The EU and Sub-Saharan Africa: an Energy Partnership? by Stefan Bössner and Gerald Stang

5 2014 JOHN MCCONNICO/AP/SIPA The EU and sub-Saharan Africa: An energy partnership? by Stefan Bössner and Gerald Stang

Three features dominate energy relations be- African resources and European needs tween Europe and sub-Saharan Africa (SSA). First, import-dependent Europe is interested Europe has long sought to diversify its sources in African supplies to help meet its oil and gas of energy imports. Although SSA remains one needs: 28% of SSA oil exports were directed to of the world’s least explored regions, many new EU customers in 2012, accounting for 8% of oil and gas discoveries continue to be made. EU oil imports. Natural gas has been a lesser West and central Africa dominate oil produc- focus, with SSA accounting for only about 1% tion, with Nigeria, Angola, the Democratic of global production. Republic of the Congo (DRC), Equatorial Guinea and Gabon producing 92% of SSA’s oil The second theme is energy poverty in Africa. in 2012. Recent oil discoveries will soon al- Despite the vast energy resources of the conti- low Uganda, Ethiopia, Madagascar, Kenya and nent, many Africans still lack access to clean, Niger to join the regional oil producers ‘club’. affordable and modern forms of energy. Efforts When it comes to natural gas, Nigeria is the re- to address this problem have become central gion’s dominant player: it was the world’s 4th to the EU-Africa Energy Partnership. The third largest exporter of liquefied natural gas (LNG) theme, climate change, has gained relevance as in 2012. Recent discoveries off the coast of east a result of the EU pushing for carbon cuts and Africa (Mozambique, Tanzania) of up to 5 tril- renewables development abroad, and African lion cubic meters (tcm) of natural gas have also governments becoming increasingly worried put this part of SSA on the gas map, with LNG about the impacts of a changing climate. exports expected to begin by 2020. Building coherence between the EU’s energy, Even as this new production comes online, development, and climate policies can help fa- however, the US Energy Information Agency cilitate progress in all three areas. A focus on (EIA) predicts that SSA will account for only sustainability in energy – for both fossil fuel 7% of growth in the world’s liquid fuels pro- production and the development of renewable duction by 2040, 75% of which will come from energy sources (RES) – will be central to this Nigeria and Angola combined. Though such effort. growth will be limited and not all new SSA oil

European Union Institute for Security Studies February 2014 1 and gas output will be directed to European predicts that energy consumption will continue to customers, increased production helps improve grow slowly: by 2035, Africa is expected to account EU energy security by shifting the global supply/ for only 6% of global energy demand, despite ac- demand balance and increasing market liquidity counting for 21% of the global population. – thereby reducing market tightness and subse- quent volatility problems. Working with energy Primary energy demand producers to develop favourable investment con- (million tonnes of oil equivalent) ditions, strong market frameworks and effective fiscal management is thus important for EU energy interests. 2010 2020 2035 Africa 690 819 984 The significant corruption and governance chal- Europe 1837 1829 1847 lenges facing Africa’s energy producers, especially Nigeria and Angola, remain high on the agenda USA 2214 2260 2187 for their partners in Europe. Addressing these China 2416 3359 3872 problems in order to avoid seeing them replicat- India 691 974 1516 ed in Africa’s newer energy producers, has been emphasised in EU aid programmes. Governance, Source: IEA, World Energy Outlook 2012, new policies scenario in particular, has been a focal area for aid deliv- ered through the European Development Fund With such low aggregate energy consumption, it (EDF) to nearly every energy producer in SSA, is no surprise that a huge share of SSA’s population though rarely with an explicit focus on energy or currently lacks access to modern forms of energy. energy rents. Expanding SSA’s participation in the In 2010, 589 million people in the region did not Extractive Industries Transparency Initiative may have electricity – a figure the IEA predicts may help ensure such efforts are supported through reach 655 million by 2035. The installed power multilateral mechanisms. As with energy produc- capacity of SSA stands at roughly 80 GW (50% of ers elsewhere, high energy rents allow govern- which is in South Africa) – less than the installed ments to resist external pressures and set their capacity of Spain. This energy poverty has a pro- own agendas – but these rents also correlate with found impact on poverty reduction strategies. corruption and waste problems. Even though the portion of the population living below the UN poverty line of $1.25 per day has For the 2007-2013 period, the only producer in decreased in relative terms (from 58% in 2000 to the region targeted with an energy-related focus 49% in 2010), more people in SSA live under this from the EU aid programme was Nigeria, which threshold today (413 million) than in 1999 (376 included energy security as part of the trade and million). Although the African Development Bank regional integration focal area. Despite having calculated that SSA is on track to miss five of the some of the world’s largest oil and gas reserves, eight Millennium Development Goals (MDGs) 82% of energy consumption in the country comes by 2015, it also estimates that making electric- from traditional biomass and waste. Nigeria thus ity universally accessible would raise African GDP exports huge amounts of oil and gas but is un- growth by between 2% and 3% and business pro- able to provide electricity to its citizens. As the ductivity by some 40%. country works to improve its governance, EU interests in buying Nigerian energy resources may These challenges help explain why the EU has of- therefore clash with Nigerian domestic interests fered to work closely with Africa on energy and in lighting homes and powering factories. A well- sustainable growth. When EU and African offi- governed energy sector could allow Nigeria, as cials met during the 2nd High Level Conference well as its fellow exporters, to earn more money of the EU-Africa Energy Partnership in February from exports and to channel a higher share of 2014, they reaffirmed the 2020 targets set at the production towards domestic needs. Getting this previous meeting, namely: balance right will not be easy, however. • bringing modern and sustainable energy to an additional 100 million Africans; Poverty and energy poverty • doubling the capacity of electricity interconnec- The energy sector is poorly developed across tions within Africa and between Africa and the much of Africa: the whole continent’s primary EU; energy demand in 2010 was one-third of that of the US. The International Energy Agency (IEA) • doubling natural gas use in Africa;

