What Energy Transition for a new global energy mega-structure?

Taking the opportunity of the COP23 in Bonn, Germany on November 6 to 17, 2017, this analysis addresses the strategic components of the necessary energy transition for Africa in general and specifically in Algeria.

Far from the euphoria of the Paris Agreement, the signatories meet again in Bonn, Germany, from 6 to 17 November 2017. It is the 23rd UN Climate Conference (COP23) with accordingly three UN goals.

  • First, to progress negotiations on the Paris Agreement that was ratified in December 2015 by 168 countries, and recently joined by Nicaragua after having been alone as a long time reluctant State. The Paris agreement stipulated control of global warming “by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius”, without setting of binding targets for each country. Many experts doubt its feasibility and the IPCC, the group of UN climate experts must meet, review in autumn 2018 and report on this issue.
  • Second, prevent other countries to join the Donald Trump position who confirmed on June 1, 2017 that the United States would withdraw from the Paris Agreement for reasons that the text “disadvantaged” his country. However, the decision of the US President will not come into force until 2019 and a US delegation will nevertheless be present in Bonn. If the risk seems moderate, it is not impossible that other countries that fear the rules to which they could be subjected to, would be tempted to opt out of the Paris Agreement like the United States. As such, particular attention will be paid to the case of Russia, the only G20 country, with Turkey, which has not ratified the text to date.
  • Third, inform about the Pacific Islands and the globe generally that has seen disasters that occurred in 2017 with super-hurricanes in the Caribbean and Florida, fires of unprecedented intensity in Portugal or California, lasting drought in East Africa, etc. To the point according to scientists, that it should further intensify in the coming years and that according to the UN’s Environment Program (UNEP), 2017 “would probably be a record year in terms of human, social and economic disasters.”

However, whilst not being utopian, fossil fuels including gas, will still for a long time over 2017/2025 be the main source of energy. But to govern is to foresee, it is up to African governments already facing the new global energy irreversible mutations to orientate towards an energy MIX between 2020 and 2030. And to prepare for an energy transition on a model linear energy of the past would be an error of reasoning.

Also, the energy engaging Nations’ security, renewable energy strategy must fit into the framework of clear and dated for a new model of energy focused on a certain energy mix, the resource assessment for achieving a set of objectives to prepare the industries of the future, new technologies and green industries, subject to the new 2020/2040 economic revolution.

According to the report from Bloomberg New Energy Finance (BNEF), to cover global demand for energy, there will be investments of around $2,100 billion by 2040 for all fossil fuels, as opposed to $7,800 billion for renewables. It is perhaps interesting to note that with $3,400 billion for solar and $3,100 billion for wind energy, both renewable energies seem to be clearly those that are likely to produce sustainable electricity cost levels lower than those of fossil energy.

China with a rapidly growing solar energy, stands since 2015 at the forefront of the global PV market, ahead of Germany.   It is also reported that its highly proactive policy would allow it to display in the next 25 years the highest CO2 emission reductions. Thus, alone, China already accounts for 40% in the new TeraWatt Hour (TWh) supplied by renewable energy. China has pledged $103 billion, or 36% of the world total, representing an increase of 17% of its annual effort. The investments also increased sharply in Chile, India, Mexico, South Africa, Pakistan and Morocco.   According to the International Energy Agency (IEA), the production of renewable electricity will increase by 40/60% by 2017 / 2020 and will provide more than a third of global electricity with notable acceleration between 2020 and 2030.

Meanwhile, the last devastating hurricanes pose the problem of global security and the urgent need for energy transition. UN studies project an unparalleled drought in North Africa between 2020 and 2025.   “Governments should hasten an end to fossil fuel subsidies, which still amount to about $500 billion per year as “advocated on November 1st, 2017 by the Secretary General of the Organization for Economic Co-operation and Development (OECD ) Angel Gurría in Toronto, Canada, in a widely reported in the world press statement; suggesting comparative advantages for non-fossil fuels.

