on the
environment and human health (IRENA, 2022).
Businesses are understanding that sustainability is valuable and sustainable strategies have a sounder business case than business-as-usual (Serafeim, 2020). The success of the most forward-looking companies is also pushing competitors to pursue a similar path. After decades of unsustainable economic growth and unequal development, pursuing sustainable principles is no longer perceived as forgoing profits for a greater good, but rather as an opportunity to maximise gains and minimise risks.
Sustainable practices allow businesses to (i) explore new markets, and increase profits; (ii) operate more efficiently and create opportunities for cost savings; (iii) reduce share price volatility and long-term risk exposure; and (iv) positively impact communities and the environment.
In these terms, the renewable energy industry is a good example of the successful integration of sustainability principles in a key industrial sector for economies and societies. Founded upon these principles, the renewable industry has demonstrated in the last three decades its ability to offer sustainable and long-term opportunities to grow. This is demonstrated through lower electricity production costs, activated technological development, and reduced risk exposure of energy companies. At the same time, renewable energy companies are leading players in advocating for the integration of sustainability into the global economic agenda and in business strategies and operations.
THE THREE DRIVERS OF SOCIO-ECONOMIC IMPACT
The next ten years will be key for sustainable development in Africa. Both the UN HLDE and the COP26 recalled that actions that governments decide to take in the coming years will shape both the possibility of achieving the SDGs and the preparedness of the continent to tackle the consequences of climate change. The engagement with, and actions of, the international community will have significant repercussions in Africa, as the continent is considered the most vulnerable to the vagaries of climate change. African governments, supported by the international community, must define new pathways to sustainable prosperity. The best way forward globally is to adopt and implement changes that can help deliver a 1.5°C scenario and find solutions that simultaneously enhance equality, justice, and social inclusion.
An energy system centred on renewable energy can help resolve many of Africa’s social, economic, health and environmental challenges. Africa can resolve these challenges by working together inclusively with a wide range of stakeholders to expand energy access, create decent jobs, eradicate poverty, and improve the welfare of all its citizens. While this may seem like a daunting task, African nations have already demonstrated their capacity to confront such formidable challenges with impressive results. By acting together, and acting now, we can ensure that Africa’s bright future lives up to its potential.