ECONOMIC BENEFITS OF DIGITALISATION TO AFRICA’S ENERGY SECTOR.
Introduction
In sub-Saharan Africa, only about a third of the population have access to electricity and the number of people without access is on the rise, according to the World Energy Outlook 2014, published by the International Energy Agency (IEA). This presents a significant barrier to economic and social development. Governments across the continent are seeking ways to enhance their existing energy infrastructure and develop new or diverse energy sources that are reliable, affordable, and sustainable. About half of Africa’s total population (548 million people) were without access to electricity in 2018 (IEA 2020). Most of these people live in Sub-Saharan Africa. Meanwhile, African businesses, from micro-enterprises to agriculture to industry, are held back by the lack of a reliable, affordable energy supply. Unless these challenges are addressed in a concerted manner, they will only intensify, as estimates by the World Bank indicate that the population will increase by one billion people in Sub-Saharan Africa by the year 2050.
A recent study of the International Renewable Energy Agency (IRENA) shows that, indeed, doubling the share of renewables in the energy mix by 2030 would lead to a rise of global Gross Domestic Product (GDP) up to 1.1 percent. It would also improve global welfare by 3.7 per cent and support the creation of over 24 million jobs in the sector all over the world. The rise of digitalization is driven by numerous factors such as automated metering, grid decentralization and growth in distributed generation. It is also enabled by significant advances in data, analytics, and connectivity. Therefore, digitalization of energy systems enables utilities to maintain grid stability and reliability, monitor the grid and identify points of failures, reduce operations and maintenance costs, optimize, and forecast energy production and extend the operational lifetime of assets.
Digitalization is considered as a key factor in meeting the future energy requirements of Africa. According to the International Energy Agency, digitalization – described as “the growing application of information and communications technologies (ICT) across the economy”- is set to make energy systems, particularly power generation systems, more safe, productive, accessible, and sustainable. The pace of digitalization in energy is increasing rapidly. Between 2014 and 2016, global investment in digital electricity infrastructure and software increased over 20% annually, exceeding investment in gas-fired power generation. The adoption of digitalisation in the energy sector of Sub-Saharan Africa will contribute to the capacity of the continent to expand its energy resources and facilitate economic growth and development. Therefore, implementing policies that create an enabling environment for digitalisation in the energy sector will immensely benefit the sector and the region.
Economic Benefits of Digitalisation to Africa’s Energy Sector.
Digital technologies are set to transform the global energy system in coming decades, making it more connected, reliable, and sustainable. This will have a profound and lasting impact on both global energy demand and supply, according to a new report by the International Energy Agency. In a comprehensive report on the interplay between digitalization and energy, the IEA provided an analysis of how digitalization has been transforming energy systems. From the rise of connected devices at home, to automated industrial production processes and smart mobility, digital technologies are progressively changing how, where and when energy is consumed.
Thus, digitalisation of the energy sector in Africa will result into enormous economic benefits for the sector and the region. Employment of smart solutions will ensure more flexible and connected energy outcomes, subsequently improving the transmission and distribution lines, and ultimately assisting in meeting energy demand in African countries. In addition, digitalisation of Africa’s energy sector will contribute to a wealth of employment opportunities for the teeming youthful population of the continent. Moreover, energy technologies advancement, such as renewables, clean coal and nuclear, energy storage, off-grid technologies, smart grids, mini solar kits, and small wind power plants will provide an array of opportunities for new investment and development of energy resources in the continent. Furthermore, the digital space has the capacity to upskill workers, improve capital productivity and labour efficiency as well as improve energy security, accessibility, and affordability, thereby promoting local economic development and societal benefits. In addition to this, digitalisation includes the collection and use of data to gain exhaustive insights to improve efficiency and productivity levels, further boosting the energy landscape.
In the African oil and gas industry, digitalization can bring various benefits to day-to-day operations and cost reduction. For condition monitoring, specific, industry, historical and real-time data lets operators improve maintenance and inspection regimes. Real-time data from wells will allow timely decisions on underperforming wells and other potentially high-cost issues. Detecting anomalies during drilling and operations will enable more effective decision making that can deliver cost savings. There are also potential benefits for health, safety, security, and environment (HSSE) performance. Data-enabled dynamic barrier management can provide a more accurate view of condition status, allowing better prediction and mitigation of equipment failure. Extensive data on efficiency and emissions provides for better monitoring of HSSE performance and compliance. Data analytics improves understanding of environmental risks, and authorities can create more effective regulations and monitoring. These benefits will contribute to the productivity of the oil and gas sector and its contribution to the economic growth of African producing countries.
For the benefits of energy digitalisation and technology to help the continent achieve its economic growth and development aspirations, there is the need for necessary investments in energy digitalisation initiatives and sustainable infrastructure. These fundamental elements will ensure that digitalisation and technology are leveraged to create a remarkable opportunity for a sustainable, inclusive, resilient, and resource-efficient society.
Concluding Remarks
Whether and how African countries take advantage of these opportunities will depend in large part on the way that energy policies evolve. With the right institutional and policy foundations, a well-functioning energy sector can be the cornerstone of economic development and make a huge difference in the lives of Africa’s people. Effective policy choices can guide the continent to a more inclusive and sustainable energy future and accelerate its economic and industrial development. The choices that lead in this direction vary, reflecting the different resource endowments and starting points across a very diverse African energy landscape. But there are reasons for optimism, both from the dynamism of Africa’s energy sector and from the technologies that offer a cost-effective way to meet rising demand in a sustainable way. Technology and digitalisation developments and innovative approaches are opening new opportunities and making an indisputable business case for their adoption in the continent’s energy sector. With abundant indigenous resources, Africa is well placed to leverage this potential. However, the potential and availability of cost-effective technologies alone are not sufficient. Seizing this opportunity will require strong political will, attractive investment climate and a holistic policy approach to fully reap the economic benefits of digitalisation in Africa’s energy sector. It also means that current average annual investments in the African energy system must double by 2030 – to approximately 40-65 billion USD.
AMETRADE’s mission is to facilitate the flow of investment into Africa’s energy sector through its conferences, seminars, workshops, and capacity building events that showcase the challenges and enormous opportunities in the energy sector.