Around the world, the combination of volatile fossil fuel markets and the need to protect the environment and reduce greenhouse gas emissions require a revision of energy strategies. That is why we will have as a matter of urgency, to first, review our current energy consumption and, secondly, and to use all forms of energy, particularly renewable energy which remain an essential alternative for internal needs.

The world will experience a profound change in a global energy map and therefore energy transition in years 2020, 2030 and 2040 although currently the weight of fossil (coal, oil & gas) remains overwhelming (78.3%), while the nuclear plays only a marginal role in the world (2.5%). The share of renewable energy is growing in the production of electricity (23.7% at the end of 2015 against 22.8% at end 2014), but remains tiny in transport and heating and cooling systems. This high proportion of fossil fuels is due to imbalances between the subsidies granted by States on fossil fuels and those allocated to renewable: $490 billion for the first in 2015, against $135 billion, almost four times less for the second.

These blockages do not prevent the sector to now total 8.1 million direct and indirect jobs in the world (+ 5% in one year), including 2.8 million in the photovoltaic (PV) industry: 59 gigawatts (GW) in 2005, 198 in 2010, 279 in 2011, 283 in 2012, 318 in 2013, 370 in 2014 and 433 in 2015 including solar 227GW against 73GW in 2005.  the investment billion rose from 73 in 2005, 239 in 2010, 279 in 2011, 257 in 2012, 234 in 2013, 273 in 2014 and 286 in 2015. subject to long-term investment, because currently it is the technological development costs and investments in production equipment (wind turbines, solar panels, biomass boilers, etc.) that affect the cost of renewable energy. In the future, they will become a less expensive energy with stable prices. Regarding the lower costs, the IEA notes that the price of photovoltaic systems has been divided by two and sometimes more in five years (2008 to 2012).

Today, joining the production cost of hydropower, technologies advancement are making some renewables virtually reach parity for the cost of electricity, with other conventional energy sources. Renewables have essential assets to take an important place in the energy mix of the country, to bring production sites to consumption centers, to reduce the dependence of these countries on fossil fuels, contribute to security of supply and energy independence, allow for long-term control of energy prices, constitute the most appropriate vectors for the development of decentralized energy production, offer considerable potential for industrial development and new growth and help limit the impact of energy production on the environment: reduction of greenhouse gas emissions, reducing the effects on air, water and soil pollution. The production facilities of renewable energy affect very little the environment, its biodiversity and the climate generally.   But to ensure a sustainable energy transition, a significant investment and adaptation would be required in power systems to absorb, redistribute a greater proportion of power generated by renewable energy back to the energy storage and management demand for flexible power generation units on the importance of decentralized energy production in order to bring them closer to “touch points.”

According to a report of Bloomberg New Energy, there is a reversal of energy consumption in 2025: a fall in demand for fossil fuels and a net increase in demand for alternative energy. This trend must be seen in the light of the exponential development of technology (telecommunications, Internet, media, etc.) and of more electro-dependent, as in the case of our economies in the case of consumption to come to allow the access to energy for the 1.3 billion people worldwide still without light and without telecommunications as in Africa.

So, what is it for Africa where much of the population suffers from energy shortages?

The average solar irradiation of African countries, according to IRENA (International Renewable Energy Agency), between 1750 and 2500 kWh / m2 / year, almost twice that of Germany (1150 kWh / m2 / year) which has a photovoltaic park installed around 40 GW (or a photovoltaic capacity 20 times greater than that of all Africa). The load factor of photovoltaic installations would be much higher in Africa than in European countries. At the end of 2015, Africa had 2100 MW of solar photovoltaic installations assembled, 65% of this capacity is concentrated in South Africa (13% in Algeria and 9% in the Réunion islands). During the past two years, the continent has more than quadrupled its installed capacity of PV parks, but these are still modest compared to the large African potential for nearly 600 million Africans still lacking access to electrical power.