European Union Institute for Security Studies February 2014 2 • doubling gas exports to the EU; FDI inflows still come from advanced economies, the BRICS (including South Africa) invested 4% • building 10,000 MW of new hydropower facili- of their FDI in Africa between 2009 and 2011, ties, 5,000 MW of wind power capacity and 500 higher than the 3% of the EU and US respectively. MW of solar energy capacity, and tripling the ca- Infrastructure investment, in particular, is increas- pacity of other renewables; ingly financed by non-European actors. Although the EU remains the continent’s largest aid donor • improving energy efficiency in Africa in all sec- (€22.7 billion in the 10th EDF framework alone), tors. China had overtaken the World Bank as the leading funder for infrastructure projects in SSA in 2010. Apart from the call to double gas exports and the Beijing focused its investments in resource-rich ambitious goal of increasing electricity intercon- countries like Angola, Nigeria, Sudan, the DRC nections to the EU (the grandiose plans of the last and now Tanzania, where it is funding the planned decade have sunk under the weight of high costs), $1.2 billion gas pipeline from its promising gas the list is focused on helping Africa provide energy fields to the capital, Dar-es-Salaam. This level of – and in particular clean energy – to its citizens. investment signifies an expectation that Africa will DG Energy has highlighted the goal of improving continue to grow quickly, and that this growth will access to sustainable energy for developing coun- lead to both expanded energy development and tries, with efforts targeted at helping reform legal increased greenhouse gas emissions. and regulatory frameworks, catalysing investment in both small and large scale generation and inter- connections projects, and mainstreaming energy in From climate talks to sustainable projects all EU development policy instruments. International climate negotiations have long pitted As many African nations move up the development developing countries (focused on providing access ladder, the importance of providing energy in an to affordable energy to their populations) against affordable and sustainable manner for EU-Africa developed countries, responsible for most of the relations will grow. Economic trends in SSA have greenhouse gases emitted to date but leading the been positive during the past decade, with GDP shift to greener energy sources. The Joint Africa- increasing by an average of 5% between 1998 and EU Strategy Action Plan for 2011-2013 called 2008. Africa also proved for work to strengthen relatively resilient to the ‘With the 4th EU-Africa Summit African capacities for global economic cri- adaptation and mitiga- sis, with growth rates approaching and negotiations on tion; to work towards averaging 2.6% from common positions on 2009 to 2011 and re- Economic Partnerships ongoing, the EU climate change; and turning to 5% in 2012 has all the cards it needs to strengthen to reinforce coherence and 2013. This growth between the United has been supported by energy relations, foster sustainable Nations Framework both robust domestic growth in Africa, and make progress on Convention on Climate demand and rising ex- Change (UNFCCC) ports, and the World its own long-term energy security.’ negotiations and the Bank estimates that this EU-Africa partnership. positive trend is set to continue over the coming Much work is still needed to achieve progress on years. Between 2002 to 2012 the value of mer- this agenda, as European and African approaches chandise and mineral exports (including oil) also to climate negotiations and emissions cuts remain increased from $156 billion to $688 billion. While divergent. the EU remains the most important trading partner for Africa as a whole, however, China has become The developed world has promised significant the most important trading partner of SSA. Again investments in climate change mitigation and ad- between 2002 and 2012, the share of SSA’s exports aptation projects for developing countries. As the going to the BRIC countries (Brazil, Russia, India developing world’s energy demand continues to and China) rose from 9% to 36%, nearly matching boom, helping to ensure that such demand is met exports to the EU and the US combined. in a low-carbon, sustainable manner will be an important factor for directing investment. African Foreign Direct Investment (FDI) inflows have also states able to develop clean energy without break- been on the rise, going from $10.7 billion in 2002 ing the bank will likely be more open to tougher to $38.5 billion in 2012. While the majority of emission restrictions in future climate talks.

