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African Solar Panels Are Cost-Competitive With China

Africa is home to 60% of the world’s highest quality solar resources, but has only 1% of the world’s installed solar power production capacity. An under-developed industrial sector has deterred solar power developers from taking advantage of the continent’s massive solar power potential, but in a world with rising energy demand and ever more urgent calls for decarbonization, the renewable energy industry can no longer afford to ignore Africa – and Africa itself can no longer afford to be ignored.

Nearly half of the African population – roughly 600 million people – lack access to energy as of 2021. As the continental population grows (by 2050, one in four people on the planet will be in sub-Saharan Africa) and the region industrializes, African energy demand is expected to increase by a third over the next decade. Meeting this demand will require a ten-fold increase in power generation capacity by 2065.

The question, then, is how to solve the African energy trilemma: how to make sure that the energy supply is 1. sufficient, 2. affordable, and 3. sustainable. The need is enormous – but so is the economic opportunity. The good news is that the African continent has massive renewable energy potential, but fully tapping into it will be extremely challenging. Hurdles to developing the African solar power value chain include “limited access to finance, lack of supportive policy and regulatory environment, infrastructure constraints, limited local supply chains, and a lack of skilled workforce and technical expertise,” according to Amir Bahr, program manager at UN Energy, as he was recently quoted by Energy Monitor.

Despite these serious multiple challenges, interest in developing the African renewables sector is growing fast. In recent years, international investors have been rushing to get an early foothold in what is certain to be a rapidly expanding industry. Russia and China have been investing in emerging African energy markets for years, and Europe is increasingly pushing into the Sahara to build mass-scale solar farms. As a result, after decades of decline, manufacturing in sub-Saharan Africa is on an upward trend. In fact, it has quadrupled in value since the turn of the century, making it the fastest-growing manufacturing sector on the planet.

But considering that the continent is getting such a late start compared to European and Asian markets, will Africa be able to compete in solar supply chains? The short answer is yes. A recent report from Sustainable Energy for All (an UN-backed organization) finds that solar module manufacturing in some African countries is “already cost competitive with equivalent manufacturing in China.” Chinese manufacturers currently dominate global solar supply chains, in large part because they can produce panels much more cheaply than the West due to more developed value chains, a chokehold on rare Earth minerals markets, a less powerful currency, and economies of scale. While photovoltaic panels produced in Africa are not quite as cheap as those in China, they are amazingly close. “While it costs US¢16.3 for one watt of PV module assembly in China, it costs only marginally more in markets including Tanzania (US¢17.9), South Africa (US¢18), Namibia (US¢18.1) and Ghana (US¢18.3),” Energy Monitor reports.

This cost-competitiveness is in part because Africa is home to a huge concentration of the rare Earth minerals required for manufacturing solar panels. Moving photovoltaic manufacturing to Africa would not only be a win-win for the companies looking to produce a cost-competitive model, it would also be a boost to local economies, as it would serve to concentrate value addition within the countries and regions that have ample silver, copper and silicon for manufacturing. Exporting primary materials as opposed to processed and manufactured downstream components is one of the key identifiers of an undeveloped economy.

However, boosting solar manufacturing in Africa may do little to help the African energy trilemma if all the parts produced and energy are destined for international markets, instead of the local grids that so desperately need them. The PV gold rush may certainly boost certain African economies, but it won’t help the continent to breach energy gaps or decarbonize the continent’s energy mix without targeted political efforts. International development specialists stress that African countries must be in control of their own development or risk being exploited for their abundant energy resources without controlling the benefits.

By Haley Zaremba for Oilprice.com

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