According to the Agency, this energy would be competitive today as compared to the currently used fossil fuels, whether in the case of large plants or micro isolated systems (as well as domestic systems). According to Irena, the investment costs of large photovoltaic plants in Africa decreased by 61% since 2012. They now reach almost 1.3 million per MW installed (global average for PVs is around 1.8 million of $ / MW).

President Adnan Z. Amin of the IRENA is still considering a possible decline in 59% of these costs during the coming decade. The Irena highlights the fact that the present photovoltaics for Africa and a decentralized solution “modular” (with few facilities W to several tens of MW) to quickly electrify the unconnected to the regions power grids.

According to experts, it is true that the energy needs of Africa are limited to a few kWh per capita per year, the use is primarily lighting. There are no electrical networks in Africa, therefore no possible economies of scale. Africans pay for their electricity 2 times more than Europeans. It is always interesting to have cheap electrical power. But industrial development requires large amount of power, especially that of heat. While PVs are certainly more suitable for smaller off-grid installations for some African countries, industrial production would need to combine it with heat. Indeed, it is necessary to have a strategic approach to development of renewable energy. It should primarily target projects that contribute most to the achievement of objectives, without a clear position between the photovoltaic and thermal. The solar towers in Spain have proven themselves to be over many years quite valuable. This is to identify the different technologies endpoints. With GTZ (Germany) decomposition of the component value chain and cost allowed to set a realistic integration rate of 70% for solar thermal. Industrial solar thermal converges with that rate, while also agreeing with the electricity export levels to Europe. Indeed, Europe will need to import 15% of its needs in 2030, equivalent to 24 GW power or the equivalent of 50 billion M³ of gas per year.

Recent international studies have defined the four conditions to be :

  • A stable policy framework, sustainable local market size of 250 MW / year
  • An open market.
  • The technologies chosen must match the greatest potential namely allowing an integration rate, the largest job creation, providing the best match for the electricity market
  • Finally, most importantly, the technologies must offer the greatest potential for cost reduction competing fossil fuels.

In summary, a new global energy superstructure will be born between 2020 / 2030 / 2040, in which if Algeria wants to avoid a deadlock from outdated traditional patterns of the past, it would have to develop coping strategies. It is therefore a matter of clearly identifying the real players and not have a strategic vision based on utopia but realism that laws and changes in organizations would be able to solve problems. For Algeria to cover its internal consumption, its needs of 40% renewable energy by 2030 as was announced by the Ministry of Energy and in this case; what would the amount to mobilize be for the funding of such a move?

For starters, without any strategic vision of this transition, a suitable training program, a revision of the prices and subsidies policies in Algeria, private local or international investments in renewable energy would perhaps not be as profitable as one would expect. If it wants to avoid errors of economic policy in general, it should necessarily prevent any linear vision of the energy model. The passage of the coal era to that of hydrocarbons was dictated by a change in technology not in availability of this or that resource.

New technological processes that produce large scale economies with costs savings, influence the reshaping of global economic structural arrangements that in turn bear on local and global governance.

For Algeria, it is the issue of energy security that arose with the urgency of a reasonable and controlled energy transition fitting into the overall framework of a transition from a rentier economy to an economy excluding hydrocarbons in the context of global comparative advantages.

This implies to revitalize the National Energy Board, the sole authority to define energy strategy because under national security, chaired by the president of the republic, to open a national debate on the future model of energy consumption and raise all environment bureaucratic constraints that impede the growth of the creative value-added enterprise and foundation of the knowledge economy. That is why we will have in urgency, to first, review the current mode of energy consumption and, secondly, to use all forms of energy including renewable energy, which remain an alternative for domestic energy needs with other conventional energy sources.

Dr. A. Mebtoul is a University Professor, International Expert and former Director of Studies at the Department of Energy and SONATRACH both of Algeria