European Union Institute for Security Studies February 2014 3 The EU is a major supporter of the UN’s Sustainable investment, land access and water management Energy for All initiative, which calls for universal challenges facing hydro projects. access to modern energy services, doubling the rate of improvement in energy efficiency and the Overall, RES deployment has to be carefully adapt- share of renewable energy in the global energy mix. ed to geographic, demographic and developmental The EU has also enshrined the concepts of sus- predispositions, striking a balance between large tainable development and access to clean energy infrastructure projects that harness economies of in the Commission’s Green Paper on EU develop- scale and remote off-grid solutions that can pro- ment policy [COM (2010) 629] and the ‘Agenda vide energy for rural Africans. for Change’ [SEC (2011) 1172]. The Union has taken several measures, including the launch of the EU Energy Initiative (EUEI), to ensure those Looking ahead policy goals are implemented. With the 4th EU-Africa Summit approaching and In Africa, as elsewhere, the development of clean negotiations on Economic Partnerships ongoing, energy will require good investment frameworks the EU has all the cards it needs to strengthen en- and cost-benefit analyses that take into account ergy relations, foster sustainable growth in Africa, both developmental and environmental require- and make progress on its own long-term energy ments. security. Supporting fossil fuel exporters in good governance and resource management practices In 2010, the World Bank estimated that South – i.e. pursuing a balanced and sustainable devel- Africa – the most industrialised country in SSA opment of fossil fuel resources – can help coun- – has the potential to develop renewable energy tries strengthen their energy management and reap production equivalent to 1.3 times the existing both external and domestic benefits. consumption; for Benin, Sierra Leone, Namibia and Kenya, the potential was estimated to be 10 to In addition, European technical and legal assist- 12 times. With RES technologies becoming more ance could provide essential arrows in the region’s mature and price-competitive, particularly in the quiver to confront future energy and climate change solar sector, renewables potential continues to challenges. The need to face up to climate change grow. The International Renewable Energy Agency may also point to appropriate ways to strike the (IRENA) showed that in several east African re- balance between supplying energy to Europe and gions, the levelised cost of energy (LCOE) for fos- reducing energy poverty in SSA. Helping Africa sil fuel-based power generation is higher than for onto a cleaner growth path than the one followed hydro, wind, biomass and geothermal options. by the West and China can pay dividends not only Some countries, such as Tanzania, are already ex- for the climate but also for EU energy security, as perimenting with large scale RES deployment us- reduced demand for fossil fuels from Africa will ing feed-in tariffs and other support schemes. The impact international energy markets and make European Commission’s Joint Research Centre more affordable those fossil fuels that the EU does (JRC) calculated in 2013 that 34% of the rural choose to burn. population in SSA could be served most cost ef- ficiently by rapidly deployable mini- and off-grid The turn towards sustainable energy is not only photovoltaic solar power. The study showed, a political ambition but can also be seen as an however, that grid extension to connect power us- economic necessity. The EIA estimates that sub- ers to central power supplies is likely to remain Saharan countries spend more on oil imports than the most efficient solution in 39% of the regions they receive in international aid. And through its studied – and will play a vital role in fostering eco- own mixed efforts in pursuing sustainable energy, nomic growth. the EU has gained unmatched experience in sur- mounting the technological, social and economic Another source for sustainable electricity pro- obstacles to improving energy efficiency, deploying duction can be found in the region’s vast, largely RES and cutting carbon emissions. untapped hydro potential (only 20% of SSA’s estimated potential has been developed). Much of this lies in two countries: the DRC and Ethiopia. Gerald Stang is an Associate Fellow at the Expansion of the dam at Inga falls in the DRC EUISS. alone could potentially yield 40 GW of electricity, increasing SSA electricity capacity by 50%. Stefan Bössner is a former Junior Analyst at the The backlash over the $4.7 billion Ethiopian Renaissance dam project, however, highlights the EUISS.

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