COVID-19 has diverted utilities funding on a mass scale, causing more disruption in the global energy sector than ever before.
As African governments work to bolster their healthcare systems and markets, the mass reallocation of funds has pushed an additional 13 million people into energy poverty, reversing seven years of progress.
The International Energy Agency stated in its World Energy Outlook 2020 (WEO) that COVID-19 has caused more disruption to the global energy sector than any other event in recent history. An additional 13 million people across sub-Saharan African countries did not have any access to electricity in 2019, bringing the total number of people without electricity to nearly 600 million. Nigeria, the Democratic Republic of the Congo and Niger are the hardest-hit countries.
“This is the worst year for the global energy sector since the Second World War. The COVID-19 crisis is hurting vulnerable populations the most — reversing the positive track of the last few years,” IEA executive director Dr. Fatih Birol said in a statement.
Energy poverty trap
The number of people without access to electricity had been decreasing in Africa since 2013, but diverted public finance towards healthcare and economic recovery, high costs of borrowing and supply chain disruptions in the utilities and energy sector have brought that progress to a screeching halt.
The clean-cooking sector, which affects millions of both urban and rural poor, is expected to fall back into dependence on high-pollution energy sources such as charcoal, kerosene and firewood. The impacts on health and wellbeing would disproportionately affect women and children.
IEA hails solar energy as the future leader of global electricity markets, followed by wind. The global capacity of solar is set to triple before 2030, the agency reports. In contrast, the total number of solar products sold in Africa has dropped by more than 10% in the first half of this year.
In countries where energy access levels were high, private companies deploying decentralized energy solutions like solar home systems and mini-grids began facing operational and financial challenges after lockdowns began.
As a result, 30 million people on the continent who had access to electricity in 2019 may no longer be able to afford basic electricity services.
Exacerbating the challenge governments face in addressing issues of energy access, the cost of borrowing has also seen a dramatic increase. For example, the Democratic Republic of the Congo, the country with the largest number of people without electricity in sub Saharan Africa, saw its sovereign risk rise to more than 9%, thereby limiting its ability to expand energy access through international investors.
In the long term, it is critical that governments prioritize access to modern and reliable energy services. But for now, the need of the hour is to mobilize development finance institutions and donors. In order for the region to achieve the goals listed under SDG 7.1, an additional annual investment of $20 billion over the next decade is required. These investments would stimulate decentralized electricity solutions, the least costly way forward, as well as centralized power generation, distribution and transmission.